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Additional new turnover tests

In order to be eligible for the JobKeeper Payment after 27 September 2020, businesses and not-for-profits will have to meet a further decline in turnover test for each of the two periods of extension, as well as meeting the other existing eligibility requirements for the JobKeeper Payment.  In order to be eligible for the first JobKeeper Payment extension period of 28 September 2020 to 3 January 2021, businesses and not-for-profits will need to demonstrate that their actual GST turnover has significantly fallen in the both the June quarter 2020 (April, May and June) and the September quarter 2020 (July, August, September) relative to comparable periods (generally the corresponding quarters in 2019).

In order to be eligible for the second JobKeeper Payment extension period of 4 January 2021 to 28 March 2021, businesses and not-for-profits will again need to demonstrate that their actual GST turnover has significantly fallen in each of the June, September and December 2020 quarters relative to comparable periods (generally the corresponding quarters in 2019).

Businesses and not-for-profits will generally be able to assess eligibility based on details reported in the Business Activity Statement (BAS).

Editor:  Please contact our office if you wish to discuss your business’ eligibility for JobKeeper payments.

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The extended JobKeeper Payment rates

From 28 September 2020 to 3 January 2021, the JobKeeper Payment rates will be:

  • $1,200 per fortnight for all eligible employees who, in the four weeks of pay periods before 1 March 2020, were working in the business or not-for-profit for 20 hours or more a week on average, and for eligible business participants who were actively engaged in the business for 20 hours or more per week on average in the month of February 2020; and
  • $750 per fortnight for other eligible employees and business participants.

 

From 4 January 2021 to 28 March 2021, the JobKeeper Payment rates will be:

  •  $1,000 per fortnight for all eligible employees who, in the four weeks of pay periods before 1 March 2020, were working in the business or not-for-profit for 20 hours or more a week on average and for business participants who were actively engaged in the business for 20 hours or more per week on average in the month of February 2020; and
  • $650 per fortnight for other eligible employees and business participants.

Businesses and not-for-profits will be required to nominate which payment rate they are claiming for each of their eligible employees (or business participants).

The JobKeeper Payment will continue to be made by the ATO to employers in arrears.  Employers will continue to be required to make payments to employees equal to, or greater than, the amount of the JobKeeper Payment (before tax), based on the payment rate that applies to each employee. This is referred to as the wage condition.

The eligibility rules for employees remain unchanged.

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Extension of the JobKeeper Payment

Sadly, many Australian businesses are a long way from trending back to ‘normal’ as we approach 27 September 2020, the original date that JobKeeper was set to end.  Thankfully the government has announced an extension of the JobKeeper Payment, with additional turnover qualifications.

The JobKeeper Payment, which was originally due to run until 27 September 2020, will now continue to be available to eligible businesses (including the self-employed) and not-for-profits until 28 March 2021.

The payment rate of $1,500 per fortnight for eligible employees and business participants will be reduced to $1,200 per fortnight from 28 September 2020 and to $1,000 per fortnight from 4 January 2021.  From 28 September 2020, lower payment rates will also apply for employees and eligible business participants that worked fewer than 20 hours per week.

From 28 September 2020, businesses and not-for-profits seeking to claim the JobKeeper Payment will be required to demonstrate that they have suffered an ongoing significant decline in turnover using actual GST turnover (rather than projected GST turnover).  Businesses and not-for-profits will be required to reassess their eligibility with reference to their actual GST turnover in the June and September 2020 quarters.  They will need to demonstrate that they have met the relevant decline in turnover test in both of those quarters to be eligible for the JobKeeper Payment from 28 September 2020 to 3 January 2021.

From 4 January 2021, businesses and not-for-profits will need to further reassess their turnover to be eligible for the JobKeeper Payment. They will need to demonstrate that they have met the relevant decline in turnover test with reference to their actual GST turnover in each of the June, September and December 2020 quarters to remain eligible for the JobKeeper Payment from 4 January 2021 to 28 March 2021.

To be eligible for JobKeeper Payments under the extension, businesses and not-for-profits will still need to demonstrate that they have experienced a decline in turnover of at least:

  •  50 per cent for those with an aggregated turnover of more than $1 billion;
  •  30 per cent for those with an aggregated turnover of $1 billion or less;
  •  15 per cent for Australian Charities and Not for profits Commission-registered charities (excluding schools and universities).

If a business or not-for-profit does not meet the additional turnover tests for the extension period, this does not affect their eligibility prior to 28 September 2020.

The JobKeeper Payment will continue to remain open to new recipients, provided they meet the existing eligibility requirements and the additional turnover tests during the extension period.

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COVID-19 and Division 7A relief

The ATO has announced some limited relief for private companies that have loans to their shareholders or related parties that are governed by what are referred to as “complying loan agreements”.

A complying loan agreement is entered into to avoid triggering an assessable deemed dividend that could potentially be equal to the amount of the loan from the private company.

When there is a complying loan agreement between a private company and a borrower, the borrower must make the minimum yearly repayment (MYR) by the end of the private company’s income year.  This avoids the borrower being considered to have received an unfranked dividend, generally equal to the amount of any MYR shortfall.

As a result of the COVID-19 situation, the ATO understands that some borrowers are facing circumstances beyond their control.  To offer more support, the ATO will allow an extension of the repayment period for those borrowers who are unable to make their MYR by the end of the lender’s 2019–20 income year (generally 30 June).

Requesting the extension

A request for a 12-month extension can be made through the completion of an online application.  Borrowers will be asked to confirm the shortfall, that the COVID-19 situation has affected them and that they are unable to pay the MYR as a result.

When the ATO approves an application, it will let the borrower know they will not be considered to have received an unfranked dividend.  This is subject to the shortfall being paid by 30 June 2021. It will not be necessary to submit further evidence with the application.

This particular streamlined process established by the ATO only applies to applications for an extension of up to twelve months for COVID-19 affected borrowers.   It is still open to a borrower to apply to obtain a longer extension of time outside the streamlined process.

Editor: If you have been affected by the COVID-19 situation and need more to time to make your minimum yearly repayment (MYR) in relation to complying loans from private companies, contact our office for assistance.

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Regulations confirm no SG obligation on JobKeeper payments where work is not performed

The federal government has registered the Superannuation Guarantee (Administration) Amendment (Jobkeeper) Payment Regulations 2020.

These regulations ensure that amounts of salary or wages that do not relate to the performance of work and are only paid to an employee to satisfy the wage condition for getting the JobKeeper payment are prescribed by the Regulations as excluded salary or wages.

The effect is that these amounts are excluded from the calculations of an employer’s superannuation guarantee shortfall and the minimum compulsory superannuation contribution an employer is required to make in respect of an employee to avoid a superannuation guarantee charge liability.

Likewise, the Regulations recognise that an employer is only entitled to a JobKeeper payment for its employees if the business has suffered a substantial decline in turnover.  In these circumstances, it is appropriate to require employers to only make minimum superannuation contributions in respect of amounts that are required to be paid to an employee for the performance of work.

Employers would not be required to make contributions in relation to additional amounts paid to satisfy the wage condition (for example, the amount by which $1,500 exceeds an employee’s normal pay).

Editor: If you are concerned about the calculation of compulsory superannuation for any employees supported by JobKeeper, please contact our office.

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Treasury Laws Amendment (2019 Measures No 3) Bill 2019

Treasury Laws Amendment (2019 Measures No 3) Bill 2019 has passed both Houses of Parliament and is now law.

Testamentary trusts and minors

This legislation contains amendments to ensure the tax concessions available to minors in relation to income from a testamentary trust only apply in respect of income generated from assets of the deceased estate that are transferred to the testamentary trust (or the proceeds of the disposal or investment of those assets).

Broadly speaking, when a trustee distributes income to a minor it is taxed at the highest marginal rate (plus Medicare levy).  However, there are certain exceptions to this rule.  One such exception is where the trust is a testamentary trust – being a trust that was established as a result of the will of a deceased individual.  Income from a testamentary trust is a type of ‘excepted trust income’ that is generally taxed at ordinary rates.

Prior to this legislation being passed, the previously existing law did not specify that the assessable income of the testamentary trust be derived from assets of the deceased estate (or assets representing assets of the deceased estate).  As a result, assets unrelated to a deceased estate that were injected into a testamentary trust may, subject to anti-avoidance rules, generate excepted trust income that was not subject to the higher tax rates on minors.  This was an unintended consequence, which allowed some taxpayers to inappropriately obtain the benefit of concessional tax treatment.

This legislation clarifies that excepted trust income of the testamentary trust must be derived from assets transferred to the testamentary trust from the deceased estate or from the accumulation of such income.

This change will apply in relation to assets acquired by or transferred to the trustee of a testamentary trust on or after 1 July 2019.

Please contact our office if you have any concerns about testamentary trusts making distributions to minor beneficiaries.

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Treasury Laws Amendment (2020 Measures No 3) Bill 2020

Treasury Laws Amendment (2020 Measures No 3) Bill 2020 has passed both Houses of Parliament and is now law.

Extending the Instant Asset Write-Off

This legislation amends the income tax law to allow a business with an aggregated turnover for the income year of less than $500 million to immediately deduct the cost of a depreciating asset (instant asset write-off).  The asset must cost less than a threshold of $150,000 and be first used or installed ready for use for a taxable purpose by 31 December 2020.  Without these amendments the $150,000 instant asset write-off would have ended on 30 June 2020.

By extending the previous end date of 30 June 2020 to 31 December 2020, the amendments give businesses additional time to access the $150,000 instant asset write-off for their acquisitions of depreciating assets, including those purchases that have been delayed by supply chain disruptions.  Further, the amendments extend cash flow support to businesses through the early stages of the recovery from the economic conditions caused by COVID-19.

It will be interesting to see if this timeframe is further extended at some later point.  Note that, come 1 January 2021, if there is no further extension, the $150,000 threshold for the instant asset write-off for depreciating assets will collapse to $1,000 and the turnover threshold for eligibility for the outright deduction of less than $500 million will fall to a turnover of less than $10 million.

Editor: Please contact our office if you are considering purchasing a depreciating asset for your business and want to know if you will be eligible for the instant asset write-off.

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COVID-19 and tax depreciation reports – are physical inspections necessary?

Property investors and businesses will often engage a specialist quantity surveyor to prepare a tax report on capital works and depreciation deductions available to them under the tax law in respect of their income-producing properties – for example, a rental property, office building or factory.

A thorough physical inspection of the property by a quantity surveyor plays a vital role in this process in order to, amongst other things:

  • identify all possible deductions available under the tax law;
  • provide accurate valuations of qualifying plant and building works;
  • provide supporting documentation of a taxpayer’s claims for depreciation and capital works deductions, which is prudent in the event of an ATO audit.

We have become aware that some quantity surveyors are promoting tax depreciation reports that do not include a physical inspection of the property due to COVID-19 precautions.

Usually the reports are provided, with an offer to do an inspection at a later time when it is possible to do so.

However, in some cases, no offer of a site inspection is made at all.

Where a physical inspection of premises is not performed, this increases the risk of deductions being missed or errors being made.  This could result in costly adjustments if a taxpayer has to subsequently amend their tax return or is audited.

Editor: Please contact our office if you require more information about using quantity surveyor tax depreciation reports.

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.

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Guidance on JobKeeper reporting via STP

The ATO has issued guidance to help employers reporting eligible employees and JobKeeper top-up payments through Single Touch Payroll (‘STP’).

For each eligible employee, employers must notify the ATO:

  • when an eligible employee started being paid JobKeeper payments;
  • top-up payments to employees earning less than $1500 per fortnight; and
  • when an employee is no longer eligible and JobKeeper payments need to be stopped.

The ATO says this process will be managed through the ‘STP Pay Event’ by entering the relevant JobKeeper description (as outlined below) in the ‘Other Allowances’ field.

To report the JobKeeper start fortnight for an eligible employee:

Use the description ‘JOBKEEPER-START-FNXX’ where ‘XX’ represents the JobKeeper fortnight from which the first payment is made.

Report the amount as ‘zero’, or as $0.01 if the software does not support reporting ‘zero’.

To report a top-up payment for an eligible employee ordinarily earning less than $1,500 per fortnight:

Use the description ‘JOBKEEPER-TOPUP’ for the top-up amount.

To report the first full JobKeeper fortnight an employee became ineligible:

Use the description ‘JOBKEEPER-FINISH-FNXX’ where ‘XX’ represents the JobKeeper fortnight in which the last payment is made.

For example, an employee resigns, and their last payment was on 13 May 2020.  As this falls in JobKeeper fortnight 04 (being 11/05/2020 – 24/05/2020), the description ‘JOBKEEPER-FINISH-FN04’ should be used to notify the ATO that the employee is not eligible for JobKeeper from FN05.

Making corrections to (previously reported) JobKeeper start and finish information

The ATO’s guidance identifies several situations where errors made in reporting the JobKeeper start or finish information may need correction and sets out options for doing so.

In particular, guidance is provided for making corrections where:

  • the wrong employee was reported as starting or finishing;
  •  a later start or finish fortnight is incorrectly reported;
  •  an earlier start or finish fortnight

The ATO is urging employers to exercise extreme caution to ensure the accuracy of originally reported information as multiple corrections cannot be made through the STP Pay Event, ‘Other Allowances’ field.

Editor: Please contact our office if you require more information or assistance on reporting JobKeeper payments through STP.

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ATO reminder for employers – Finalise STP data for 2020

The ATO has issued a reminder to employers who report through Single Touch Payroll (‘STP’) – which should be all employers, unless an exemption or deferral applies – that they will need to finalise payroll information for the 2020 income year by making a declaration.

The due date for making finalisation declarations is:

  • 14 July 2020 for employers with 20 or more employees; and
  • 31 July 2020 for employers with 19 or fewer employees.

Employers that finalise through STP are not required to provide payment summaries to employees and lodge a payment summary annual report to the ATO.

Instead, employees will be able to access their payroll information (for preparation of their 2020 tax return) through a registered tax agent or via ATO online services.

Editor: Please contact our office if you require more information on finalising STP data.