18 May 2020
accountants news

The 2019/2020 Tax Guide For You And Your Business

Jobkeeper: What to do now.

Most businesses have now determined their eligibility for the JobKeeper payment, but with the scheme about to commence, the questions are turning to what steps are next to administer the claim.

The ATO has clarified the process to claim foreligible businesses. The steps include:
• Register your interest and subscribe for JobKeeper payment updates through the ATO website.
• Continue to pay eligible employees at least $1,500 each per fortnight (the first JobKeeper fortnight is from 30 March to 12 April), or make a single combined payment of $3,000 by the end of the month.
• Notify eligible employees of your intention to claim JobKeeper payments and confirm that they are not also claiming the payment through another employer.
• Provide nominated employees with the JobKeeper employee nomination notice to complete before the end of April if you intend to claim JobKeeper payment for April.
• Enrol for the JobKeeper payment on or after 20 April 2020 through the ATO’s Business Portal
• Fill out the online form with your bank details and entitlement claims based on business participation, e.g. sole traders.
• State number of employees who will be eligible for the first two JobKeeper fortnights (30 March -12 April and 13 April – 26 April).

Despite providing undeniable benefits, the JobKeeper scheme also presents risk. Cash flow risks can occur because businesses must ensure all eligible employees are paid a minimum $1,500 per fortnight to all nominated employees. To receive the first payment in May 2020, employees must have been paid the minimum from 30 March 2020. In addition, employers who apply for the scheme but fail to pay their eligible employees may face penalties up to $126,000 for individual employers, or $630,000 for corporations as a breach of the Fair Work Act.

The ATO is also closely monitoring businesses seeking to profit from the scheme. Remedies that are available include clawing back funds (with
interest) which it deems to be improperly paid. They will also require monthly reports of current and projected sales as part of the compliance
process with the JobKeeper scheme.

Rent relief for commercial tenants

The Government has introduced a mandatory code for commercial tenants and landlords to help commercial renters through COVID-19.

The code will apply from 3 April 2020 to SMEs with an annual turnover of less than $50 million and are participating in the JobKeeper program.

Under the code of conduct for commercial tenancies:

• Landlords must not terminate leases for non-payment of rent during the COVID-19 pandemic and recovery period.
• Tenants must stay committed to their lease terms.
• Landlords must offer reductions in rent as waivers and deferrals proportionate to the tenant’s reduction in trade during COVID-19. Waivers must constitute no less than 50 per cent of the total rent reduction during that period.
• Benefits that owners get for their properties as outgoing reliefs (e.g. deferred loan payments, land tax, reduced charges) should be passed onto the tenant in the appropriate proportion.

The code will be implemented nationwide and aims to encourage parties to reach agreeable outcomes on a case by case basis. For commercial tenants, this means negotiating rent reductions corresponding to their annual turnover reductions and being provided extended lease terms for the rent waiver and deferral period.

What to consider when dismissing employees due to COVID-19

Business owners have faced many challenges and changes over the last month, but when it comes to employees, it is critical not to lose sight of obligations that remain when ending employment.

Despite being faced with additional pressure at this time, employers must continue with their obligations to comply with the applicable award, enterprise agreement, workplace policy or employment contract, as well as providing employees with their legal entitlements such as notice, accrued leave and redundancy payments when dismissing or standing down employees due to restrictions placed on them by COVID-19.

The Fair Work Act prohibits employers from dismissing employees due to illness or injury, meaning that if they have contracted COVID-19, or have symptoms that prevent them coming into work, they cannot be dismissed.
Employers who are affected by COVID-19, such as those who are facing business slow down or are shutting down may dismiss employees under redundancy. Employees may be entitled to redundancy pay if their continuous service to the employer is more than 12 months. Regular redundancy eligibility requirements still apply and not all employees will be eligible, such as casual workers, apprentices and trainees.

The Australian Government has enabled employers to make temporary and partial stand downs during COVID-19. Stand downs can be enforced without pay if the business has been closed due to enforceable government direction (non-essential services), if a significant portion of employees are under self-quarantine, or if work is forced to stop due to lack of supply.

Working from home: what deductions can you claim?

Many employees are now being required to work from home to meet social distancing requirements placed on them by COVID-19, and are now faced with meeting some of the costs associated with their job, such as heating, lighting and internet; costs that are normally paid by their employer.

Expenses incurred by employees that are related to their job can typically be claimed as a tax deduction. Deductible running expenses include:

• Utilities such as heating, cooling and lighting.
• Cleaning costs for your work area.
• Mobile or landline phone expenses for work calls.
• Internet connection.
• Computer consumables and stationery.
• Repair costs for home office equipment and furniture.
• Depreciation of home office equipment, computers, furniture and fittings.
• Small capital items such as a computer (purchased for the purpose of working from home) can be claimed if they cost under $300. If the cost exceeds $300, the decline in value can be deducted.
The ATO has introduced a new ‘shortcut method,’ where you can claim additional running expenses at a rate of 80 cents for each hour you work from home as a result of COVID-19. The shortcut will apply from 1 March 2020 to 30 June 2020. A record of hours worked such as timesheets or rosters must be kept as proof. If you only undertake minimal work tasks from home such as occasionally checking emails or taking calls, then you are not eligible for the deduction. To claim the deduction, you must specify your claim with the note “COVID-hourly rate” when lodging your upcoming 2019-20 tax return.

Individuals can also choose to deduct working from home expenses using the pre-existing methods, which may prove to be more tedious.

• The actual cost method: individuals claim the actual portion of running expenses incurred for work by keeping a diary that details the work portion of your household running expenses. This can include receipts and documents supporting your claim.
• The fixed-rate method: a fixed rate of 52 cents per hour worked can be claimed. This applies for electricity and decline in furniture expenses, but the actual work-related portion of expenses must be calculated for phone and internet costs, the depreciation of office equipment and computer consumables and stationery.

Expenses such as rent, mortgage and insurance cannot be claimed unless you have a permanent home office.

Major changes to instant asset write-off

Instant asset write-off policies have been expanded as part of the Government’s COVID-19 initiative to encourage business spending in an effort to increase cash flow, stave off an economic recession, boost consumption and protect employment.

The instant asset write-off threshold has been increased from $30,000 to $150,000 and has expanded access to include businesses with an aggregated annual turnover of less than $500 million (up from $50 million). This applies from 12 March 2020 until 30 June 2020, for new or second-hand assets first used or installed ready for use in this timeframe.

Items that small businesses can purchase under the new instant asset write-off scheme include:

• Company vehicles;
• Computer equipment;
• Office furniture and facilities; and
• Solar systems for business premises.

In addition, the Government is introducing a 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation.
As spending money on additional equipment at this time may be problematic given the financial burden placed on businesses during COVID-19, any expenditure needs to be made with respect to the cashflow and tax effect of any purchase, particularly a large one.

Businesses in a position to invest in equipment may be able to take advantage of the write off and offset against any taxable gains they receive as part of the Government economic stimulus initiatives, and at the same time invest to improve business efficiency.

Superannuation strategies for 2020

Super contributions are one of the areas that individuals need to review now, even more so this year with the capital losses incurred by most super fund balances as a result of the economic downturn due to COVID-19.
The recent turn of events may give rise to individuals needing to revisit their super strategies and contributions, perhaps to tax effectively and regain some lost ground.

Concessional contributions

Concessional contributions are before-tax contributions made into your super fund. They include employer contributions, salary sacrifice payments and personal contributions you claim as a tax deduction. The concessional contributions cap is $25,000 for all ages for the 2019-20 financial year.
From 1 July 2018 individuals with a total superannuation balance of less than $500,000 on 30 June of the previous financial year may be entitled to carry forward unused contributions and contribute more than the general concessional contributions cap and make additional concessional contributions for any unused amounts.

Concessional contributions are taxed at 15 per cent. Individuals may also pay Division 293 tax which is an additional tax on concessional contributions for individuals whose combined income and contributions are greater than $250,000.

Non-concessional contributions

Non-concessional contributions are paid into super funds from after-tax income. They include contributions made by individuals or their spouse to a super fund where contributions are not claimed as an income tax deduction. The annual non-concessional contribution cap for the 2019-20 financial year is $100,000.

Eligible individuals may make bring-forward contributions, allowing them to bring the next three years of your annual non-concessional contributions cap forward into the current financial year without breaching the contributions cap.

Non-concessional contributions are not taxed unless the caps are exceeded.

Early release of superannuation available

The Government has changed superannuation rules to alleviate the COVID-19 impacts on individuals, allowing a temporary early release of superannuation.

Temporary early release of superannuation

Individuals affected by COVID-19 will be able to access up to $10,000 of their superannuation before 1 July 2020, as well as a further $10,000 after this date for approximately three months. To be eligible, you must comply with one or more of these requirements:

• You are unemployed.
• You are eligible for a parenting payment, jobseeker payment, youth allowance for jobseekers, special benefit or farm household allowance.
• You were made redundant in 2020.
• Your working hours were reduced by at least 20 per cent during 2020.
• You are a sole trader and your business was suspended or experienced a turnover reduction of at least 20 per cent during 2020.

Applications for early release of your superannuation will open from mid-April 2020. Individuals will be able to apply directly through the ATO through the myGov website and certify that they meet eligibility requirements.

Before applying for the early release of super, individuals should get advice in relation to the impact of such a strategy and what options may be available.

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