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.

Federal Government releases economic update

On 23 July 2020, Federal Treasurer Josh Frydenberg released the Economic and Fiscal Update July 2020 to reconcile the Federal Budget position for the Government’s $289 billion in COVID-19 measures.

The Treasurer has forecast an underlying cash Budget deficit of $85.8 billion for 2019–2020, rising to $184.5 billion for 2020–2021 (or 9.7% of gross domestic product [GDP]). Gross debt is expected to increase to $851.9 billion (45% of GDP) at 30 June 2021, while net debt will be $677.1 billion (35.7% of GDP). Once the economic recovery is established, the Treasurer expects stronger growth and an improvement in the country’s fiscal position to help stabilise government debt as a share of GDP.

Tax receipts have been revised down by $95.6 billion, being $31.7bn in 2019–2020 and $63.9 billlion in 2020–2021, due to the severe contraction in economic activity resulting from the COVID-19 pandemic. The Treasurer said the outlook for tax receipts remains uncertain, reflecting uncertainty around the economic outlook and how it interacts with structural and administrative features of the tax system, such as the ability of taxpayers to carry forward losses to offset future income. Total tax receipts, including GST and indirect taxes, are estimated to fall from $432 billion in 2019–2020 to $416 billion for 2020–2021.

The Economic and Fiscal Update outlines the key COVID-19 policy response measures announced by the Government since March 2020. The Treasurer said the Government has provided economic support for workers, households and businesses of around $289 billion (14.6% of GDP) in response to COVID-19. The unemployment rate is forecast to peak at 9.25% in the December quarter of 2020.

JobKeeper extension

The economic update incorporates the extension of JobKeeper payments for six months beyond its legislated finish date of 27 September 2020, as announced by the Government on 21 July 2020. The total cost of the JobKeeper regime, as extended, is now estimated to be $85.7 billion over 2019–2020 and 2020–2021.

As announced on 21 July, the current JobKeeper per-employee payment of $1,500 per fortnight will be reduced to $1,200 per fortnight from 28 September (or $750 for employees working less than 20 hours per fortnight). From 4 January to 28 March 2021, the rate is $1,000 (or $650 for less than 20 hours per fortnight). Businesses will also be required to demonstrate an actual decline in turnover (rather than a predicted decline) from 28 September under the existing turnover test for each of the two periods of extension.

New measures announced

While the update did not include any major new financial support measure announcements, it brought information about the following changes that do not appear to have been previously announced:

• Early super release of $10,000 extended to 31 December 2020: the Government will extend the application period from 24 September 2020 to 31 December 2020 for the early release of superannuation (tax-free) by those dealing with adverse economic effects of COVID-19. Eligible Australian and New Zealand citizens and permanent residents were able to access up to $10,000 of their superannuation before 1 July 2020. A second application can be made via myGov to access a further $10,000 until 31 December 2020 (extended from 24 September).
• Wage subsidy for apprentices and trainees extended: the Supporting Apprentices and Trainees (SAT) wage subsidy will be extended for a further six months to 31 March 2021, and expanded to include medium-sized businesses (with less than 200 employees) from 1 July 2020 to 31 March 2021. The apprentices or trainees must have been in training with the business as at 1 July 2020. The SAT wage subsidy provides eligible employers with 50% of the apprentice or trainee’s wages for nine months, up to $7,000 per quarter, to support the continuity of training. The original wage subsidy scheme enabled eligible employers to apply for the wage subsidy for nine months until 30 September 2020.
• Personal income tax exemption for Operation Orenda: a full income tax exemption will be provided for the pay and allowances of Australian Defence Force (ADF) personnel deployed on Operation Orenda as part of the United Nations Multidimensional Integrated Stabilisation Mission in Mali.
• Unclaimed superannuation transfers to KiwiSaver: the start date for the 2015–2016 Budget measure to allow the ATO to pay lost and unclaimed superannuation amounts directly to New Zealand KiwiSaver accounts, has been revised from 1 July 2016 to six months after the date of Royal Assent of the enabling legislation (which is yet to be introduced).
• Eligible rollover fund (ERF) transfers to ATO: the Government will amend the measures in the Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020 proposing to require all ERFs to exit the super industry. The start date of the proposal to prevent super funds transferring new amounts to ERFs will be deferred by 12 months – it had originally been proposed to apply from seven days after Royal Assent to the Bill. The requirement for ERFs to transfer to the ATO all ERF accounts less than $6,000 will be deferred to 30 June 2021 (instead of 30 June 2020). All remaining ERF accounts will need to be transferred to the ATO by 31 January 2022 (instead of 30 June 2021). The amendments will also allow all super funds to voluntarily transfer amounts to the ATO in circumstances where the trustee believes it is in the best interests of that member, such as where amounts would otherwise be transferred to an ERF. The Bill is currently before the Senate, having been passed by the House of Representatives without amendment on 11 February 2020.

Other recently revised start dates

A range of other tax and super start dates were recently revised by the Assistant Treasurer on 30 June 2020, including:

• Division 7A: targeted amendments to Div 7A as part of the Ten Year Enterprise Tax Plan (originally announced at the 2016–2017 Budget) broadly propose to simplify the Div 7A loan rules, provide a “self-correction mechanism” for inadvertent errors and safe harbour rules for the use of assets. The start date has been revised from 1 July 2020 to income years commencing on or after the date of Royal Assent of the enabling legislation.
• SMSF member limit: the maximum number of allowable members in self-managed superannuation funds (SMSFs) and small APRA funds has been increased from four to six. The start date has been revised from 1 July 2019 to Royal Assent of the enabling legislation.
• Super exempt current pension income (ECPI): the changes to reduce red tape for super funds proposed in the 2019–2020 Budget will remove the requirement for super funds to obtain an actuarial certificate when the fund uses the proportionate method and all members of the fund are fully in the retirement phase for all of the income year. The start date has been revised from 1 July 2020 to 1 July 2021.
• Managed investment trusts (MITs): the measure removing the capital gains discount at the trust level for managed investment trusts and attribution MITs was originally announced in the 2018 Federal Budget. The start date had already been delayed from 1 July 2019 to 1 July 2020.
• Petroleum Resource Rent Tax (PRRT): PRRT changes to get a fair return (compliance and administration changes). The start date has been revised from 1 July 2019 to the income year commencing on or after three months after the date of Royal Assent of the enabling legislation.

Federal Budget in October

The Economic and Fiscal Statement on 23 July was never meant to be a “mini budget”. The Federal Budget will be handed down on 6 October 2020. Mr Frydenberg has previously indicated that the Government is looking at the timing of the legislated personal income tax cuts and may consider bringing them forward as part of the Budget in October.

Under the existing personal income tax cuts legislated to apply from 1 July 2022, the $37,000 income threshold for the 19% rate will increase to $45,000, and the $90,000 threshold for the 32.5% rate will increase to $120,000. From 2024–2025, the rate that applies to taxable income between $45,000 and $200,000 will be 30% and the top marginal tax rate of 45% will apply to taxable income in excess of $200,000. That is, the 37% bracket will be abolished.

Source: https://budget.gov.au/2020-efu/economic-fiscal-update.htm; https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/economic-and-fiscal-update; https://treasury.gov.au/coronavirus/jobkeeper/extension.

Instant asset write-off further extended

The Government has announced that the $150,000 instant asset write-off will be extended for a further six months. It was due to finish on 30 June 2020, but will now cease on 31 December 2020. The instant asset write-off applies to entities with turnover of between $10 million and $500 million (up from $50 million for this limited period) for acquisitions during the period from 12 March 2020 to 31 December 2020. Up to 11 March, the threshold limit had been $30,000 but was increased as a COVID-19 stimulus measure.

JobKeeper extended, with changes

The Government has announced that JobKeeper payments will continue for six months beyond the legislated finish date of 27 September 2020, subject to revamped eligibility rules. Treasurer Josh Frydenberg said the Government will introduce two tiers of payment rates as part of “JobKeeper 2.0” to better reflect the pre-COVID-19 incomes of recipients.

The extension of JobKeeper from 28 September 2020 until 28 March 2021 will also include a requirement for businesses and not-for-profits to demonstrate an actual decline (not merely predict a decline) in turnover under the existing turnover test. The JobKeeper payment will also be stepped down and paid at two rates. Importantly, the existing arrangements for those receiving JobKeeper payments continue until 27 September 2020.

Treasury review finds “strong case” for continuing JobKeeper

The Government’s JobKeeper extension was announced following the release of a Treasury review recommending that there was a “strong case” for continuing the JobKeeper wage subsidy, with some modifications. The Treasury review concluded that the JobKeeper payment has met its objectives to save businesses and jobs, maintain the formal connection between employer and employee, and provide income support. The Government has used these findings to help frame its six-month extension of the JobKeeper regime until 28 March 2020.

The Treasurer said the JobKeeper payment of $1,500 per fortnight for an eligible employee has been in operation since 30 March for 960,000 businesses and 3.5 million workers (or about 30% of the private sector workforce). Treasury found businesses receiving the payment had on average a decline in turnover in April of 37% compared with the same month last year. Sole traders represented 40% of the organisations receiving the payment but only 12% of individual recipients.

One of the consequences of the flat $1,500 fortnightly payment since 30 March has been that some people are receiving more income under JobKeeper than they did pre-COVID-19. About a quarter of JobKeeper recipients saw their income increase by an average of about $550. Accordingly, the Government said it will introduce a second-tier payment from 28 September 2020, reflecting varied working arrangements. Businesses will also be required to demonstrate an actual decline in turnover.

The new JobKeeper arrangements are expected to cost an additional $16.6 billion. The total cost of the JobKeeper regime, as extended, is now estimated to be $85.7 billion over 2019–2020 and 2020–2021. As recommended by the Treasury review, an independent evaluation will be conducted at the conclusion of the program.

The JobKeeper payment rate ($1,500 per fortnight until 27 September) is to be reduced and paid at the following two rates.

Period	Full rate per fortnight	Rate per fortnight where <20 hours worked per week
28 September 2020 to 3 January 2021	$1,200	$750
4 January 2021 to 28 March 2021	$1,000	$650

Phase 1: 28 September 2020 to 3 January 2021

• Tier 1 – $1,200 per fortnight: from 28 September 2020 to 3 January 2021, the payment rate will be reduced from $1,500 to $1,200 per fortnight for all eligible employees who, in the four weeks before 1 March 2020, were working in the business for 20 hours or more per week on average and for eligible business participants who were actively engaged in the business for more than 20 hours per week on average in the month of February 2020.
• Tier 2 – $750 per fortnight: for employees who were working in the business for less than 20 hours a week on average and business participants who were actively engaged in the business less than 20 hours per week in the same period.

Phase 2: 4 January 2021 to 28 March 2021

• Tier 1 – $1,000 per fortnight: from 4 January 2021 to 28 March 2021, the payment rate will be $1,000 per fortnight for all eligible employees, who in the four weeks before 1 March 2020, were working for 20 hours or more a week on average and for eligible business participants who were actively engaged in the business for more than 20 hours per week on average in the month of February 2020.
• Tier 2 – $650 per fortnight: for employees who were working for less than 20 hours a week on average and business participants who were actively engaged in the business for less than 20 hours per week in the same period.

Businesses and not-for-profits will be required to nominate which payment rate they are claiming for each of their eligible employees (or business participants).

The ATO will have discretion to set out alternative tests where an employee’s or business participant’s hours were not usual during the February 2020 reference period. For example, this will include where the employee was on leave, volunteering during the bushfires, or not employed for all or part of February 2020. Guidance will be provided by the ATO where the employee was paid in non-weekly or non-fortnightly pay periods and in other circumstances the general rules do not cover.

The JobKeeper Payment will continue to be made by the ATO to employers in arrears. Employers will continue to be required to satisfy the “wage condition” by making payments to employees equal to, or greater than, the amount of the JobKeeper payment (before tax), based on the payment rate that applies to each employee.

Note that under the existing rules, employers are not obliged to make superannuation guarantee (SG) contributions in relation to salary or wages that do not relate to the performance of work, and are only paid to an employee to satisfy the wage condition for getting a JobKeeper payment. That is, an employer is not required to make SG contributions in respect of top-up amounts of additional wages paid using a JobKeeper Payment. However, an employer’s super guarantee obligations are unchanged where an employee is paid more than the JobKeeper Payment amount (before tax) per fortnight.

Business eligibility: additional turnover tests

From 28 September 2020, businesses and not-for-profits seeking to claim JobKeeper payments will 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, businesses will be required to reassess their eligibility for the JobKeeper extension with reference to their actual turnover in the June and September quarters 2020.

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 will need to demonstrate that their actual GST turnover has significantly fallen in the 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 will again need to demonstrate that their actual GST turnover has significantly fallen in each of the June, September and December 2020 quarters relative to comparable periods (generally the corresponding quarters in 2019).

The ATO will have discretion to set out alternative tests that would establish eligibility in specific circumstances where it is not appropriate to compare actual turnover in a quarter in 2020 with actual turnover in a quarter in 2019, in line with the ATO’s existing discretion. Information about the existing discretion is available on the ATO website.

Businesses and not-for-profits will generally be able to assess eligibility based on details reported in the Business Activity Statement (BAS). Alternative arrangements will be put in place for businesses and not-for-profits that are not required to lodge a BAS (eg if the entity is a member of a GST group).

As the deadline to lodge a BAS for the September quarter or month is in late October, and the December quarter (or month) BAS deadline is in late January for monthly lodgers or late February for quarterly lodgers, businesses and not-for-profits will need to assess their eligibility for JobKeeper in advance of the BAS deadline in order to meet the wage condition (which requires them to pay their eligible employees in advance of receiving the JobKeeper payment in arrears from the ATO). The ATO will also have discretion to extend the time an entity has to pay employees in order to meet the wage condition, so that entities have time to first confirm their eligibility for the JobKeeper payment.

To be eligible for JobKeeper payments under the extension, the decline in turnover test remains the same as the existing rules. That is:

• charities registered with the Australian Charities and Not-for-profits Commission (ACNC), excluding schools and universities: 15%;
• entities with turnover less than $1 billion: 30%; and
• entities with turnover greater than $1 billion: 50%.

Registered religious institutions responsible for religious practitioners will continue to be eligible to receive the JobKeeper payment provided they meet existing eligibility requirements and the additional turnover tests during the extension period.

The eligibility rules for employees remain unchanged. The self-employed will be eligible to receive the JobKeeper payment where they meet the relevant turnover test, and are not a permanent employee of another employer.

Example

The Treasury fact sheet sets out the following example to illustrate the operation of the turnover test under the JobKeeper extension.

Retesting turnover under JobKeeper extension

Carmen owns and runs the City Cafe. Carmen started claiming the JobKeeper Payment for her eligible staff and herself as a business participant when the JobKeeper Payment commenced on 30 March 2020. At the time, Carmen estimated that the projected GST turnover for City Cafe in April 2020 would be 70% below its actual GST turnover in April 2019. To be eligible for the JobKeeper Payment from 30 March 2020 to 27 September 2020, Carmen needed to show the turnover for the City Cafe was estimated to decline by at least 30%.

As a monthly BAS lodger, Carmen submitted her BAS for the City Cafe in April, May and June. For each of these, her actual turnover was as follows:

June quarter	2020	2019
April	20,000	200,000
May	50,000	200,000
June	100,000	200,000
Total for June quarter	170,000	600,000
Decline for June quarter	72%

From July to September, actual turnover improved as follows:

September quarter	2020	2019
July	110,000	200,000
August	140,000	200,000
September	150,000	200,000
Total for September quarter	400,000	600,000
Decline for September quarter	33%

The actual turnover decline for both the June and September 2020 quarters was still greater than 30%, so City Cafe was eligible for the JobKeeper Payment for the period of 28 September 2020 to 3 January 2021.

Business continued to improve for the City Cafe, and actual turnover for the December 2020 quarter was 20% less than the December quarter 2019, so the City Cafe was no longer eligible to claim the JobKeeper for the second extension period starting from 4 January 2021.

Working out JobKeeper payment rate to be claimed

In this scenario, Carmen also needs to calculate how much to claim for each of her staff, and for herself as a business participant. As Carmen was working full-time at the cafe herself throughout February 2020, she is entitled to claim $1,200 per fortnight from 28 September 2020 to 3 January 2021, as an eligible business participant.

She has three full-time employees who are also eligible to be paid $1,200 per fortnight because they each worked 20 hours or more per week throughout February 2020.

Carmen has an employee, Chris, who works part-time with different hours every other week: 14 hours one week; and 22 hours the next week. During the 2 pay fortnights prior to 1 March 2020, Chris was employed for 36 hours in each fortnight. On average, Chris worked less than 20 hours per week for City Cafe. Carmen is eligible to claim $750 per fortnight for Chris, from 28 September 2020 to 3 January 2021.

Cathy is an eligible employee who worked on a long-term casual basis during February 2020. To determine what rate of JobKeeper Payment to claim for Cathy, Carmen looks at pay records for the two fortnightly pay periods before 1 March 2020. She sees that Cathy was employed on average less than 20 hours per week, so Carmen claims $750 per fortnight for Cathy, from 28 September 2020 to 3 January 2021.

Carmen also started employing Charles from September 2020. Because Charles was not employed at City Cafe on 1 March 2020, Carmen cannot claim the JobKeeper Payment for Charles.

Treasury fact sheets updated

In addition to the fact sheet Extension of the JobKeeper Payment, Treasury has updated its other JobKeeper fact sheets to incorporate the extension of the regime, and the reduced payment amounts and additional turnover tests from 28 September 2020. The other previously-released Treasury fact sheets, updated to 21 July 2020, include:

• JobKeeper Payment: updated to note the extension of JobKeeper payments until 28 March 2021, subject to reduced payment amounts and eligibility changes;
• JobKeeper Payment – protecting integrity: includes a cross-reference to the JobKeeper extension fact sheet; and
• JobKeeper Payment – changes to the Fair Work Act: Treasury notes that the amendments to the Fair Work Act 2009 that enable employers entitled to receive JobKeeper payments to temporarily vary working arrangements for eligible employees will cease entirely on 28 September 2020. Authorised JobKeeper Enabling Stand Down Directions will remain in effect until revoked or replaced by the employer, or until the provisions cease completely on 28 September 2020.

Legislative amendments required

The extension of the JobKeeper regime beyond 27 September is expected to require legislative amendments once Parliament resumes from 24 August 2020.

Source: https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/jobkeeper-payment-and-income-support-extended; https://treasury.gov.au/publication/jobkeeper-review; https://treasury.gov.au/sites/default/files/2020-07/Fact_sheet-JobKeeper_Payment_extension.pdf; https://treasury.gov.au/coronavirus/jobkeeper; https://treasury.gov.au/sites/default/files/2020-07/Fact_sheet-JobKeeper_Payment_0.pdf; https://treasury.gov.au/sites/default/files/2020-07/Fact_sheet_Protecting_integrity_0.pdf; https://treasury.gov.au/sites/default/files/2020-07/Fact_sheet-Changes_to_Fair_Work_Act.pdf.

JobKeeper payments to childcare providers end

The ATO’s key dates for JobKeeper have been updated to note that payments for childcare providers will stop from 20 July 2020.

This follows the changes to the rules by the Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No 5) 2020, registered on 6 July 2020, to transition certain approved providers of childcare services out of the scheme. The Government has instead decided to extend separate support to this sector by the reintroduction of the Child Care Subsidy and the introduction of an additional Transition Payment as part of the Early Childhood Education and Care transition arrangements.

The ATO said the changes to the rules have been confirmed so that eligibility for JobKeeper payments ends from 20 July for:

• employees of an approved provider of childcare services where those employees whose ordinary duties are that they are engaged principally in the operation of the childcare centre; and
• eligible business participants where the business entity is an approved provider of a childcare service.

The ATO says childcare providers need to ensure that they do not claim JobKeeper for employees and eligible business participants who are no longer eligible. Likewise, childcare providers will not be reimbursed for payments made after JobKeeper Fortnight 8 (6 July to 19 July).

Source: www.ato.gov.au/General/JobKeeper-Payment/JobKeeper-key-dates/; www.legislation.gov.au/Details/F2020L00884; www.ato.gov.au/Non-profit/Newsroom/Looking-after-your-workers/JobKeeper-rule-changes-for-child-care-providers/.

Coronavirus Supplement extended, with changes

The Government has announced that it will extend the temporary Coronavirus Supplement payment from 25 September to 31 December 2020 but the rate will be reduced from $550 to $250 per fortnight.

Since 27 April 2020, a Coronavirus Supplement of $550 per fortnight has effectively doubled the social security payments for job seekers, sole traders and students in receipt of the JobSeeker Payment, Sickness Allowance, Youth Allowance for jobseekers, Parenting Payment Partnered, Parenting Payment Single, Partner Allowance, Sickness Allowance and the Farm Household Allowance. Individuals eligible for these payments receive the full amount of the $550 Coronavirus Supplement on top of their payment each fortnight.

The Supplement will continue to be $550 per fortnight for payments up to and including the reporting period ending 24 September 2020.

Supplement $250 from 25 September

From 25 September to 31 December 2020, the Government will continue to pay the Supplement to existing and new income support recipients but at a reduced rate of $250 per fortnight.

The Government will also reintroduce a range of means testing arrangements to ensure that social security payments are appropriately targeted.

Adjusted income taper test

From 25 September 2020 until 31 December 2020, the income-free area for JobSeeker Payment and Youth Allowance (other) will increase to $300 per fortnight from $106 per fortnight for JobSeeker Payment (and $143 per fortnight for Youth Allowance (other)). This means that recipients of these payments can earn income of up to $300 per fortnight and still receive the maximum payment rate of JobSeeker Payment or Youth Allowance (other).

The taper rate will be simplified. The previous JobSeeker Payment income test of 50 cents for each dollar between $106 and $256 per fortnight, and 60 cents for every dollar over $256 per fortnight, will be replaced with a single income test of 60 cents for every dollar of income earned above $300 per fortnight.

The Coronavirus Supplement will remain outside the income test, meaning that anyone eligible for the Coronavirus Supplement will receive the full rate of the Supplement.

A lower income taper rate of 40 cents in the dollar continues to apply for JobSeeker Payment recipients who are principal carer parents. The current income free area for principal carer parents also continues to apply.

Asset tests and waiting times

From 25 September 2020, the assets test and the liquid assets waiting period (LAEP) will be reintroduced and the JobSeeker Payment partner income test will increase from 25 cents for every dollar of partner income earned over $996 per fortnight to 27 cents for every dollar of partner income earned over $1,165 per fortnight. The partner income test cut-out will increase to $3,086.11 per fortnight (or $80,238.89 per annum) for individuals with no personal income, from 25 September 2020.

Reduced waiting times, including the ordinary waiting period, newly arrived resident’s waiting period (NARWP) and the seasonal work preclusion period, will continue to be waived until 31 December 2020.

Job-seeking mutual obligation

The mutual obligation requirements are being reintroduced so that individuals are required to take a job on offer. The gradual reintroduction of mutual obligation requirements commenced on 9 June 2020.

Source: https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/jobkeeper-payment-and-income-support-extended.

ATO alert on fraudulence and non-compliance: COVID-19 measures

The ATO is on the look-out for fraudulent schemes designed to take advantage of the Government’s COVID-19 stimulus measures. This includes JobKeeper, early release of superannuation, and boosting cash flow for employers.

The ATO will be using its wide array of data sources (eg STP, income tax returns, information from super funds, etc) to assess and identify inappropriate behaviour. The ATO has also established a confidential tip-off line for the public to raise concerns of any wrongdoing.

“We’ve received intelligence about a number of dodgy schemes, including the withdrawal of money from superannuation and re-contributing it to get a tax deduction. Not only is this not in the spirit of the measure (which is designed to assist those experiencing hardship), severe penalties can be applied to tax avoidance schemes or those found to be breaking the law. If someone recommends something like this that seems too good to be true, well, it probably is”, ATO Deputy Commissioner Will Day said.

Mr Day said the ATO will be conducting checks, “so if you’ve received a benefit as part of the COVID-19 stimulus measures and we discover you are ineligible, you can expect to hear from us. If you think this may apply to you, you should contact us or speak to your tax professional”. Penalties for fraud can include financial penalties, prosecution, and imprisonment for the most serious cases.

Mr Day also cautioned the community to protect their identities and be vigilant of scammers.

The following is a summary of the ATO’s compliance efforts for each stimulus measure:

• JobKeeper: ensuring eligibility criteria is met (business income, eligible employees, etc) and no manipulation of turnover to satisfy decline in turnover test;
• early release of superannuation: identifying dishonest behaviour such as applying when there is no change in salary or employment information, artificially arranging affairs or making false statements to meet the eligibility criteria and withdrawing and re-contributing super for a tax advantage; and
• boosting cashflow for employers: identifying schemes designed to create entitlement such as artificially restructuring businesses, artificially changing the character of payments to salary or wages, inflating reported withholding amounts, resurrecting dormant entities or phoenixing and making false statements.

Source: www.ato.gov.au/Media-centre/Media-releases/ATO-zeroes-in-on-COVID-19-fraud/.

Top tax time myths for 2020 that slow down returns

The ATO has published a list of common mistakes and misconceptions taxpayers have around tax time.

“Our main priority is to help people get the facts straight before they lodge so that it’s a smooth, easy and fast process”, Assistant Commissioner Karen Foat said.

The ATO has said that last year nearly 500,000 individual tax returns were amended, with some taxpayers even amending their own returns before they were processed, which actually slows down the processing of their return.

The top tax time myths of 2020:

• bank details don’t update themselves: the ATO does not keep track of changes to bank nominations for taxpayers to receive tax refunds (if any);
• it’s not okay to double dip: “It’s important to remember that if you’re claiming under the shortcut method (of working from home expenses), you cannot claim a separate additional deduction for any expenses you incur as a result of working from home,” Ms Foat said;
• home to work travel is not claimable: generally, most people cannot claim the cost of travelling from home to work unless, they are required by their employer to transport bulky tools or equipment and there is not a safe place to store these at the workplace;
• you can’t just claim a flat $300 if you had no expenses: “We often see people claiming a deduction despite not purchasing anything. When we question them, we often find it’s because they thought everyone is entitled to claim $300. While you don’t need receipts for claims of expenses up to $300 but you must have actually spent the money and be able to show us how you worked out your claim”, Ms Foat said;
• work-related expenses need to be work-related: taxpayers can only claim for expenses that are directly related to earning their income;
• lodging earlier doesn’t always mean getting your refund earlier: each year the ATO automatically includes information from employers, banks, private health insurers (and this year JobKeeper for employees and JobSeeker amounts) in people’s returns. For most people this information is ready by the end of July. Taxpayers are advised to include all relevant information if lodging before the ATO automatically updates the information to avoid delays in return.

Source: www.ato.gov.au/Media-centre/Media-releases/Don-t-let-these-Tax-Time-myths-slow-down-your-return/.

Working from home deductions: “shortcut” rate extended

The ATO has extended, from 30 June 2020 to at least 30 September 2020, the “shortcut” rate outlined in Practical Compliance Guideline PCG 2020/3 for claiming work-from-home running expenses. The ATO also says it will give further consideration as to whether the date the Guideline will cease to apply “may be extended beyond 30 September 2020”.

As amended on 8 July 2020, PCG 2020/3 allows eligible taxpayers to claim additional running expenses incurred between 1 March 2020 and 30 September 2020 at the rate of $0.80 per work hour, provided they keep a record of the number of hours worked from home.

Taxpayers eligible to use the shortcut rate are employees and business owners who:

• work from home to fulfil their employment duties or to run their business during the period from 1 March 2020 to 30 September 2020; and
• incur additional running expenses that are deductible under s 8-1 or Div 40 of the Income Tax Assessment Act 1997 (ITAA 1997).

The additional running expenses covered by the shortcut rate are listed at para 26 of PCG 2020/3 and comprise lighting, heating, cooling and cleaning costs, electricity for electronic items used for work, the decline in value and repair of home office items such as furniture and furnishings in the area used for work, phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device. Taxpayers who use the shortcut rate to claim a deduction for their additional running expenses cannot claim any further deductions for the listed expenses.

Taxpayers who choose not to use the shortcut rate can:

• claim $0.52 per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture (in accordance with PS LA 2001/6), plus the work-related portion of phone and internet expenses, computer consumables, stationery and the work-related portion of the decline in value of a computer, laptop or similar device; or
• claim the actual work-related portion of all running expenses, which need to be calculated on a reasonable basis.

IGTO investigates ATO communication of taxpayer rights

The Inspector General of Taxation and Taxation Ombudsman (IGTO) has launched a new investigation into effective communication of taxpayers’ rights to review, complain and appeal decisions made and actions taken by the ATO. The investigation will seek to understand and confirm how effectively, clearly and completely the ATO communicates appropriate information to taxpayers and their representatives on these taxpayers’ rights. Initially, the review will focus on ATO communications which concern debt decisions in relation to individuals and small business taxpayers as they have been deemed most “vulnerable”.

The communication of taxpayers’ rights is an important but often overlooked feature of the tax system. Essentially, it is the right of taxpayers to be informed of their rights and obligations when the ATO makes decisions about them and their right to question those decisions. It ensures procedural fairness and is consistent with the Taxpayers’ Charter which states that the ATO will outline the taxpayer’s options if they want a decision or action reviewed including legal review rights and the formal complaints process.

Where a taxpayer is affected by a decision or action taken by the ATO, the principles of procedural fairness generally require that they should be given an opportunity to dispute the decision made and have the matter reviewed independently. This can be done through various avenues including formal review rights (eg the Administrative Appeals Tribunal [AAT] or Federal Court), review rights within the ATO (eg objections and internal reviews), and external complaints investigation services such as the IGTO.

Therefore, it is imperative to procedural fairness and the Taxpayers’ Charter that taxpayers are aware of their rights to object, appeal and/or raise a taxation complaint in relation to legal correctness and fairness of ATO’s decisions or decision-making processes.

In examining the taxation complaints service, the IGTO has observed that information on rights of appeal and opportunities to raise complains varies across different types of ATO-issued correspondence. In particular, the IGTO found in a number of investigations that ATO correspondence may not clearly and/or completely advise taxpayers and their representatives of their rights to review, complain and appeal.

For example, the IGTO uncovered correspondence in some instances which includes information regarding formal review rights with no reference to taxpayers’ rights to an internal ATO review or the ability to lodge a complaint with the ATO or the IGTO. This may result in taxpayers not being fully aware of their review options and lead to significant Court and/or professional fees.

As such, the IGTO has launched a new investigation into effective communication of taxpayers’ rights to review, complain and appeal decisions made and actions taken by the ATO. The investigation will seek to understand and confirm how effectively, clearly, and completely the ATO communicates appropriate information to taxpayers and their representatives on these taxpayers’ rights. It will also involve an investigation of a selection of written communications of ATO decisions made, to look for clear communication of taxpayers’ rights to review or otherwise.

This substantial review will take place in stages, focusing initially on ATO communications which concern debt decisions in relation to individuals and small business taxpayers. IGTO has decided to initially focus on this narrow group as it has noted that these taxpayers are most likely not to have significant financial resources to appeal taxation decisions in the Courts. After the initial stage, the review will also seek to confirm ATO communications around access to the AAT Small Business Taxation Division (SBT Division).

Source: www.igt.gov.au/news-publications/news/review-announcement-investigation-how-effectively-ato-communicates-taxpayers-rights-complain-review-and-appeal.

Banks further extending loan repayment deferrals

The Australian Banking Association (ABA) has announced a new phase of support to assist customers to get back to making their loan repayments. With the six-month loan repayment deferral period set to end on 30 September, the ABA said customers with reduced incomes due to COVID-19 will be eligible to apply for an extension of their deferral for up to four months.

A deferral extension of up to four months will not be automatic. It will only be provided to those who genuinely need some extra time. Bank customers with reduced incomes and ongoing financial difficulty due to COVID-19 will be contacted as they approach the end of their initial deferral period. Wherever possible, borrowers are expected to return to a repayment schedule through a restructure or variation to their loan.

ABA CEO Anna Bligh said many customers may need less than four months to either restructure their loan or get back into full repayments. Banks will work with customers to find the best options to restructure or vary their loan. Options may include: extending the length of the loan; converting to interest only payments for a period of time; consolidating debt; or a combination of these and other measures.

While over 800,000 borrowers have deferred their repayments throughout the COVID-19 crisis, “many customers have already chosen to resume making repayments”, Ms Bligh said.

If, during or at the end of any deferral, customers continue to be severely financially impacted and are unable to make repayments, Ms Bligh said they will be assisted through their bank’s hardship process to determine the best long-term solution for their circumstances.

Source: www.ausbanking.org.au/banks-enter-phase-two-on-covid-19-deferred-loans/.

Super contributions beyond age 65 from 1 July 2020

The Assistant Minister for Superannuation Senator Jane Hume has welcomed the recent amendments to the SIS Regulations that will allow more people to make voluntary superannuation contributions from 1 July 2020.

The Superannuation Legislation Amendment (2020 Measures No 1) Regulations 2020, registered on 29 May 2020, allow people aged 65 and 66 (ie under age 67) to make voluntary super contributions (both concessional and non-concessional) without meeting the work test. The amendments bring these contribution rules into line with those for individuals under 65 years, providing greater flexibility to make contributions as they approach retirement. The age limit for making spouse contributions has also been increased from 69 to 74 from 1 July 2020.

These changes to the super contributions rules were previously announced in the 2019–2020 Federal Budget. Another change in that Budget package will allow people aged 65 and 66 (ie under age 67) to make up to three years of non-concessional contributions (ie $300,000) under the bring-forward rule from 1 July 2020. Senator Hume said this additional measure is still before the House of Representatives in the Treasury Laws Amendment (More Flexibility Superannuation) Bill 2020.

Source: https://ministers.treasury.gov.au/ministers/jane-hume-2019/media-releases/delivering-greater-superannuation-flexibility-new-financial; www.legislation.gov.au/Details/F2020L00645.

 

Tax time 2020 is here

Don’t jump the gun and lodge too early

Tax time 2020 is here, but it’s likely to be anything but routine. Many individuals on reduced income or have increased deductions may be eager to lodge their income tax returns early to get their hands on a refund. However, the ATO has issued a warning against lodging too early, before all your income information becomes available. It’s important to remember that employers have until the end of July to electronically finalise your income statement, and the same timeframe applies for other information from banks, health funds and government agencies.

For most people, income statements have replaced payment summaries. So, instead of receiving a payment summary from each employer, your income statements will be finalised electronically and the information provided directly to the ATO. Your income statements can be accessed through myGov and the information is automatically included in your tax return if you use myTax.

Although you may be eager to lodge as soon as possible, the ATO has warned against lodging too early, as much of the information on your income may not be confirmed until later. It’s generally important to wait until income statements are finalised before lodging a tax return to avoid either delays in processing or a tax bill later on. Your income statement will be marked “tax ready” on myGov when it’s finalised, and other information from banks, health funds and government agencies will be automatically inserted into your tax return when it’s ready towards the end of July.

If you still choose to lodge early, the ATO advises carefully reviewing any information that’s pre-filled so you can confirm it’s correct. When lodging early you’ll also have to formally acknowledge that your employer(s) may later finalise income statements with different amounts, meaning you may need to amend your tax return and additional tax may apply.

Tax return tips

With the great disruptors of the Australian bushfires and the global coronavirus (COVID-19) pandemic, and the associated government economic stimulus measures, there are some key tax-related matters for everyone to be aware of this year.

The ATO has a range of approaches to support taxpayers through tax time 2020, especially where new circumstances mean you might be receiving a different type of income or be able to claim new deductions. The ATO’s Tax Time Essentials page (www.ato.gov.au/taxessentials) provides a one-stop-shop for the things that are a little different this year and how they impact tax returns.

People accessing super early as a part of the COVID-19 early release scheme can rest assured that this money will not form a part of their assessable income. To date, 1.98 million people have withdrawn an average of $7,475 from their super under the scheme.

Another key difference this year is the introduction of the optional simplified method for claiming work from home expense deductions. This method allows you to claim 80 cents for each hour you worked from home from 1 March 2020 to 30 June 2020, to cover all deductible expenses. However, if you were working from home before 1 March 2020 or have documented actual expenses that work out to be more than 80 cents per hour you can still use the usual method to claim expenses related to working from home.

If you were unable to work from home and had to take leave or were temporarily stood down, if your employer made any kind of payment, either regular or one-off, those amounts will need to be declared as wages and salary on your return and tax will apply at your usual marginal rates. This applies regardless of whether the payments are funded by the government JobKeeper scheme.

If you’ve been made redundant or had your employment terminated, any payment you receive may consist of a tax-free portion and a concessionally taxed portion, which means that you could potentially pay less tax.

Expanded instant asset write-off for businesses

If you’ve purchased assets for your business, remember that you may be eligible to claim an immediate deduction under the instant asset write-off, which was recently expanded.

From 12 March to 30 June 2020 inclusive, the instant asset write-off threshold for each asset increased to $150,000 (up from $30,000) for business entities with aggregated annual turnover of less than $500 million (up from $50 million).

To get it right, remember:

• check if your business is eligible;
• both new and secondhand assets can be claimed, as long as each asset costs less than $150,000;
• assets must be first used or installed ready for use between 12 March and 30 June 2020;
• a car limit applies for passenger vehicles;
• if the asset is for business and private use, only the business portion can be claimed;
• you can claim a deduction for the balance of a small business pool if its value is less than $150,000 at 30 June 2020 (before applying depreciation deductions); and
• different eligibility criteria and thresholds apply to assets first used or installed ready for use before 12 March 2020.

Additional cash flow boost coming for businesses

If your business is one of many that received the initial cash flow boosts as a part of the government’s COVID-19 economic stimulus measures, prepare for more help coming your way. When you lodge your monthly or quarterly activity statements for June to September 2020, your business will receive additional cash flow boosts.

Generally, the additional amount will be equal to the total amount that you initially received and will be split evenly between the lodged activity statements. Quarterly payers will generally receive 50% of their total initial cash flow boost for each activity statement, while monthly payers will generally receive 25% of their total initial cash flow boost for each activity statement.

However, if you’ve made adjustments or revised your activity statements after lodgment, the amount of additional cash flow boost payments you receive may be different.

Remember, if you haven’t made payments to employees subject to withholding, you need to report zero for PAYG withholding when lodging your activity statements to ensure you receive the additional cash flow boost payments. It’s important that you don’t cancel PAYG withholding registration until you have received the additional cash flow boosts.

ATO scam calls may soon be a thing of the past

Last year, some 107,000 ATO impersonation scam calls were reported to the authorities. The real number is likely to be much higher, given that most of these type of calls go unreported. Scammers are increasingly using technological advances to appear more legitimate and nab unsuspecting victims.

One technique commonly used is “spoofing”, where scammers use software to mislead the caller ID technology on mobile phones and modern fixed line phones. Rather than transmitting the actual, typically overseas, phone number the call is coming from, the software “overstamps” it with another phone number. Commonly, the numbers used are widely publicised, such as the legitimate numbers used by the ATO.

Due to the prevalence of these scams and the large amount of money lost by individuals, Australian telcos, the ATO and the Australian Communications and Media Authority (ACMA) recently collaborated on a three-month trial of technology to block scam calls appearing to originate from legitimate ATO phone numbers. Under the Scam Technology Project, participating telcos used software to identify calls which had been “overstamped” with specified ATO phone numbers and blocked them.

According to the government, the trial has been “highly successful” in blocking spoof calls from specified ATO numbers. While this blocking technology will not stop scammers randomly ringing Australians pretending to be from the ATO, it will stop specific ATO numbers appearing in the caller ID on the recipient’s phone, making the scam seem less convincing.