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SBS Accountants & Advisors

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P r a c t i c e U p d a t e - January/February 2021

Posted on February 21, 2021 at 8:25 PM



 

New measures applying from 1 January 2021

The Government has provided an update of a number of new measures which came into effect from 1 January 2021, including (among others):

  • The most significant changes to Australia’s insolvency framework in 30 years, which are intended to reduce costs, cut red tape and help more small businesses recover from the pandemic. The reforms introduce a new, simplified debt restructuring process. These measures apply to incorporated businesses with liabilities of less than $1 million — covering around 76% of businesses subject to insolvencies today, 98% of which have less than 20 employees.
  • Australians will have more power to choose their own superannuation fund: ‘Your Superannuation, Your Choice’ allows around 800,000 Australians to decide where their retirement savings are invested, representing around 40% of all employees covered by a current enterprise agreement.
  • The Government’s HomeBuilder program has been extended to 31 March 2021. The scheme is expected to support the construction or major rebuild of an additional 15,000 homes.
  • Major reforms to Australia’s foreign investment framework take effect, with new requirements for foreign investors.

 

Shortcut rate for claiming home office expenses extended

The ATO has extended (again) the ability to utilise the "shortcut rate" for claiming home office running expenses to 30 June 2021 (it previously only applied until 31 December 2020).

The ATO's guideline allows certain taxpayers to claim a fixed rate per hour (80 cents per hour) for most additional running expenses incurred when working from home by keeping a record of the number of hours they have worked from home, rather than needing to calculate specific running expenses.

The expenses included in the shortcut rate include lighting, heating, cooling and cleaning costs, the decline in value and repair of home office items (such as furniture and furnishings in the area used for work, computers and laptops, etc.), and phone and internet expenses.

However, the guideline does not cover "occupancy expenses", such as rent, mortgage interest, property insurance and land taxes.

 

AAT decision on JobKeeper and backdated ABNs

On 21 December 2020, the AAT handed down its decision in a case relating to a taxpayer's eligibility for JobKeeper payments, in circumstances where the Registrar of the Australian Business Register decided to reactivate a previously cancelled ABN after 12 March 2020, with a backdated effective date on or before 12 March 2020.

The AAT held that the taxpayer met the JobKeeper requirement to have an ABN on 12 March 2020.

However, the ATO disagrees with this decision and has lodged an appeal in the Federal Court.

While the appeal outcome is pending, the ATO will postpone finalising decisions regarding an entity’s eligibility for JobKeeper where the entity has backdated its registration in order to qualify.

The ATO is taking a similar position in regard to eligibility for the Cash Flow Boost.

Note that the AAT's decision has not changed the need to satisfy all other eligibility conditions.

 

SMSF related party rental income deferrals due to COVID‑19

The ATO has made a determination to ensure that trustees of SMSFs do not inadvertently breach the "in-house asset rules" where the fund allows a related party to defer the payment of rent under a lease agreement (on arm’s length terms) because of the financial impact of COVID‑19.

Where the requirements of the determination are met, the deferral of rent will not be treated as a "loan" or "financial accommodation" to the related party in either or both of the 2019/20 or 2020/21 income years.

The determination also applies where an SMSF owns interests in a "non-geared" company or unit trust that allows a tenant to defer the payment of rent under a lease (on arm’s length terms) because of the financial impact of COVID‑19.

 

ATO data-matching programs

The ATO has announced it will engage in the following data-matching programs:

  • it will acquire motor vehicle registry data from state and territory motor vehicle registry authorities for 2019/20 through to 2021/22, with records relating to approximately 1.5 million individuals to be obtained each financial year; and
  • it will acquire data on Australian sales made through online selling platforms for the 2018/19 through to 2022/23 financial years, collecting 20,000 to 30,000 account records each financial year (with around half of the matched accounts relating to individuals).

These records will be electronically matched with ATO data holdings to identify non-compliance with registration, lodgment, reporting and payment obligations under taxation laws.

 

JobMaker Hiring Credit scheme: Claims open from 1 February 2021

The JobMaker Hiring Credit is being administered by the ATO and provides a wage subsidy payment directly to employers as an incentive to employ additional job seekers aged 16 to 35 years.

Registrations for the JobMaker Hiring Credit scheme opened on 7 December 2020, and claims for the first JobMaker period can be made from 1 February 2021, provided employers are registered and meet all eligibility requirements.

Employer eligibility requirements include that applicants:

  • are up to date with their tax and GST lodgment obligations for the last 2 years;
  • have not claimed JobKeeper payments for a fortnight that started during the JobMaker period; and
  • are reporting through Single Touch Payroll.

The ATO will be writing to employers who have registered for the JobMaker Hiring Credit from 15 January 2021, encouraging them to check that they meet all JobMaker Hiring Credit eligibility criteria before they claim, to ensure that registrants can make a claim from 1 February 2021 and there are no delays in them receiving their payments.

Editor: Please contact us if you need any help with these claims.

Cash payment limit Bill shelved

It appears that the Government has decided not to proceed with its proposal to limit cash payments in Australia to $10,000.

This measure was originally raised as part of the 2018/19 Budget, and the Government subsequently introduced a Bill to the House of Representatives, proposing to make it an offence for entities to make or accept cash payments of $10,000 or more.

That Bill passed the House and was then introduced to the Senate on 11 November 2019, but proceeded no further, and the Government withdrew the Bill from the Senate on 3 December 2020.

 

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

 

Practice Update - December 2020

Posted on December 30, 2020 at 6:55 PM


Improvements to be made to full expensing measure

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

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

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

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

 

JobMaker Hiring Credit passed

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

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

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

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

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

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

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

 

ATO Visa Data Matching Program

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

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

How to avoid getting dodgy advice

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

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

Red flags include:

  • people the taxpayer doesn't know cold calling with advice;
  • unsolicited letters, emails or phone calls after the taxpayer has been through court action with a creditor;
  • advice to transfer assets to a third party without payment;
  • refusal to provide advice in writing;
  • advice suggesting they have a sympathetic liquidator who will protect the taxpayer's personal interests and assets;
  • advice to withhold certain records from the bankruptcy trustee or liquidator, or provide incorrect information to authorities; and
  • advice to deal with the liquidator or trustee on the taxpayer's behalf.

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

 

STP data-sharing with Services Australia

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

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

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

 

Proposed FBT exemption — retraining and reskilling

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

It is proposed that this exemption will not apply to:

  • retraining provided under a salary packaging arrangement;
  • training provided through Commonwealth supported places at universities; or
  • repayments towards Commonwealth student loans.

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

 

 

 

Getting the margin scheme right

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

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

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

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

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

  • calculate the margin correctly; and
  • report the amount of the margin on the sale on their BAS — not the full amount of payment received.

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

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

  • can't claim GST credits for the sale; and
  • don't report it on their activity statement.

 


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

 

P r a c t i c e U p d a t e - November 2020

Posted on November 8, 2020 at 11:45 PM

Tax cuts pass Parliament

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

Tax relief for individuals

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

  • the low income tax offset increased from $445 to $700;
  • the top threshold of the 19% tax bracket increased from $37,000 to $45,000; and
  • the top threshold of the 32.5% tax bracket increased from $90,000 to $120,000.

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

Tax relief for business

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

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

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

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

 

Employers need to apply recent tax cuts as soon as possible

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

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

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

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

 

Deferrals of interest due to COVID-19

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

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

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

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

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

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

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

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

 

Simplified home office expense deduction claims due to COVID-19

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

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

 

Companies holding meetings and signing documents electronically

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

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

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

 

COVID-19 and loss utilisation

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

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

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

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

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

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

Employees on JobKeeper can satisfy the ‘work test’

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

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


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

 




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