Property investors warned for common tax traps

Extending administrative relief for companies to use technology

The Government has passed legislation renewing the temporary relief that allows companies to use technology to meet regulatory requirements under the Corporations Act 2001.

These temporary relief measures will allow companies to hold virtual meetings and use electronic communications to send meeting-materials and execute documents until 31 March 2022.  This should ensure that companies can meet their obligations as they continue to deal with the uncertainty of the COVID-19 pandemic.

With the extension of this temporary relief, the Government will now seek to introduce permanent reforms later this year to give companies the flexibility to use technology to hold meetings, such as hybrid meetings, and sign and send documents.

Expansion of support for SMEs to access funding

The Government is providing additional support to small and medium sized businesses ('SMEs') by expanding eligibility for the SME Recovery Loan Scheme. 

Specifically, in recognition of the continued economic impacts of COVID‑19, the Government will remove requirements for SMEs to have received JobKeeper during the March quarter of 2021, or to have been a flood affected business, in order to be eligible under the SME Recovery Loan Scheme.

As with the existing scheme, SMEs who are dealing with the economic impacts of the coronavirus with a turnover of less than $250 million will be able to access loans of up to $5 million over a term of up to 10 years. 

Other key features include:

-   The Government guarantee will be 80% of the loan amount.

-  Lenders are allowed to offer borrowers a repayment holiday of up to 24 months.

- to refinance any pre-existing debt of an eligible borrower.

-   Loans can be either unsecured or secured (excluding residential property).

The loans will be available through participating lenders until 31 December 2021.

ATO warns property investors about common tax traps

In 2019/20, over 1.8 million Australians owned rental properties and claimed $38 billion in deductions, so the ATO is reminding property investors to beware of common tax traps that can delay refunds or lead to an audit costing taxpayers time and money.

The most common mistake rental property and holiday homeowners make is neglecting to declare all their income, including failing to declare any capital gains from selling an investment property. 

Assistant Commissioner Tim Loh said: “To put it simply, you should expect tax consequences for any property that you earn income from that isn’t your main residence.”

“We are expanding the rental income data we receive directly from third-party sources such as sharing economy platforms, rental bond authorities, and property managers.  We will contact taxpayers about income they’ve received but haven’t included in their tax return.  This will mean they need to repay some of their refund,” Mr Loh said.

So far, the ATO has adjusted more than 70% of the 2019/20 returns selected for a review of rental information.

“Most people we contact about their rental deductions are able to justify their claims.  However, there are instances where we have to knock back claims where taxpayers didn’t keep receipts, claimed for personal use, or claimed for ineligible deductions,” Mr Loh said.

Editor: We can help make sure you get your rental income and deductions right, including where rental income has been affected by COVID-19.

Div.293 concessional contribution assessments have been issued

The ATO has recently issued approximately 30,000 Division 293 assessments for the 2018/19 and 2019/20 financial years.

Editor: Division 293 tax is an additional tax on super contributions, which reduces the tax concession for individuals whose combined income and contributions are greater than the Division 293 threshold (currently $250,000).

Due to a system issue, concessional contributions reported for these financial years were not included in Division 293 assessments where that super account was also reported as closed during that financial year.  This reporting issue was resolved in June 2021, and this has resulted in affected members receiving either an initial or amended Division 293 assessment.

Travel allowances and 'LAFHAs'

The ATO has released a Ruling explaining:

-    when an employee can deduct accommodation and food and drink expenses when travelling on work;

-    the FBT implications, including the application of the 'otherwise deductible rule', where an employee is reimbursed for accommodation and food and drink expenses, or where the employer provides or pays for these expenses; and

-    the criteria for determining whether an allowance is a 'travel allowance' or a 'living-away-from-home allowance' ('LAFHA') benefit.

Whether accommodation and food and drink expenses are deductible depends on the facts and circumstances of each case, so the Ruling uses examples to show how to determine the deductibility of these expenses in a range of situations.

Time running out to register for the JobMaker Hiring Credit

The JobMaker Hiring Credit scheme's third claim period is now open, so if a taxpayer has taken on additional eligible employees since 7 October 2020, they may be able to claim JobMaker Hiring Credit payments for their business.

Eligible businesses can receive up to:

-   $10,400 over a year for each additional eligible employee hired aged 16 to 29 years; and

-   $5,200 over a year for each additional eligible employee hired aged 30 to 35 years.

The JobMaker Hiring Credit is available to businesses for each additional eligible employee hired before 6 October 2021, so, if a business is thinking about taking on extra staff, they should check if they are eligible to participate in the scheme.

Labor commits to income tax cuts and certainty on negative gearing

The ALP has formally announced that, if elected to Government, they will deliver "the same legislated tax relief . . . as the Morrison Government".

This means they have committed to upholding the legislated changes to personal income taxes, and will also maintain the existing regimes for negative gearing and capital gains tax to provide "certainty and clarity to Australian working families after a difficult two years for our country and the world".

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

ATO to ramp up checking on not-in-use ABN's

Government proposal to modernise business communications

The Government has committed to modernising certain laws so that they are 'technology neutral', to enable easier communication between businesses, individuals and regulators.

The first phase of legislative reform will focus on key areas raised by stakeholders which are implementation-ready (ideally by the end of 2021), including:

-    expanding the range of documents that can be validly signed electronically;

-    increasing the range of documents that can be sent electronically to shareholders and amending requirements to contact lost shareholders;

-    improving flexibility for customers when changing address and consenting to electronic communication with credit providers;

-    removing prescriptive requirements for notices to be published in newspapers, where suitable alternatives have been identified; and

-    addressing provisions in Treasury legislation where only non-electronic payment options are in place.

Subsequent phases will consider reforms in additional areas that could benefit from greater technology neutrality, including communication with regulators, and product disclosure and recordkeeping requirements.

ATO "keeping JobKeeper payment fair"

The ATO is using its compliance resources to maintain the integrity of the JobKeeper measure.

While most businesses and employees have done the right thing, the ATO has identified concerning and fraudulent behaviour as well as claims by a small number of organisations and employees, and will actively pursue these claims.

Some of the concerning behaviours the ATO is currently examining include:

-     businesses that have:

           –    made claims for employees without a nomination notice, or have not paid their employees the correct JobKeeper amount (before tax);

           –    made claims for employees where there is no history of an employment relationship;

           –    amended their prior business activity statements to increase sales in order to meet the turnover test; or

           –    recorded an unexplained decline in turnover, followed by a significant increase; and

-     individuals who have knowingly:

          –    made multiple claims for themselves as employees or as 'eligible business participants'; or

          –    made claims both as an employee and an 'eligible business participant'.

The ATO encourages all JobKeeper applicants to review their applications and contact the ATO if they have made mistakes (and the ATO may not pursue repayment of an overpayment in certain circumstances, such as for honest mistakes).

If anyone is concerned that someone is doing the wrong thing in relation to the JobKeeper payment, they are encouraged to tell the ATO about it.  The ATO will be examining JobKeeper Tip-Offs and contacting businesses where it has concerns and needs more information.

Independent review service for small businesses made permanent

Following a successful multi-year pilot, the ATO’s small business independent review service will be offered permanently as a dispute resolution option for eligible small businesses.

ATO Deputy Commissioner Jeremy Geale said the service is all about ensuring small businesses are given the opportunity to achieve an independent, fast, free, and fair resolution when they disagree with the ATO’s audit position:

“Independence is critical when handling a dispute, so we ensure each and every independent review is done by an officer from a different part of the ATO who was not involved in the original audit”.

The ATO’s small business independent review service is available to eligible small businesses with an annual turnover of less than $10 million in relation to disputes about income tax, GST, excise, luxury car tax, wine equalisation tax, and fuel tax credits, and is in addition to other dispute options.

Disputes about employer obligations like superannuation and FBT are not eligible for the independent review service.

More information about the ATO’s independent review service, including how to request a review and eligibility criteria, is available on the ATO’s website.

ATO asks businesses to check if they are still using their ABNs

The ATO has advised that, if a business hasn’t used its ABN for a while, the ATO may contact them about cancelling their ABN. 

The ATO may also contact them about their ABN if their business situation has changed.

To ensure businesses don’t miss out on Government support, including during unfortunate events, it’s essential that they regularly review their ABN details and keep them up to date (or cancel their ABN if the business is no longer operating, so that Government agencies can tailor their support to those that need it).

It’s also important to check that the business has listed the physical address of the business, as otherwise it can be difficult for emergency services and Government agencies to make contact. 

A business' mailing address and physical location address can be listed separately on its ABN data, and these (and other ABN details) can be checked and updated online at any time.

Passenger movement data-matching program

The ATO will access data from the Department of Home Affairs on passenger movements during the 2016/17 to 2022/23 financial years, and match it with certain sections of ATO data holdings to identify taxpayers that can be provided with tailored information to help them meet their tax and superannuation obligations, or to ensure compliance with taxation and superannuation laws.

Data items include names, dates of birth, arrival  and departure dates, passport Information, and status types (visa status, residency, lawful, Australian citizen).

The ATO estimates that records relating to approximately 670,000 individuals will be obtained each financial year.

Super contribution caps will increase from 1 July 2021

The ATO has confirmed that, from 1 July 2021, the superannuation concessional and non-concessional contribution caps will be indexed.

The new caps for the 2021/22 year will be:

-    Concessional Cap:              $27,500

-    Non-Concessional cap:  $110,000 (or $330,000 over 3 years)

The total superannuation balance limit that determines if an individual has a non-concessional contributions cap of nil will also increase from $1.6 to $1.7 million, effective from 1 July 2021.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

JobKeeper comes to an end

JobKeeper comes to an end

The ATO has advised that the final JobKeeper payment will be processed in April 2021.

Enrolled businesses do not have to do anything when the program closes, although they will need to complete their final March monthly business declaration by 14 April 2021.

Also, once a business is no longer claiming JobKeeper Payments, it may start to be eligible to receive the JobMaker Hiring Credit for any additional employees that started employment on or after 7 October 2020.

ATO loses case on JobKeeper and backdated ABNs

On 24 March 2021, the Full Federal Court handed down its decision in a case concerned with the requirement that an entity claiming JobKeeper must have had an ABN on 12 March 2020, or a later time allowed by the ATO.

The Registrar of the Australian Business Register had reactivated the relevant entity's previously cancelled ABN after 12 March 2020, but with a backdated effective date on or before 12 March 2020. 

The Court held that backdating an ABN to have an effective date on or before 12 March 2020 did not satisfy the requirement for the entity to have had an ABN on 12 March 2020.

However, the Court also held that the ATO's decision not to allow the entity a "later time" to have an ABN was a "reviewable decision", and that the Commissioner's discretion should be exercised in these circumstances (i.e., the Court held that the entity should be entitled to JobKeeper).

The Court's decision does not change the need to satisfy all of the other eligibility requirements.

Editor: Where the ATO has postponed finalising a decision regarding a taxpayer's eligibility for JobKeeper (and/or the cash flow boost) pending the Court's decision, the ATO will contact the affected taxpayer shortly to provide them with an update.

First criminal conviction for JobKeeper fraud

A person claiming to be a sole trader  was convicted of three counts of making a false and misleading statement to the Commissioner of Taxation, in order to receive $6,000 in JobKeeper payments to which he was not entitled, as he was not operating a genuine business and he had already agreed to be nominated by his full-time employer for the allowance.

The ATO has a dedicated integrity strategy that supports the administration of the Government’s stimulus packages, with robust and efficient compliance systems that make it very easy to identify fraudulent behaviour and stop it. 

ATO Deputy Commissioner Will Day said “Since the first payments were made in April, the ATO has monitored every payment, every day, every month, and will continue to do so until the last payment is made."

ATO's taxable payments reporting system update

The ATO has confirmed that more than 60,000 businesses have not yet complied with lodgment requirements under the taxable payments reporting system ('TPRS') for 2019/20.

The TPRS is a black economy measure designed to assist the ATO to identify contractors who don’t report or under-report their income.

The ATO estimates that around 280,000 businesses need to lodge a Taxable payments annual report ('TPAR') for the 2020 financial year.

Importantly, 2020 was the first year that businesses that pay contractors to provide road freight, information technology, security, investigation, or surveillance services may need to lodge a TPAR with the ATO (in addition to those businesses providing building and construction, cleaning, or courier services).

Businesses who have not yet lodged need to lodge as soon as possible to avoid penalties.

ATO Assistant Commissioner Peter Holt added that some businesses may not realise they need to lodge a TPAR, but may be required to, depending on the percentage of payments received for deliveries or courier services.

“Many restaurants, cafés, grocery stores, pharmacies and retailers have started paying contractors to deliver their goods to their customers.  These businesses may not have previously needed to lodge a TPAR.  However, if the total payments received for these deliveries or courier services are 10% or more of the total annual business income, you’ll need to lodge,” Mr Holt said.

FBT rates and thresholds for the 2021/22 FBT year

The ATO has updated its webpage containing the fringe benefits tax ('FBT') rates and thresholds for the 2017/18 to 2021/22 FBT years.

Two amounts that were not previously announced for the 2021/22 FBT year are:

-   the FBT record keeping exemption is $8,923 (up from $8,853 for the 2020/21 FBT year); and

-   the statutory or benchmark interest rate is 4.52% (down from 4.80% for the 2020/21 FBT year).

The ATO also separately released two taxation determinations setting out further rates and thresholds for the FBT year commencing on 1 April 2021, being:

-   Motor vehicle (other than a car) — cents per kilometre rate; and

-   Reasonable food and drink amounts for employees living away from home.

Editor: Please contact our office if you need more information about these rates or FBT in general.

Warning regarding new illegal retirement planning scheme

The ATO has recently identified a new scheme where SMSF trustees were informed that they could set up a new SMSF to roll-over the fund balance from the old SMSF and then liquidate their old SMSF, in an attempt to avoid paying potential tax liabilities.

The ATO warns that taking part in this arrangement and others like it can result in civil and criminal actions and could ultimately put the members' retirement savings at risk.

If a trustee of an SMSF believes they have been approached by a promoter of a retirement planning scheme, the ATO recommends they seek a second opinion from a registered tax agent or appropriately qualified financial adviser, and also report the promoter to the ATO.

New succession planning guide for family businesses

The Australian Small Business and Family Enterprise Ombudsman, in conjunction with Family Business Australia, has released a new online guide to succession planning — the “Introductory Guide to Family Business Succession Planning” — which provides a step-by-step guide to passing the family business on to the next generation.

A recent report revealing that 54% of family businesses have no documented succession plan in place and no retirement plan for the current CEO.

The easy-to-read guide offers tips on how to handle tense conversations that can arise between family members throughout the transition phase.

The guide is free and available on both the Family Business Australia and the ASBFEO’s websites.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

STP reporting concessions for closely held payees will end June 2021

March 2021

Changes to STP reporting concessions from 1 July 2021

Small employers (19 or fewer employees) are currently exempt from reporting ‘closely held’ payees through Single Touch Payroll ('STP').  Also, a quarterly STP reporting option applies to micro employers (four or fewer employees).  These concessions will end on 30 June 2021.

The STP reporting changes that apply for these employers from 1 July 2021 are outlined below.

Closely held payees (small employers)

From 1 July 2021, small employers must report payments made to closely held payees through STP using any of the options below.  Other employees must continue to be reported by each pay day.

A ‘closely held payee’ is an individual who is directly related to the entity from which they receive payments.  For example, this could include family members of a family business, directors or shareholders of a company and beneficiaries of a trust.

Payments to such payees can be reported via STP (from 1 July 2021) using any of the following options:

1.    Report actual payments on or before the date of payment.

2.    Report actual payments quarterly on or before the due date for the employer’s quarterly activity statements. 

3.    Report a reasonable estimate quarterly on or before the due date for the employer’s quarterly activity statements.  Note that consequences may apply for employers that under-estimate amounts reported for closely held payees.

Small employers with only closely held payees have up until the due date of the payee’s tax return to make a finalisation declaration.  Employers will need to speak with these payees about when their individual income tax return is due.

Micro employers

From 1 July 2021, the quarterly reporting concession will only be considered for eligible micro employers experiencing ‘exceptional circumstances’.

Common examples of when the ATO would generally consider it to be fair and reasonable to grant a deferral due to exceptional or unforeseen circumstances include natural disasters, other disasters or events, serious illness or death.

Additionally, ‘exceptional circumstances’ for access to the STP quarterly reporting concession from 1 July 2021 may include where a micro employer has:

-   seasonal or intermittent workers; or

-   no or unreliable internet connection.

The ATO says it will consider any other unique circumstances on a case-by-case basis.

It should be noted that registered agents must apply for this concession and lodge STP reports, quarterly, on behalf of their eligible micro employer clients.  

The STP reports are due the same day as the employer’s quarterly activity statements. 

If an employer prefers to report monthly, the STP reports must be lodged on or before the 21st day of the following month. 

Finalisation declarations will need to be submitted by 14 July each year.

Editor: Please contact our office if you require more information or assistance with these STP reporting options.  

Paper PAYG and GST quarterly instalment notices

The ATO has previously advised that it will no longer issue paper activity statements after electronic lodgment.  Instead, electronic activity statements will be available for access online, three to four days after the activity statement is generated.

As part of its digital improvement program, the ATO stopped issuing paper quarterly PAYG and GST instalment notices (forms R, S & T), where taxpayers had a digital preference on ATO systems.  The September 2020 notice was the last one issued to these taxpayers.

However, the ATO has received feedback from tax professionals that issues have arisen for some of their clients as a result of this change.  For example, some taxpayers who are self-lodgers rely on the receipt of the paper statements as a reminder that their instalments are due.

As an interim solution, the ATO said it will issue paper PAYG and GST quarterly instalment notices starting with the March 2021 quarterly notices.

For taxpayers impacted by this change, the ATO will work with their registered agents to take their circumstances into account.  The ATO has a range of practical support options available, including lodgment deferrals and payment plans that agents can access online, on behalf of their clients.

For self-lodgers, the ATO has issued an email notification reminding them that their December 2020 PAYG and GST instalment notices are due for payment soon (by 2 March 2021).

The ATO said it will continue to work with the tax profession to develop a digital solution for the PAYG and GST instalment notices that is workable for registered agents and their clients.

Editor: Please contact our office if you require more information about paper PAYG or GST quarterly instalment notices.

Avoiding disqualification from SG amnesty

The superannuation guarantee (‘SG’) amnesty ended on 7 September 2020.  Employers who disclosed unpaid SG amounts and qualified for the amnesty are reminded that they must either pay in full any outstanding amounts they owe, or set up a payment plan and meet each ongoing instalment amount so as  to avoid being disqualified and losing the benefits of the amnesty.

The ATO will be sending employers reminders to pay disclosed amounts, if they have not previously engaged with the ATO.  Employers will have 21 days to avoid being disqualified from the amnesty.

Registered agents can assist their employer clients who qualified for the SG amnesty avoid disqualification.  In particular, if a client needs to set up a payment plan, agents can do this (online) on their behalf, if the employer:

-   has an existing debit amount under $100,000 (total balance or overdue amounts);

-   does not already have a payment plan for that debit amount; and

-   has not defaulted on a payment plan for the relevant account more than twice in the past two years.

The ATO has advised that employers who are disqualified from the amnesty will:

-   be notified in writing of the quarter they are disqualified for;

-   be charged an administration component of $20 per employee for each disqualified quarter;

-   have their circumstances considered when deciding a Part 7 penalty remission (this is an additional penalty of up to 200% of the unpaid SG amount that may be imposed under the SG laws); and

-   be issued with a notice of amended assessment.

Employers who continue to qualify for the SG amnesty are reminded that they can only claim a tax deduction for amounts paid on or before 7 September 2020 (i.e., the amnesty end date).

Editor: Please contact our office if you require more information or would like us to set up a payment plan for SG amnesty amounts on your behalf.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

New incentive: “JobMaker” Hiring Credit

Improvements to be made to full expensing measure

The government will expand eligibility for the temporary 'full expensing measure', which temporarily allows certain businesses to deduct the full cost of eligible depreciable assets in the year they are first used or installed.

Editor: The government initially announced in the 2020/21 Budget that businesses with a turnover of up to $5 billion would be able to immediately deduct the full cost of eligible depreciable assets as long as they are first used or installed by 30 June 2022.

The government will also allow businesses to opt out of temporary full expensing and the backing business investment incentive on an asset‑by‑asset basis. 

This change will provide businesses with more flexibility in respect of these measures, removing a potential disincentive for them to take advantage of these incentives (Editor: For example, where the automatic application of full expensing might cause the entity to make a loss).

JobMaker Hiring Credit passed

The government has passed legislation to establish the JobMaker Hiring Credit, which is part of the government’s economic response to the COVID-19 pandemic.

The JobMaker Hiring Credit is specifically designed to encourage businesses to take on additional young employees and increase employment. 

It does this by providing employers with a fixed amount of $200 per week for an eligible employee aged 16 to 29 years and $100 per week for an eligible employee aged 30 to 35 years, paid quarterly in arrears by the ATO.

To be eligible, the employee must have been receiving JobSeeker Payment, Youth Allowance (Other) or Parenting Payment for at least one of the previous three months, assessed on the date of employment.  Employees also need to have worked for a minimum of 20 hours per week of paid work to be eligible, averaged over a quarter, and can only be eligible with one employer at a time.

The hiring credit is not available to an employer who does not increase their headcount and payroll. 

Employers and employees will be prohibited from entering into contrived schemes in order to gain access to or increase the amount payable.

Existing rights and safeguards for employees under the Fair Work Act will continue to apply, including protection from unfair dismissal and the full range of general protections.

ATO Visa Data Matching Program

The ATO will acquire visa data from the Department of Home Affairs for 2020/21 through to 2022/23, relating to approximately 10 million individuals for each financial year.

The data will be used to identify non-compliance with obligations under taxation and superannuation laws, including registration, lodgment, reporting and payment responsibilities.

How to avoid getting dodgy advice

The ATO is warning taxpayers who may be thinking about pausing, changing or closing their business, due to the current economic conditions, to be wary of untrustworthy advisers who may recommend inappropriate or illegal behaviour.

This could include illegal phoenix activity, where businesses intentionally remove their assets prior to winding up so that they can be used in a copy of the original business.

Red flags include:

-   people the taxpayer doesn't know cold calling with advice;

-   unsolicited letters, emails or phone calls after the taxpayer has been through court action with a creditor;

-   advice to transfer assets to a third party without payment;

-   refusal to provide advice in writing;

-   advice suggesting they have a sympathetic liquidator who will protect the taxpayer's personal interests and assets;

-   advice to withhold certain records from the bankruptcy trustee or liquidator, or provide incorrect information to authorities; and

-   advice to deal with the liquidator or trustee on the taxpayer's behalf.

The ATO instead recommends anyone thinking of pausing, changing or closing their business to contact a qualified professional, such as an accountant, lawyer, or registered liquidator.

STP data-sharing with Services Australia

Single Touch Payroll ('STP') allows the ATO to share data in real-time with other government agencies, to "help them deliver government services to the Australian community".

As part of the ATO's data-matching program, it has a STP data-sharing arrangement with Services Australia to help them administer Australia's welfare system. 

This means that people who are on an income support payment from Services Australia and need to report their employment income fortnightly to Centrelink will now see their employer details are pre-filled.

Proposed FBT exemption — retraining and reskilling

The government has announced it will introduce an exemption from FBT for retraining and reskilling benefits provided by employers to redundant, or soon to be redundant, employees where the benefits may not be related to their current employment.

It is proposed that this exemption will not apply to:

-    retraining provided under a salary packaging arrangement;

-    training provided through Commonwealth supported places at universities; or

-    repayments towards Commonwealth student loans.

If enacted, this proposed measure is intended to apply from the day it was announced (i.e., 2 October 2020).

Getting the margin scheme right

Editor: The margin scheme may allow a property owner to pay less GST when they sell the property — paying GST of 1/11th of their margin on the sale, rather than 1/11th of the total sale price.

If a property owner wants to use the margin scheme when selling property, they must be eligible before the property is offered for sale.

This may be where they're selling new property as part of their business and they're registered for GST.

Importantly, among other criteria, there must be a written agreement before settlement between the supplier and purchaser to use the margin scheme — this could be part of the contract.

To avoid the common errors suppliers make when selling property using the margin scheme, the ATO is reminding suppliers that they must also:

-    calculate the margin correctly; and

-    report the amount of the margin on the sale on their BAS — not the full amount of payment received.

Editor: We can help determine your eligibility and also calculate the margin.

Also remember that, when someone purchases property using the margin scheme, they:

-   can't claim GST credits for the sale; and

-   don't report it on their activity statement.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

TAX CUTS PASS PARLIAMENT

November 2020

Tax cuts pass Parliament

The Government announced various tax measures in the 2020 Budget on 6 October 2020, and it was able to secure passage of legislation containing some of the important measures very shortly afterwards, as summarised below.

Tax relief for individuals

The Government brought forward 'Stage two' of their Personal Income Tax Plan by two years, so that, from 1 July 2020:

-   the low income tax offset increased from $445 to $700;

-  the top threshold of the 19% tax bracket increased from $37,000 to $45,000; and

-   the top threshold of the 32.5% tax bracket increased from $90,000 to $120,000.

In addition, in 2020/21, low and middle-income earners will receive a one-off additional benefit of up to $1,080 from the low and middle income tax offset.

Tax relief for business

Businesses with a turnover of up to $5 billion are now able to immediately deduct the full cost of eligible depreciable assets as long as they are first used or installed by 30 June 2022.

To complement this, the Government will also temporarily allow companies with a turnover of up to $5 billion to offset tax losses against previous profits on which tax has been paid.

Also, businesses with an aggregated annual turnover between $10 million and $50 million will, for the first time, be able to access up to ten small business tax concessions.

Under the changes passed by the Parliament, the Government will also enhance previously announced reforms to invest an additional $2 billion through the Research and Development Tax Incentive.

Employers need to apply recent tax cuts as soon as possible

The ATO has now updated the tax withholding schedules to reflect the 2020/21 income year personal tax cuts — the updated schedules are available at ato.gov.au/taxtables.

The ATO has said that employers now need to make adjustments in their payroll processes and systems in order for the tax cuts to be reflected in employees’ take-home pay.

Employers must make sure they are withholding the correct amount from salary or wages paid to employees for any pay runs processed in their system from no later than 16 November onwards.

Employees should be aware that any withholding on the old scales will be taken into account in their tax return.

Deferrals of interest due to COVID-19

Many lenders have recently allowed borrowers with investment property loans to defer repayments for a period of time.

While repayments are being deferred, interest (and fees) will usually be added to the loan balance (i.e., the deferred interest will be 'capitalised').

However, it is important to recognise in such situations that, while repayments are not being made during the relevant period, borrowers continue to ‘incur’ the interest during that time. 

Further, interest will continue to be calculated and will accrue on both the unpaid principal sum of the loan and the unpaid (i.e., capitalised) interest.  The interest that accrues on the unpaid or capitalised interest is referred to as ‘compound interest’.

Importantly, the ATO has previously acknowledged that, if the underlying, or ordinary, interest is deductible, then the compound interest will also be deductible. 

Accordingly, interest expenses (including any compound interest) will generally be deductible to the extent the borrowed monies are used for income producing purposes (such as where the borrowed funds are used to purchase a rental property).

However, interest on a loan will not be deductible to the extent to which the borrowed funds are used for private purposes (e.g., to purchase a home, a private boat, or to pay for a holiday).

Editor: Note that, despite the name, "penalty interest" is not always "in the nature of interest" and, in some cases, may not be deductible (e.g., due to the expense being capital in nature).

Simplified home office expense deduction claims due to COVID-19

Given that many Australians continue to work from home due to COVID-19, the ATO has updated its Practical Compliance Guideline which allows taxpayers working from home to claim a rate of 80 cents per hour, by keeping a record of the number of hours they have worked from home, rather than needing to calculate specific running expenses.

The application of the Guideline has been extended so that it now applies from 1 March 2020 until 31 December 2020. 

Companies holding meetings and signing documents electronically

The Government has made another determination extending the timeframe within which companies can hold meetings electronically and enabling electronic signatures to be used, to relieve companies from problems they face due to the Coronavirus situation.

This determination is intended to be in effect until (and will be repealed from) 22 March 2021, unless the Government determines otherwise.

Editor: Note that the Government has also released exposure draft legislation to make these reforms (in respect of virtual meetings and electronic document execution) permanent.

COVID-19 and loss utilisation

The ATO understands the way some businesses operate has been impacted as a result of COVID-19.

Some of these impacts may have resulted in changes that affect whether they are able to utilise their carried-forward losses in the current or a future income year.

For companies to utilise their carried-forward losses in a particular year, they need to satisfy the continuity of ownership test or, if they fail that test, they need to satisfy the business continuity test ('BCT').  

Whether a company can utilise carried-forward losses requires a consideration of its facts and circumstances.

Generally, a company that has completely closed its business with no intention to resume will fail the BCT.  However, a company that has temporarily closed its business may still be able to satisfy the BCT.

Importantly, the mere receipt of JobKeeper payments will not cause a company to fail the BCT.

Employees on JobKeeper can satisfy the ‘work test’

The Australian Prudential Regulation Authority ('APRA') has confirmed that, where an employer is receiving the JobKeeper wage subsidy for an individual, superannuation funds should consider the individual to be ‘gainfully employed’ for the purpose of the ‘work test', even if that individual has been fully stood down and is not actually performing work.

As such, superannuation funds can assume that all members in receipt of the JobKeeper subsidy satisfy the ‘work test’ when determining whether they can make voluntary superannuation contributions.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

August newsletter - update on "work from home shortcut' method.

80 cents per hour 'shortcut' method for home office expenses has been extended

Back in April 2020 the ATO announced that a 'shortcut' method was to be made available to use from 1 March 2020 until 30 June 2020 for individuals claiming home office expenses due to COVID-19.   The ATO has recently announced an extension of this shortcut method to also include 1 July 2020 to 30 September 2020.

In summary, a taxpayer can claim a deduction of 80 cents for each hour they work from home due to COVID-19 as long as the individual is:

q   working from home to fulfil their employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls; and

q   incurring additional deductible running expenses as a result of working from home.

A taxpayer does not have to have a separate or dedicated area of their home set aside for working, such as a private study.

The shortcut method rate covers all deductible running expenses such as: electricity and gas  used for heating/cooling and running electronic items used for work purposes; depreciation and repair of assets used for work purposes; work-related phone and internet costs.

Editor:  If you are working from home due to COVID-19 and have queries about what deductions you can claim, contact our office.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

EMPLOYERS ! overdue super contributions - amnesty is ending

September 2020

Superannuation guarantee rate increase update

Recently, arguments both for and against increasing the rate of compulsory superannuation guarantee ('SG') have continued to be tossed around!

The SG is the compulsory amount of superannuation an employer must pay into an eligible employee’s chosen super fund.

The rate of SG has been frozen at 9.5% of an employee’s ordinary wages since July 2014, but from 1 July 2021 it is due to incrementally increase (by 0.5% each financial year) until it ultimately reaches 12% in July 2025. 

As a result, the superannuation guarantee rate is currently set to increase to 10% from 1 July 2021.

Editor: At this stage, despite a lot of political rhetoric and media coverage, no change has been announced to change these set plans.

Superannuation guarantee amnesty ends 7 September 2020

Speaking of the superannuation guarantee, time is rapidly running out for employers to apply for the SG amnesty and catch up on past unpaid super without incurring a penalty.

The ATO encourages employers to apply for the amnesty and make payments as early as they can. 

Importantly, eligible amnesty amounts paid by 7 September 2020 are tax deductible!

The ATO must receive amnesty applications by 11:59 pm (local time) on 7 September 2020. 

Broadly, to be eligible for the amnesty:

-   the unpaid super must be for a quarter between 1 July 1992 and 31 March 2018;

-   the shortfall cannot have already been disclosed to the ATO; and

-   the ATO cannot already be examining the shortfall.

If an employer cannot pay in full, the ATO will work with them to set up a flexible payment plan.

Superannuation guarantee payments and PRNs

Applicants will need their payment reference number (‘PRN’) to make SG amnesty payments. 

The ATO has been sending employers their PRN within 14 business days of receiving their application, however, if an amnesty application has not been lodged by mid-August, they can get their PRN:

q   from a super guarantee charge related statement issued for the same Australian Business Number; or

q   by phoning the ATO on 1800 815 886 between 8.00am and 6.00pm from Monday to Friday.

Editor: If you wish to discuss the implications of the SG amnesty and any related payment plans (or indeed anything else with respect to SG obligations and liabilities) please contact our office to discuss.

Ref: SG amnesty ends 7 September 2020, ATO website, August 3 2020

JobKeeper 2.0 - tweaks to the 'Decline in Turnover' Tests

On 21 July 2020, the Government announced that the JobKeeper Payment (‘JKP’) would be extended until 28 March 2021 (i.e., for a further six months beyond its original end date of 27 September 2020). 

As a result, JKPs will now be made over two separate extension periods, being:

-   Extension period 1 – which covers the seven new JobKeeper fortnights that commence on 28 September 2020 and end on 3 January 2021; and

-   Extension period 2 – which covers the six new JobKeeper fortnights that commence on 4 January 2021 and end on 28 March 2021.

Furthermore, on 7 August 2020, the Government announced adjustments to JobKeeper 2.0 to expand the eligibility criteria for JKP, primarily in the wake of the tougher COVID-19 restrictions recently imposed in Victoria. 

These adjustments will apply nationwide, and the crucial amendments include adjustments to the proposed new ‘Decline in Turnover’ tests applicable from 28 September 2020.

More specifically, to qualify for the JKP in the two new extension periods (outlined above), businesses will now only have to demonstrate that their actual GST turnovers have decreased (in accordance with the applicable rates) in the previous quarter.

For these purposes, the applicable rate of decline in turnover required to qualify for the JKP is determined in accordance with the existing rules (e.g., 30% for entities with an aggregated turnover of $1 billion or less). 

Specifically, to be eligible for the JKP Extension Period 1 (i.e., from 28 September 2020 to 3 January 2021), businesses only need to demonstrate an applicable decline in turnover in the September 2020 quarter.

This differs from the previously announced JobKeeper 2.0, where they would have been required to show that they had suffered an applicable decline in turnover in both the June and September 2020 quarters.

To be eligible for the JKP Extension Period 2 (i.e., from 4 January 2021 to 28 March 2021) businesses only need to demonstrate an applicable decline in turnover in the December 2020 quarter.

Whereas under the previously announced JobKeeper 2.0, they would have been required to show that they had suffered an applicable decline in turnover in each of the June, September and December 2020 quarters.

Importantly, the dual payment rate system originally proposed in JobKeeper 2.0 will remain, with the full rate of payment decreasing from $1,500 to $1,200 per fortnight from 28 September 2020 and then to $1,000 per fortnight from 4 January 2021. 

The proposed reduced rates (being $750 from 28 September 2020 and $650 from 4 January 2021) will also remain for employees and business participants who worked fewer than 20 hours per week in the relevant period.

Ref: Extension of the JobKeeper Payment, Treasury fact sheet, 7 August 2020

Expanded eligible employee definition for JobKeeper

Additional recently implemented JobKeeper changes mean more employees will qualify for JobKeeper payments from 3 August 2020.

This is primarily because:

-   the eligible employee test has been extended from 3 August 2020 to include eligible employees who were employed on 1 July 2020 (in addition to the original 1 March 2020 employment date) who are not currently nominated for the JKP by another entity; and

-   from the fortnights commencing on 3 August 2020 and 17 August 2020 (i.e., JobKeeper fortnights 10 and 11) employers will have had until 31 August 2020 to meet the ‘wage condition’ for all new eligible employees included in the JobKeeper scheme under the 1 July eligibility test.

Importantly, as a result of these recent tweaks to the JobKeeper scheme, participating employers should have provided any new eligible employees with an employee nomination form.

The onus is on employers to ensure all of their employees now eligible for JKPs as a result of the new 1 July test are given the opportunity to be included.

Ref: More employees now able to access JobKeeper, ATO media release, 19 August 2020.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

ATO - JOBKEEPER & work from home update

Coronavirus: Government’s JobKeeper Payment

A major part of the Government’s response to the Coronavirus (or 'COVID-19') pandemic is the ‘JobKeeper Payment’ Scheme.

The JobKeeper Payment is a wage subsidy that will be paid through the tax system (i.e., it will be administered by the ATO) to eligible businesses impacted by COVID-19.

Under the scheme, eligible businesses will receive a payment of $1,500 per fortnight per eligible employee and/or for one eligible business participant (i.e., an eligible sole trader, partner, company director or shareholder, or trust beneficiary).

The subsidy will be paid for a maximum period of six months (i.e., from 30 March 2020 up until 27 September 2020).  It will be paid to eligible businesses monthly in arrears, with the first payments to employers commencing from the first week of May 2020.

The JobKeeper Payment will ensure that eligible employees (and, where applicable, eligible business participants) receive a gross payment (i.e., before tax) of at least $1,500 per fortnight for the duration of the scheme.

An employer will only be eligible to receive a JobKeeper Payment in respect of an ‘eligible employee’ if, at the time of applying:

-    for employers with an aggregated annual turnover of $1 billion or less - the employer estimates that their projected GST turnover has fallen (or is likely to fall) by 30% or more; or

-   for employers with an aggregated annual turnover of more than $1 billion - the employer estimates that their projected GST turnover has fallen (or is likely to fall) by 50% or more; and

-   the employer is not specifically excluded from the scheme (e.g., one that is subject to the Major Bank Levy, one that is in liquidation, etc.).

For an employer that is registered as a charity with the Australian Charities and Not-for-Profits Commission (excluding universities and non-government schools registered as charities, which are subject to the 30% or 50% decline in turnover tests, as outlined above), a 15% decline in turnover test applies.

Importantly, eligible employers must actually elect to participate in the JobKeeper Scheme via an application to the ATO.  In making such an application, an employer will also need to:

-    Provide information to the ATO on all eligible employees (i.e., confirming the eligible employees were engaged as at 1 March 2020 and are currently employed by the business, including those who have been stood-down or re-hired). Treasury has indicated that, for most businesses, the ATO will use Single Touch Payroll (‘STP’) to pre-populate these details.

-    Continue to provide information to the ATO on a monthly basis, including the number of eligible employees employed by the business and details of its turnover.

The ATO has available on its website an online form which can be used by employers to register their interest in the JobKeeper Payment Scheme.

Editor:  Please contact our office If you have any queries in relation to the JobKeeper Scheme.

Shortcut method to claim deductions if working from home

As the situation around COVID-19 continues to develop, the ATO understands many employees are now working from home.  To make it easier when claiming a deduction for additional running costs you incur as a result of working from home, special arrangements have been announced.

A simplified method has been introduced that allows you to claim a rate of 80 cents per hour for all your running expenses, rather than having to calculate the additional amount you incurred for specific running expenses.

This simplified method will be available to use from 1 March 2020 until 30 June 2020.  You may still use one of the existing methods to calculate your running expenses if you would prefer to.

You can claim a deduction of 80 cents for each hour you work from home due to COVID-19 as long as you are:

-  Working from home to fulfil your employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls; and

-   Incurring additional deductible running expenses as a result of working from home.

You do not have to have a separate or dedicated area of your home set aside for working, such as a private study.

Editor:  Please contact our office if you need more information about this deduction.

SMSFs may be able to offer rental relief to related party tenants

As a result of the financial effects of the COVID-19 pandemic, some self-managed superannuation funds (‘SMSFs’) which own real property may want to give a tenant – who is a related party – a reduction in rent because the related party tenant has had a collapse in revenue.

Charging a related party a price that is less than market value is usually a contravention of the strict legislative rules SMSFs and their trustees are required to follow.

The ATO has recently advised that its approach for the 2019–20 and 2020–21 financial years is that it will not take action if an SMSF gives a tenant – even one who is also a related party – a temporary rent reduction, waiver or deferral because of the financial effects of COVID-19 during this period.

If there are temporary changes to the terms of the lease agreement in response to COVID-19, it is important that the parties to the agreement document the changes and the reasons for the change.  You can do this with a minute or a renewed lease agreement or other contemporaneous document. 

Editor:  Please contact our office if you have an SMSF that could be impacted by a lease with a tenant, where the tenant cannot afford to pay some or all of its rent because of the economic consequences of COVID-19.

ATO reminder about salary packaged super

The ATO has provided employers with a recent reminder that, from 1 January 2020, there has been a legislative change to ensure that when an employee sacrifices pre-tax salary in return for an additional concessional contribution into superannuation, it will not result in a reduction in the 9.5% Superannuation Guarantee (‘SG’) obligation their employer has even though doing so reduced their Ordinary Time Earnings.

The ATO has provided information for employers, payroll software providers and intermediaries who may need to change the way they calculate SG.

The ATO advises that, from 1 January 2020, you calculate the minimum amount of SG on the employee's ‘OTE base’.  This is the sum of the employee's OTE and any OTE amounts they sacrifice in return for super contributions.

Additionally, super contributions to an employee's fund under an effective salary sacrifice arrangement no longer count towards an employer’ super guarantee obligations.

Editor:  If your business allows for salary sacrifice arrangements, feel free to contact our office to ensure that you are calculating SG correctly.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

COVID19 - HOME OFFICE running costs - simplified method

April 2020 - ATO announces short cut method for claiming home office running costs

The Australian Taxation Office (‘ATO’) has announced a temporary simplified short cut method to make it easier for individual taxpayers to claim deductions for additional running expenses incurred (e.g., additional heating, cooling and lighting costs), as a result of working from home due to the Coronavirus pandemic. Refer to the ATO’s Media Release of 7 April 2020.

Based on the announcement, the ATO will allow individuals to claim a deduction for all running expenses incurred during the period 1 March 2020 to 30 June 2020, based on a rate of 80 cents for each hour an individual carries out genuine work duties from home. This is an alternative method to claiming home running expenses under existing arrangements, which generally require an analysis of specific running expenses incurred and more onerous record-keeping.

ATO’s 80 cents per hour method covers all running costs

The 80 cents per hour method is designed to cover all deductible running expenses associated with working from home and incurred from 1 March 2020 to 30 June 2020, including the following:

• Electricity expenses associated with heating, cooling and lighting the area at home which is being used for work.

• Cleaning costs for a dedicated work area.

• Phone and internet expenses.

• Computer consumables (e.g., printer paper and ink) and stationery.

• Depreciation of home office furniture and furnishings (e.g., an office desk and a chair).

• Depreciation of home office equipment (e.g., a computer and a printer).

This means that, under the 80 cents per hour method, separate claims cannot be made for any of the above running expenses (including depreciation of work-related furniture and equipment). As a result, using the 80 cents per hour method could result in a claim for running expenses being lower than a claim under existing arrangements (including the existing 52 cents per hour method for certain running expenses). Furthermore, according to the ATO’s announcement, under the 80 cents per hour method:

(a) there is no requirement to have a separate or dedicated area at home set aside for working (e.g., a private study)

(b) multiple people living in the same house could claim under this method (e.g., a couple living together could each individually claim running expenses they have incurred while genuinely working from home, based on the 80 cents per hour method)

(c) an individual will only be required to keep a record of the number of hours worked from home as a result of the Coronavirus, during the above period. This record can include time sheets, diary entries/notes or even rosters.

Working from home running expenses that are incurred before 1 March 2020 (and/or incurred from this date where an individual does not use the 80 cents per hour method) must be claimed using existing claim arrangements. Broadly, these existing claim arrangements require:

• an analysis of specific running expenses incurred as a result of working from home; and

• more onerous record-keeping (e.g., the requirement to provide receipts and similar documents for expenses being claimed, as well as the requirement to maintain a time usage diary or similar record to show how often a home work area was used during the year for work purposes).