Budget personal tax cuts and business concessions now law

Several tax announcements from the 2020 Federal Budget have now been passed into law.

These include bringing forward changes to the personal income tax thresholds so that they apply from 1 July 2020. From that date, the top threshold of the 19% personal income tax bracket is increased from $37,000 to $45,000. The top threshold of the 32.5% tax bracket is increased from $90,000 to $120,000. The low income tax offset increases to $700 and the low and middle income tax offset (up to $1,080) is retained for 2020–2021.

A range of tax concessions already available to small businesses have been extended to medium sized businesses as well, and businesses with turnover less than $5 billion can deduct the full cost of eligible depreciating assets that are installed ready for use between 6 October 2020 and 30 June 2022.

Implement new PAYG withholding rates by 16 November

The ATO has issued updated tax withholding schedules to reflect the 2020–2021 income year personal tax cuts. Employers must now make sure they are withholding the correct amounts for pay runs processed in their systems from no later than 16 November onwards.

With these changes coming partway through the income year, employees and other payees will receive their entitlement to the reduced tax payable for the entire 2020–2021 year when they lodge their income tax returns for that period.

Working from home “shortcut” deduction extended

The ATO advises that the “shortcut” rate for claiming work-from-home running expenses has been extended, in recognition that many employees and business owners are still required to work from home due to COVID-19 This shortcut deduction rate was previously extended to 30 September 2020, but will now be available until at least 31 December 2020.

Eligible employees and business owners, therefore, can choose to claim additional running expenses incurred between 1 March 2020 and 31 December 2020 at the rate of 80 cents per work hour, provided they keep a record (such as a timesheet or work logbook) of the number of hours worked from home during the period.

JobKeeper decline in turnover tests: temporary trading cessation

An additional category for alternative “decline in turnover” tests is now available for the purposes of the revised JobKeeper payment system (which commenced on 28 September 2020) for entities that temporarily ceased trading for some or all of the relevant comparative period.

Under the revised system, an entity must have had an actual decline in its turnover for the applicable quarter relative to the same quarter in 2019. This generally involves making a one-to-one comparison of the 2020 numbers to those in the corresponding period in 2019, to see if it exceeds the 15%, 30% or 50% decline threshold (depending the type of entity).

Alternative tests can only be used if there is not an “appropriate relevant comparison period” in 2019, and four requirements must be satisfied for an entity to use the alternative tests for the new “temporary cessation of business” category. That is, in the comparison period:

• the entity’s business had temporarily ceased trading due to an event or circumstance outside the ordinary course of the entity’s business;
• trading temporarily ceased for a week or more;
• some or all of the relevant comparison period occurred during the time in which the entity’s business had temporarily ceased trading; and
• the entity’s business resumed trading before 28 September 2020.

Data-matching program: apprentices and trainees

The Department of Education, Skills and Employment (DESE) has commenced a new ongoing data-matching program with the ATO in relation to the Supporting Apprentices and Trainees (SAT) measure. The program seeks to confirm the eligibility of employers receiving the subsidy, as well as stamp out any potential double-dipping of government assistance (for example, claiming both SAT and JobKeeper support at the same time for the same employee).

Under SAT, employers can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wage paid until 31 March 2021. To be eligible, an apprentice must have been in an Australian apprenticeship with a small business as at 1 March 2020. SAT has since been expanded to include medium sized businesses that had an apprentice in place on 1 July 2020. Employers of any size who re-engage an eligible out-of-trade apprentice are also eligible to claim the SAT wage subsidy. However, there are restrictions on when an employer can claim SAT for an eligible apprentice.

Data relating to around 117,000 apprentices and trainees and more than 70,000 employers will be transferred between DESE and the ATO. The program will be ongoing, with data transfer to occur at regular intervals as required over the life of the SAT measure.

Where the data-matching program detects a discrepancy or an anomaly that requires verification, DESE will contact the business and provide them with an opportunity to verify the accuracy of the information on which the eligibility was based. Businesses will be given at least 28 days to respond and any relevant individual circumstances will be taken into consideration.

Small business tax options during COVID-19: ATO reminder

The ATO has reminded businesses impacted by COVID-19 that they have a range of tax options to consider, including claiming a deduction for any losses. And for businesses finding it difficult to estimate income for the purposes of PAYG instalments, the ATO will not apply penalties or interest for excessive variations where businesses make a “best attempt” to estimate their end-of-year tax.

Tax losses

Sole traders and individual partners in a partnership who meet certain conditions can offset current year losses against other assessable income (such as salary or investment income) in the same income year. Otherwise, the loss can be deferred or carried forward and offset in a future year when the business next makes a profit. Businesses set up under a company structure that have made a tax loss in a current year can generally carry forward that loss for as long as they want. Of course, it’s crucial to keep proper records when claiming a deduction for losses.

Closing a small business

The ATO has acknowledged that some businesses may need to close their doors – either temporarily or permanently – due to COVID-19, particularly in Victoria. It calls on such businesses to “do their best to keep up with tax and super obligations”.

If a business is forced to close permanently as a result of COVID-19, or for any other reason, it must still lodge any outstanding activity statements and instalment notices, make GST adjustments on the final activity statement and lodge final tax returns. This will enable the ATO to finalise the tax account and issue any refunds that might be owed.

Insolvency reforms announced for small businesses

The Government has announced that it will introduce insolvency reforms to help small businesses restructure in response to COVID-19, including:

• the introduction of a new debt restructuring process for incorporated businesses with liabilities of less than $1 million, drawing on key features from Chapter 11 of the US Bankruptcy Code;
• moving from a one-size-fits-all “creditor in possession” model to a more flexible “debtor in possession” model;
• providing a rapid 20-business day period for the development of a restructuring plan by a small business restructuring practitioner, followed by 15 business days for creditors to vote on the plan; and
• creating a new, simplified liquidation pathway for small businesses to allow faster and lower cost liquidation.

Safeguards will be included to prevent companies from using the new processes to undertake corporate misconduct, including firms seeking to carry out illegal phoenix activity.

The new insolvency processes are proposed to be available from 1 January 2021.

JobKeeper payments satisfy “work test” for super contributions

The Australian Prudential Regulation Authority (APRA) has published new guidance on the interaction between JobKeeper payments and satisfying the “work test” for the purpose of voluntary superannuation contributions.

Where an individual is aged 67–74 and is stood down from their employment due to the impacts of COVID-19 but is in receipt of the JobKeeper payment, APRA says a super fund trustee can accept a personal contribution from that individual under the super “work test” rules. APRA’s view is that where an employer is receiving the JobKeeper wage subsidy for an individual, registrable superannuation entity (RSE) licensees should consider the individual to be “gainfully employed” for the purposes of the “work test”, even if that individual has been fully stood down and is not actually performing work. In APRA’s view, this is appropriate because the individual is still employed and is obtaining a valuable benefit from their employer.

SMSF asset valuations: concession during COVID-19

The ATO has advised that it will not apply a penalty for self managed super fund (SMSF) trustees that have difficulty obtaining evidence to support market valuations of assets due to COVID-19.

SMSF trustees are required to provide objective and supportable evidence to their auditor each year to establish that assets of the fund are valued at market value.

During the 2020 and 2021 financial years, the ATO will not apply a penalty if it is satisfied that the difficulty in obtaining valuation evidence is due to COVID-19. Instead, the ATO will send the SMSF trustee a letter advising them to ensure they comply with the ATO’s valuation guidelines and have supporting valuation evidence by the time of their next audit if possible. However, the ATO warns that repeated contraventions of the valuation evidence requirements could lead to future penalties.

Digital AGMs and signatures: legislative determination

The Government has formally extended the ability for companies to convene annual general meetings (AGMs) and other prescribed meetings entirely online until March 2021.

This extension allows company boards to:

• provide notice of AGMs to shareholders using email;
• achieve a quorum with shareholders attending online; and
• hold AGMs meetings online, with shareholders able to put questions to board members online and vote online.

Company officers are also permitted to use electronic signatures to meet the relevant legal requirements.

Keeping you informed about the Federal Budget

The Australian Government will hand down its Federal Budget for 2020–2021 on the evening of Tuesday 6 October 2020.

The Client Alert team will, as usual, work to bring you a special Budget Extra edition that outlines the key announcements to assist you in dealing with your clients’ queries. You can expect to receive it on Wednesday 7 October.

A little Budget history

Seeing a Federal Budget this late in the year is, like so much of 2020, a bit unusual. Since 1994, Australia’s Federal Budget has usually been handed down by the Treasurer on the second Tuesday in May. But, as we’ve previously reported, this year is not the only time that exceptional circumstances have lead to a change in Budget timing. Exceptions were made in 1996, when an election and a change of government occurred in March and the Budget was handed down in August; in 2016, when the Budget was handed down on the first Tuesday in May because the government was considering calling call a double dissolution election; and most recently in 2019, when a Federal election was called for 18 May and the Budget was presented on 2 April.

Between 1901 and 1993 the Budget was presented in August, on the first Tuesday night of Parliament’s spring session.

COVID-19 and FBT: updated ATO advice

The ATO has updated its COVID-19 and fringe benefits tax (FBT) information webpage, providing a really useful outline of some issues that may arise due to an employer’s response to COVID-19. There are likely to be some pandemic-related benefits currently provided that may not otherwise have been of consideration; for example, some employers may now be presented with FBT issues for the first time.

Although the webpage (and the following summary) deals with FBT specifically, while reading it is worth thinking through the related income tax consequences, including issues such as who incurs a particular expense (as opposed to who pays it), reimbursements, invoicing and other documentation requirements.

Working from home devices

Items provided to employees to allow them to work from home (or otherwise offsite) due to COVID-19 will usually be exempt from FBT if they are primarily used by employees for work. The items include:

• laptops;
• portable printers; and
• other electronic devices.

Also, the minor benefits exemption or the otherwise deductible rule may apply if an employer:

• allows an employee to use a monitor, mouse or keyboard that they otherwise use in the workplace;
• provides them with stationery or computer consumables; or
• pays for their phone and internet access.

The minor benefits exemption may apply for minor, infrequent and irregular benefits under $300. In addition, the otherwise deductible rule may allow an employer to reduce the taxable value of benefits by the amount that an employee can claim as a once-only deduction.

Garaging work cars at employees’ homes

Employers may have been garaging work cars at their employees’ homes due to COVID-19. There may not be an FBT liability depending on:

• the type of vehicle;
• how often the car is driven; and
• the calculation method chosen for car benefits.

There is a separate ATO fact sheet on this matter. Its executive summary contains the following information:

• Where a car isn’t being driven at all, or is only being driven for maintenance purposes, the ATO accepts that the employer isn’t holding the car for the purposes of providing fringe benefits. If the employer elects to use the operating cost method (and maintains appropriate records), it may not have an FBT liability for a car.
• Certain kinds of cars may also be exempt from FBT even where they are garaged at employees’ homes.
• If an exemption doesn’t apply and a work car is garaged at an employee’s home, it will be deemed to be available for private use and the employer may have an FBT liability.
• The employer can take into account the impact of COVID-19 on the business use of a car if it is being driven during the period it is garaged at a home. This will require the employer to maintain a logbook (or to have kept a logbook in any of the previous four years) which will enable it to calculate its FBT liability.
• The logbook-keeping requirements will depend on whether an employer is already maintaining an existing logbook for the year.
• For any car fringe benefits calculated using the operating cost method, the employer may adjust its business use estimates to reflect changes in its employees’ driving patterns due to COVID-19.

Logbooks

Employees’ driving patterns may have changed due to the effects of COVID-19. The ATO notes that if an employer uses the operating cost method, it may have an existing logbook. If so, the employer can still rely on this logbook to make a reasonable estimate of the business kilometres travelled. However, the employer can also choose to keep a new logbook that is representative of its business use throughout the year.

The issue of logbooks is also addressed in more detail in the COVID-19 and car fringe benefits fact sheet.

Emergency accommodation, food and transport

An employer will not have to pay FBT if it provides emergency accommodation, food, transport or other assistance to an employee where:

• the benefit is emergency assistance to provide immediate relief; and
• the employee is, or is at risk of being, adversely affected by COVID-19.

In the context of COVID-19, this would apply to:

• expenses incurred relocating an employee, including paying for flights home to Australia;
• expenses incurred for food and temporary accommodation if an employee cannot travel due to restrictions (domestic, interstate or intrastate);
• benefits provided that allow an employee to self-isolate or quarantine; and
• transporting or paying for an employee’s transport expenses, including car hire and transport to temporary accommodation.

An employer will not have to pay FBT for benefits that are considered “emergency assistance”. This includes providing temporary accommodation and meals to fly-in, fly-out or drive-in, drive-out employees who are unable to return to their normal residences due to COVID-19 domestic and international travel restrictions.

Items that help protect employees from COVID-19

An employer may need to pay FBT on items it gives employees to help protect them from contracting COVID-19 while at work. These include:

• gloves;
• masks;
• sanitisers;
• antibacterial spray.

The ATO says, however, that these benefits are exempt from FBT under the emergency assistance exemption if employers provide them to employees who:

• have physical contact with – or are in close proximity to – customers or clients while carrying out their duties; or
• are involved in cleaning premises.

Examples of this type of work include:

• medical (such as doctors, nurses, dentists and allied health workers);
• cleaning;
• airline;
• hairdressing and beautician; and
• retail, café and restaurant.

Where employment duties are not of this kind, the minor benefits exemption may apply if an employer provides an employee with minor, infrequent and irregular benefits under the value of $300.

Emergency health care

There is a limited exemption from FBT if an employer provides emergency health care to an employee who us affected by COVID-19. It only applies to health care treatment provided:

• by an employee of the same employer (or an employee of a related company);
• on the employer’s premises (or premises of the related company); or
• at or adjacent to an employee’s worksite.

If an employer pays for its employee’s ongoing medical or hospital expenses, FBT applies. However, if an employer pays to transport an employee from the workplace to seek medical help, that cost is exempt from FBT.

Flu vaccinations for employees working from home

Providing flu vaccinations to employees is generally exempt from FBT because it is work-related preventative health care.

Employers will not have to pay FBT for providing their employees with a voucher or reimbursement for getting the flu vaccine from a GP or chemist, as long as that benefit is available to all of its employees. If only some of the employees choose to receive the flu vaccine, the voucher or reimbursement is still exempt from FBT, as long as it is offered to all of the employer’s employees.

COVID-19 testing

The ATO states that, as all employees are considered equally susceptible to contracting the virus, COVID-19 testing qualifies for the FBT exemption for work-related medical screening. However, employers will only be exempt from FBT liability for providing COVID-19 testing to employees if both of the following apply:

• testing is carried out by a legally qualified medical practitioner or nurse; and
• testing is available to all employees.

If it turns out that only some employees get COVID-19 tests, the tests are still exempt – again, as long as they are offered to all of the employer’s employees.

Cancelled events

An employer will not have to pay FBT if it is required to pay non-refundable costs for cancelled events that its employees were due to attend. This is because:

• the arrangement was between the employer and the event organisers, not its employees and the organisers; and
• the employer has not provided any fringe benefits to its employees, as they did not get to attend the event.

However, an employer may have to pay FBT if its employees were required to pay for their attendance at the cancelled event and the employer reimbursed them. This would be an expense payment fringe benefit – unless the otherwise deductible rule applies.

Not-for-profit salary packaging: ATO concession for meal provision

Not-for-profit employers may provide salary-packaged meal entertainment to their employees to take advantage of an exempt or rebatable cap.

Arrangements to provide meals may qualify as salary-packaged meal entertainment, depending on the facts and circumstances of the meal and how the meal is provided.

This may be particularly salient for employers such as hospitals and aged care facilities, and the like.

Given the unprecedented circumstances brought about by COVID-19, the ATO will not apply compliance resources to scrutinise expenditure under these arrangements for the:

• FBT year ending 31 March 2021 – where meals are provided by a supplier that was authorised as a meal entertainment provider as at 1 March 2020; and
• FBT year ended 31 March 2020 – when restaurants and public venues were closed.

Source: www.ato.gov.au/General/COVID-19/Support-for-businesses-and-employers/COVID-19-and-fringe-benefits-tax/; www.ato.gov.au/law/view/document?DocID=AFS/CAR-FBT-COVID-19/00001&PiT=99991231235958.

ATO updates on new JobKeeper arrangements

The ATO has released a somewhat dazzling array of new and updated information sheets addressing the changes to JobKeeper.

Actual decline in turnover test

The ATO states that the actual decline in turnover test can be satisfied in two ways, using:

• the basic test; or
• the alternative test.

The basic test involves the comparison of actual GST turnover for the relevant comparison periods (eg September 2020 to September 2019). Generally, businesses will use the basic test. The option of an alternative test has been made available for some cases where the normal comparison period is not appropriate – for example, when a business has been operating for less than a year (although there are other instances where an alternative test can be used). The ATO will issue guidance on the alternative test “soon”.

There is also a modified basic test for group employer labour entities. This refers to those entities that supply employee services to members of consolidated or consolidatable group, or GST groups.

The ATO states that the actual decline test is similar to the “original” decline in turnover test (ie based on projected turnover), except that:

• it must be used for specific quarters only;
• actual sales made in the relevant quarter must be used, not projected sales, when working out GST turnover; and
• sales must be allocated to the relevant quarter in the same way a business would report those sales to a particular BAS (if registered for GST).

Decline in turnover tests

The ATO states that existing participants (ie those enrolled in JobKeeper before 28 September) have already satisfied the original decline in turnover test, and do not need to satisfy it again. They do, however, need to satisfy the actual decline in turnover test.

New participants (ie those enrolling from 28 September) also need to satisfy the actual decline in turnover test. Although they need to satisfy the original decline in turnover test, they will satisfy it if they satisfy the actual decline in turnover test – and they can enrol on that basis.

The ATO advises employers unable to claim JobKeeper that they should notify their eligible employees. Employees should also be advised that the employer is no longer obligated to pay them the amount equivalent to JobKeeper. Those employees will not be eligible to be nominated for JobKeeper by any other entity.

There is no obligation to do monthly reporting during extension period in which an employer is not eligible to receive JobKeeper.

JobKeeper key dates

For the JobKeeper fortnights starting 28 September 2020 and 12 October 2020 only, the ATO is allowing employers until 31 October 2020 to meet the wage condition for all employees included in the JobKeeper scheme.

In addition, to claim payment for the September JobKeeper fortnights, employers must have enrolled by 30 September.

80-hour threshold for employees

The ATO states that a full-time employee who has been employed for their full 28-day reference period will usually satisfy the 80-hour threshold.

However, closer examination may be required for eligible employees who are:

• part-time;
• long-term casual;
• not paid on an hourly basis; and/or
• stood down.

If an employee has been stood down, an alternative reference period may apply to them.

Any overtime performed by an employee in the course of their employment in their 28-day reference period will count towards the 80-hour threshold. It is the actual hours of overtime performed that count; that is, if a penalty rate loading applies, it does not increase the number of hours counted.

It does not matter if an eligible employee takes their leave at full pay or half pay, or through a purchased leave arrangement. The employer must still count the total number of hours covered by the leave taken. For example, if an employee takes eight hours of annual leave at half pay, the employer counts eight hours towards their 80-hour threshold, not four (full pay) hours.

Unpaid leave is not counted towards the 80-hour threshold. However, if an employee takes unpaid leave, an alternative reference period may apply.

An employee only needs to satisfy the 80-hour threshold in one of the 28-day reference periods. If they satisfy it in one reference period, the employer does not need to determine if they satisfy it in other reference periods.

For employers who have a 30-day pay cycle, the 80-hour requirement equates to 85.72 hours. For a 31-day pay cycle, the equivalent is 88.58 hours.

Employers should use the most accurate workplace records to show the actual hours eligible employees worked in their 28-day reference period. Employers can use their employment records (eg payroll data or timesheets) to help determine whether employees satisfy the 80-hour threshold.

Eligible employees

Employers cannot claim for employees who:

• were first employed after 1 July 2020;
• left employment before 1 July 2020 (except in limited circumstances);
• have been, or have agreed to be, nominated by another employer (except in limited circumstances); or
• are casual employees, unless they were employed by the employer on a regular and systematic basis during the 12-month period that ended 1 July 2020.

If employees have multiple employers, they can usually choose which employer they want to be nominated by. However, if employees are long-term casuals and have other permanent employment, they must choose their permanent employer. They can’t be nominated for the JobKeeper payment by more than one employer.

Employers must also have given a JobKeeper employee nomination notice to any additional employees who first become eligible on or after 3 August 2020 using the 1 July test. This should have been given to any newly eligible employees by 24 August 2020. If not already done, the ATO says it should be done as soon as possible.

Source: www.ato.gov.au/General/JobKeeper-Payment/In-detail/Actual-decline-in-turnover-test/; www.ato.gov.au/General/JobKeeper-Payment/Decline-in-turnover-tests/; www.ato.gov.au/General/JobKeeper-Payment/Payment-rates/80-hour-threshold-for-employees/; www.ato.gov.au/General/JobKeeper-Payment/Employers/Your-eligible-employees/.

Extended COVID-19 support and relief measures

JobKeeper extension Bill passed

The Coronavirus Economic Response Package (Jobkeeper Payments) Amendment Bill 2020 received Royal Assent on 3 September 2020 as Act No 81 of 2020. This followed the House of Representatives agreeing to the six Government amendments passed by the Senate on 1 September 2020. Those minor Senate amendments apply to the Fair Work measures in Sch 2 of the Bill.

The changes in the Bill extend the end date of the JobKeeper scheme from 27 September 2020 to 28 March 2021, as announced by Prime Minister Scott Morrison on 21 July 2020. The Bill also amends the tax secrecy provisions in relation to JobKeeper and extends certain provisions of the Fair Work Act 2009 implemented in response to COVID-19.

From 27 September until March 2021, there will be a two-tiered JobKeeper payment:

• for the December quarter, payments will be reduced from $1,500 to $1,200 per fortnight per employee, or $750 for workers employed for less than 20 hours a week; and
• for the March quarter, payments will be $1,000 per fortnight, or $650 for workers employed for less than 20 hours a week.

The extension to the employment reference date from 1 March to 1 July 2020 has been made via statutory rules.

Fair Work amendments: 10% decline in turnover certificate

The legislation requires that an eligible financial service provider issues a written certificate that relates to a specified employer, stating that the employer satisfied the 10% “decline in turnover test” for the designated quarter applicable to a specified time.

As originally drafted in the Bill, the definition of “eligible financial service provider” included a registered company auditor, a registered tax or BAS agent (or tax (financial) adviser) or a qualified accountant.

The amendments remove registered company auditors and tax (financial) advisers from the definition. This means qualified accountants, registered tax agents and BAS agents are the only professionals who can supply the certificate. It is important to note that lawyers may not do so.

In addition, the amendments make clear that the issuing of the 10% decline in turnover certificate involves a declaration from an eligible financial service provider that relates to a specific employer and confirms that, based on the information provided, the employer satisfied the 10% test for the designated quarter applicable to a specified time. This replaces the originally drafted requirement that the provider “express an opinion”.

Source: https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr6583%22; https://parlinfo.aph.gov.au/parlInfo/download/legislation/amend/r6583_amend_ed967ce0-aee9-4f9a-8ff5-ef8861a029d3/upload_pdf/B20SW102.pdf;fileType=application%2Fpdf; https://www.ato.gov.au/General/JobKeeper-Payment/JobKeeper-extension-announcement/.

Coronavirus Supplement extended

The Social Security (Coronavirus Economic Response – 2020 Measures No 14) Determination 2020, registered on 30 August 2020, extends the period for payment of the COVID-19 Supplement from 25 September to 18 December 2020, but at the reduced rate of $250 per fortnight (down from $550). This measure was announced by Federal Treasurer Josh Frydenberg on 21 July 2020. A further instrument will be made to extend the COVID-19 Supplement from 19 December to 31 December 2020.

The instrument amends multiple legislative instruments that have modified aspects of the Social Security Act 1991 as part of the Government’s COVID-19 economic response. For example, the assets tests and the liquid assets test waiting period are reinstated for certain payments from 25 September 2020.

The instrument also temporarily increases the income free area to $300 a fortnight for certain JobSeeker Payment recipients for the period 25 September 2020 to 31 December 2020, and increases the partner income taper rate for JobSeeker Payment recipients from 25 cents to 27 cents for every dollar over the partner income free area. The instrument also extends to 31 December 2020 the temporary pension portability measure.

Source: www.legislation.gov.au/Details/F2020L01093.

COVID-19 early release of super extended

The Treasury Laws Amendment (Release of Superannuation on Compassionate Grounds) Regulations (No 3) 2020, registered on 3 September 2020, give effect to the Government’s extension of the COVID-19 early release of superannuation up to $10,000 until 31 December 2020.

As part of the Economic and Fiscal Update in July 2020, the Government announced that it would extend the application period to allow those dealing with adverse economic effects of COVID-19 to access up to $10,000 of their super (tax-free) for the 2020–2021 year.

These regulations amend reg 6.19B(2) of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regs) to allow an application via the myGov website to access $10,000 of super until 31 December 2020 (extended from 24 September). Eligible Australian and New Zealand citizens and permanent residents were also able to access up to $10,000 of their super for the 2019–2020 year by 1 July 2020.

The changes under the new regulations apply from 4 September 2020. In accordance with the original provisions, provided that a valid application is made by 31 December 2020, the ATO can make a determination to release up to $10,000 of super after the application period has expired.

Source: www.legislation.gov.au/Details/F2020L01133.

Bankruptcy concessions and director liability safe harbour extended

In a media release on 7 September 2020, the Government announced that it will extend its temporary insolvency and bankruptcy protections until 31 December 2020. Federal Treasurer Josh Frydenberg said that regulations will be made to extend the temporary increase in the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive.

The changes will also extend the temporary relief for directors from any personal liability for trading while insolvent.

Background

In March 2020 the Government made a number of important changes to the Bankruptcy Act 1966 and the Corporations Act 2000 (Corporations Act) via the Coronavirus Economic Response Package Omnibus Act 2020 (the Omnibus Act). The changes were intended to provide relief from issues caused by the pandemic by way of lessening the threat of actions which could unnecessarily push companies and/or directors, as well as individuals, into insolvency and force the winding up of a business.

Statutory thresholds

The Omnibus Act increased the minimum amount of debt required to be owed before a creditor can initiate involuntary bankruptcy proceedings from $5,000 to $20,000. The statutory minimum for a creditor to issue a statutory demand was increased from $2,000 to $20,000.

Timeframes

The timeframe in which a debtor must comply with a bankruptcy notice was changed from 21 days to six months. The timeframe in which a debtor is protected from enforcement action by a creditor following presentation of a declaration of intention to present a debtor’s petition was changed from 21 days to six months.

There was also an increase to the period within which a debtor must respond to a statutory demand. The statutory period increased from 21 days to six months.

Directors’ personal liability

The Omnibus Act inserted a new provision which provides that directors have temporary relief from personal liability for insolvent trading if debts are incurred in the ordinary course of business. Directors otherwise have a duty to prevent insolvent trading.

A director may rely on the temporary safe harbour in relation to a debt incurred by the company if the debt is incurred:

• in the ordinary course of the company’s business;
• during the period starting on 24 March 2020; and
• before any appointment of an administrator or liquidator of the company during the temporary safe harbour application period.

A director is taken to incur a debt in the ordinary course of business if it is necessary to facilitate the continuation of the business. This could include, for example, a director taking out a loan to move some business operations online. It could also include debts incurred through continuing to pay employees during the pandemic.

A person wishing to rely on these safe harbour provisions in a proceeding in which unlawful insolvent trading is alleged bears an evidential burden in relation to that matter – and a new definition of “evidential burden” was inserted into the Corporations Act.

A holding company may rely on the safe harbour for insolvent trading by its subsidiary if it takes reasonable steps to ensure the safe harbour applies to each of the directors of the subsidiary, and to the debt, and if the safe harbour does so apply. The holding company bears an evidential burden in relation to these matters.

Egregious cases of dishonesty and fraud are still subject to criminal penalties. Any debts incurred by the company will still be payable by the company.

Measures extended

The measures were enacted with an intended life span of six months, meaning that they were due to finish on or around the time that the JobKeeper and JobSeeker measures were originally intended to finish, on 28 September 2020.

The end time has now been pushed back to 31 December 2020 (unlike JobKeeper, which is going to the end of March 2021).

The Omnibus Act actually amended the Bankruptcy Act (and Corporations Act) to remove references to amounts and time periods, and updated them to reflect that the statutory minimum may be changed via regulation. This means that the proposed extension will be implemented by regulation rather than by further amending legislation, removing the need to wait for Parliament to resume before the proposal becomes law.

Although the wording of the Government’s press release on the extension does not specifically address the minimum amount of debt required before a creditor can initiate involuntary bankruptcy proceedings, it is reasonable to assume that both $20,000 limits will stay in place – the release only refers to “the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive”.

Source: https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/extension-temporary-relief-financially-distressed.

ASIC grants hardship relief for withdrawals from frozen funds

The Australian Securities and Investments Commission (ASIC) has announced new relief measures for operators of managed funds to facilitate withdrawals by members who are facing financial hardship during the COVID-19 pandemic.

The conditional relief implemented by the ASIC Corporations (Hardship Withdrawals Relief) Instrument 2020/778, registered on 27 August 2020, will apply to all responsible entities (REs) of registered managed investment schemes (MIS) that have become “frozen funds”.

The relief measures will ease some of the statutory restrictions on REs and improve access to investments by members who meet specific hardship criteria. ASIC previously granted hardship relief to REs of frozen funds on a case-by-case basis only. ASIC has also issued Information Sheet INFO 249 Frozen funds – information for responsible entities to provide updated guidance about frozen funds.

Frozen funds

At times of extreme market volatility, some managed funds may need to suspend redemptions and freeze funds to protect the interests of the members as a whole. A fund is frozen when the responsible entity has suspended or cancelled redemptions to prevent withdrawals from destabilising their fund. When a fund is frozen members will generally not have access to their investments for a period of time. This does not necessarily mean that there has been a loss of asset value or that investors will not get their money back eventually.

ASIC Deputy Chair Karen Chester has said the hardship relief will make it easier for REs of frozen funds to enable withdrawals by investors suffering hardship. However, in doing so, REs will still have to act in the best interests of members.

Eligibility criteria

To be eligible to make hardship withdrawals from frozen funds, a member must meet at least one “hardship criterion” such as severe financial hardship, unemployment for over three months, compassionate grounds or permanent incapacity. An eligible member may:

• withdraw up to a total of $100,000 of their investment per calendar year; and
• receive up to four withdrawals per calendar year.

An RE has the discretion to facilitate a hardship withdrawal where the RE is satisfied that the member has met the hardship criteria. Members of frozen funds should contact their RE for information on hardship withdrawals in the first instance. More information on frozen funds is available on ASIC’s Moneysmart website, www.moneysmart.gov.au.

Source: www.legislation.gov.au/Details/F2020L01069; https://asic.gov.au/for-finance-professionals/fund-operators/running-a-fund/requirements-when-running-a-managed-investment-scheme/frozen-funds-information-for-responsible-entities/.

Super choice of fund and enterprise agreements Bill passed

The Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019 received Royal Assent on 3 September 2020. The changes the Bill makes will extend the super “choice of fund” regime to employees covered by enterprise agreements and workplace determinations made from 1 January 2021 (revised from 1 July 2020).

Federal Treasurer Josh Frydenberg has said this will allow another 800,000 people to make choices about where their super guarantee contributions are invested, representing around 40% of all employees covered by a current enterprise agreement. The measure was originally announced as part of the Government’s response to the Murray Financial Services Inquiry (FSI) in October 2015.

Choice of fund extended to enterprise agreements

The Bill amends s 32C of the Superannuation Guarantee (Administration) Act 1992 (SGAA) to enable employees to choose their own super fund where they are employed under a workplace determination or enterprise agreement made on or after 1 January 2021. This will require an employer to give a standard choice form to an employee in certain circumstances; for example, upon commencement of their employment or when receiving a written request from an employee.

An employer will not be required to provide existing employees with a choice form, unless they request it once a new determination or agreement is made on or after 1 January 2021. However, existing employees will be able to request a choice of fund form from their employer and the employer will be required to act on such a request.

Where a new employee does not choose a fund, the proposed changes will enable an employer to continue to make compulsory super guarantee contributions for an employee with the same fund, in accordance with the previous determination or agreement, and comply with the choice of fund rules.

If a workplace determination or enterprise agreement made after January 2021 includes a term that restricts choice, such a term will not be enforceable under s 32Z of the SGAA to the extent that the employer instead makes contributions to an employee’s chosen fund. Examples of terms which restrict choice include terms that list several funds the employer must choose between to make contributions to.

A technical amendment (s 20(3A) of the SGAA) will ensure employers are not penalised with a SG shortfall if they rely on the existing exemptions for employees in certain defined benefit schemes.

Start date revised to 1 January 2021

The Bill was passed after the House of Representatives agreed to the two Government Senate amendments to revise the start date so that it applies to enterprise agreements and workplace determinations made from 1 January 2021 (instead of 1 July 2020, as originally proposed). The other amendment by Senator Rex Patrick (Independent) requires the Australian Prudential Regulation Authority (APRA) to review the provisions to identify any unintended consequences, including the ongoing viability and profitability of defined benefits schemes. The APRA review will need to be completed within 30 months of Royal Assent to the Bill and must involve consultation with industry stakeholders.

Source: https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fbillhome%2Fr6447%22; https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/government-passes-legislation-through-senate-allow; https://parlinfo.aph.gov.au/parlInfo/download/legislation/amend/r6447_amend_c2eff2f8-445e-4d13-adde-dce9de7dcdec/upload_pdf/B20UD113.pdf;fileType=application%2Fpdf; https://parlinfo.aph.gov.au/parlInfo/download/legislation/amend/r6447_amend_f94c441e-cf5b-4897-ae4d-83a4af7fbf01/upload_pdf/8926%20revised%20TLA%20(Your%20Super,%20Your%20Choice)%20Bill%202019_Patrick.pdf;fileType=application%2Fpdf.

Super guarantee amnesty now closed

The ATO has reminded employers that the superannuation guarantee (SG) amnesty closed on 7 September 2020. The amnesty enabled employers to self-correct historical SG underpayments, without incurring the normal penalties, for SG shortfalls from 1 July 1992 until 31 March 2018.

Any amnesty applications received by the ATO after 11:59pm on 7 September will not qualify for the amnesty and but instead will be treated as a standard lodgment of a super guarantee charge (SGC) statement.

Applications received after 7 September

The ATO says it will notify late applicants in writing of the quarters that aren’t eligible for the SG amnesty and charge the administrative component ($20 per employee per quarter). The ATO will consider whether to remit the additional SGC Part 7 penalty (up to 200%): see Draft Practice Statement Law Administration PS LA 2020/D1. A minimum penalty of 100% will apply if the ATO subsequently commences an audit in respect of non-disclosed quarters covered by the amnesty.

The ATO will issue a notice of amended assessment with the increased SGC amount owing. Any SGC payments made after 7 September 2020 are not deductible, even if they relate to SG shortfalls disclosed under the amnesty.

Applications received by 7 September

To retain the benefits of the amnesty, the law requires an eligible employer to pay the outstanding SGC amount in full or enter into a payment plan with the ATO. Note that the SGC amount disclosed in an amnesty application must be paid to the ATO (not the employee’s super fund).

Amnesty payments made after 7 September 2020 are not deductible (including amounts paid under a payment plan after 7 September). If an employer is subsequently unable to maintain payments under a payment plan, the ATO will disqualify the employer from the amnesty and remove the amnesty benefits for any unpaid quarters.

Source: www.ato.gov.au/Business/Super-for-employers/Superannuation-guarantee-amnesty/.

JobKeeper changes: turnover test and employment start date

Prime Minister Scott Morrison announced further changes to JobKeeper on 7 August 2020. The changes are intended to ensure that eligibility for the revised JobKeeper scheme – to commence on 28 September 2020 – will be based on a single quarter tax period, rather than multiple quarters as previously announced. Employees hired as at 1 July 2020 will now also be eligible to receive JobKeeper.

Treasury has updated its JobKeeper factsheets as at 7 August 2020 to incorporate the PM’s announcements.

Background

The JobKeeper rules implemented in March 2020 in response to the COVID-19 pandemic were due to finish on 27 September 2020. The Government then announced on 21 July 2020 that the scheme would be extended for six months (ie until 28 March 2021), albeit in an amended form.

As a reminder, the key highlights of JobKeeper Version 2 – to start on 28 September – are that:

• the extended scheme will apply at a top rate of $1,200 per employee (down from the current $1,500) per JobKeeper fortnight from 28 September 2020 until 3 January 2021, then drop to $1,000 until 28 March 2021;
• lower rates will apply for part-time and casual employees; and
• businesses will be required to re-test their eligibility for the payment scheme to access the extension.

Changes to turnover test

The latest changes relate to the eligibility test announced in JobKeeper Version 2.

JobKeeper Version 2 originally required that, from 28 September 2020, businesses and not-for-profits seeking to claim JobKeeper payments would have to meet a further decline in turnover test for each of the two periods of extension, as well as meeting the other existing eligibility requirements. That is, at that time businesses would have been required to reassess their eligibility for the JobKeeper extension with reference to their actual turnover in the June and September quarters 2020.

The precise details of JobKeeper Version 2 were as follows:

• In order to be eligible for the first JobKeeper Payment extension period of 28 September 2020 to 3 January 2021, businesses and not-for-profits would have needed to demonstrate that their actual GST turnover had significantly fallen in both the June quarter 2020 (April, May and June) and the September quarter 2020 (July, August and September) relative to comparable periods (generally the corresponding quarters in 2019).
• For the second JobKeeper Payment extension period of 4 January to 28 March 2021, businesses and not-for-profits would have needed to demonstrate that their actual GST turnover had significantly fallen in each of the June, September and December 2020 quarters relative to comparable periods (generally the corresponding quarters in 2019).

Amendments to turnover test and employment start date

The PM has eased the proposed changes to turnover tests (discussed above) for businesses Australia-wide (ie not just for Victoria).

The changes mean that businesses will now only be required to show the requisite actual decline in turnover for the September quarter alone, rather than for both the June and September quarters (for the period to 3 January 2021, ie the December quarter). Similarly, businesses will only need to demonstrate a decline in turnover for the December 2020 quarter, rather than each of the June, September and December 2020 quarters (for the period to 28 March 2021, ie for the March quarter).

The Treasurer also announced a change for the start date for employees, with those hired as of 1 July to be eligible for JobKeeper Version 2 from 3 August. Previously, employees had to be on the books as at 1 March 2020.

Source: www.pm.gov.au/media/more-support-more-businesses-and-workers; https://treasury.gov.au/coronavirus/jobkeeper.

JobKeeper reference date now 1 July 2020: Statutory Rules made

The Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No 7) 2020, registered on 14 August 2020, changed the JobKeeper employment reference date to 1 July 2020 (from 1 March 2020) for determining employee eligibility, with effect from 3 August 2020. The amending rules commenced on 15 August 2020 and apply to JobKeeper fortnights that began on or after 3 August 2020; that is, they are retrospective.

General observations

The changes do not affect any entitlements payable under the existing JobKeeper rules, ie for JobKeeper fortnights ending on or before 2 August 2020.

Although the reference date is now 1 July 2020, there is scope for certain employees who have been or will be re-engaged by the same employer after that date to nevertheless qualify for JobKeeper (see under the heading “re-employed employees”). This does open the door for certain employees to be re-engaged and their employer to receive JobKeeper for the wages it pays.

Eligible employers that have employees who become eligible under the revised rules had to notify the newly eligible employees by 22 August 2020. The employer then had until 31 August to satisfy the requisite wage condition.

The other changes that have previously been announced will be dealt with in separate amendments, namely:

• the extension of JobKeeper payments to 28 March 2021 (the end date otherwise being 27 September 2020);
• changes to the turnover test (ie from projected turnover (ie prospective) to actual turnover (retrospective)); and
• the two-tiered payment system.

The extension and changes to the rules bring the estimate of JobKeeper payments overall to $101.3 billion.

Overall purpose

For JobKeeper fortnights beginning on or after 3 August 2020, the reference date for determining certain employee eligibility conditions is changed from 1 March 2020 to 1 July 2020. The Explanatory Statement says that the purpose of this change is to extend the scope of JobKeeper so that “it also benefits employers of more recently engaged employees”.

Importantly, the amending rules preserve the existing eligibility of employees for JobKeeper payments; that is, those for whom employers are currently receiving JobKeeper. Under the amendments, these are termed “1 March 2020 employees”, meaning those employees who satisfied the rules as at that date.

As a result, for JobKeeper fortnights beginning on or after 3 August 2020, an individual can be an eligible employee if they:

• meet the eligibility requirements with reference to the new 1 July 2020 date; or
• qualify as a 1 March 2020 employee.

Newly eligible employees

The later reference date provides the opportunity for qualifying employers to access JobKeeper for those employees who they engaged after 1 March 2020 and who were in an employment relationship as at 1 July 2020. That is, for new employees engaged after 1 March.

The changes also allow employers to qualify for JobKeeper payments for those employees who do not qualify as 1 March 2020 employees, but became eligible by meeting the conditions under the new 1 July 2020 reference date. These include employees who:

• were not considered eligible 1 March 2020 employees because they did not meet the definition of a long-term casual employee as at 1 March 2020, but have since so qualified (ie as at 1 July 2020);
• were not considered eligible 1 March 2020 employees because they were not aged 16 years, but have since become aged 16 years and over by 1 July 2020 (ie they have had a birthday!);
• are aged 16 or 17 years and were living independently or not undertaking full-time study on 1 July 2020; and
• were residents or holders of a Subclass 444 (Special Category) visa on 1 July 2020.

Currently qualifying employees (1 March 2020 employees)

The amending rules make no changes to the existing eligibility of employees who are already covered by JobKeeper; that is, those for whom the employer has been receiving the benefit based on their status as at 1 March 2020. In other words, eligible 1 March 2020 employees do not need to retest (and potentially lose) their eligibility for their employer due to the introduction of the 1 July 2020 date, or satisfy any new nomination requirements.

Despite the status of 1 March 2020 employees being preserved, such employees must continue to meet the ongoing requirements under the rules – including, somewhat obviously, that they are actually employed by the employer, but also that they are not excluded from being an eligible employee (eg because they are in receipt of parental leave pay or dad and partner pay, or entitled to a workers’ compensation payment).

Although employees do not qualify as 1 March 2020 employees if their employment has ceased since 1 March, they may qualify for JobKeeper if they are engaged by another employer as at 1 July 2020. Further, if 1 March 2020 employees are made redundant by an employer and are later re-employed by the same employer (including after 1 July 2020), there is scope for them to qualify without further testing (as follows).

Employees who have changed employers since 1 March

The new rules allow individuals who had nominated as an eligible employee with one employer as at 1 March 2020 to re-nominate as an eligible employee of another employer as at 1 July 2020. An individual who re-nominates as an eligible employee of a new employer is excluded from being an eligible employee of the old employer (this is to avoid “double dipping”). A key condition is that the individual must have ceased their employment with the first employer before 1 July 2020 and commenced their employment with the new employer by 1 July 2020.

The reason for the cessation of employment is not relevant – the employee could have had their employment terminated, they could have resigned, or the employer may have ceased to exist.

Put simply, being employed by 1 July 2020 is the key determinant (ie satisfying the requirements as at that date). The status of the employee as at 1 March 2020 is not relevant to that employee or the new employer for these purposes.

Re-employed employees (by the same employer)

Eligible 1 March 2020 employees who are re-employed by their former employer may qualify for JobKeeper without the need to retest their eligibility under the 1 July 2020 reference date (since their eligibility under the former 1 March 2020 requirements and nomination requirements continues to be preserved).

This is intended to provide support to employers that have re-employed their former employees who had been let go because of the impacts of COVID-19.

Under the rules, where there is a break in the employment relationship between the employer and an individual who was an eligible employee for any JobKeeper fortnight ending on or before 2 August 2020, the eligibility of that individual is generally preserved for JobKeeper fortnights beginning on or after 3 August 2020. Once an individual is no longer employed by their former employer, the former employer is no longer entitled to receive the JobKeeper payment in relation to the individual (because the payment only applies to employees). The eligibility of an individual re-employed by the same employer is not preserved if the individual re-nominated for another employer.

It is worth reproducing the example in the Explanatory Statement to illustrate the intended operation of these changes.

Notification requirements for employees re-employed after 1 July 2020

Eligible 1 March 2020 employees who are re-employed by their former employer after 1 July 2020 must provide a notice to the re-employing employer if all of the following circumstances apply:

• the individual was an eligible employee of the qualifying employer as a 1 March 2020 employee of the employer;
• the individual had ceased to be employed by the qualifying employer after 1 March 2020 but before 1 July 2020; and
• the individual was re-employed by the qualifying employer after 1 July 2020.

The notice that must be provided to the employer is one that states if the individual had provided a nomination notice to another employer under the new 1 July 2020 reference date. This notice will enable an employer that re-employs a 1 March 2020 employee to determine whether or not it can rely on the original nomination notice that was provided to it before the individual ceased their employment. In the event that an individual does not comply with the obligation to notify, the Explanatory Statement “cautions” the employer to obtain a statement from the individual before claiming an entitlement to the JobKeeper payment in relation to the employee.

Employer obligations

Employers that are already participating in the JobKeeper program are required to give a notice to all employees about the revised JobKeeper reference date, other than:

• employees to whom the employer has previously given a notice in writing advising that the employer has elected to participate in the JobKeeper scheme;
• employees who had previous provided the employer with a nomination form in relation to the JobKeeper scheme;
• individuals who the employer reasonably believes do not satisfy the 1 July 2020 requirements; and
• employers that are ACNC-registered charities that have elected to disregard certain government and related supplies and the individual’s wages and benefits are funded from such government and related sources.

This is designed to ensure that newly qualified employees are given the same notification details that applied when JobKeeper was first introduced, without the need to give it to those employees for whom the employer is already receiving JobKeeper (as their status has been preserved).

This notification must have occurred within seven days of the commencement of the Statutory Rules (ie by 22 August 2020).

Further, to be eligible for the JobKeeper payment for any newly eligible employees under the 1 July 2020 reference date, a qualifying employer must provide notice to the ATO of information about that employee and their nomination. Where an employer has provided this notification to the ATO for entitlement to receive JobKeeper payments in respect of the eligible employee, the employer must notify the employee within seven days.

For those employers entering JobKeeper for the first time, the notification requirement will apply to all of their employees.

The ATO states that employers should have started paying new eligible employees a minimum of $1,500 per fortnight from the JobKeeper fortnight 10, which commenced on 3 August (ie in order to qualify). However, for the fortnights commencing on 3 August 2020 and 17 August 2020, the ATO has allowed employers until 31 August 2020 to meet this wage condition for all new eligible employees included in the JobKeeper scheme under the 1 July eligibility test. In other words, the money must have been received by the employee(s) by 31 August.

It also states that employers can commence claiming for the JobKeeper reimbursement for the new eligible employees from 1 September, when they can lodge their August monthly declaration claim. The business monthly declaration for August is due to be lodged by 14 September, and new employees should be included in that form.

Source: www.legislation.gov.au/Details/F2020L01021; www.legislation.gov.au/Details/F2020L00419; www.ato.gov.au/Media-centre/Media-releases/More-employees-now-able-to-access-JobKeeper/.

PM announces pandemic leave disaster payment for Victoria

Prime Minister Scott Morrison announced on 3 August 2020 a “disaster payment” in the form of a pandemic leave disaster payment. The payment will be one-off amount of $1,500, available to workers in Victoria who have no sick leave available who have to self-isolate for 14 days as a result of an instruction by a public health officer.

It will only apply to workers in Victoria, where the Government has declared a “state of disaster” and imposed Stage 4 lockdowns, which are expected at this point to run until mid-September.

The Victorian Government has already announced that it will provide a disaster payment, principally made to those on short-term visas; that is, those who are not permanent residents or citizens of Australia who otherwise wouldn’t have accessed Commonwealth payments. The Federal Government will provide its payment to those who fall outside that scope and who don’t have leave available to them because it has been used up.

To this end, the Government has registered the Financial Framework (Supplementary Powers) Amendment (Home Affairs Measures No 4) Regulations 2020, which establish the legislative authority for the Government to make pandemic leave disaster payment grants.

In response to questions from journalists, the PM advised:

• the Federal Government payment will not apply to states other than Victoria (although there is scope to extend it if other states are forced to declare a state of disaster);
• it will continue for as long as the Government says there is a state of disaster;
• it will only apply while the Victorian Stage 4 restrictions are operative; and
• the payment is only for the fortnight that a worker is to self-isolate – it is not a recurring fortnightly payment while the state of disaster declaration remains in force.

Accessing the Federal Government payment

Services Australia has provided further details on its website. It states that, to get this payment, the applicant must:

• be at least 17 years old;
• live in Victoria; and
• have no income from paid work, including sick leave entitlements.

In addition, the Victorian Department of Health and Human Services must also have told the applicant to self-isolate or quarantine. They must have done this because the applicant:

• has COVID-19;
• has been in close contact with a person who has COVID-19;
• cares for a child, aged 16 years and under, who has COVID-19; and/or
• cares for a child, aged 16 years and under, who has been in close contact with a person who has COVID-19.

If a person has to self-isolate more than once, they can claim this payment each time. However, a person cannot get this payment if they already receive:

• an income support payment, ABSTUDY Living Allowance, Paid Parental Leave or Dad and Partner Pay;
• the JobKeeper payment; or
• the Victorian Coronavirus (COVID-19) Worker Support Payment.

Coronavirus Worker Supplement Payment (Victoria)

The Victorian Government announced its Coronavirus Worker Supplement Payment on 30 July.

To be eligible for a one-off $1,500 Coronavirus (COVID-19) Worker Support payment, the claimant must have been instructed by the Department of Health and Human Services:

• to self-isolate or quarantine at home because they are either diagnosed with coronavirus (COVID-19) or are a close contact of a confirmed case; or
• that a child aged aged under 16 in the claimant’s care needs to self-isolate or quarantine at home because they are either diagnosed with coronavirus (COVID-19) or are a close contact of a confirmed case.

To receive the payment, the claimant must:

• be 17 years and over;
• be currently living in Victoria (including people on Temporary Protection Visas and Temporary Working Visas 457 and 482);
• be likely to have worked during the period of self-isolation or quarantine and are unable to work as a result of the requirement to stay at home;
• not be receiving any income, earnings or salary maintenance from work;
• have exhausted sick leave entitlements, including any special pandemic leave; and
• not be receiving the JobKeeper payment or other forms of Australian Government income support.

Workers include those that are permanent, casual, part-time, fixed-term and self-employed. There is no requirement for a claimant to be a citizen or permanent resident to be eligible.

Source: www.pm.gov.au/media/press-conference-australian-parliament-house-act-3aug20; www.legislation.gov.au/Details/F2020L00994/Download; www.servicesaustralia.gov.au/individuals/news/pandemic-leave-disaster-payment-victoria; www.dhhs.vic.gov.au/covid-19-worker-support-payment.

Loans put on hold and debt forgiveness: ATO’s views

The ATO has “clarified” its position on loans put on hold during COVID-19. The ATO will consider a debt to be forgiven for tax purposes if:

• the debtor is somehow relieved from the legal obligation to repay it; or
• there is evidence that the creditor won’t insist on repayment or rely on the obligation for repayment.

A debt is not considered to be forgiven if a creditor only postpones an amount payable and the debtor acknowledges the debt – unless there is evidence that the creditor will no longer rely on the obligation for repayment.

The Div 7A implications are specifically spelt out (as a debt forgiven by a private company can be treated as a deemed dividend). For these purposes, a debt is forgiven if a reasonable person would conclude a creditor will not insist on payment or rely on the borrower’s obligation to pay. However, simply allowing more time to repay a debt due to COVID-19 will not result in the debt being treated as forgiven.

Source: www.ato.gov.au/Business/Business-bulletins-newsroom/General/Loans-put-on-hold-during-COVID-19/.

Residency and source of income in the COVID-19 era

The ATO has issued an update on residency and source of income. It deals with issues from the perspectives of an Australian resident and a foreign resident in the context of a change of residency due to COVID-19.

In terms of Australian residents, the update addresses those who are temporarily overseas and those who have had to return to Australia early from certain foreign service. The latter may involve the “91 days of continuous foreign service” test.

Where the update is interesting regards what it says about foreign residents who are stuck in Australia because of the COVID-19 pandemic. The ATO acknowledges that “COVID-19 has created a special set of circumstances that must be taken into account when considering the source of the employment income earned by a foreign resident who usually works overseas but instead performs that same foreign employment in Australia”.

Whether salary or wages earned from continuing foreign employment working remotely while in Australia temporarily is assessable depends on:

• whether it is from an Australian or a foreign source; and
• whether a double tax agreement (DTA) applies.

Where the remote working arrangement is short-term (three months or less), the ATO readily accepts that income from that employment won’t have an Australian source. Unfortunately, COVID-19 has no end in sight and the travel restrictions are set to last much longer than three months.

So, for working arrangements longer than three months, the ATO says that individual circumstances need to be examined to determine if a person’s employment is connected to Australia. This includes whether:

• the terms and conditions of the employment contract change;
• the nature of the job changes;
• a person starts performing work for an Australian entity affiliated with his or her employer;
• the economic impact or result of work shifting to Australia;
• the person’s “economic employer” is in Australia (ie the entity for which the person is providing services: as per Taxation Ruling TR 2013/1);
• work is performed with Australian clients;
• the performance of work is wholly or to a significant degree dependent on the person being physically present in Australia to complete it;
• Australia becomes the person’s permanent place of work; and
• the person’s “intention towards Australia” changes.

However, the ATO also notes that “in some limited situations your employment income may not have an Australian source”. (It is worth noting the use of the term “limited situations” here). This may be the case if all the following apply:

• the only thing that has changed about the person’s employment is that they are now doing it from Australia as a result of COVID-19;
• there are no other connections to Australia; and
• the person intends to leave Australia as soon as possible.

The update goes on to provide two examples and to discuss DTAs.

Source: www.ato.gov.au/General/COVID-19/Support-for-individuals-and-employees/Residency-and-source-of-income/; www.ato.gov.au/law/view/view.htm?docid=%22AFS%2F23AG-COVID-19%2F00001%22

ATO’s employees guide for work expenses updated

The ATO has updated its employees guide for work expenses for 2019–2020. The document is designed to assist employees to determine whether incurred expenses are tax deductible, and outlines the substantiation requirements.

It explains:

• how to determine if an expense is deductible against employment income;
• how to apportion partly deductible expenses;
• outright deduction versus amortisation; and
• requisite records.

The following are highlighted as being new for 2019–2020:

• The additional method for calculating running expenses incurred as a result of working from home (the “shortcut method” allowing an 80 cents per hour deduction) was introduced to help employees working from home during the COVID-19 pandemic. This method was initially only available to use from 1 March 2020 to 30 June 2020, but has now been extended to 30 September 2020.
• Taxation Ruling TR 2020/1 Income tax: employees: deductions for work expenses under s 8-1 of ITAA has been released. This ruling provides guidance on when an employee can claim a deduction for a work expense.

The employees guide highlights (and tries to debunk) what it terms “common myths” about expenses – for example, the myths that everyone can automatically claim $150 for clothing and laundry, 5,000 km of travel under the cents per kilometre method for car expenses, or $300 for work-related expenses, even if they didn’t spend the money, or that employees can claim gym membership if they need to be fit for work. There are others, such as television subscriptions and the usual chestnuts of uniforms and educational courses.

The guide is broken down into the following categories:

• Part A – Claiming a deduction: the basic conditions;
• Part B – Apportioning work-related expenses;
• Part C – Commonly claimed expenses;
• Part D – Substantiation requirement;
• Part E – Exceptions and relief from substantiation; and
• Part F – Decline in value under the capital allowance provisions.

Changes applicable to 2019–2020 or relating to COVID-19 can be found at the end of each part of the guide. Of possible interest is Part C, which contains new details on:

• the “shortcut method” available to calculate running expenses for a defined period of time relating to COVID-19, and additional examples showing the operation of the method;
• protective items that may have been purchased as a result of COVID-19;
• sunscreen and the requirement to have an Australian Register of Therapeutic Goods (ARTG ID) number displayed on the product.

Source: www.ato.gov.au/law/view/view.htm?docid=%22SAV%2FEGWE%2F00001%22.

FBT: cars garaged at employees’ homes during COVID-19

The ATO has published a fact sheet to assist employers in determining if they have an FBT liability where cars are garaged at employees’ homes because of COVID-19.

The fact sheet states that the ATO will accept that an employer isn’t holding a car for the purposes of providing fringe benefits where the car isn’t being driven at all, or is only being driven for maintenance purposes. Provided that the employer elects to use the operating cost method and maintains odometer records, the employer will not have an FBT liability for a car. Without electing to use the operating cost method or not having odometer records, the statutory formula method applies and an FBT liability will arise as the car garaged at the employee’s home is taken to be available for private use.

Where a home-garaged car is being driven by an employee for business purposes, the ATO says the employer may be able to reduce the taxable value of the car fringe benefit by taking into account the business use, provided the employer has logbook records and odometer records for the period in question. Logbook records will need to be for at least:

• 12 continuous weeks; or
• until the car stops being garaged at home, if this is less than 12 weeks.

The fact sheet also provides information on logbook requirements for car fringe benefits and options for employers to consider where COVID-19 has impacted driving patterns.

Source: www.ato.gov.au/law/view/view.htm?docid=%22AFS%2FCAR-FBT-COVID-19%2F00001%22.