Explanatory Memorandum – November 2021

ATO scrutinising gifts or loans from overseas

The ATO has recently issued an alert warning taxpayers against disguising undeclared foreign income as gifts or loans from related overseas entities, including family and friends. It says it has continued to encounter situations where Australian resident taxpayers have derived amounts of income or capital gains offshore that are assessable, but the taxpayers have failed to declare the amounts in their income tax returns.

Individuals who are Australian residents for tax purposes should remember that their worldwide income, as well as certain profits derived by offshore entities they control, is assessable income for Australian tax purposes.

The ATO will now be looking closely at arrangements where taxpayers are aware of their residency status and the tax implications that flow from it, but attempt to avoid or evade tax of their foreign assessable income by concealing the character of the funds upon repatriation to Australia by disguising the amounts as either gifts or loans from a related overseas entity.

Whether or not a gift or loan is genuine depends upon the following criteria being satisfied:

  • the characterisation of the transaction as a gift or loan is supported by appropriate documentation;
  • the behaviour of the parties is consistent with that characterisation; and
  • the monies provided are sourced from funds genuinely independent of the gift or loan receiver.

If family or friends who reside overseas have provided a genuine gift to an individual or their business, it is prudent for them to keep supporting documents such as:

  • any declarations the donor has made in their country of residence about the nature of the amounts transferred;
  • an executed contemporaneous deed of gift prepared by the donor;
  • formal identification of the donor (eg a copy of their photo identification from their passport or identity card);
  • a copy of the donor’s bank statements showing the gift and donor’s wealth before they made the gift; and
  • financial records reflecting the donor’s transfer.

Gifts also include inheritances. Where an inheritance is received, a certified copy of the donor’s will or a distribution statement for the estate should be a part of the recordkeeping.

In relation to genuine loans from overseas entities made to help start up a business or to acquire income-producing assets, supporting documents may include the following:

  • a properly documented loan agreement that details parties to the loan, date, amount, interest rate, frequency of repayments and terms of the loan;
  • correspondence relating to the loan, such as pre-contractual negotiation communications or variations made post-agreement);
  • documents in relation to security or guarantees provided;
  • arrangements governing the drawdown and transmission of funds;
  • financial records showing advance of funds and subsequent repayments, including interest and principal payments over the loan term;
  • financial and accounting records showing how the loan amounts were used; and
  • documents showing the payment of withholding tax.

If there is any uncertainty about whether particular amounts are genuine gifts or loans, the ATO has said it will form a view based on all the available evidence – therefore, keeping contemporaneous and complete records is strongly recommended. The ATO notes that a deed of gift or a statutory declaration (provided either by the donor or the receiver) may not be accepted as conclusive evidence.

New data matching program: government payments

A new data matching program designed to identify and address non-compliance with tax and super obligations is under way in relation to government payments for the 2018–2019 to 2022–2023 income years. In essence, it covers most services that the Commonwealth Government pays third-party program providers to deliver.

Specifically, data will be obtained from the following agencies in relation to these programs that they deliver:

  • Comcare – services provided under the Safety Rehabilitation and Compensation Act 1988;
  • Department of Education, Skills and Employment – VET FEE-HELP scheme, VET student loans program, child care subsidy, employment services;
  • Department of Health – aged care subsidy, hearing services program, Commonwealth home support program;
  • National Disability Insurance Agency – National Disability Insurance Scheme (NDIS);
  • National Indigenous Australian Agency – Indigenous Advancement Strategy;
  • Department of Home Affairs – youth transition support services, national community hubs, humanitarian settlement program, Australian cultural orientation program, adult migrant English program, free translating service, and settlement engagement and transition support program;
  • Department of Veterans’ Affairs – health treatment program; and
  • clean energy regulator – large-scale renewable energy target and small-scale renewable energy scheme.

The wide-ranging nature of this program is designed to identify and address non-compliance with tax and super obligations by service providers receiving government payments or helping deliver the specified programs. The data collected will enhance the information the ATO currently receives from government entities through the taxable payments annual report (TPAR).

This means that contractors, subcontractors and consultants in any type of business structure (sole trader, company, partnership or trust) that receive payments from government under any of these programs may be subject to extra scrutiny.

Service provider identification details obtained under the program will vary depending on whether they are individuals or entities. For individuals and sole traders, basic details collected will include names (first and last), dates of birth, addresses (residential, postal, etc), ABNs, service types, email addresses and phone numbers. For entities, basic details collected will include service provider business names, addresses (business, postal, registered, etc), ABNs, ACNs, organisation or service types, contact names, email addresses and phone numbers.

Payment information obtained under the program will consist of service provider IDs, names of services, types of services (linked to programs), value of payments received for the relevant financial years, counts and types of claims, and withholding and re-credit amounts.

It is estimated that 36,000 service providers will be captured under this program each financial year; of that number, approximately 11,000 will be individuals and the rest will be companies, partnerships, trusts and government entities.

The ATO will be checking the registration obligations of third-party providers (ABNs, TFNs, GST and PAYG withholding) as well as lodgment obligations (outstanding income tax, BAS and FBT returns). It will also look at whether service providers have correctly reported income, comparing the data obtained against income records, and will check for any outstanding tax and super debts and assess the entity’s ability to pay those debts.

Source: www.ato.gov.au/General/Gen/Government-Payments-Program/

www.legislation.gov.au/Details/C2021G00763

Do you need a Director Identification Number?

Directors of companies will soon have to enrol in the Director Identification Number regime. This requires current and future directors to apply for director identification numbers (DIN) which will be permanently linked to the individual, even if they are no longer a director. It is hoped the regime will make it easier to trace relationships across companies and reduce instances of phoenixing and other illegal activity. Most existing directors will have until 30 November 2022 to apply for the DIN through the ATO.

The Director Identification Number regime came into force late in 2020 as a tool for the Federal Government to reduce phoenixing and black economy activities. Broadly, the regime will require all directors to confirm their identity with the ATO, at which time they will be issued a unique identifier. This identifier will then be permanently linked to the individual, even if they cease to be a director.

The Government has recently introduced an instrument that extends the time available for persons who are eligible officers immediately before the commencement of the obligations to apply for a DIN. Individuals that operate under the Corporations Act 2001 and became a director on or before 31 October 2021 are required to apply for a DIN before the end of the transitional period, which is between 4 April 2021 and 30 November 2022.

Directors who operate under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 and became a director on or before 31 October 2021 will have even more time to apply for a DIN – until 30 November 2023 (with a transition period between 4 April 2021 and 30 November 2023). Any individuals who are appointed directors between 1 November 2021 and 4 April 2022 will have within 28 days of their appointment to apply for the DIN, and from 5 April 2022 individuals seeking to become directors will need to apply for a DIN before their appointment.

It is envisaged that the DIN will provide traceability of a director’s relationships across companies, enabling better tracking of directors of failed companies and preventing the use of fictitious entities. It will also assist regulators to investigate a director’s involvement in what may be repeated unlawful activity, including illegal phoenixing.

The Australian Securities and Investments Commission (ASIC) and external administrators will also benefit, saving time and money, as the DIN will make it simpler to track the corporate history of various directors and assist liquidators in improving the efficiency of the insolvency process. The DIN is also expected to protect individuals against the fraudulent use of stolen identities to set up companies, and is expected to improve overall data integrity and security.

To prevent abuse of the regime, any conduct that undermines the DIN requirement will be subject to civil and criminal penalties. This includes deliberately providing false identity information, intentionally providing a false DIN or intentionally applying for multiple DINs.

Directors will be able to use the new Australian Business Registry Services (ABRS) online services to register from 1 November 2021.

Sign-ins and director identity verification will be conducted using the myGovID app. This app requires a compatible smart device and will require an individual to enter personal details and verify at least two Australian identity documents (drivers licence, birth certificate, citizenship certificate, passport, etc) to obtain the “standard identity strength”. The “strong identity strength” which is currently in testing phase will require the completion of an additional face verification check.

Source: www.legislation.gov.au/Details/F2021L01391

www.ato.gov.au/General/Gen/Modernising-Business-Registers/

www.abrs.gov.au/director-identification-number/who-needs-apply-and-when

COVID-19 relief for SMSFs extended

Due to the ongoing economic impacts of COVID-19 on large parts of Australia, the ATO has announced the extension of various COVID-19 relief measures for trustees of self managed superannuation funds (SMSFs). The relief previously only applied to the 2019–2020 and 2020–2021 financial years, but will now also be available for the 2021–2022 financial year.

SMSF residency test

To be a complying super fund and receive tax concessions, SMSFs must be an “Australian super fund” at all times during the year. This requires, among other things, for the central management and control of the SMSF (ie individual trustees, or directors of a corporate trustee) to ordinarily be in Australia. Under the relief, a fund will still meet this requirement even if its central management and control is temporarily outside of Australia for up to two years.

Obviously, with the Australian borders pretty much closed during the entirety of the pandemic, and many other countries imposing travel bans, some individual trustees or directors of a corporate trustee may be stranded in another country over the two-year limit through no fault of their own. In these situations, provided there are no other changes in the SMSF or in the circumstances of the individual trustee (or directors of the corporate trustee) affecting other residency conditions, the ATO has indicated it will not apply compliance resources to determine whether a fund meets the residency test.

Rental relief

If an SMSF or a related party has continued to provide rental relief based on the current market conditions, whether it be a rental reduction, waiver or deferral to a tenant, the ATO will provide relief in the form of not taking any compliance action against the fund. However, this is predicated on the rental relief being offered on commercial terms, and there being proper documentation with regards to the arrangement.

The ATO notes that not taking compliance action is only an interim measure. In due course it will be making a formal determination, similar to the one made in 2020, to ensure that rental deferrals offered by SMSFs or related parties to their tenants does not cause a loan or an investment to be an in-house asset in the current and future financial years.

Loan repayment relief

For loan repayment relief provided by an SMSF to a related or unrelated party due to the financial impacts of COVID-19, where the relief is offered on commercial terms and the changes to the loan agreement are properly documented, the ATO will provide relief on similar terms as the interim rental relief – that is, it will not take any compliance action against the fund. This will also apply to limited recourse borrowing arrangements (LRBAs).

In-house assets

Where an SMSF exceeds the 5% in-house asset threshold at 30 June 2021 due to the financial impacts of COVID-19, trustees must still prepare a written plan to reduce the market value of the fund’s in-house assets to below 5% by 30 June 2022. However, the ATO has said it will not take any compliance action where the plan has not been executed by the due date (30 June 2022) as a result of the market not having recovered, or in some cases the plan may be unnecessary owing to the recovery of the market.

PAYG variations

The ATO has also confirmed that its penalty and interest relief for excessive PAYG variations applies to SMSFs that continue to be impacted by COVID-19 during 2021–2022. The ATO will not apply penalties or interest for excessive variations of PAYG instalments during the 2021–2022 income year, provided that the taxpayer has taken reasonable care to estimate their end-of-year tax.

This ATO concession for penalties and interest applies to 30 June ordinary balancers for the 2021–2022 income year and entities that have been granted a substituted accounting period (SAP). For an entity with a SAP, any variation must relate to instalments made during the 2021–2022 income year.

A PAYG instalment variation requires a reasonable and genuine attempt to determine the liability. When considering if a genuine attempt has been made, the ATO takes into account what a reasonable person would have done in the taxpayer’s circumstances.

The ATO notes that PAYG variations do not carry over into the new income year. Therefore, if a taxpayer made variations in the 2020–2021 income year, they may need to vary again in 2021–2022. The varied amount or rate then applies for all of the taxpayer’s remaining instalments for the income year, or until they make another variation.

The ATO encourages PAYG instalment payers to review their tax position regularly and vary the PAYG instalments as their situation changes. Taxpayers who realise they have made a mistake working out their PAYG instalment can correct it by lodging a revised activity statement or varying a subsequent instalment.

If a taxpayer is unable to pay an instalment amount, the ATO requires them to still lodge an instalment notice and discuss a payment arrangement with the ATO so that they don’t have a debt at the end of the year.

Audits

The ATO has also extended to 2021–2022 its existing COVID-19 relief in the Addendum to the Auditor/actuary contravention report (ACR). The ACR relief for 2021–2022 will apply for:

  • rental relief (including rental reductions, waivers and deferrals);
  • loan repayment relief (including for LRBAs); and
  • in-house assets.

Approved SMSF auditors need to refer to the Addendum when determining whether a contravention arises because of the relief, when to report a contravention to the ATO via an ACR for the 2021–2022 financial year, and what evidence to obtain from the trustees to support the relief. In summary, SMSF auditors need to check that:

  • rental relief is offered on commercial terms due to the financial impacts of COVID-19 (having regard to relevant state and territory COVID-19 support measures) and the arrangement is appropriately documented;
  • loan repayment relief is offered on commercial terms due to the financial impacts of COVID-19 (having regard to the terms of relief offered by commercial lenders), and the changes to the loan agreement are properly documented;
  • funds that exceeded the 5% in-house asset threshold at 30 June 2021 due to the financial impacts of COVID-19 have prepared a written plan to reduce the market value of the fund’s in-house assets to below 5% by 30 June 2022.

The ATO has said that SMSF auditors need to use their professional judgment when determining whether relief is offered on commercial terms due to the financial effects of COVID-19. If there is insufficient appropriate evidence to support the relief, including that it is offered on commercial terms, SMSF auditors should report this via an ACR where the reporting criteria are met.

Audit opinion modifications

The existing ACR Addendum notes that auditors may still need to modify their opinion in Part B of the audit report where they identify any material breach of the provisions and regulations listed within the audit report, even if those breaches have arisen from the impacts of COVID-19 in circumstances where the ATO will not be taking compliance action against them. Even where a modification is not necessary, for example because the auditor forms an opinion that the contravention is not material, the auditor must still notify the trustee of these contraventions. This could be done in the management letter to the trustee.

The ATO also recommends that auditors add to the management letter that the ATO will not be taking any compliance action against these contraventions for the 2019–2020, 2020–2021 and 2021–2022 financial years. All other contraventions identified in the fund need to be reported to the trustee in the management letter and reported to the ATO in the ACR where the reporting criteria are met.

Arm’s length terms must be documented

The ATO relief generally only applies where a landlord has “acted in good faith” and agreed that the tenant can defer payment of rent on arm’s length terms during one or all of the 2019–2020, 2020–2021 and 2021–2022 income years in order to ease the financial hardship caused by COVID-19.

The National Cabinet Mandatory Code of Conduct (or any relevant state-based codes or legislation) may assist in assessing whether the rental deferral has been negotiated in good faith and on arm’s length terms.

There must also be contemporaneous documentation reflecting the arm’s length terms and that the lease remains enforceable. Any deferred amounts must also be repaid by the tenant as soon as practicable.

Source:

www.pm.gov.au/sites/default/files/files/national-cabinet-mandatory-code-ofconduct-sme-commercial-leasing-principles.pdf

www.service.nsw.gov.au/campaign/covid-19-help-businesses/covid-19-assistance-commercial-and-residential-landlords

www.vsbc.vic.gov.au/your-rights-and-responsibilities/retail-tenants-and-landlords/

www.ato.gov.au/Super/Sup/Varying-your-pay-as-you-go-instalments-due-to-COVID-19/

www.ato.gov.au/Forms/Auditor-actuary-contravention-report-instructions/?anchor=AddendumAuditorContraventionReportingins#AddendumAuditorContraventionReportingins

www.ato.gov.au/Super/Sup/COVID-19-relief-in-ACR-Addendum-extended-to-2021-22-financial-year/

 

Client Alert – November 2021

ATO scrutinising gifts or loans from overseas

The ATO has recently issued an alert warning taxpayers against disguising undeclared foreign income as gifts or loans from related overseas entities, including family and friends. It says it has continued to encounter situations where Australian resident taxpayers have derived amounts of income or capital gains offshore that are assessable, but the taxpayers have failed to declare the amounts in their income tax returns.

The ATO will now be looking closely at arrangements where taxpayers are aware of their residency status and the tax implications that flow from it, but attempt to avoid or evade tax of their foreign assessable income by disguising amounts as either gifts or loans from a related overseas entity.

If family or friends who live overseas have provided a genuine monetary gift or loan to you or your business, you should keep as much supporting documentation as possible about it. This is because if there is any uncertainty about whether particular amounts are genuine gifts or loans, the ATO will form a view based on all of the available evidence.

Contemporaneous and complete records should include detailed financial records, full loan documentation, formal identification of the giver and any declarations they made about the money in their country of residence. A deed of gift or a statutory declaration may not be accepted as conclusive evidence.

Inheritances also count as “gifts”. If you receive an inheritance from overseas, a certified copy of the person’s will or a distribution statement for the estate should be a part of your recordkeeping.

New data matching program: government payments

A new data matching program designed to identify and address non-compliance with tax and super obligations is under way in relation to government payments for the 2018–2019 to 2022–2023 income years. It covers most services that the Commonwealth Government pays third-party program providers to deliver.

The ATO will obtain data from Comcare, the Department of Health, the National Disability Insurance Agency, the National Indigenous Australian Agency, the Department of Home Affairs, the Department of Veterans’ Affairs and the clean energy regulator. This will add to the information the ATO currently receives from government entities through the taxable payments annual report (TPAR).

This means that contractors, subcontractors and consultants in any type of business structure (sole trader, company, partnership or trust) that receive payments from government under these agencies’ programs may be subject to extra scrutiny.

It is estimated that 36,000 service providers will be captured under this program each financial year. Of that number, approximately 11,000 will be individuals and the rest will be companies, partnerships, trusts and government entities.

Do you need a Director Identification Number?

Directors of companies will soon have to enrol in the Director Identification Number regime. This requires current and future directors to apply for director identification numbers (DIN) which will be permanently linked to the individual, even if they are no longer a director. It is hoped the regime will make it easier to trace relationships across companies and reduce instances of phoenixing and other illegal activity. Most existing directors will have until 30 November 2022 to apply for the DIN through the ATO.

The Director Identification Number regime came into force late in 2020 as a tool for the Federal Government to reduce phoenixing and black economy activities.

Individuals that operate under the Corporations Act 2001 and became a director on or before 31 October 2021 are required to apply for a DIN before the end of the transitional period, which is between 4 April 2021 and 30 November 2022.

Directors who operate under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 and became a director on or before 31 October 2021 will have even more time to apply for a DIN – until 30 November 2023 (with a transition period between 4 April 2021 and 30 November 2023). Any individuals who are appointed directors between 1 November 2021 and 4 April 2022 will have within 28 days of their appointment to apply for the DIN, and from 5 April 2022 individuals seeking to become directors will need to apply for a DIN before their appointment.

Any conduct that undermines the DIN requirement will be subject to civil and criminal penalties. This includes deliberately providing false identity information, intentionally providing a false DIN or intentionally applying for multiple DINs.

Directors will be able to use the new Australian Business Registry Services (ABRS) online services to register from 1 November 2021. Sign-ins and director identity verification will be conducted using the myGovID app.

COVID-19 relief for SMSFs extended

Due to the ongoing economic impacts of COVID-19 on large parts of Australia, the ATO has announced the extension of various COVID-19 relief measures for trustees of self managed superannuation funds (SMSFs). The relief previously only applied to the 2019–2020 and 2020–2021 financial years, but will now also be available for the 2021–2022 financial year.

SMSF residency test

To be a complying super fund and receive tax concessions, SMSFs must be an “Australian super fund” at all times during the year. This requires, among other things, for the central management and control of the SMSF (ie individual trustees, or directors of a corporate trustee) to ordinarily be in Australia. Under the relief, a fund will still meet this requirement even if its central management and control is temporarily outside of Australia for up to two years.

Rental relief

If an SMSF or a related party has continued to provide rental relief based on the current market conditions, whether it be a rental reduction, waiver or deferral to a tenant, the ATO will provide relief in the form of not taking any compliance action against the fund. However, this is predicated on the rental relief being offered on commercial terms, and there being proper documentation with regards to the arrangement.

Loan repayment relief

For loan repayment relief provided by an SMSF to a related or unrelated party due to the financial impacts of COVID-19, where the relief is offered on commercial terms and the changes to the loan agreement are properly documented, the ATO will provide relief on similar terms as the interim rental relief – that is, it will not take any compliance action against the fund. This will also apply to limited recourse borrowing arrangements (LRBAs).

In-house assets

Where an SMSF exceeds the 5% in-house asset threshold at 30 June 2021 due to the financial impacts of COVID-19, trustees must still prepare a written plan to reduce the market value of the fund’s in-house assets to below 5% by 30 June 2022. However, the ATO has said it will not take any compliance action where the plan has not been executed by the due date as a result of the market not having recovered, or in some cases the plan may be unnecessary because of market recovery.

PAYG variations

The ATO has confirmed that its penalty and interest relief for excessive PAYG variations applies to SMSFs that continue to be impacted by COVID-19 during 2021–2022. The ATO will not apply penalties or interest for excessive variations of PAYG instalments during the 2021–2022 income year, provided that the taxpayer has taken reasonable care to estimate their end-of-year tax.

Audits

The ATO has also extended to 2021–2022 its existing COVID-19 relief in the Addendum to the Auditor/actuary contravention report (ACR). The ACR relief for 2021–2022 will apply for rental relief (including rental reductions, waivers and deferrals), loan repayment relief (including for LRBAs), and in-house assets.

 

Explanatory Memorandum – October 2021

Federal COVID-19 support developments

Additional financial support for child care providers

On 23 August the Prime Minister and the Minister for Education and Youth issued a joint media release announcing new support measures for child care providers impacted by extended COVID-19 lockdowns.

Child care services in Commonwealth-declared hotspots will be eligible for new fortnightly payments of 25% of their pre-lockdown revenue, while outside school hours care (OSHC) services will be eligible for fortnightly payments of 40% of pre-lockdown revenue.

This measure will apply to services seven days after the hotspot is declared, where state and territory governments have directed families to keep their children at home. Where children are still allowed to attend child care, the supports will kick in four weeks after the hotspot declaration.

The new payments will immediately benefit child care services in affected areas of Sydney and the ACT and OSHC services in metropolitan Melbourne. All other services in metropolitan Melbourne, regional Victoria and regional NSW will become eligible after seven days of lockdown, with payments to be backdated to 23 August 2021.

The supports will also be available for services who meet the criteria in any future extended lockdowns. The measure is in addition to the existing Commonwealth supports – including gap fee waivers, which allow the Commonwealth Child Care Subsidy to continue even when children are not attending a child care service.

Payments will be contingent on providers:

  • expecting attendance below 50%;
  • waiving gap fees for all families whose children are not attending;
  • maintaining staffing levels;
  • agreeing to a fee freeze for the duration of support; and
  • not accessing other Commonwealth Government funded supports.

Payments are made available directly to providers. Families in affected areas are not required to do anything.

Source: www.pm.gov.au/media/targeted-assistance-child-care-services-during-covid-lockdown.

Non-assessable non-exempt income status of New South Wales and Victorian programs

The Federal Treasurer has issued the Income Tax Assessment (Eligible State and Territory COVID-19 Economic Recovery Grant Programs) Amendment Declaration (No 2) 2021.

Its effect is to declare certain grant programs administered by NSW and Victoria as “eligible grant programs”. This means that a payment received by an entity from a specified program is non-assessable non-exempt (NANE) income.

For those who have an interest in these things, the Treasury Laws Amendment (2020 Measures No 5) Act 2020 inserted s 59-97 into the Income Tax Act 1997 (ITAA 1997) to give the eligible Minister power to declare certain grant programs as eligible for NANE treatment. Following that, a legislative determination in 2020 set out which programs were eligible for NANE treatment in the 2019–2020 year.

Earlier this year, the Treasury Laws Amendment (COVID-19 Economic Response) Act 2021 extended the tax-free status of state recovery grants to the 2021–2022 year (because s 57-97(1)(c) of ITAA 1997 only otherwise applied to grants received in 2020–2021).

Accordingly, it should be noted that the latest Declaration does not create anything new, but rather extends the status quo to the current income year (and applies it to programs that may not have earlier existed).

New South Wales

The following NSW programs now qualify as eligible grant programs, meaning payments received under them are NANE income:

  • the 2021 COVID-19 business grant;
  • the 2021 COVID-19 JobSaver payment;
  • the 2021 COVID-19 micro-business grant; and
  • the NSW Performing Arts COVID Support Package.
Victoria

The following Victorian programs now qualify as eligible grant programs, meaning payments received under them are NANE income:

  • the Alpine Resorts Support Program (Streams 1, 2 and 3);
  • the Business Continuity Fund;
  • the Business Costs Assistance Program Round Two – July Extension;
  • the Licenced Hospitality Venue Fund 2021 – July Extension; and
  • the Small Business COVID Hardship Fund.

As a reminder, the first Determination, the Income Tax Assessment (Eligible State and Territory COVID-19 Economic Recovery Grant Programs) Amendment Declaration (No 1) 2021, listed the following Victorian grants as declared eligible grant programs:

  • the Alpine Support Program;
  • the Business Costs Assistance Program Round Two;
  • the Impacted Public Events Support Program;
  • the Independent Cinema Support Program;
  • the Licensed Hospitality Venue Fund 2021;
  • the Live Performance Support Program; and
  • the Sustainable Event Business Program.

Source: www.legislation.gov.au/Details/F2021L01178.

State and territory COVID-19 support developments

Australian Capital Territory: support extended and expanded

The Federal Treasurer and the ACT Chief Minister have issued a joint media release announcing expanded and additional support for businesses affected by COVID-19 lockdowns. The support takes the form of two tranches.

COVID-19 Business Support Grants

The two governments had already agreed to jointly fund ACT “COVID-19 Business Support Grants”, which take the form of one-off grants of up to $20,000 for employing businesses and $7,500 for non-employing businesses where those businesses’ turnover has declined by 30% or more as a result of the COVID-19 health restrictions.

There will be an additional ACT “COVID-19 Business Grant Extension” payment of $10,000 for all employing businesses and $3,750 for non-employing businesses, to be paid to all businesses who were eligible for the COVID-19 Business Support Grant in industries that are “still significantly impacted by the health restrictions”.

Additional one-off top-up payments will also be made for larger businesses at the following rates:

  • $10,000 for employing businesses with a turnover greater than $2 million and less than $5 million;
  • $20,000 for employing businesses with a turnover greater than $5 million and less than $10 million; and
  • $30,000 for employing businesses with a turnover greater than $10 million.

Both governments have agreed to discuss any additional extensions under the COVID-19 Business Support Grant program on 1 October.

COVID-19 Tourism, Accommodation Provider, Arts and Events and Hospitality Grants

Further one-off grants to businesses in the tourism, accommodation provider, arts and events and hospitality industries will be provided at the following rates:

  • $1,000 for non-employing businesses;
  • $3,000 for employing businesses with turnover less than $2 million;
  • $10,000 for employing businesses with turnover greater than $2 million and less than $5 million; and
  • $20,000 for employing businesses with turnover greater than $5 million.

The eligibility criteria will match the eligibility criteria for the COVID-19 Business Support Grant.

Details are still being finalised. These payments will not be administered until October, pending an assessment of the COVID-19 Business Support Grants. Approximately 2,000 businesses could be eligible for this additional one-off grant.

Businesses can find further information and apply for the grants on the ACT Government’s website.

Source: www.act.gov.au/business/business-support/covid-19-economic-support-for-business

https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/further-support-act-businesses-impacted-covid-19

Queensland: support for New South Wales border businesses

The Federal Treasurer and the Queensland Premier have issued a joint media release outlining details of business support packages aimed at businesses on the NSW and Queensland border affected by the COVID-19 economic downturn.

The $52.8 million emergency support package is stated to help Queensland businesses suffering due to the border restrictions between the two states and to provide targeted support to tourism and hospitality businesses facing significant hardship.

The joint Federal–State package includes:

  • $40 million for the “Tourism and Hospitality Sector Hardship Program” to deliver one-off grants of $15,000, $25,000 and $50,000 for small, medium and large employing businesses across Queensland that have experienced a reduction in turnover of at least 70% for at least seven consecutive days between 1 July and 30 September;
  • $6.3 million to extend the existing “COVID-19 Business Support Grants” program; and
  • $6.5 million to provide one-off “Hardship Scheme” grants of $5,000 for employing businesses and $1,000 for non-employing sole traders to recipients of the “COVID-19 Business Support Grants” in the border zone in the event of an extended border closure.

The state-funded elements include:

  • up to $1 million to match City of the Gold Coast Council and Destination Gold Coast’s “Play Money” campaign, encouraging Gold Coasters to patronise border businesses;
  • $50,000 support for marketing campaigns in Coolangatta; and
  • $700,000 for additional mental health support for business owners and their families in the border zone.

These special hardship grants will be available from mid-October 2021. Further details are available on the Queensland Business webpage.

Source: www.business.qld.gov.au/

https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/queensland-businesses-new-south-wales-border-benefit

South Australia: support for tourism and hospitality industries; hardship grants

The Federal Treasurer and the SA Premier have issued a joint media release outlining details of business support packages aimed at SA businesses affected by the COVID-19 economic downturn.

As seems to be the case with these announcements, this package involves a tinkering of already announced measures mixed in with some new measures.

The programs will deliver support to an estimated 3,500 local businesses and will be administered by the SA state government. The SA Treasury website has a useful tabular summary of grants, but also sets out other business support measures (eg land tax, payroll tax) which have been implemented during the pandemic.

The “COVID-19 Tourism and Hospitality Support Grant” is aimed at businesses in eligible tourism and hospitality sectors (and other sectors such as performing arts, creative artists, taxis and car rental) that have already received the “COVID-19 Additional Business Support Grant”, as follows:

  • a grant of $3,000 for employing businesses with turnover less than $2 million;
  • a grant of $10,000 for employing businesses with turnover of greater than $2 million;
  • a grant of $20,000 for employing businesses with turnover of greater than $5 million; and a grant of $1,000 for non-employing businesses.

There is also a new “COVID-19 Business Hardship Grant” of $6,000 for employing businesses with annual payrolls below $10 million and $2,000 for non-employing businesses that have experienced a minimum 50% reduction in turnover over the eligible period and haven’t been eligible for previous business grant support since July 2021.

In addition, the SA government is increasing its state-funded “Major Events Support Grant”, to provide grants of up to $100,000 for large cancelled or postponed events where attendee numbers at the event were expected to be greater than 10,000, in recognition of the significant costs incurred with large events. Eligible events that have already applied for the $25,000 grant will now receive a top-up of up to a further $75,000, bringing total assistance to $100,000.

Source: www.treasury.sa.gov.au/Growing-South-Australia/COVID-19

https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/further-support-south-australian-small-businesses

Tasmania: support increased

The Federal Treasurer and the Premier of Tasmania have issued a joint media release outlining details of an expanded business support package aimed at operators impacted by border closures.

The existing Business Support Package will be boosted from $20 million to $50 million, with grants of up to $50,000 to be available to eligible businesses across two funding rounds.

In addition, the Tasmanian government will provide support including:

  • payroll tax relief for tourism and hospitality industry businesses where there has been a 30% reduction in turnover in the September 2021 quarter;
  • waiving vehicle registration and passenger transport accreditation fees for vehicles including taxis, luxury hire cars, tour operator buses and rental car operators for renewal notices received between 1 July and 31 December 2021; and
  • waiving the license fees payable to Parks & Wildlife, which removes a significant burden for tourism businesses operating within Tasmania’s parks.

Full details about the program can be accessed on the Business Tasmania website, and eligible businesses can apply immediately.

Source: www.business.tas.gov.au/home

https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/supercharge-business-support-package-way-tasmanian

Victoria: Commercial Tenancy Relief Scheme

The Victorian Premier has announced that new regulations have been made to provide relief for commercial tenants struggling with rent payments.

The Commercial Tenancy Relief Scheme was implemented via the Commercial Tenancy Relief Scheme Act 2021, which received assent on 10 August 2021. The Act came into operation on 10 August 2021 but will sunset on 30 April 2022 (with the Regulations remaining in force until 30 October 2022).

The scheme is designed to assist small and medium-sized businesses with an annual turnover of less than $50 million that have experienced a loss in turnover of more than 30% during the pandemic. Eligibility for rent relief has been broadened, with tenants now able to choose three consecutive months between 1 April and 30 September 2021 to compare to their turnover in the same three months in 2019.

Businesses will get financial relief in the form of a proportionate reduction in rent. For example, a business with a turnover of 40% of pre-pandemic levels can only be charged 40% of its rent. Of the balance, at least half must be waived, with the remainder to be deferred.

As part of the scheme, the Victorian Small Business Commission will provide information so that landlords and tenants can negotiate an agreement, and free mediation for those who need assistance.

New businesses are also protected under the scheme, with any business which has opened since April 2019 eligible for assistance.

The scheme will apply retrospectively from 28 July 2021 and will run until 15 January 2022.

To help landlords that are doing the right thing by eligible tenants, the Victorian government will provide land tax relief of up to 25%, in addition to any previous relief, with the support worth up to $100 million.

Small landlords who can demonstrate acute hardship will be eligible to apply for payments as part of a $20 million hardship fund.

More details can be found on the VSBC website.

Source: www.vsbc.vic.gov.au

Western Australia: assistance grants for tourism businesses

The Federal Treasurer and the WA Premier (among others) have issued a joint press release announcing that WA tourism businesses impacted by COVID-19 will soon be able to apply for funding support under a new joint Commonwealth–state program.

It is anticipated about 3,500 businesses will be eligible for grants of up to $10,000 under the program – including tourism operators, accommodation providers and travel agents.

To be eligible for support, applicants must demonstrate at least a 30% reduction in turnover (by comparing the period 15 May to 25 June with 10 July to 20 August). The following funding amounts will be made available to eligible businesses:

  • $2,000 grant for all sole traders and for employing businesses with an annual turnover between $50,000 and $100,000;
  • $5,000 grant for employing businesses with an annual turnover between $100,000 and $1 million; and
  • $10,000 grant for employing businesses with an annual turnover between $1 million and $10 million.

In order to be eligible, a business must be:

  • registered with Tourism WA as a previous grant recipient or as part of the agency’s marketing campaigns in 2020 or 2021;
  • a member of, or accredited through, a relevant tourism organisation; or
  • a travel agent that has been offering domestic product to travellers.

More information should be available on the WA COVID-19 coronavirus: support for business website.

Source: https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/assistance-grants-wa-tourism-businesses-impacted

www.wa.gov.au/organisation/department-of-the-premier-and-cabinet/covid-19-coronavirus-support-business

https://treasury.gov.au/

Closing a business? Don’t forget the GST registration

If the current prolonged lockdowns and economic conditions have prompted your clients to sell or close their business, it’s important they are aware of the need to cancel the related GST registration within a certain period, unless the business is in a specific industry or performs a specific role.

Typically, unless the business is taxi driving/ride-sourcing, you represent an incapacitate entity (ie an individual who is bankrupt or a company in liquidation and that entity is registered for GST), or you are an Australian resident who acts as an agent for a non-resident that is registered (or required to be registered) for GST, you must cancel your GST registration within 21 days if you sell or close your business.

Remember, cancelling a GST registration will also cancel other registrations such as fuel tax credits, luxury car tax and wine equalisation tax, even if the ABN is not cancelled. If you’re registered for PAYG, PAYG instalments or have FBT obligations, you will need to keep lodging business activity statements (BASs) even if you cancel your GST registration.

While you can usually cancel your GST registration from a date that you choose (which should be the last day you want your previous business to be registered), you cannot cancel the registration retrospectively if you were still operating on a GST-registered basis after the date you chose.

Similarly, if you choose a cancellation date and then continue to operate on a GST-registered basis, you will not be able to cancel the registration.

When you cancel your business’s GST registration, you’ll be required to lodge any outstanding BASs and complete a final GST activity statement which should include all sales, purchases and importations made in the final tax period. This should include the sale of the business, sale of any of business assets, adjustments for any assets held after cancellation, and/or any other adjustments. For taxpayers operating on a cash basis, all the sales and purchases that still need to be attributed from a previous tax period will need to be recorded.

For taxpayers who are cancelling their GST registration because the business has been restructured, sold or closed, the associated ABN must also be cancelled. However, if a company was not restructured, sold or closed, but simply no longer carries on a business, then there is a choice for the business owner to keep the ABN registration. Nevertheless, the GST registration must be cancelled in those circumstances.

Overseas businesses that have been hit by lockdowns in various states may have seen their taxable supplies drop below the GST turnover threshold (ie $75,000) – in those instances, cancellation of GST registration or associated ABNs need to be carefully considered, as the business may still have Australian income tax obligations. This also applies if overseas businesses’ taxable supplies fall below the GST threshold due to not being connected to the Australian Indirect Tax Zone.

New stapled super changes coming for employers

Employers get ready – there’ll soon be an extra step involved when it comes to hiring new employees. From 1 November 2021, employers will need to determine if a new employee has a “stapled” fund and request such details from the ATO in the event that the new employee has not chosen a super fund. A stapled super fund is essentially an existing super account that is linked – or “stapled” – to an individual and follows them throughout their job changes. The change aims to reduce unnecessary account fees for super members by avoiding having a new super account opened every time an employee starts a new job.

Currently, when a new employee starts a new job they are eligible to choose the super fund that their super guarantee contributions will go to. If they do not choose their own fund, the super contributions will be paid into the employer’s default fund.

With the recent passing of legislation to make it easier for employees to take their existing super funds with them when they move jobs, from 1 November if a new employee doesn’t choose a super fund, employers may be required to request their “stapled super fund” details from the ATO. A stapled super fund is essentially an existing super account which is linked or “stapled” to an individual and follows them throughout their job changes.

To ensure you’re ready for this change, your business should check ATO online services to confirm that you have the requisite access levels. If your business does not have full access in ATO online services, you’ll need to have the “Employee Commencement Form” permission in order to request a stapled fund.

From 1 November, you will still need to offer your eligible employees a choice of super fund and pay their super into the account they nominate – that part of your obligations doesn’t change. However, if your employee doesn’t choose a super fund, you will need to request the stapled fund details from the ATO. In most cases, a request can be made after you’ve submitted a TFN declaration or a Single Touch Payroll (STP) pay event linking the new employee to your business. There is no limit to the number of requests you are able to make.

Responses will usually be received through the online portal in minutes. The ATO will also notify the associated employee of the stapled fund request and the fund details provided. If the resulting stapled fund cannot accept new contributions from the employee for some reason, the employer will need to make another request for the employee’s stapled super fund through the online portal.

In the event that this new request returns the same stapled super fund, the employer will be required to call the ATO to obtain an alternative stapled super fund account. At the same time, the ATO will be able to advise whether contributions can be made to a default fund or another fund that meets the “choice of fund” rules in that situation.

Businesses that have over 100 new employees starting can make a bulk stapled fund request to the ATO. Bulk requests will need to be in a particular format and can be made through the secure mail function within online services for businesses. Once the file is processed, a response will be sent through the secure mail function, and can take up to five business days.

Remember, a business/an employer cannot provide recommendations or advice about super to its employees, unless the business/employer is licensed by the Australian Securities and Investments Commission (ASIC) to provide financial advice. Further, if businesses/employers fail to meet the choice of super fund obligations, penalties may apply.

MySuper performance test results and new super comparison tool

This year marks the beginning of annual performance tests on MySuper products, run by the Australian Prudential Regulation Authority (APRA). The requirement was introduced as part of the Federal government’s Your Future, Your Super reforms, and aims to hold super funds to account for underperformance and enhance industry transparency. The first annual test of 76 (out of 80) MySuper products from various super funds or registrable superannuation entities (RSEs) found that 13 products failed to meet the benchmark. These products will need to notify their members of the failed test and make the improvements needed to ensure they pass next year’s test.

Other changes introduced as part of Your Future, Your Super include access to a new interactive online super comparison tool, YourSuper, hosted by the ATO.

APRA notes that there are around 80 MySuper products from various super funds or RSEs in the Australian market. It assessed 76 out of the total 80 products with at least five years of performance history against an objective benchmark, and found that 13 products failed to meet the benchmark.

“It is welcome news that more than 84 per cent of products passed the performance test”, said APRA Executive Board Member Margret Cole, “however, APRA remains concerned about those members in products that failed … Trustees of the 13 products that failed the test now face an important choice: they can urgently make the improvements needed to ensure they pass next year’s test or start planning to transfer their members to a fund that can deliver better outcomes for them.”

Trustees of failed products are required to write to members by 27 September 2021 advising them of their performance test outcome and providing details of the ATO’s YourSuper comparison tool. If the product fails the performance test in two consecutive years, the RSE licensee will be prohibited from accepting new beneficiaries into that product.

The YourSuper comparison tool – available on the ATO website and via your MyGov account – allows users to display a table of MySuper products ranked by fees and net returns (updated quarterly), as well as compare up to four MySuper products at a time in more detail. When comparing products, the investment performance is listed in an easy-to-understand form. A “Performing” result indicates that the product has met or exceeded the performance test benchmark. “Underperforming” means the product has not met the benchmark and “Not assessed” means the product has had less than five years of performance history, so has not yet been rated by APRA.

The data used by APRA for the performance test includes:

  • net investment return;
  • strategic asset allocation;
  • total investments;
  • administration fees;
  • indirect cost ratio and administration costs;
  • administration-related tax expense/benefit;
  • advice fees;
  • indirect cost ratio advice costs; and
  • advice-related tax expense/benefit.

The performance test itself has two parts. It involves the assessment of investment performance relative to a benchmark portfolio created using the product’s strategic asset allocation, and an assessment of administration fees charged in the last financial year relative to the median fee charged for the category of product. If the product underperforms the combined test by more than 0.5%, the product is deemed to have failed the test.

Remember, the results of performance tests conducted by APRA only relate to MySuper products, which are basic super accounts without unnecessary features and fees. RSEs usually offer multiple products in addition to MySuper products, so don’t panic if you see the name of your super fund (RSE) on the list of underperforming products. However, if you see the name of your specific product or receive a letter indicating that the fund you’re in has failed the performance test, it may be time to investigate the reasons why or switch to a different product.

Source: www.ato.gov.au/Calculators-and-tools/YourSuper-comparison-tool

www.apra.gov.au/news-and-publications/apra-releases-inaugural-your-future-your-super-performance-test-results

Client Alert – October 2021

Federal COVID-19 support developments

Additional financial support for child care providers

The Prime Minister and the Minister for Education and Youth recently announced new support measures for child care providers that are impacted by extended COVID-19 lockdowns.

Child care services in Commonwealth-declared hotspots will be eligible for new fortnightly payments of 25% of their pre-lockdown revenue, and outside school hours care (OSHC) services will be eligible for fortnightly payments of 40% of pre-lockdown revenue.

This measure will apply to services seven days after the hotspot is declared, where state and territory governments have directed families to keep their children at home. Where children are still allowed to attend child care, the supports will kick in four weeks after the hotspot declaration.

The new payments will immediately benefit services in affected areas of Sydney, the ACT and Melbourne. Other services will become eligible after seven days of lockdown, with payments backdated to 23 August. The support will then be available for services that meet the criteria in any future extended lockdowns.

Payments are made available directly to providers. Families in affected areas are not required to do anything.

State and territory COVID-19 support developments

Australian Capital Territory

Expanded and additional support will be available for businesses affected by COVID-19 lockdowns, in the form of two grant programs:

  • COVID-19 Business Support Grants: An additional COVID-19 Business Grant Extension payment of $10,000 for employing businesses and $3,750 for non-employing businesses will be available to businesses eligible for the existing Business Support Grants and in industries “still significantly impacted by the health restrictions”.
  • COVID-19 Tourism, Accommodation Provider, Arts and Events and Hospitality Grants: Further one-off grants will be available in October to eligible businesses in the tourism, accommodation provider, arts and events and hospitality industries.
Queensland

Federal and state funded emergency support packages worth $52.8 million will be available to assist Queensland businesses suffering due to the NSW–Queensland border restrictions, and to provide targeted support to tourism and hospitality businesses facing significant hardship. These special hardship grants will be available from mid-October.

South Australia

The COVID-19 Tourism and Hospitality Support Grant will be available for businesses in eligible tourism and hospitality sectors, and other sectors such as performing arts, creative artists, taxis and car rental, that have already received the COVID-19 Additional Business Support Grant.

There is also a new COVID-19 Business Hardship Grant for certain employing businesses that haven’t been eligible for previous business grant support since July 2021.

In addition, the SA government is increasing its Major Events Support Grant, to provide up to $100,000 for large cancelled or postponed events where more than 10,000 attendees were expected.

Tasmania

The existing Business Support Package will be boosted from $20 million to $50 million, with grants of up to $50,000 available to eligible businesses across two funding rounds.

In addition, the Tasmanian government will offer eligible tourism and hospitality industry businesses payroll tax relief, waived vehicle registration and passenger transport accreditation fees and waived Parks & Wildlife license fees. Businesses can apply immediately.

Victoria

New regulations have been made to provide relief under the Commercial Tenancy Relief Scheme for small and medium-sized commercial tenants struggling with rent payments. Eligibility has been broadened, and businesses will get relief in the form of a rent reduction proportionate to the amount of turnover lost due to COVID-19.

The Victorian Small Business Commission will provide information so that landlords and tenants can negotiate an agreement, and free mediation for those who need assistance.

Land tax relief will be available to help landlords that are doing the right thing by eligible tenants, and eligible small landlords can apply for payments from a $20 million hardship fund.

Western Australia

WA tourism businesses impacted by COVID-19 will soon be able to apply for funding support under a new joint Commonwealth–State program. About 3,500 businesses will be eligible for grants of up to $10,000, including tourism operators, accommodation providers and travel agents.

Closing a business? Don’t forget the GST registration

If the current prolonged lockdowns and economic conditions have prompted you to sell or close your business, it’s important to be aware of the need to cancel the related GST registration within a certain period, unless your business is in a specific industry or performs a specific role.

Cancelling a GST registration will also cancel other registrations such as fuel tax credits, luxury car tax and wine equalisation tax, even if the ABN is not cancelled. If you’re registered for PAYG, PAYG instalments or have FBT obligations, you will need to keep lodging business activity statements (BASs) even if you cancel your GST registration.

While you can usually cancel your GST registration from a date you choose (which should be the last day you want your previous business to be registered), you cannot cancel the registration retrospectively if you were still operating on a GST-registered basis after that date. Similarly, if you choose a cancellation date and then continue to operate on a GST-registered basis, you will not be able to cancel the registration.

When you cancel your business’s GST registration, you’ll need to lodge any outstanding BASs and complete a final GST activity statement which should include all sales, purchases and importations made in the final tax period. This should include the sale of the business, sale of any of business assets, adjustments for any assets held after cancellation, and/or any other adjustments. If you operate on a cash basis, all the sales and purchases that still need to be attributed from a previous tax period must be recorded.

If you’re cancelling a GST registration because the business has been restructured, sold or closed, the associated ABN must also be cancelled. If a company was not restructured, sold or closed, but simply no longer carries on a business, the GST registration must still be cancelled but there’s a choice to keep the ABN registration active.

New stapled super changes coming for employers

Employers get ready – there’ll soon be an extra step involved when it comes to hiring new employees. From 1 November 2021, employers will need to determine if a new employee has a “stapled” super fund and request the details from the ATO where a new employee has not nominated a super fund.

A stapled super fund is essentially an existing super account that is linked – or “stapled” – to an individual and follows them throughout their job changes.

Currently, when a new employee starts a new job they are eligible to choose the super fund that their super guarantee contributions will go to. If they do not choose their own fund, the super contributions will be paid into the employer’s default fund. The stapling change aims to reduce unnecessary account fees by avoiding having a new super account opened every time a person starts a new job.

To ensure you’re ready for this change, check ATO online services to confirm that your business has the required access levels. You’ll need to have the “Employee Commencement Form” permission in order to request a stapled fund.

After 1 November you’ll still need to offer your eligible employees a choice of super fund and pay their super into the account they nominate – that part of your obligations doesn’t change. However, if your employee doesn’t choose a fund, you’ll need to request the stapled fund details from the ATO. In most cases, a request can be made after you’ve submitted a TFN declaration or a Single Touch Payroll (STP) pay event linking the new employee to your business.

Responses will usually be received through the online portal in minutes. The ATO will also notify the associated employee of the stapled fund request and the fund details provided.

Remember, an employer cannot provide recommendations or advice about super to its employees, unless the business is licensed by the Australian Securities and Investments Commission (ASIC) to provide financial advice. Penalties may apply if your business fails to meet the “choice of super fund” obligations.

MySuper performance test results and new super comparison tool

This year marks the beginning of annual performance tests on MySuper products, run by the Australian Prudential Regulation Authority (APRA). The tests were introduced as part of the Federal government’s Your Future, Your Super reforms, aiming to hold super funds to account for underperformance and enhance industry transparency. The first annual test of 76 MySuper products from various super funds or registrable superannuation entities found that 13 products failed to meet the benchmark. These products will need to notify their members of the failed test and make the improvements needed to ensure they pass next year’s test.

A new interactive online super comparison tool, YourSuper, is also now available on the ATO website and via MyGov. It displays a table of MySuper products ranked by fees and net returns (updated quarterly), and you can compare up to four MySuper products at a time in more detail.

The performance tests conducted by APRA only relate to MySuper products, which are basic super accounts without unnecessary features and fees. Registrable superannuation entities usually offer multiple products in addition to MySuper products, so don’t panic if you see the name of your super fund on the list of underperforming products. However, if you see the name of your specific product or receive a letter indicating that the fund you’re in has failed the APRA performance test, it may be time to investigate the reasons why or switch to a different product.

The ATO is targeting side hustlers: Here’s what you need to know

This is an interesting article for those of you who have started a side business.

Starting a side business can open a path towards financial freedom, but that opportunity comes with the risk of falling afoul of the Australian Taxation Office.

Director of tax communications at H&R Block Mark Chapman said that starting a side business comes with tax obligations that have to be met.

The first tip offered when it comes to side businesses is to remember that every extra dollar your business earns will count against your annual taxable income.

Even if you get paid in cash, you’ll need to declare that additional income. Not doing so comes with significant risks, so it’s much better to err on the side of caution.

If the annual turnover of your business is greater than $75,000, you’ll also have to register your small business for GST and apply that tax to transactions. Having to do adopt this extra tax obligation can sometimes work in your favor.

The GST you pay on your purchases or expenses can be offset against the GST you owe; only the net figure is paid to the taxman.

Keeping track of just how much extra income you need to declare can be messy.

Investing in professional bookkeeping software can help alleviate this.

There are plenty of accounting software packages out there that can help you stay on top of your figures.

Having the right records in place is also an important step when it comes to deductions.

Handling this aspect of the tax system correctly can usually be time-consuming, but it’s usually worth the trouble. The total extra income of your side business is going to be dependent not just on the amount earned, but also the amount of deductions made.

Be sure to claim all business expenses whether that’s the cost of buying stock, heating your office or any of the many other expenses you might incur.

Additionally, a common pitfall for new business owners is failing to put aside money to pay their taxes.

Proactive management of your cash flow to set money aside for future tax bills is necessary.

If your customers are slow to pay your invoices, you’ll struggle to pay your debts and you definitely don’t want to be in debt to the ATO.

 

Source: https://www.nestegg.com.au/earn-money/tax-refund 

Explanatory Memorandum – September 2021

Single Touch Payroll update

Phase 2 coming soon

The ATO is expanding the information that businesses send through Single Touch Payroll (STP). From 1 January 2022, most employers will be required to send additional information such as the commencement date of employment and cessation date of employment for employees, their reasons for leaving employment and work type (eg full-time, part-time). The basic information about salary and wages and super liability information in Phase 1 of the STP rollout will also be further drilled down in Phase 2, moving away from just reporting the gross amounts.

STP was originally introduced in 2016 as a way for employers to report their employees’ tax and super information to the ATO in real time. Most employers, regardless of the number of their employees, were required to start reporting from 1 July 2021 – this included small employers with closely held/related payees. However, employers with a withholding payer number (WPN) have until 1 July 2022 to start reporting payments through STP.

In Phase 1, the information sent to the ATO through STP included basic salaries and wages, PAYG withholding and super liability information. The amount of information sent to the ATO is being expanded in Phase 2, which has a mandatory starting date of 1 January 2022. From that date, each employee included in the STP report will need to have either a TFN or an ABN attached, as well as an employment commencement date.

Additional information will also need to be provided on the employment basis of employees according to their work type. Types include, for example, full-time, part-time, casual, labour hire, voluntary agreement (ie a contractor to bring work payments into the PAYG withholding system), death beneficiary or non-employee (ie a contractor who is included for voluntary reporting of super liabilities only).

According to the ATO, the Phase 2 report will also include a six-character tax treatment code for each employee. The code will be automatically generated by the STP software and is an abbreviated way of outlining the factors that can influence amounts withheld from payments. For example, it’ll let the ATO know whether they are regular employees that have the tax-free threshold applied or not. It will also let the ATO know if they are in special categories of employee, such as actors, horticulturists/shearers, working holiday makers, seasonal workers, foreign residents or seniors.

The basic information about salary and wages and super liability information will also be further drilled down. Instead of reporting the gross amount, employers will need to report the following separately:

  • gross salary and wages;
  • paid leave – including annual, long service, personal/carer, rostered days off (RDOs), study leave, compassionate leave, family and domestic leave, paid parental leave, workers’ compensation, ancillary and defence leave, and cash-out of leave in service;
  • allowances – including cents-per-kilometre, award transport payments, laundry, overtime meal allowance, domestic or overseas travel, tool allowances, qualification and certification allowances, task allowances and other allowances;
  • overtime – including on-call, stand-by or availability allowances, call-back payments, excess travel etc;
  • bonuses and commissions;
  • directors’ fees – including remuneration paid to both working and non-working directors;
  • lump sum W – return to work payment; and
  • salary sacrifice – including reporting pre-sacrifice amounts as well as separate reporting of salary sacrifice.

While most of this increase in information will be automatically taken care of in most employers’ software solutions, the increased stratification of reporting requires more attention to be paid to payroll to ensure all the information entered into the system is correct.

Closely held employees reporting exemption through STP

The ATO registered legislative instrument Taxation Administration – Single Touch Payroll – 2019-20 and 2020-21 Income Years Closely Held Payees Exemption 2021 on 28 July 2021. This instrument exempts certain entities from the requirement to report through STP on payments made to closely held payees. The exemption applies in the 2019–2020 and 2020–2021 income years, and the instrument is taken to have commenced on 1 July 2019. It had earlier been issued in draft form.

Small employers with closely held payees have already been exempt from reporting these payees through STP for the 2019–2020 and 2020–2021 financial years via ATO administration, and this is what the instrument now formally implements.

For these purposes, small employers are those with 19 or fewer employees. A closely held payee is an individual who is directly related to the entity from which they receive a payment.  For example:

  • family members of a family business;
  • directors or shareholders of a company; and
  • beneficiaries of a trust.

The ATO offers the following three options for reporting payments made to closely held payees from 1 July 2021.

Option 1: report actual payments for each pay event

Small employers can report actual payments to closely held payees through STP on or before the date of payment. In other words, whenever the small employer makes a payment to a closely held payee, they report the information on or before each pay event.

Option 2: report actual payments quarterly

Small employers can choose to report any closely held payees on a quarterly basis. However, such employers must continue to report information about all of their other employees via STP on or before payday.

This quarterly option does not change the due date for:

  • notifying and paying PAYG withholding on activity statements;
  • making super guarantee contributions for any closely held payees.
Option 3: report a reasonable estimate quarterly

This reporting option allows small employers to report reasonable year-to-date amounts for their closely held payees quarterly. Not unexpectedly, there is more detail surrounding this option.

The ATO will remit any failure to withhold penalty a small employer may incur if it:

  • reports year-to-date withholding amounts and tax withheld for a closely held payee that is equal to or greater than 25% of the payee’s total gross payments and tax withheld from the previous finalised payment summary annual report (PSAR) across each quarter of the current financial year in its quarterly STP reports;
  • report and pay the tax withheld on time.

It is important that small employers do not underestimate amounts reported for their closely held payees. If an ATO review identifies that a small employer made payments to closely held payees equalling more that 25% of their total gross payments for the last financial year and did not report this through STP, the entity may:

  • be liable for super guarantee charge (SGC) and have to lodge SGC statements (if it did not make sufficient contributions during a quarter);
  • not be able to deduct the payment for income tax; and
  • be liable for penalties and interest.
Correcting information

Quarterly reporters have until the due date of their next quarterly STP report to correct a closely held payee’s year-to-date information.

If a closely held payee will not be included in a following quarterly STP report, the small employer must either:

  • include them in its current quarterly STP report with corrected year to date amounts; or
  • lodge an update event by the relevant due date for quarterly activity statement with the corrected year to date amount for the payee.
Finalisation declarations

Small employers with only closely held payees have up until the due date of the closely held payee’s individual income tax return to make a finalisation declaration for a closely held payee.

Small employers can make a finalisation declaration for a closely held payee at any time during the financial year (eg for closely held payees who have ceased employment). They must make a finalisation declaration for arm’s length employees by 14 July.

Tax time 2021: rental property pitfalls

This tax time, the ATO is again closely monitoring claims in relation to rental properties. As with previous years, it’s on the lookout for rental property owners who do not declare all their income and capital gains from selling property. Other areas of concern include claims for interest charges on personal loans, and deductions for capital works.

The ATO has data-matching programs in place that collect detailed information about properties and owners for income years all the way from 2018–2019 to the 2022–2023. These programs expand the rental income data collected directly from third-party sources, including sharing economy platforms, rental bond authorities and property managers.

“People should remember that there’s no such thing as free real estate when it comes to their tax returns”, Assistant Commissioner Tim Loh has said. “Our data analytics scrutinise returns for rental deductions that seem unusually high. We will ask questions, and this may lead to a delay in processing your return.”

According to the ATO, in the 2019–2020 financial year over 1.8 million taxpayers owned rental properties and claimed $38 billion in deductions. While the ATO acknowledges that most taxpayers do the right thing and are able to justify their claims, it notes that over 70% of the 2019–2020 returns selected for review of rental information have subsequently had adjustments made.

The most common mistake that rental property owners and holiday homeowners make is not declaring all their income and capital gains from selling the property. This shortfall will obviously be tackled with information obtained from data-matching programs, but also sophisticated data analytics which will single out tax returns with unusually high rental deductions.

Another area of concern this tax time includes claims for interest charges on personal loans. For example, if you take out a loan to buy a rental property and rent it out at market rates, the interest on the loan is deductible. However, if you redraw money from that mortgage for personal use (eg to buy a car, pay off the mortgage of the house you’re living in etc), then you cannot claim interest on that part of the loan.

Taxpayers should also be careful when claiming deductions for capital works. While the cost of repairs for wear and tear to the property are immediately deductible if they’re replacing or fixing an existing item (eg a broken toilet or showerhead), the cost of upgrading the property or areas of the property (eg a kitchen or bathroom renovation) would be considered capital works and any deduction needs to be spread over a number of years.

For short-term stay property owners who have been affected by COVID-19 and travel restrictions, the ATO notes that if your plans to rent out the property in 2020–2021 were the same as in previous years, you will be able to claim the same proportion of expenses, although taxpayers can only do this if the property was not used privately. For example, if you, your family members, or friends have stayed at the property for free or at a reduced rate, you will not be able to claim some or all of the expenses relating to that period.

Rental property owners who have provided rental concessions to their tenants in the form of either reduced or deferred rent due to COVID-19 impacts will only need to declare the rent that has been received. Normal expenses can still be claimed on the property as long as the reduced rent was determined at arms’ length and in line with current market conditions.

New sharing economy reporting regime proposed

The government is seeking to legislate compulsory reporting of information for sharing economy platforms in order to more easily monitor the compliance of participants, while at the same time reducing the need for ATO resources. This would encompass any platforms that allow sellers and buyers to transact in a variety of sectors, although the reporting requirement would not apply if the transaction only relates to supply of goods where ownership of the goods is permanently changed, title of real property is transferred, or the supply is a financial supply.

As the sharing economy becomes more prevalent and fundamentally reshapes many sectors of the economy, the government is scrambling to contain the fall-out. While there no standard definition of the term “sharing economy”, it is usually taken to involve two parties entering into an agreement for one to provide services, or loan personal assets, to the other in exchange for payment. Examples of platforms in a wide variety of sectors include Uber, Airbnb, Car Next Door, Menulog, Airtasker and Freelancer, to name a few.

With the rapid expansion of various sharing economy platforms, the government’s Black Economy Taskforce has noted that without compulsory reporting, it would be difficult for the ATO to gain information on compliance of sharing economy participants without the use of targeted audits. Putting formal reporting requirements in place would align Australia with international best practice.

On the back of the Taskforce’s report, the government has now released draft legislation for consultation to define the scope of compulsory reporting requirements in order to ensure integrity of the tax system and reduce the compliance burden on the ATO.

This new compulsory reporting regime would apply to all operators of an electronic service, including websites, internet portals, apps, gateways, stores and marketplaces. Any platforms that allow sellers and buyers to transact will be required to report information on certain transactions. However, the reporting requirement will generally not apply if the transaction only relates to supply of goods where ownership of the goods is permanently changed, where title of real property is transferred, or the supply is a financial supply.

Based on the draft legislation, platform operators will be required to report transactions that occur on or after 1 July 2022 if they relate to a ride-sourcing or a short-term accommodation service, unless an exemption applies. From 1 July 2023 all other categories of sharing economy platforms will be required to report, unless an exemption applies.

While the ATO will ultimately be responsible for determining the exact information to be reported, at a minimum, the following information is expected to be required once reporting commences:

  • seller’s identification information, including full legal name, date of birth, primary address, bank account details, ABN, TFN, telephone and email details; and
  • consideration and transaction information, including total gross and net payments to seller, GST attributable to gross payments, total fees/commissions withheld, GST attributable to total fees/commissions, property address (if a transaction relates to rental of real property), and period for which property is booked during the reporting period.

It is expected only the aggregate or total transactions relating to a seller over the reporting period will need to be provided; that is, information will not need to be provided on a transactional basis. Again, while the ATO will ultimately determine the frequency of reporting, the initial reporting is expected to be on a biannual basis (ie 1 July to 31 December, and 1 January to 30 June) with the relevant information to be reported by 31 January and 31 July respectively.

The government is hoping that with the introduction of this new reporting regime it is able to boost tax receipts, and by extension government coffers, by stamping out tax non-compliance (whether deliberate or unintentional) by those participants in the sharing economy.

Reminder: super changes for the 2021 financial year

The government’s long-slated “flexibility in superannuation” legislation is finally law. This means from 1 July 2021, individuals aged 65 and 66 can now access the bring-forward arrangement in relation to non-concessional super contributions. The excess contributions charge will also be removed for anyone who exceeds their concessional contributions cap, and individuals who received a COVID-19 super early release amount can now recontribute up to the amount they released without it counting towards their non-concessional cap.

Previously, if you made super contributions above the annual non-concessional contributions cap, you were able to automatically gain access to future year caps if you were under 65 at any time in the financial year. The bring-forward arrangement allows you to make non-concessional contributions of up to three times the annual non-concessional contributions cap in that financial year.

With the passing of the flexibility in super legislation, individuals aged 65 and 66 who were previously unable to access the bring-forward arrangement in relation to non-concessional contributions are now permitted to do so.

For the 2021 income year, the non-concessional contributions cap is $110,000, which means that individuals aged 65 and 66 can access a cap of up to $330,000 under the bring forward arrangement.

From 1 July 2021, the excess contributions charge is also removed. Previously, any individual who exceeded their concessional contributions would have been liable to pay the excess concessional contributions charge as well as the additional tax due when the excess contributions were withdrawn and included in their assessable income. The charge was approximately 3%, and was calculated from the start of the income year in which the excess contributions were made up until the day before the tax was due to be paid.

Individuals who make concessional contributions exceeding their cap on or after 1 July 2021 will no longer be liable to pay the excess concessional contributions charge. They will, however, still be issued with a determination and be taxed at their marginal tax rate on any excess concessional contributions amount, less a 15% tax offset to account for the contributions tax already paid by their super fund.

Recontributions of COVID-19 early released super

With the fast-moving COVID-19 situation last year, many individuals lamenting a lack of financial support from the government early on opted to withdrawal money from their super as a lifeline. Under the COVID-19 early release measures, individuals could apply to have up to $10,000 of their super released during the 2019–2020 financial year and another $10,000 released between 1 July and 31 December 2020. Between 20 April 2020 and 31 December 2020, the ATO received 4.78 million applications for early release, totalling $39.2 billion worth of super.

Not all of the individuals who applied to have their super released ended up needing to use it once the government ramped up its financial support programs (including JobKeeper, JobSeeker and the cash flow boosts). From 1 July 2021, those individuals who received a COVID-19 super early release amount can recontribute to their super up to the amount they released, and those recontributions will not count towards their non-concessional contributions cap. The recontribution amounts must be made between 1 July 2021 and 30 June 2030 and super funds must be notified about the recontribution either before or at the time of making the recontribution.

COVID-19 recontribution amounts are not a new type of contribution; rather, they are a personal contribution that receives a treatment to exclude it from an individual’s non-concessional contribution cap. Individuals can make COVID-19 recontributions to any fund of their choice where the fund rules allow. Each COVID-19 recontribution amount must be detailed on a separate approved form and cannot exceed $20,000 per approved form.

COVID-19 recontribution amounts will need to be reported by super funds to the ATO via MATS as a personal contribution. The ATO has requested that super funds record and hold the required information until it finalises the functionality to enable funds to use the Bulk Data Exchange facility via the Business Portal. The ATO is working through the process for self managed super funds (SMSFs) and will advise about that in due course.

Client Alert – September 2021

Single Touch Payroll update

Phase 2 coming soon

The ATO is expanding the information that businesses send through Single Touch Payroll (STP). From 1 January 2022, most employers will be required to send additional information such as the commencement date of employment and cessation date of employment for employees, their reasons for leaving employment and work type. The basic information about salary and wages and super liability information in Phase 1 of the STP rollout will also be further drilled down in Phase 2, moving away from just reporting the gross amounts.

According to the ATO, the Phase 2 report will also include a six-character tax treatment code for each employee. The code will be automatically generated by the STP software and is an abbreviated way of outlining the factors that can influence amounts withheld from payments.

STP was originally introduced in 2016 as a way for employers to report their employees’ tax and super information to the ATO in real time. Most employers, regardless of the number of their employees, were required to start reporting from 1 July 2021.

Employers with a withholding payer number (WPN) have until 1 July 2022 to start reporting payments through STP, and small employers that make payments to closely held payees are exempt from reporting these payees through STP for the 2019–2020 and 2020–2021 financial years.

While the Phase 2 increase in information will be automatically taken care of in most STP software solutions, the increased stratification of reporting may require you to pay more attention to your business’s payroll, to ensure all the information you enter into the system is correct.

Tax time 2021: rental property pitfalls

This tax time, the ATO is again closely monitoring claims in relation to rental properties. The ATO has data-matching programs in place that collect detailed information about properties and owners for income years all the way from 2018–2019 to the 2022–2023. These programs expand the rental income data collected directly from third-party sources, including sharing economy platforms, rental bond authorities and property managers.

In the 2019–2020 financial year over 1.8 million taxpayers owned rental properties and claimed $38 billion in deductions. While most taxpayers do the right thing and are able to justify their claims, the ATO notes that over 70% of the 2019–2020 returns selected for review of rental information needed adjustments.

The most common mistake that rental property owners and holiday homeowners make is not declaring all their income, and their capital gains from selling property.

Another area of concern involves claims for interest charges on personal loans. For example, if you take out a loan to buy a rental property and rent it out at market rates, the interest on the loan is deductible. However, if you redraw money from that mortgage for personal use (eg to buy a car or pay off the mortgage of the house you’re living in), then you can’t claim interest on that part of the loan.

You should also be careful when claiming deductions for capital works. While the cost of repairs for wear and tear are immediately deductible if you’re replacing or fixing an existing item (eg a broken toilet), the cost of upgrading the property or areas of the property is considered capital works and any deductions need to be spread over a number of years.

New sharing economy reporting regime proposed

The government is seeking to legislate compulsory reporting of information for sharing economy platforms in order to more easily monitor the compliance of participants, while at the same time reducing the need for ATO resources.

As the sharing economy becomes more prevalent and fundamentally reshapes many sectors of the economy, the government is scrambling to contain the fall-out. While there no standard definition of the term “sharing economy”, it’s usually taken to involve two parties entering into an agreement for one to provide services, or to loan personal assets, to the other in exchange for payment. Examples of platforms include Uber, Airbnb, Car Next Door, Menulog, Airtasker and Freelancer, to name a few.

With the rapid expansion of various sharing economy platforms, the government’s Black Economy Taskforce has noted that without compulsory reporting, it is difficult for the ATO to gain information on compliance without undertaking targeted audits. Putting formal reporting requirements in place will align Australia with international best practice.

The government has now released draft legislation for consultation to define the scope of compulsory reporting requirements in order to ensure integrity of the tax system and reduce the compliance burden on the ATO.

This new compulsory reporting regime would apply to all operators of an electronic service, including websites, internet portals, apps, gateways, stores and marketplaces. Any platforms that allow sellers and buyers to transact will be required to report information on certain transactions. However, the reporting requirement will generally not apply if the transaction only relates to supply of goods where ownership of the goods is permanently changed, where title of real property is transferred, or the supply is a financial supply.

Based on the draft legislation, platform operators will be required to report transactions that occur on or after 1 July 2022 if they relate to a ride-sourcing or a short-term accommodation service, unless an exemption applies. From 1 July 2023 all other categories of sharing economy platforms will be required to report, unless an exemption applies.

The initial reporting is expected to be biannual (1 July to 31 December, and 1 January to 30 June) with electronic service operators required to report the relevant information by 31 January and 31 July respectively.

Reminder: super changes for the 2021 financial year

The government’s long-slated “flexibility in superannuation” legislation is finally law. This means from 1 July 2021, individuals aged 65 and 66 can now access the bring-forward arrangement in relation to non-concessional super contributions. The excess contributions charge will be removed for anyone who exceeds their concessional contributions cap, and individuals who received a COVID-19 super early release amount can now recontribute it without hitting their non-concessional cap.

Previously, if you made super contributions above the annual non-concessional contributions cap, you could automatically access future year caps if you were under 65 at any time in the financial year.

The bring-forward arrangement allows you to make non-concessional contributions of up to three times the annual non-concessional contributions cap in that financial year.

Previously, individuals who exceeded their concessional contributions cap would have to pay the excess contributions charge (around 3%) as well as the additional tax due when excess contributions were re-included in their assessable income. However, people who exceed their cap on or after 1 July 2021 will no longer pay the charge, but will still receive a determination and be taxed at their marginal tax rate on any excess concessional contributions amount, less a 15% tax offset to account for the contributions tax already paid by their super fund.

Recontributions of COVID-19 early released super

Under the COVID-19 early release measures, individuals could apply to have up to $10,000 of their super released during the 2019–2020 financial year and another $10,000 released between 1 July and 31 December 2020. Between 20 April 2020 and 31 December 2020, the ATO received 4.78 million applications for early release, totalling $39.2 billion worth of super.

Not everyone who applied to have super released ended up needing to use it once the government ramped up its financial support programs. From 1 July 2021, people who received a COVID-19 super early release amount can recontribute to their super up to the amount they released, and those recontributions will not count towards their non-concessional contributions cap. The recontribution amounts must be made between 1 July 2021 and 30 June 2030 and super funds must be notified about the recontribution either before or at the time of making the recontribution.

More support for NSW businesses as Premier declares ‘national emergency’

Projections from earlier in the week by the Population Interventions Unit at the University of Melbourne estimated that Sydney’s stay-at-home orders would need to be extended into September to get the latest outbreak under control, meaning businesses could be facing prolonged closure.

On Friday, facing yet another day of rising case numbers, NSW Premier Gladys Berejiklian declared the situation as a “national emergency”.

While some business owners have said the new federal and state support grants are not sufficient to weather lockdown losses, with many calling for the reinstatement of JobKeeper, new details have emerged about the payroll tax reduction and the deferral scheme announced by the state government earlier this month.

According to a new statement issued by the state treasurer, any business that carries a payroll tax liability now has the option to defer lodgement and payment of their 2020–21 annual reconciliation until 7 October 2021.

Payroll tax customers who are ordinarily required to lodge monthly returns will also have the option of deferring their returns due in August and September until 7 October 2021.

Moreover, anyone who chooses to defer their payments is eligible for an interest-free payment plan of up to 12 months.

Additionally, businesses with annual wages between $1.2 million and $10 million that can prove a 30 per cent decline in turnover over a similar period in 2019 are set to receive a 25 per cent reduction in their 2021–22 payroll tax.

Businesses across NSW are eligible for the reductions and deferrals.

Parliament Passes Bill on Tax-Free COVID-19 Support Payments

The Treasury Laws Amendment (COVID-19 Economic Response No. 2) Bill 2021 finally passed both houses without amendment on Monday after the Senate agreed not to insist on a transparency measure which would have forced businesses to disclose how much they received in JobKeeper wage subsidies.

Under the new law, COVID-19 Disaster Payments dating back to its introduction on 3 June will now be non-assessable non-exempt income, meaning recipients will take home more than they did under the $90 billion JobKeeper wage subsidy program, which was taxed.

Workers who lose 20 or more hours of work a week will receive $750 a week, while those who lose between 8 and 20 hours will receive $450.

COVID-19 Disaster Payment recipients can now expect to be better off by $90 a week compared with the JobKeeper wage subsidy, based on an annualised $39,000 income of $750 each week.

The newly passed bill will also ensure that COVID-19 business support payments will be treated as non-assessable non-exempt income.

Business support payments will only be tax-free if they are made under a program declared eligible by Treasurer Josh Frydenberg and were received in the 2021–22 financial year.

Entities must also have an aggregated turnover of less than $50 million to be eligible for the concessional tax treatment, putting it at odds with NSW’s JobSaver program which was recently expanded to businesses with an annual turnover of up to $250 million.

Information and data from the ATO will also now be shared with the relevant states and territories administering COVID-19 business support programs.

Finally, the bill will also give Treasurer Josh Frydenberg powers to authorise additional COVID-19 payments to businesses affected by state or territory lockdowns between 1 July 2021 and 31 December 2022.

Michael Croker, tax leader at Chartered Accountants Australia and New Zealand, believes the Treasurer now has ace up his sleeve as states continue to enter snap lockdowns to combat the spread of COVID-19.

 

Source: https://www.accountantsdaily.com.au/tax-compliance/16021-parliament-passes-bill-on-tax-free-covid-19-support-payments

Client Alert – August 2021

ATO tax time support: COVID-19 and natural disasters

The ATO has a range of year-end tax time options to support taxpayers who have been affected by the COVID-19 pandemic and recent natural disasters.

Income statements can be accessed in ATO online services through myGov accounts from 14 July.

The ATO also reminds those who may have lost, damaged or destroyed tax records due to natural disasters that some records can be accessed through their myGov account or their registered tax agent. For lost receipts, the ATO can accept “reasonable claims without evidence, so long as it’s not reasonably possible to access the original documents”. A justification may be required on how a claim is calculated.

JobKeeper

Payments received as an employee will be automatically included in the employee’s income statement as either salary and wages or as an allowance. However, sole traders who received JobKeeper payment on behalf of their business will need to include the payment as assessable income for the business.

JobSeeker

Payments received will be automatically included in the tax return at the Government Payments and Allowances question from 14 July.

Stand down payments

Employees receiving one-off or regular payments from their employer after being temporarily stood down due to COVID-19 should expect to see those payments automatically included in their income statement as part of their tax return.

COVID-19 Disaster Payment

The Australian Government (through Services Australia) COVID-19 Disaster Payment for people affected by restrictions is taxable. Taxpayers are advised to ensure they include this income when lodging their returns.

Other assistance

The tax treatment of assistance payments can vary; the ATO website outlines how a range of disaster payments impact tax returns and includes guidance on COVID-19 payments, including the taxable pandemic leave disaster payment.

Early access to superannuation

Early access to superannuation under the special arrangements due to COVID-19 is tax free and does not need to be declared in tax returns.

Hardship priority processing of tax returns

If your business is experiencing financial difficulties due to the latest lockdowns, the ATO may be able to help by processing your tax return faster and expediting the release of any refund to you. To be eligible for priority processing, you’ll need to apply to the ATO and provide supporting documents (within four weeks of your submission) outlining your circumstances. “Financial difficulty” may include many situations such as disconnection of an essential service, pending legal action or repossession of a business vehicle.

You can apply for ATO priority processing over the phone or through your tax professional after the lodgment of the tax return in question. Once the initial request for priority processing is received, you’ll be notified and contacted if more information is required. Processing will take more time for businesses that have lodged several years’ worth of income tax returns of amendments at the same time, and those that have unresolved tax debts.

Before lodging any priority processing request, check the progress of your return through online services, over the phone or by contacting us as your tax professional. If the return is in the final stages of processing, you may not need to lodge a priority processing request – the return will be finalised before the ATO has an opportunity to consider the request.

Workplace giving versus salary sacrifice donations

Have you made donations either through workplace giving or salary sacrifice arrangements with your employer? If so, and you want to claim a deduction in your tax return, it’s important to know that the tax treatment differs depending on which method you used to make the donation.

Essentially, workplace giving is a streamlined way for employees to regularly donate to charities and deductible gift recipients (DGRs). Usually a fixed portion of your salary is deducted from your pay each pay cycle and your employer forwards the donation on to the DGR. However, the amount of your gross salary remains the same and, depending on your employer’s payroll systems, the amount of tax you pay each pay period may or may not be reduced to take into account the donation.

On the other hand, under a typical salary sacrificing donation arrangement, you agree to have a portion of your salary donated to a DGR in return for your employer providing you with benefits of a similar value. Your gross salary is reduced by the salary sacrificed amount and the amount of tax you pay each pay period will be reduced. Your employer makes the donation to the DGR.

If you’ve made a donation under workplace giving, you can claim a deduction in your tax return. This is regardless of whether or not your employer reduced the amount of tax you paid each pay cycle to account for the amount of the donation. Your employer will give you a letter or email stating the total amount donated to DGRs, and the financial year in which the donations were made. Alternatively, your employer will provide the total amount of donations you made for the year in your tax time payment summary, under the “Workplace giving” section.

If you’ve made a donation to a DGR under a salary sacrifice arrangement, however, you’re not entitled to claim a deduction in your tax return, since it’s your employer that is making the donation to the DGR – not you.

If you make donations outside the workplace, remember that for a donation to be deductible it must be made to a DGR and truly be a gift or donation of $2 or more. You can still claim a deduction if you receive a token item in recognition of your donation (eg a lapel pin, wristband or sticker).

Employers beware: increase in super guarantee

From 1 July 2021, the rate of super guarantee increased from 9.5% to 10%. Businesses using manual payroll processes should be careful that this change doesn’t lead to unintended underpayment of super, which may attract penalties.

The new rate of 10% is the minimum percentage now required by law, but employers may pay super at a higher rate under an award or agreement.

Most payroll and accounting systems will have incorporated the increase in their super rate, but it’s always good to check. If your business is still using a manual process to pay your employees, you’ll need to work out how much super to pay under the new rate.

This latest increase to 10% is by no means the last time the super guarantee rate will change over the next few years. From 1 July 2022 to 30 June 2023 (ie next financial year) the rate will increase to 10.5%, followed by another 0.5% point increase to 11% in the 2023–2024 financial year. So, employers will need to be on their toes to make sure the right amount of super guarantee is paid for the next few years.

COVID-19 lockdown support: NSW, Vic and SA

If your business or employment income has been affected by recent COVID-19 related lockdowns in New South Wales, Victoria and South Australia, financial help is available from both the state and Federal governments. Depending on the length of the lockdown, businesses may be eligible to receive a co-funded small and medium business support payment, as well as various cash grants.

Federal support

For small and medium businesses, depending on the length of the lockdown, the Federal government will fund up to 50% small and medium business support payments to be administered by the states.

Non-employing businesses (eg sole traders) will also be eligible.

The Federal government will also seek to make various state business grants tax exempt and provide support for taxpayers through the ATO with reduced payment plans, waiving interest charges on late payments and varying instalments on request.

For individuals, the COVID-19 Disaster Payment will be available in any state or territory where a lockdown has been imposed under a state public health order.

New South Wales

Eligible businesses will be able to claim state government grants under the business grants program. Smaller and micro businesses that experience a specified decline will be eligible for a payment per fortnight of restrictions.

Payroll tax waivers will be available for certain businesses, as well as payroll tax deferrals and interest free payment plans.

Commercial, retail and residential landlords who provide rental relief to financially distressed tenants will be able to claim land tax relief. Residential landlords that are not liable for land tax may be able to claim a capped grant where they reduce rent for tenants.

The NSW government will also be protecting tenants with a short-term eviction moratorium for rental arrears
where a residential tenant suffers a loss of income due to COVID-19 and meets a range of other criteria. There will also be no recovery of security bonds, lockouts or evictions of impacted retail/commercial tenants prior to mediation.

Victoria

Businesses in Victoria will be provided with cash grants from the state government. These payments will be automatically made to eligible businesses and sole traders to minimise delays. The state government estimates that up to 90,000 business that previously received assistance payments in relation to previous lockdowns will receive the new cash grants.

South Australia

Small and medium-sized businesses that suffer a significant loss of income or were forced to close as a result of South Australia’s seven-day lockdown are being offered an emergency cash grant as part of a $100 million business support package. The package also includes a new cash grant for eligible small businesses that don’t employ staff.

In addition, the SA government will provide fully-funded income support payments for eligible workers in regional SA who live or work outside of the Commonwealth-declared “hotspot” local government areas, and are therefore not entitled to the Federal COVID-19 Disaster Payment.