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Coronavirus stimulus: JobKeeper Payment

In this latest round of Coronavirus stimulus, the government has bought out the big guns in an effort to help people keep their jobs amidst the economic downturn. The "JobKeeper Payment" is a part of a $130bn wage subsidy scheme that is designed to provide a fortnightly payment of $1,500 per employee. This new payment will be paid to employers, for up to 6 months for each eligible employee that was on their books on 1 March 2020 and is retained or continues to be engaged by the employer. Eligible employers include business structured through companies, partnerships, trusts, sole traders, and not-for-profits (including charities). Businesses with a turnover of less than $1bn must show that their turnover will be reduced by more than 30% relative to a comparable period a year ago (of at least a month) to be eligible for the payment. Businesses with a turnover of $1bn or more need to demonstrate that their turnover will be reduced by more than 50% relative to a comparable period a year ago (of at least a month). Employees that will be eligible for the payment are full-time and part-time employees, including stood down employees, self-employed individuals, and casual employees that have been with their employer for at least the previous 12 months. The eligible employee will also need to be either Australia residents, NZ citizens in Australia who hold a subclass 444 special category visa, migrants who are eligible for JobSeeker payment or Youth Allowance (Other). The program is now open for applications through the ATO, eligible employers need to include supporting information demonstrating the relevant downturn in the business. In addition, employers will also be required to report the number of eligible employees employed by the business to the ATO on a monthly basis. The first payments are expected to flow to eligible businesses in the first week of May as monthly arrears. According to the government, where employers participate in the scheme, they must pay eligible employees a minimum of $1,500 per fortnight before tax, even if the eligible employee ordinarily receives less than that amount. If an employee ordinarily receives more than $1,500, they should continue to receive their regular income according to their prevailing workplace arrangements. Individuals eligible for both the JobKeeper Payment and the JobSeeker Payment will only be eligible for one type of payment. In addition, where an employee has multiple employers, only one employer will be eligible to receive the payment. The employee will need to notify their primary employer to claim the JobSeeker Payment on their behalf. The claiming of the tax-free threshold will in most cases be sufficient notification that an employer is the employee's primary employer.

Coronavirus concessions: State governments

Following on from the Federal government's $17.6bn stimulus package unveiled last week for the coronavirus (COVID-19), some State governments have announced various concessions to support businesses and keep the local economy moving during this difficult and uncertain time.

  • NSW - businesses with payrolls of up to $10m will have their payroll tax waived for 3-months. In addition, the government will also seek to bring forward the next round of payroll tax cuts by raising the threshold limit to $1m starting the 2020-21 financial year. For small businesses including bars, cafes, restaurants and tradies, the government will waive a range of fees and charges.
  • Queensland - a new $500m concessional loan facility will be available and comprise of loans of up to $250,000 with an initial interest-free period for businesses to retain staff. In addition, payroll tax deferral of 6-months will be extended to all affected businesses across the state.
  • Western Australia - household fees and charges will be frozen until at least 1 July 2021 (including electricity, water, motor vehicle charges, emergency services levy, and public transport fares). The energy assistance payment will be increased to $600 for eligible concession cardholders including pensioners. Small to medium businesses with a payroll between $1m and $4m will receive a one-off grant of $17,500 and the payroll tax threshold increase to $1m will also be brought forward to 1 July 2020. In addition, affected employers that pay $7.5m or less in Australian Taxable Wages can also apply to defer payment of their 2019-20 payroll tax until 21 July 2020.
  • Tasmania - small businesses in the hospitality, tourism, seafood and exports sectors with a turnover of less than $5m will have access to interest-free loans for the purpose of purchasing equipment or restructuring business operations. Payroll tax will be waived for this financial year for hospitality, tourism and seafood industry businesses. Other affected small to medium businesses with an annual payroll of up to $5m in Australian Wages can also apply to have their payroll tax payment waived. A youth employment payroll tax rebate scheme will be implemented from 1 April 2020 and a one-off $5,000 grant will be provided to businesses that hire an apprentice or trainee. There will also be emergency relief payments to individuals and families as well as various other grants and measures to help the tourism sector, communities, front line workers, and metal health organisations.

ATO coronavirus administrative support

ATO has recently announced that it will implement a series of administrative measures to assist taxpayers experiencing financial difficulty as a result of the coronavirus (COVID-19) pandemic. The measures that will apply is similar to those for taxpayers affected by the bushfires. However, one important point of difference is that while the bushfire measures applied automatically to particular geographical areas, assistance for those impacted by COVID-19 will not be automatically implemented. As such, taxpayers that have been affected will need to contact the ATO to discuss their situation in order to come up with a tailored support plan. Businesses on a quarterly reporting cycle for GST will be able to change their reporting and payment to monthly in order to get quicker access to GST refunds. However, the ATO notes that businesses can only make the change from the start of a quarter, so any changes now will take effect from 1 April 2020, and once a change is made you must keep reporting monthly for 12 months before you can elect to revert back to quarterly reporting. Additionally, businesses registered for fuel tax credits that change to a monthly GST reporting cycle will also need to claim fuel tax credits monthly. Another thing to note is that changing your GST reporting cycle to monthly doesn't mean you have to change your PAYG withholding reporting cycle, each is managed separately. Businesses that are quarterly PAYG instalment payers can vary their PAYG instalments on activity statement for the March 2020 quarter. To do this, they must lodge a revised activity statement before the instalment due date and before their tax return is lodged. Any business that vary their PAYG instalment rate or amount may also be eligible to claim a refund for any instalments made for the September and December 2019 quarters. In addition to the above, the ATO will defer by up to 4 months the payment date of amounts due through the BAS (including PAYG instalments), income tax assessments, FBT assessments and excise. It will also consider remitting any interest and penalties applied to tax liabilities incurred after 23 January 2020 for any businesses affected by COVID-19. Taxpayers that need help with paying existing and ongoing tax liabilities are encouraged to contact the ATO to arrange a low-interest payment plan. The ATO has also clarified that emergency accommodation, food, transport, medical or other assistance provided by employers to employees affected by COVID-19 may be exempt from FBT depending on the circumstances. However, despite the concessions offered, it notes that employers will still need to meet their ongoing super guarantee obligations for their employees. The ATO says by law, it cannot vary the contribution due date or waive the super guarantee charge where super guarantee payments are late or unpaid.

Is the ATO blocking you?

Have you tried to contact the ATO and were unable to get through to speak to an officer or was outright blocked? Well, you're not alone, according to the latest figures released (year to date 31 December 2019), the ATO failed at its target of answering 80% of general calls within 5 minutes, while blocking almost 500,000 calls. For the year to 31 December 2019, the ATO answered a total of around 3.7m calls within the 5-minute target. 252,196 calls, almost 7%, were abandoned, and 491,186 calls, almost 13% were blocked. During tax time, a total of around 3m calls were answered within the 5-minute target. 207,741 calls, around 6%, were abandoned, and 485,348, or 16% of calls were blocked. According to the ATO, it blocks calls from "entering the ATO environment" when inbound calls are expected to significantly exceed its capacity. While the ATO says blocking calls minimises the risk of taxpayers queuing for excessively long periods of time then subsequently abandoning the call without receiving service, it is cold comfort for those whose calls were blocked. It is unknown how long calls are being blocked during these peak periods as the ATO does not provide data on this measure, but this should be of particular concern for taxpayers in areas with unstable or poor phone reception and those who are calling during busier times such as after a natural disaster or during tax time. For the prior year (2018-19), the ATO met and exceeded their target with 81% of calls answered within 5 minutes and goes up to 87% during tax time. Almost 6m calls were answered by the ATO in that year with only 6% of calls abandoned (384,648) and 6% (372,270) calls blocked. Just in relation to tax time, around 2.5m calls were answered, with 5% (133,816) calls abandoned and 2% (56,292) calls blocked. Looking at the data, there appears to be a worrying increase in the percentage of calls being blocked from 2018-19 to 2019-20 during both tax time (2% vs 16%) and over the year (6% vs 13%), however, the effect is much more pronounced during tax time. While the ATO does not provide a cause as to why more calls are being blocked, it could be a combination of more calls to the ATO and static staffing levels. If you've been blocked, or are unable to reach the ATO, contact us. According to ATO data, 90% of tax practitioner calls were answered within 2 minutes and zero calls were blocked. We can help you get through to the ATO and get the answers you're looking for.

Scam targeting natural disaster victims

Victims of the recent natural disasters beware, there is an SMS scam circulating that purports to give you "an 8% bonus" on your 2020 tax return. The scam urges victims to start the process by filling out a form and provides a link to a what looks like the genuine myGov website. According to the ATO, this website is fake and this scam is a classic case of scammers impersonating the ATO in an effort to collect personal information including names, birth dates, addresses, emails, phone numbers and online banking login details. Once this information is obtained, scammers can use it to commit identify theft, including porting your phone, accessing your bank account, obtaining a loan in your name, lodge tax returns, steal your superannuation, commit other types of fraud or they could on sell the information to others to commit these offences. The ATO notes that over the past few years, it has seen an increasing number of reports of scammers contacting members of the public pretending to be from the ATO by SMS, email and phone. The scams are also becoming more sophisticated, such as the use of software to imitate ATO phone numbers, and the use of a three-way conversation between the scammer, the victim and another scammer impersonating the victim's tax agent. If you receive a call from someone saying they are from the ATO but aren't sure, the best course of action is to hang up and call the ATO back on the appropriate number listed on its website, or call your tax agent on their listed number to seek advice. While the ATO does send SMS, emails and calls taxpayers, remember, the ATO would never: send an SMS or email asking you to click on a hyperlink to log into myGov or other government websites; ask for personal identifying information in order to receive a refund; use aggressive or rude behaviour, or threaten you with immediate arrest, jail or deportation; project its number onto caller ID; request a payment of a debt via cardless cash, iTunes or Google Play cards, pre-paid Visa cards, cryptocurrency, or direct credit to a personal bank account. If you've fallen victim to this or other tax-related scams, there's no shame, with increasingly sophisticated scams in play, last year over 15,000 people reported to the ATO that they provided scammers with their personal identifying information. The sooner you notify the ATO, the better the outcome.

Policing the tax man

Do you know who to turn to when you have a complaint about the way you've been treated by the Tax Office? Whether you're an individual or business, the Inspector-General of Taxation and Taxation Ombudsman (IGTO) should be your first port of call. The department has two distinct, yet intertwined functions. As the Taxation Ombudsman, the IGTO provides all taxpayers with an independent complaints investigation service. One of the main roles of the IGTO is that it must investigate complaints by taxpayers (or their representatives) where a Tax Official's actions of inactions, decisions or systems have affected them personally. As the Inspector General of Taxation, it also conducts reviews and provide independent advice and recommendations to the Government, ATO and other departments. In the first quarter of 2019-20, the IGTO received 909 complaints, a 14% increase over the same period in 2018-19. 82.4% of the complaints received were from self-represented individuals and approximately 10-12% of the individuals being small business taxpayers. Represented taxpayers were largely represented by a family member or friend, with around a third being represented by an accountant or tax practitioner. The top 5 issues raised in complaints for the first quarter remains largely the same as the previous year, that is, debt collection, payments to the taxpayer, lodgement and processing, communications, and audit and review. According to the IGTO, issues surrounding debt collection have featured consistently among the complaints lodged since the assumption of the Tax Ombudsman service. While the IGTO has direct access to ATO officers, records and systems, it cannot investigate how much tax needs to be paid, provide advice regarding structure of tax affairs or assist with decisions made by other government agencies apart from the Tax Practitioners Board. Examples of what the IGTO can investigate and assist taxpayers with include the following: extension of time to pay; review the ATO's debt recovery action; investigate delays with processing tax returns; follow up on delays in responses; confirm whether relevant information has been considered for your matter; better understand the actions and decisions taken by the Tax Office; and identify other options you may have and the agencies that can help you. Taxpayers can approach the IGTO at any stage of their dispute with the Tax Office, although it is recommended that they first approach the ATO officer/manager assigned to their case, followed by the complaints section of the Tax Office, before lodging an IGTO complaint. Complaints can be made online, via phone or post, and services are offered in languages other than English as well as for hearing, sight or speech impaired.

Insurance payouts: are they taxable?

In recent months, parts of Australia have been battered by a combination of fire and floods. As people try to piece their lives together in the aftermath, insurance payouts go a long way in helping rebuild homes and replace lost items. However, you'll need to beware if you receive an insurance payout in relation to your business, home business or rental property, as there may be tax consequences. While insurance payouts relating to personal property (including household items, furniture, electrical goods, private boats and cars) and your main residence are not taxed. If you keep a home office or run a business from home, and you receive an insurance payout in relation to the property being damaged or destroyed, there may be CGT consequences. Similarly, if you have a rental property or rented out a room of your main residence which later becomes damaged or destroyed and is subject to an insurance payout, you will need to include the insurance payout amount when you work out whether you have a capital gain or loss. This applies even if you were casually renting out a room, your home, or (part of) your farm as short stay accommodation. For those operating a business, the tax consequences of an insurance payout are even more complicated depending on what the money received is for. For example, destroyed business premises would have CGT consequences, while any insurance amount you receive for repair of damage will need to be included in your assessable income. If an amount is received in relation to damaged or destroyed trading stock, it must be included as assessable income. For any depreciating assets used in generating assessable income (ie office equipment), you will need to calculate the difference between the amount received from insurance and its book value at the time it was destroyed. Any excess would need to be included as assessable income while a deduction can be claimed for any losses. For depreciating assets in the low-value pool, you will need to reduce the closing pool balance by the amount of insurance payment you receive. In addition, the tax treatment will need to be modified if an asset was partly used to produce assessable income and in a low-value pool. The tax treatment of insurance payments for work cars are similar to that of depreciating assets described above, except if you used the logbook method for claiming car expenses. Businesses that correctly informed their insurer of their GST status when they took out the insurance will not have to pay GST on the insurance payment and may be entitled to GST credits for purchases that are made with the payment.

New measures to combat illegal phoenixing

Many of you have heard of illegal phoenixing but are not sure of what exactly it encompasses. While there is no legislative definition of illegal phoenixing or phoenixing activity, at its core, it is the use of serial deliberate insolvency as a business model to avoid paying company debts. In a report in 2018, it is estimated that potential illegal phoenixing has an annual direct cost to businesses, employees and governments of between $2.85bn and $5.13bn.

It is no wonder then the government has been on the war path to stamp out the practice. Specific measures targeting illegal phoenixing has recently been passed including:

  • new criminal offences and civil penalty provisions for company officers that fail to prevent the company from making "creditor-defeating dispositions" and other persons (including pre-insolvency advisers, accountants, lawyers, other business advisers etc) that facilitate a company making a "creditor-defeating disposition".
  • liquidators and ASIC can seek to recover the assets for the company's creditors, and in some cases, creditors can recover compensation from a company's officers and other persons responsible for making a "creditor-defeating disposition".
  • preventing abandonment of companies by a resigning director or directors, leaving the company without a natural person's oversight. Practically, under the new laws, a director cannot resign or be removed by a resolution of company members if doing so would leave the company without a director (unless the company is being wound up).
  • if the resignation of a director is reported to ASIC more than 28 days after the purported resignation, the resignation is deemed to take effect from the day it is reported to ASIC. However, a company or director may apply to ASIC or the Court to give effect to the resignation notwithstanding the delay in reporting the change to ASIC.
  • the Commissioner of Taxation can now collect estimates of anticipated GST liabilities (including LCT and WET liabilities). The Commissioner can also recover director penalties from company directors to collect outstanding GST liabilities (including LCT and WET) and estimates of those liabilities.
  • Commissioner of Taxation can also to retain a refund to a taxpayer that has other outstanding lodgements or information that needs to be provided.

Legitimate businesses need not fret, safe habour provisions for genuine business restructures and 

Changes to student loans

With the average annual cost of an undergraduate degree for Australian students hovering around the $10,000 mark, a 3-year degree could easily cost upwards of $30,000 depending on what you're studying and where you're studying. In the current employment market, rife with short-term employment and contracting whilst at the same time maintaining the requirement for higher qualifications, an average university student could easily end up with a much larger than average debt due to changing courses, units of study, or degrees. To help these students, the new year ushers in a welcome student loan change in the form of a new combined, renewable HELP loan limit. The combined HELP loan limit replaces the current FEE-HELP limit and is a cap on what university students can borrow to cover the cost of tuition. If you're a university student with an existing FEE-HELP, VET FEE HELP and/or VET Student Loan, the debt will be carried over and count towards your new HELP loan limit. Any previous HECS-HELP debt will not be included in the HELP loan limit, but new HECS-HELP loans commencing from 1 January 2020 will be included. The new combined HELP loan limit is an increase on previous cap, which means that most students will have access to additional funds up to a limit of $106,319 for 2020. While medicine, dentistry, and veterinary science students may have access to additional funds for their study up to a maximum of $152,700 for 2020. Remember, the limit is indexed to increase on 1 January (with CPI) every year so if you're close to the limit, it may be good practice to check to see if you're entitled to borrow extra at the beginning of each year of study. Another thing to note is that the new combined HELP loan limit is renewable. That is, any repayments you make on your HELP debt will increase your available balance, up to the limit. Both voluntary and compulsory repayments will credit your HELP balance. However, any PAYG repayments will not credit your HELP balance until you complete your tax return for the year, and it is processed by the ATO. This change is in addition to other changes introduced in 2019 relating to the minimum HELP repayment threshold. Both the repayment threshold and the repayment rate were lowered so that only those earning below $45,881 escaped any form of repayment. Based on the median starting salary for female undergraduates (ie those with Bachelor degrees) of $60,000, the repayment rate would be 3% which would equate to a yearly payment of $3,189.57 if the full HELP loan limit of $106,319 was used.

Super guarantee loophole closed

The concept of super guarantee should be a very familiar to everyone, particularly anyone who is an employee, as it makes up the bulk of future retirement income. You may not know the particular name, but you would know about the requirement for employers to contribute 9.5% of your salary or wages into a nominated super account. You could also be salary sacrificing an amount of your salary and wages to put extra into your super. Did you know that, previously, salary sacrificed amounts counted towards employer contributions which meant a potential reduction in an employer's mandated super guarantee contributions. In addition, employers were also able calculate super guarantee obligations on a lower post salary sacrificed earnings base. Depending on the type of employment agreement you have with your employer, if you salary sacrificed an amount equal to or exceeding the super guarantee that the employer was required to pay, your employer could've potentially not made any additional contributions under the super guarantee. Therefore, employees who salary sacrificed could've unknowingly been short-changed and end up with lower super contributions as well as a lower salary to the tune of thousands. However, this all changed from 1 January 2020, from that date, amounts that an employee salary sacrifices to superannuation cannot reduce an employer's super guarantee charge, and do not form part of any late contributions an employer makes that are eligible to be offset against the super guarantee charge. From that date, to avoid a shortfall in super guarantee charge, employers must contribute at least 9.5% of an employee's ordinary time earnings (OTE) base to a complying super fund. OTE base consists of their OTE and any amounts sacrificed into superannuation that would've been OTE, but for the salary sacrifice arrangement. If the employer does not contribute the full amount of the super guarantee, they will have a super guarantee shortfall which is subject to a non-deductible penalty (super guarantee charge). The amount of shortfall is calculated by reference to their employee's total salary or wages base, which includes any amounts sacrificed into superannuation. There's been many prominent cases in the media of employees being paid the incorrect amount of wages and super by a range of employers. If you're unsure whether you've been short-changed in terms of super contributions from your employer, we can help you work that out.

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