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
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/
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
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
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.
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