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Tax Refunds and Returns in Australia: Why Is It Too Low?

It’s that time of year again. You’ve filed your taxes and are eagerly awaiting your tax refund. But when the refund arrives, it’s much lower than you expected. Why is your tax refund so low? 

If you pay tax on the portion of your taxable income that is subject to tax and you are considered an Australian resident for income tax purposes, you may be qualified for both of the following:

  • tax offset for low-income individuals
  • tax reductions for low- and middle-income earners

You are not obliged to finish a specific tax return section to benefit from these tax reductions. Once you’ve filed your tax return, accountants figure out your tax offset for you.

You won’t get the offset as a separate payment; if you are qualified, it will be a part of your tax return, and the amount will be reflected on your notice of assessment.

The prospect of a tax refund is all the more appealing given that Australia is now experiencing a recession due to the pandemic.

However, a tax consultant from Australia has cautioned that there are several reasons why taxpayers who are entitled to refunds this year may get less money than they had anticipated.

Almost eight out of ten Australians who submit tax returns are eligible for a cash refund. But for some of us, the return we are entitled to is far smaller than we had anticipated.

How Do Tax Refunds Work in Australia?

Every year, about 14 million people in Australia submit tax returns. Only about two-thirds of eligible people receive a refund, and the average amount is slightly over $4,000.

As a result, a total of $3 billion is reimbursed. As a result, you should be certain that you are making all the necessary efforts to maximise your return.

To avoid penalties, you must file your income tax returns by October 31. (Alternatively, you could be eligible for an extension over this deadline if you register with a tax professional before October 31.)

The return processing will take about two weeks, although your agent can update you on its status anytime.

These due dates will remain the same, and COVID-19 will not impact how you typically file your tax return. Because of the Low and Middle-Income Tax Offset available to many taxpayers, you could get a larger tax refund this year.

Why Is Your Tax Return Less?

According to the ATO’s most recent timetable, many taxpayers have already begun receiving tax refunds. But one of the questions that keep coming up is why it is at such a low level.

Or, to put it another way, why is the amount of the return payment so much less than what was anticipated when compared to the sums received in previous years?

Refunds have decreased between 8% and 10% from the previous year, according to information provided by the ATO.

It is possible that, when comparing your tax return from one year to the next, the total amount will be lower due to different circumstances.

The amount of your refund you are eligible to receive may be lowered if your income changes or if you cease to qualify for a tax credit or deduction.

It would help if you weren’t concerned since it’s conceivable that getting a lower tax refund will be beneficial in the long run. 

Even if you consider your tax refund “found money,” a more realistic comparison would be the situation in which you contribute money to the government without obtaining any interest in return.

When comparing their refund from one year to the next, many taxpayers are astonished to discover that their return has drastically decreased.

Your tax refund may need to be altered if your financial condition has recently changed. These alterations may include It’s crucial to prepare as much as possible to prevent getting caught off guard by a surprise occurrence.

Why Your Tax Refund Is Lower Than Expected

Due to changes made to their withholdings at the beginning of 2018, some taxpayers began receiving larger paychecks, which resulted in their paying less tax for the whole year.

Some taxpayers will pay less in total taxes due to the adjustment, but they might not get their entire anticipated tax refund.

Another result of the tax reform that was put into place at the end of 2017 is that the ATO modified the data that businesses use to estimate how much tax should be withheld from employees’ paychecks after the beginning of the year.

As a result, for certain employees whose withholding was based on out-of-date tax laws, some refunds and quantities payable were different from what they had been in recent years.

Conclusion 

There are a few reasons why your tax refund may be lower than expected. Firstly, the ATO may have made an error when processing your tax return on the sunshine coast. Secondly, you may have had deductions or offsets applied to your refund. Finally, the amount of tax you paid during the year may have been higher than usual, resulting in a lower refund.

If you are concerned that your tax refund is too low, you should contact the ATO and a tax consultant to discuss your options.

SMB Accounting offers services for individual income tax returns, small-business accounting using a variety of small-business accounting products, SMSF audits (self-managed super funds), and an accounting firm based on the Xero accounting software. In addition, we provide audits for trust accounts, nonprofit organisations, special needs audits, audits of financial statements for specific purposes, and more. Contact us if you have queries about your tax! 

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DIN—What It Is, Why You Need It, and How to Obtain It

As part of the 2020 Budget Digital Business Plan, the Australian government wants to implement the Modernising Business Registers program. In this program, the ABRS (Australian Business Registry Services) was to be established to help businesses register and manage the information they share with the government. This is to be rolled out between 2021 to 2024, and the first change is that directors need to get a DIN (Director Identification Number).

Today, we want to shed light on the DIN to help you understand what it is, why you need it, and how to obtain it:

What is a DIN?

The DIN is a unique identification number for a director in the business industry. This number will make it easy for the government and businesses to identify a director by name. The identification number is mandatory for the directors of certain businesses and companies, the Australian Taxation Office (ATO), and the Australian Securities and Investments Commission (ASIC).

Why Do We Need a DIN?

As part of the Modernising Business Registers program, the DIN is being introduced as a way to help the government identify directors. This will help them track directors of Australian companies and enable the officers to gather information about the director.

If a director doesn’t have a DIN, they won’t be able to open one. This is because the government will be using the DIN when they verify the identity of directors using an online portal that they will use to register businesses.

How to Get a DIN?

If you want to register a business, you must get a DIN. Here is how to do it:

Step #1 – Determine if you need a DIN

As mentioned earlier, the DIN is mandatory for the directors of certain businesses, including companies, the ATO and the ASIC. This means that if you are running a business that requires a DIN, you need to get one. The DINs can be obtained using an online portal. To register for a DIN, you need a MyGov account. You can set one up as soon as you know you need a DIN.

If you are the director of a public company, you will have to apply for a PBN (person business number) instead of a DIN.

Step #2 – Register for a DIN

To register for a DIN, you need to visit the Government Gateway. This is an online portal that will allow you to complete the registration process. To start, you will need the following:

Go to this link Director ID Regsitration

Go through the instructions and you may need to collect some of your personal information eg

  • Personal details, including your name and date of birth
  • Your business registration details, including business name and ABN (Australian Business Number)
  • Your email address
  • The bank account details where you want to receive the DIN
  • Biometrics such as a numeric device and a photograph

Step #3 – Receive your DIN

After you enter the required information and successfully register for a DIN, you will receive an email from the government. The email that you will receive will be from myGov and not the Department of Home Affairs, which also handles business registrations. This is why you should always check the source of the email and the link. The link in the email will take you to the Government Gateway, where you will be asked to verify your identity.

After you have verified your identity, you will receive the DIN in your bank account. The government will deposit the DIN in your bank account without any deductions.

Conclusion

In an effort to help the government identify directors, the Australian government has decided to roll out the DIN. The introduction of this identification number is part of the 2020 Budget Digital Business Plan. If you are running a business and is the appointed director, you should consider obtaining a DIN. It is compulsory, so get yours as soon as possible to avoid any trouble!

SMB Accounting offers individual tax returns, small business accounting, and various other services to help companies stay on top of their finances and obligations. If you are looking for accountants in South East Queensland to help you with obtaining a DIN, work with us today!

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Audit Requirements of Not-For-Profits: What You Need to Know

Not-for-profit businesses are businesses that are set up for a social or environmental cause rather than to make a profit. They are usually registered as charities, and there are over 56,000 registered charities in Australia. Not-for-profit businesses are important because they help to empower social and economic growth. However, they can sometimes be bogged down by tedious audits. To help with this issue, we thought it would be useful to put together a brief article about this subject. If this is something that you’re interested in learning more about, read on as we break down everything you need to know about audit requirements for not-for-profits.

ACNC Requirements

ACNC registered charities that make more than $250,000 a year have to give the ACNC financial statements within six months of the end of the financial year. Companies that are limited by guarantee and registered with the ACNC only have to give the ACNC annual reports, not ASIC.

Funding Obligations

If your not-for-profit organization is grant-funded, you may be required to have your accounts audited annually by a registered company auditor. This would be regardless of your annual revenue.

Constitution 

If an organization has a requirement for an audit specified in their constitution or rules, they will need to have their accounts audited by a registered company auditor. This is regardless of the organization’s annual revenue.

Incorporated Associations

State or Territory regulators require associations to provide an annual report which details the association’s financial activity. For associations registered with the ACNC, this requirement is reduced to only reporting to the ACNC. If an association is not registered with the ACNC, they are required to submit an annual statement and audited financial statement within six months of the end of the financial year.

In order to be registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC), organisations must meet certain requirements. One of these requirements is that they must report to the ACNC annually. For charities based in the Australian Capital Territory (ACT), South Australia or Tasmania, this means reporting to both the ACNC and the relevant state regulator. Charities based in other jurisdictions must only report to the ACNC.

If you are incorporated in NSW, you will need to lodge a Summary of Financial Affairs with NSW Fair Trading. This must be done within one month of your AGM or within seven months of the end of your financial year, whichever is later. Tier 1 organisations, which are those with revenue exceeding $250,000 or current assets exceeding $500,000, must also provide audited financial statements

Organisations in Victoria that make less than $250,000 a year don’t have to report their finances to anyone. If they make between $250,000 and $1 million, they can choose to have their accounts reviewed or audited, but they don’t have to. If they make more than $1 million, they must have an audit and they have to give their financial statements to Consumer Affairs Victoria.

Companies in Queensland must submit an annual return and financial statements to the state government within one month of their annual general meeting (AGM). Financial statements must be either audited by a registered company auditor or verified by a certified accountant.

Incorporated associations in the Northern Territory must submit their financial statements to the AGM within 28 days. The audit requirements for these associations are less strict than in other states and are based on tiers.

Conclusion

We hope this article helps you gain a better understanding of the audit process for non-for-profit businesses. While it may seem complicated at first, the information above should help you navigate the audit requirements with ease.

If you’re looking for help with the audit process, then you’ve come to the right place. SMB Accounting is fast becoming one of the leaders in Australia when it comes to providing accounting services. As an accounting firm serving Brisbane, Sunshine Coast, and Fraser Coast, we help clients by providing business advice, taxation, and XERO/MYOB/Quickbooks consulting. Whenever you need help managing your income tax returns or keeping your finances in check, SMB Accounting is the one to call. Contact us today to get started.

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TAX SAVING STRATEGIES

 

TAX SAVING STRATEGIES

 

Even with the final day of the financial year to go, traditionally, year-end tax planning for small businesses is based around two simple concepts (i.e., Accelerating business deductions and deferring income).  Consideration will obviously also need to be given to the impact of the  COVID-19 pandemic on specific businesses as in itself has had the effect of reducing incomes and therefore tax payable.

Small Business Entities (‘SBEs’)  (i.e., Businesses with an aggregated turnover of less than $10 million) often have greater access to year-end tax planning due to particular concessions that only apply to them.  Taxpayers that qualify as an SBE can generally pick and choose which of the concessions they wish to use each year (although see below regarding the simplified depreciation rules).  The following are a number of areas that may be considered for all business taxpayers.

Maximising deductions for non-SBE taxpayers

Non-SBE business taxpayers should endeavour to maximise deductions by adopting one or more of the following strategies:

  • Prepayment strategies;
  • Accelerating expenditure; and
  • Accrued expenditure.

Prepayment strategies – non-SBE

Any part of an expense prepayment relating to the period up to 30 June is generally deductible.

In addition, non-SBE taxpayers may generally claim the following prepayments in full:

  • expenditure under $1,000;
  • expenditure made under a ‘contract of service’ (e.g., salary and wages); or
  • expenditure required to be incurred under law.

Note:  Prepayments can be a little confusing, so before you commit to making a payment please feel free to email SMB Accounting with any queries or assistance if required.

Accelerating expenditure – non-SBE

This is where a business taxpayer brings forward expenditure on regular, on-going deductible items.  Business taxpayers are generally entitled to deductions on an ‘incurred basis’.  Therefore, there is generally no requirement for the expense to be paid by 30 June 2020 (i.e., as long as the expense has genuinely been ‘incurred’).

Checklist

The following may act as a checklist of possible accelerated expenditure:

  • Depreciating assets – Non-SBEs that have an  aggregated annual turnover of less than $50 million can claim an immediate deduction for eligible assets costing less than $30,000 for any assets acquired and first used (or installed ready for use) from 7:30pm (AEDT) 2 April 2019 to before 12 March 2020.
    From 7:30pm (AEDT) on 2 April 2019 and first used (or installed ready for use) from 12 March 2020 to 30 June 2020 this has been increased to $150,000.
    Depreciating assets costing $100 or less can be written off in the year of purchase and depreciating assets costing less than $1,000 can be allocated to a low value pool and depreciated at 18.75% (which is half of the full rate of 37.5%) in their first year, regardless of the date of purchase.
    Finally, a 50% accelerated depreciation concession may apply for new eligible assets that start to be held and used (or installed ready for use) from 12 March 2020 to 30 June 2021.
  • Repairs.
  • Consumables/spare parts.
  • Advertising.
  • Superannuation – contributions to a complying superannuation fund, to the extent contributions are actually made (i.e., they cannot be accrued but must be paid by 30 June).

Accrued expenditure

Non-SBE taxpayers (and many SBE taxpayers – refer below) are entitled to a deduction for expenses incurred as at 30 June 2020, even if they have not yet been paid.

The following expenses may be accrued:

  • Salary or wages and bonuses – the accrued expense for the days that employees have worked but have not been paid as at 30 June 2020.
  • Interest – any accrued interest outstanding on a business loan that has not been paid.
  • Commissions – where employees or other external parties are owed commission payments.
  • Directors’ fees – where a company is definitively committed to the payment of a director’s fee as at 30 June 2020, it can be claimed as a tax deduction.

Maximising deductions for SBE taxpayers

Deductions can be maximised for SBE business taxpayers by accelerating expenditure and  prepaying deductible business expenses.

Accelerating expenditure – SBE 

In addition to accelerating other expenditure items, SBE taxpayers can choose to write-off depreciating assets costing less than $30,000 (or potentially  $150,000) in the year of purchase.*

Assets costing more than the relevant immediate asset write-off threshold are allocated to an SBE general pool and depreciated at 15% (or potentially at 57.5% for eligible new assets subject to the 50% accelerated depreciation concession) in their first year.  Therefore, where appropriate, SBE business taxpayers should consider purchasing/installing these items by 30 June 2020.

(*) The immediate asset write-off threshold was originally increased to ‘less than $30,000’, for eligible assets first used or installed ready for use between 7:30pm (AEDT) 2 April 2019 and 30 June 2020. 

The threshold was subsequently increased to $150,000 for eligible assets first used or installed ready for use from 12 March 2020 to 30 June 2020 as a result of the Government’s response to the COVID-19 pandemic.

Prepayment strategies – SBE

SBE taxpayers making prepayments before 1 July 2020 can choose to claim a full deduction in the year of payment where they cover a period of no more than 12 months (ending before 1 July 2020).

Otherwise, the prepayment rules are the same as for non-SBE taxpayers.

The kinds of expenses that may be prepaid include:

  • Rent on business premises or equipment.
  • Lease payments on business items such as cars and office equipment.
  • Interest – check with your financier to determine if it’s possible to prepay up to 12 months interest in advance.
  • Business trips.
  • Training courses that run on or after 1 July 2020.
  • Business subscriptions.
  • Cleaning.

 

Information Required

This is some of the information we will need to help us prepare your income tax return:

  • Stock-take details as at 30 June 2020.
  • Debtors listing (including a list of bad debts written off) as at 30 June 2020.
  • Note: In order to claim a deduction, the debt must be written off on or before 30 June.
  • Creditors listing as at 30 June 2020.

 

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 stephen@smbaccounting.com.au

 P 1300 854 159

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Jobkeeper Payment Alternate test – Update 4

JobKeeper Alternative Turnover Tests

The ATO has now determined alternative tests for various businesses in relation to the fall in turnover where there is not an appropriate relevant comparison period.

If your business satisfies the basic test, you do not need to go to any of the alternative tests as outlined.

The alternative tests can apply in the following circumstances:

1. the entity commenced business after the relevant comparison period (the business did not exist in that period)

2. the entity acquired or disposed of part of the business after the relevant comparison period (the business is not the same business in that period as it is now)

3. the entity undertook a restructure after the relevant comparison period (the business is not the same business in that period as it is now)

4. the entity’s turnover substantially increased by:

      • 50% or more in the 12 months immediately before the applicable turnover test period; or
      • 25% or more in the 6 months immediately before the applicable turnover test period, or
      • 12.5% or more in the 3 months immediately before the applicable turnover test period.

5. the entity was affected by drought or other declared natural disaster during the relevant comparison period

6. the entity has a large irregular variance in their turnover for the quarters ending in the 12 months before the applicable turnover test period, or

7. the entity is a sole trader or small partnership where sickness, injury or leave have impacted an individual’s ability to work which has affected turnover.

The Commissioner cannot determine an alternative decline in turnover test in all circumstances. It is only where there is an event or circumstance that is outside the usual business setting for entities of that class which results in the relevant comparison period in 2019 not being appropriate for measuring decline in turnover.

The Commissioner can also only determine a test for a class of entities and cannot make discretionary decisions for individual entities.

If you fall into more than one of the classes of entities covered by the alternative test, you can choose which alternative decline in turnover test to apply. You only need to satisfy one of the tests (it does not matter if you do not satisfy one of the other tests that applies to you).

We are providing calculation and enrollment into the JobKeeper system as a free complimentary service to our clients in order that those businesses survive these uncertain times.

DOWNLOAD ARTICLE – Jobkeeper Payment Alternate test – Update 4

 

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If you need any assistance, please get in contact with us at

 stephen@smbaccounting.com.au

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JobKeeper Guidance – Update 3

JobKeeper Guidance and Payment

Further information has now been released by Treasury to clarify the comparison period is for either;

      1. any monthly period from March 2020 to the end of September 2020 OR
      2. any quarterly period from April to June or July to September, compared to the same monthly or quarterly period in 2019.

Importantly, once this self-assessed test is met for either;

(a) a monthly period OR

(b) any quarterly period,

there is no requirement to re-test in later months or quarters.

Eg, if a business assesses that its turnover will fall by 30% in April 2020 compared to April 2019, the business retains its eligibility until the JobKeeper payments stop for all businesses at the end of September 2020, rrespective of its turnover in the months subsequent to April 2020. It is not required to estimate or determine turnover for subsequent periods.

In addition, where an entity does not qualify in the month eg April 2020, or the April to June quarter, it can re-test in later months or quarters.

The information acknowledges that comparing monthly or quarterly periods from April 2020 and onwards, to April 2019 and onwards, may not always be possible or may lead to unfair outcomes.

The result is, where the ATO is satisfied that there is no such comparison period in 2019 or there is not an appropriate relevant comparison period, the ATO Commissioner may, by legislative instrument, determine an alternative decline in the turnover test.

The two examples that have been given in the information release relate to;

  • businesses that were not in existence for the whole of the comparison period in 2019. (In the explanatory materials, the business is permitted to average its actual turnover, from October 2019 when it came into existence, to March 2020, and then compare that average to its estimated turnover in April 2020).
  • businesses that were impacted by a natural disaster during the 2019 comparison period

On a positive note, the ATO Commissioner will retain flexibility to apply other alternative tests and take into account other unique circumstances (aside from natural disaster and start-up businesses) confronted by a business (should the 2019 comparison period not be reflective of typical turnover).

Treasury, in a separate fact sheet, Supporting Business to Retain Jobs, has stated that these alternative tests may include eligibility being established as soon as a business temporarily ceased trading or where a business significantly curtails its operations.

The JobKeeper payments package began on 30 March 2020, legislation was only passed last week, and the pay periods prescribed relate to fortnightly pay periods and the ATO’s guidance has come during the second fortnightly pay period running from 13 April to 26 April.

Hence, the ATO will assume that the minimum payment of $1,500 (before tax) has been paid for each of the first two fortnights, even if it has been paid late, provided it is paid to the employee by the end of April.

Important: If employers do not continue to pay their employees for each pay period, they will cease to qualify for the JobKeeper payment.

“This means that employees can make two fortnightly payments of at least $1,500 per fortnight before the end of April, or a combined payment of at least $3,000 before the end of April,” the ATO said.

While the ATO has set out guidance on determining the decline in turnover test for businesses, it has yet to reveal the alternative tests for businesses where turnover periods are not appropriately comparable.

This will be passed on ASAP as soon as we receive such information.

Guidance for sole traders and businesses that operate in the form of a company, trust or partnership will also soon be provided by the Tax Office.

It is also important to note, it has been confirmed that the payment will be limited to one entitlement for each director of an entity, even if there are multiple business owners or participants.

How To Enrol and Apply for JobKeeper

There are eight (8) steps that businesses or their advisors have to take to enrol for JobKeeper:

  1. Register your interest and subscribe for JobKeeper payment updates
  2. Check your employees meet the eligibility requirements.
  3. Continue to pay at least $1,500 to each eligible employee per JobKeeper fortnight (the first JobKeeper fortnight is the period from 30 March to 12 April).
  4. Notify eligible employees that you are intending to claim the JobKeeper payment on their behalf and check they aren’t claiming JobKeeper payment through another employer or have nominated through another business. If they are receiving JobSeeker they need to notify Centerlink to cancel.
  5. Send the JobKeeper employee nomination notice to your nominated employees to complete and return to you by the end of April if you plan to claim JobKeeper payment for April.
  6. From 20 April 2020, I can enrol clients or you can enrol yourself with the ATO for the JobKeeper payment. You must do this by the end of April to claim JobKeeper payments for April.
  7. In the online form, provide your bank details and indicate if you are claiming an entitlement based on business participation, for example if you are a sole trader.
  8. Specify the estimated number of employees who will be eligible for the first JobKeeper fortnight (30 March – 12 April) and the second JobKeeper fortnight (13 April – 26 April).

Download Article – Jobkeeper Guidance

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Claiming your Home Office Expenses

You may now be working from home more than ever and you will be incurring costs of working from home, outlined below are various details as to  what you can claim and how to claim those deductible expenses at tax time

In order to be able to claim, all of the following must apply:

      • You must have spent the money.
      • The expense must be directly related to earning your income.
      • You must have a record to prove it.

No deduction can be claimed for items that your employer has provided or where you have been reimbursed for the expense.

If you are not reimbursed by your employer, but instead receive an allowance from them to cover your expenses when you work from home, you:

      • must include this allowance as income in your tax return.
      • can claim a deduction as outlined.

Expenses you can claim

You will be able to claim a deduction for the additional running expenses you incur if you work from home,. These include:

      • electricity expenses associated with heating, cooling and lighting the area from which you are working and running items you are using for work
      • cleaning costs for a dedicated work area
      • phone and internet expenses
      • computer consumables (for example, printer paper and ink) and stationery
      • home office equipment, including computers, printers, phones, furniture and furnishings – you can claim either the:
        • full cost of items up to $300
        • decline in value for items over $300.

The  tracking of all of these expenses can be challenging so the ATO  will accept a temporary simplified method (or shortcut method) of calculating additional running expenses for the period starting 1 March 2020 until at least 30 June 2020. The ATO has also indicated they  may extend this method, depending on when work patterns start to return to normal (whatever that may be in the future).

Expenses you can’t claim

If you are working from home only due to COVID-19, you:

      • cannot claim occupancy expenses such as mortgage interest, rent and rates
      • cannot claim the cost of coffee, tea, milk and other general household items your employer may otherwise have provided you with at work.

Calculating running expenses

Additional Running Expenses can be claimed in 3 different methods:

      • shortcut method ─ claim a rate of 80 cents per work hour for all additional running expenses
      • fixed rate method ─ claim all of these:
        • a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture,
        • the work-related portion of your actual costs of phone and internet expenses, computer consumables, stationery, and
        • the work-related portion of the decline in value of a computer, laptop or similar device.
      • actual cost method ─ claim the actual work-related portion of all your running expenses, which you need to calculate on a reasonable basis.

For more information on how to calculate and claim a deduction under the actual cost method or fixed rate method see Employees Working Working From Home

Shortcut method

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,
      • 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.

The shortcut method rate covers all deductible running expenses, including:

      • electricity for lighting, cooling or heating and running electronic items used for work (for example your computer), and gas heating expenses
      • the decline in value and repair of capital items, such as home office furniture and furnishings
      • cleaning expenses
      • your phone costs, including the decline in value of the handset
      • your internet costs
      • computer consumables, such as printer ink
      • stationery
      • the decline in value of a computer, laptop or similar device.

You do not have to incur all of these expenses, but you must have incurred additional expenses in some of those categories as a result of working from home due to COVID-19.

If you use the shortcut method to claim a deduction for your additional running expenses, you cannot claim a further deduction for any of the expenses listed above.

You must keep a record of the number of hours you have worked from home as a result of COVID-19. Examples are timesheets, diary notes or rosters.

If you use the shortcut method to claim a deduction and you lodge your 2019-20 tax return through myGov or a tax agent, you must include the note ‘COVID-hourly rate’ in your tax return.

Records you must keep

If you use the shortcut method, you only need to keep a record of the hours you worked at home, for example timesheets or diary notes.

If you use the other methods, you must also keep a record of the number of hours you worked from home along with records of your expenses. For more information on what those records are see Employees Working Working From Home.

 

 

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JobKeeper Payments Update 2

JobKeeper

In the third and largest economic stimulus package up to 6 million workers are set to be eligible for the $130 billion wage subsidy, known as the JobKeeper payment.

The flat $1,500 payment, which will be delivered by the ATO, will be paid to businesses, and will include businesses which have been structured through companies, partnerships, trusts and sole traders.

The full $1,500 a fortnight, before tax, to eligible employees will be required to pass on by employers.

Eligibility – businesses with a turnover of < $1 billion will need to self-assess a reduction in revenue of 30 per cent or more, relative to a comparable period a year ago.

Qualified employees will include those employed by the employer as at 1 March 2020, including those who have been stood down and retrenched workers can be re-employed to qualify for the JobKeeper payment.

How to apply and Participation in JobKeeper

  • Eligible businesses, will need to register an intention to apply on the ATO’s website. and additional information will come from the ATO about how and when claims for JobKeeper can be made.
  • A payment period is a rolling 14 day period commencing Monday 30 March 2020 and ending on Sunday 27 September 2020 (6 Months)
  • Information on the number of eligible employees engaged as at 1 March 2020 and those currently employed by the business, including those stood down or rehired, will need to be provided to the ATO, although the Tax Office will look to use Single Touch Payroll data to pre-populate the employee details for the business.
  • The ATO will make payments to the employers monthly in arrears, but the first payment will be sent in the first week of May and will be backdated to 30 March 2020 to allow employers to start paying their workers now.
  • Employers will be required to report the number of eligible employees employed by the business to the ATO on a monthly basis.
  • A normal payroll is run for employees and reported via Singe Touch Payroll (STP). The claims process will then be linked to STP to support the JobKeeper payment to the employer. If you do not use STP (eg Sole Trader, Trust Beneficiary, Director Fee, Dividend in Lieu of Labour etc) A manual claim process will apply.
  • The payment is treated as ordinary income for an employee and is subject to PAYG withholding tax.
  • An employer will be required to advise an employee if they have been nominated as an eligible employee for which an employer will be reimbursed a JobKeeper payment.

 

Contrived schemes and consequences

The legislation also makes clear that anyone who enters into or carries out a scheme for the sole or dominant purpose of obtaining a corona virus economic response payment will face a wide range of administrative and criminal sanctions, including up to 10 years’ imprisonment.

However, the legislation empowers the commissioner to call out any change in the financial position of any entity as part of a scheme designed to improperly pocket JobKeeper cash, and the ATO has extensive payback powers.

The legislation has clawback rules empowering the ATO to recover overpaid amounts and target those who weren’t entitled to payments received, plus interest.

 

Eligibility for employers

Definition of turnover:

For existing business:-

  • works on your BAS – if you are cash or accrual preparer. If you prepare your BAS as cash then you look at your Profit and Loss under a cash basis. If you are accrual then you check your PL as accrual. looking at the same period eg. Jan – March compared 2019 to 2020.

For the Start up business that has not been trading for over a year:

  • the ATO is working out how to report.

 

If your business turnover has not declined by 30% or 50% but is expected to at some point?

  • YES – Still go in and register.

I am self-employed Sole Trader, do I qualify?

  • YES – meeting some criteria – your 2019 income tax has been lodged prior to 12th of March 2020, Your BAS have been lodged

If I operate as a partnership, can each partner receive JobKeeper?

  • NO – only one (1)  partner can receive the JobKeeper payment

If I operate my business through a trust, can I receive the JobKeeper payment?

  • YES – but still only one (1) person can receive the JobKeeper

I operate as a company and usually pay myself a director fee. Can I receive JobKeeper payments?

  • YES –  One (1) shareholder or director can claim

As one of these types of businesses, how do I apply for the JobKeeper program?

  • it will be an online application

 

 Employees will be eligible if:

They are currently employed by an eligible employer or who were in that employment on 1 March 2020 and continue to be employed (even if currently stood down)

  • Is full-time, part-time or a casual who is employed on a regular and systematic basis or longer than 12 months as at 1 March 2020
  • Aged 16 years or older at 1 March 2020
  • An Australian citizen, a permanent visa holder or a special category holder ) eg 444 subclass) as at 1 March 2020.
  • Is a resident for Australian Income Tax purposes
  • Not in receipt of a JobKeeper payment from another employer.

I started with my employer after 1 March 2020 am I eligible for JobKeeper?

  • NO – only if you have been stood down

As a casual employee, how does JobKeeper affect me?

  • You need to be with the same employee for over 12 months.

If I am an employee on a fixed-term contract, how does JobKeeper affect me?

  • You are eligible if the contract started before the 1 March 2020

If my employer has put me on paid or unpaid leave can I still receive JobKeeper?

  • YES

If I am receiving Workers Compensation, can I receive Job Keeper payments?

  • YES – if you are doing light duties while still receiving Work Cover and some wages
  • NO – if you are only receiving work cover payments

What if I am on Parental Leave?

  • NO – You are not eligible to receive the JobKeeper

Where I have a salary sacrifice arrangement in place, how does the Job Keeper payment impact such an arrangement?

  • It does not any effect to your arrangement

 

Payments:

I have paid my employees, when does my business get reimbursed the JobKeeper payment?

  • The first week of May 2020

How often will the ATO make payments to my business?

  • Monthly in ARREARS

What is if pay my employees monthly not fortnightly?

  • the ATO will average it to fortnightly amounts, to make sure it has been passed on to the employee

If I have stood employees down after 1 March 2020 what do I do for these employees?

  • register and start paying the min $1500 per fortnight to the employees that are eligible

If my business is still operating and my employees are working do I still get a JobKeeper reimbursement?

  • Yes – please register

If I currently pay an employee less the $1500 per fortnight how am I impacted by the JobKeeper arrangement?

  • You must top up there pay to match the JobKeeper payment

If I currently pay an employee more than $1500 per fortnight how am I impacted by the JobKeeper arrangement?

  • the difference of their pay is out of the business
  • You must top up there pay to match the JobKeeper payment

If I currently pay an employee more than $1500 per fortnight how am I impacted by the JobKeeper arrangement?

  • the difference of their pay is out of the business

If I let my employees go after 1 March 2020, re-hire them and then immediately stand them down, what is the JobKeeper impact?

  • YES – they are eligible for JobKeeper when you bring them back, the employee must de-register from JobSeeker payments.

I don’t have enough funds to pay eligible employees until I receive the reimbursement, what should I do?

  • The JobKeeper must be paid in Arrears, there are many loans that you can apply for

If an employee resigns after I receive a JobKeeper payment, what must I do?

  • When you submit that months report to the ATO you take them off the list, if you employ a new person to replace them that employee is not eligible

How does PAYG withholding and Superannuation apply to a JobKeeper payment that I make to an employee?

  • PAYG is to be deducted from the employee and paid to the ATO via your BAS as per normal pay run.
  • Super is payable if the employee is still working.
  • Super is NOT payable if you are paying the JobKeeper to the employee as a stand-down (not working)
  • Super does not need to be paid on the difference of the employees pay if you are topping them up with the JobKeeper payment, eg. employee normally gets $1000 FT now gets $1500 super is only on the $1000 as per normal. It is up to the employer if you pay super on the extra $500.

If an employee I had to let go or was stood down is receiving a JobSeeker payment, how does JobKeeper impact both me and my employee?

  • Once you have advised the employee that they are on JobKeeper payments, the employee needs to tell Centerlink to cancel the JobSeeker payments. There will be data matching, note, the employee cannot claim both and they will need to pay back any amount they received unlawfully.

 Timing

The JobKeeper program is effective from 30 March 2020 and runs for 6 months until 27 September 2020. They will be made to eligible employers monthly in Arrears, with the first payment being made in the first week of May 2020.

Compliance and other issues

The JobKeeper program will be subject to ATO audit activity and there will be obligations on employers to establish their eligibility as well as that of their employees.

The ATO will cross-check payments with Services Australia data as well as other agencies to identify any multiple payments made.

There is further guidance coming from the ATO to assist businesses to assess eligibility, in particular, the ATO focus will be on ‘manipulation’ of turnover for a business that seeks to qualify. Businesses that are identified as ‘manipulation’ will face penalties.

Examples:

  1. Employer with employees on different wages

Greg owns a travel business with two employees. The business is still operating at this stage, but Greg expects that turnover will decline by more than 30 per cent in the coming months. The employees are:

  • Brooke, who is a permanent full-time employee on a salary of $2,000 per fortnight before tax and who continues working for the business; and
  • Zac, who is a permanent part-time employee on a salary of $800 per fortnight before tax and who continues working for the business.

Greg is eligible to receive the JobKeeper payment for each employee, which would have the following benefits for the business and its employees:

  1. The business continues to pay Brooke her full-time salary of $2,000 per fortnight before tax, and the business will receive $1,500 per fortnight from the JobKeeper payment to subsidise the cost of Brooke’s salary and will continue paying the superannuation guarantee on Anne’s income;
  2. The business continues to pay Zac his $800 per fortnight before tax salary and an additional $700 per fortnight before tax, totalling $1,500 per fortnight before tax. The business receives $1,500 per fortnight before tax from the JobKeeper payment which will subsidise the cost of Zac’s salary. The business must continue to pay the superannuation guarantee on the $800 per fortnight of wages that Zac is earning. The business has the option of choosing to pay superannuation on the additional $700 (before tax) paid to Nick under the JobKeeper payment.

Greg can register his initial interest in the scheme from 30 March 2020, followed subsequently by an application to the ATO with details about his eligible employees.

In addition, Greg is required to advise his employees that he has nominated them as eligible employees to receive the payment. Greg will provide information to the ATO on a monthly basis and receive the payment monthly in arrears.

2. Self-employed

Sienna is a sole trader running a florist. She does not have employees. Sienna’s business has been in operation for several years. The economic downturn due to the coronavirus has adversely affected Sienna’s business, and she expects that her business turnover will fall by more than 30 per cent compared to a typical month in 2019.

Sienna will be able to apply for the JobKeeper payment and would receive $1,500 per fortnight before tax, paid on a monthly basis.

 

Please feel free to share to any person you may think may benefit 😊

If you need any assistance, please get in contact with us at

 stephen@smbaccounting.com.au

 P 1300 854 159

 

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Commercial Tenancy Relief

On 7th April 2020, the Government announced SME Commercial Leasing Principles During CoVid 19 that is to be implemented between landlords and tenants through the COVID-19 crisis.

Throughout the pandemic and a reasonable recovery period the document appears to be very supportive of the Tenants (which is usually the business)

“Reasonable recovery period” is a term that is very noticeable throughout the document, and this flags the government’s aim to support businesses long term. Further provisions are to ensure that any agreed repayments can be stretched out over 24 months (or further if required) and are not onerous. Note this can even apply if the lease term has ended.

Basically, if your turnover is less than the $50M threshold and in addition the JobKeeper system applies, then the code should be applied to you as a tenant.

At the moment it is unclear how the code is going to be upheld in a legal sense as it is not intended to supersede legislation in each state, but it aims to compliment such legislation

It specifies that the landlords are to agree tailored, bespoke and temporary arrangements for each tenant

The code specifies:

    1. A lease cannot be terminated by the landlord due to non payment of rent during the period. This also includes for a reasonable subsequent recovery period
    2. The offer must be proportionate reductions up to 100% of any amount payable and refers to the pandemic period as well as the subsequent period
    3. At a minimum, the rent reduction should be the equivalent of the % decline in turnover (ie decrease of 50% in turnover, reduction in rent a minimum of 25%)
    4. Deferral

a) The repayment of this deferred amount should be over the great of the lease term remaining or 24 months

b) Any repayments should not start until the earlier of the Government ending the pandemic or the lease finishing

    1. Any discounts/decreases in statutory charges must be passed on (eg rate, land tax, or insurance proceeds)
    2. No fees/charges/interest can be applied
    3. Landlord cannot recover amounts owing from Security Bond
    4. Complete freeze on rental increases

Example: If your rent is $3,000

  • a 80% loss in turnover would result in a guaranteed 80% cash flow relief of $2,400 net rent $600.
  • At a minimum, half is provided as rent free/rent waiver ($1,200) for the proportion of which the qualifying tenant’s revenue has fallen.
  • Up to half ($1,200) could be through a deferral of rent, with this to be recouped over at least 24 months in a manner that is negotiated by the parties

Based on the examples provided, it appears that for whatever total % cashflow relief is agreed, the application of that % is for 50% rent abatement and 50% rental deferral.

The deferred payments are to be recouped over at least a 24 month period that would begin when the COVID-19 pandemic is officially over. This is in line with what we have been expecting and discussing with you all.

To know more about claiming a tax deduction for any of your expenses, or for help filling out the paperwork, please get in contact with us at

Please feel free to share to any person you may think may benefit 😊

If you need any assistance, please get in contact with us at

 stephen@smbaccounting.com.au

 P 1300 854 159
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Five (5) Steps to get you “over the bridge” and survive the Recession

Just understand this is going to be tough, and when it gets tough you either dive, survive or thrive. It is our mission to ensure you thrive once the crisis is past and hopefully grow bigger and stronger on the other side.

You need to be proactive now! Hard decisions aren’t easy to make, that is why they are HARD. If you don’t make the decisions now, there will be others that make them for you, either your landlord, bank, tax office or a supplier) Get on top of those decisions first.

As they say “Be the first to the table!”

Step 1 – Approach your landlord

Yes you have signed your lease to pay an amount of rent per week, per month etc and you are liable for it. But if you are a business that has either been closed down by the Government or your income has fallen drastically, your landlord should understand. If you don’t pay, what can they do? They cant replace you with a like tenant as they can’t open due to closures. You will find that your landlord should/will work with you as they have cashflow problems as well.

Your landlord may have a repayment deferral with the bank, hence they can pass some of that on to you for the term of that deferral. It is in their BEST interest to have a tenant than not have one at all and try to replace you.

Step 2 – Your Bank is in the mood to assist

As with your landlord, it is in the banks BEST interest to provide assistance for both business loans and your private house mortgages. You need to initiate the contact as they generally won’t come to you. Most of the major banks have announced a 6 month deferral on loan repayments and various other cost saving measures eg merchant terminal fees.

Not only are there these announcements by the banks, there are also financial hardship provisions which are available to use. YOU JUST NEED TO CONTACT YOUR BANK before its too late

Step 3 – Government Assistance is coming

By now you would have received a few emails and blogs from our firm regarding  Federal Government stimulus packages 1 and 2, as well as the various state governments and councils are Australia have announced their own packages to assist in these bizarre times.

The largest stimulus announced to date is the 100% PAYGW refund back to your ATO tax account. Most businesses with a turnover of less than $50Mil and you had to be registered for PAYG as at 12th March 2020, and pay wages during either March Qtr or month of March for monthly lodgers, generally will have access toa minimum of $20,000 to a max of $100,000 to be paid over 6 months

These payments are tied to your BAS lodgements so so important to keep them up to date

At this stage however, we have not received any legislation, but from the details and examples issued by treasury the amount will be applied to your ATO account. If there is a credit, this will be refunded within 14 days

There are other measures including government guarantee to banks for small business loans up to $250k unsecured with repayment holidays for 6 months. At this stage unless your business is strong and basically untouched, we would advise any further borrowings should be considered carefully.

In addition to all this the ATO has established the following support;

  • Deferral of ATO Payments (these are for debts after 23rd January 2020)
  • Remitting interest & penalties
  • Low interest payment plan (for debts incurred prior to 23rd January 2020)

Again the ATO won’t come to you automatically so if need be get in touch with them on 1800 806 218 and see what assistance you can get to help with your cash flow. From the experience to date it only takes a few minutes and they are granting payment deferrals for up to 13th July initially

Step 4 – Keep staff informed

Your staff are and will be your biggest asset, both now and once we are through this downturn. Speak to them. Keep them informed. They are just as anxious as you are in these uncertain times. Be open and honest, be compassionate – everyone is feeling the pain.

Try to reduce their hours as opposed to letting them go altogether as the above assistance is in place (maybe a little slow in coming), but they are coming to assist with retaining your staff.

Step 5 – Speak to us

We have spoken to a large number of clients and still have to, but we are working tirelessly to work through and advise on how best to approach in a methodical manner. We will be in contact. We understand the stresses that as business owners or employees or contractors you are going through hence this 5 step process we have put together is for your assistance.

 

Please feel free to share to any person you may think may benefit 😊

If you need any assistance, please get in contact with us at

 stephen@smbaccounting.com.au

 P 1300 854 159

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