Accounting

JobKeeper

The end date of the JobKeeper scheme has now been extended from 27 September 2020 to 28 March 2021, as announced by Prime Minister Scott Morrison on 21 July 2020. The relevant legislation also amends 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 employment reference date has also been extended from 1 March to 1 July 2020 via a change in the statutory rules.

The law now 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.

Coronavirus Supplement

The period for payment of the COVID-19 Supplement has now been extended 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 income-free area is temporarily increased to $300 a fortnight for certain JobSeeker Payment recipients for the period 25 September 2020 to 31 December 2020, and the partner income taper rate for JobSeeker Payment recipients has been adjusted.

COVID-19 early release of super

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. This has now been achieved, allowing an application via the myGov website to access $10,000 of super until 31 December 2020 (extended from 24 September).

Bankruptcy concessions and director liability safe harbour extension

The Government has 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.

The ATO has updated its COVID-19 and fringe benefits tax (FBT) advice, providing a useful outline of some issues that may arise due to an employer’s response to COVID-19.

Tip: Although the following summary deals with FBT specifically, it is worth thinking through the related income tax consequences. Contact us to find out more.

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.

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, and logbooks

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.

Employees’ driving patterns may have changed due to the effects of COVID-19. 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.

There is also a separate ATO fact sheet on these matters.

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.

An employer will also not have to pay FBT for benefits that are considered “emergency assistance”.

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 and 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.

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.

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.

COVID-19 testing

COVID-19 testing also qualifies for the FBT exemption for work-related medical screening, under ceration conditions.

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.

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.

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.

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 “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.

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.

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

  • bank details don’t update themselves: the ATO does not keep track of changes to bank nominations for taxpayers to receive tax refunds;
  • 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;
  • 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: 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 the ATO;
  • 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. Taxpayers are advised to include all relevant information if lodging before the ATO automatically updates the information, so as to avoid delays in the return.

If you’ve purchased assets for your business, remember that you may be eligible to claim an immediate deduction in your 2019–2020 and 2020–2021 tax returns under the instant asset write-off, which was recently further expanded.

From 12 March to 31 December 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 (to claim for the 2019–2020 year) or from 1 July to 31 December 2020 (to claim for the 2020–2021 year);
  • 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 the relevant date (before applying depreciation deductions); and
  • different eligibility criteria and thresholds apply to assets first used or installed ready for use before 12 March 2020.

On 23 July 2020, Federal Treasurer Josh Frydenberg released the Economic and Fiscal Update July 2020, outlining 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 gross domestic product) in response to the pandemic.

The economic update incorporated the extension of JobKeeper payments for six months beyond its legislated finish date of 27 September 2020. The total cost of the extended JobKeeper regime is now estimated to be $85.7 billion over 2019–2020 and 2020–2021.

While the update did not include any major new financial support measure announcements, it brought information about a range of other changes, including that:

  • the Government will extend the application period to 31 December 2020 for the early release of superannuation (tax-free) by those dealing with adverse economic effects of COVID-19;
  • 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;
  • a full income tax exemption will be provided for Australian Defence Force (ADF) personnel deployed on Operation Orenda as part of the United Nations Multidimensional Integrated Stabilisation Mission in Mali;
  • 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; and
  • the start date of the proposal to prevent super funds from transferring new amounts to eligible rollover funds will be deferred by 12 months.

The Economic and Fiscal Update was never meant to be a “mini budget”, and 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.

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.

Tip: Tax agents can also access this information, and we’re here to help you get your return right this year.

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.

Businesses (including sole traders and charities) must have suffered a “substantial decline” in turnover to qualify for the JobKeeper Payment of $1,500 per eligible employee. The basic decline in turnover test requires an entity to measure its projected GST turnover for a turnover test period in 2020 and compare this to the current GST turnover for a relevant comparison period in 2019. In particular, the entity needs to allocate supplies made, or likely to be made, to a turnover test period or relevant comparison period based on when the supply is made or is likely to be made, and to then determine the value of those supplies. Any shortfall is to be expressed as a percentage. If this equals or exceeds specified thresholds, the entity satisfies the decline in turnover test.

The ATO has recently issued Law Companion Ruling LCR 2020/1, a non-binding ruling that explains various aspects of the test and sets out practical compliance approaches for calculating turnover.

The ATO has extended the Single Touch Payroll (STP) exemption for small employers in relation to closely held payees from 1 July 2020 to 1 July 2021 in response to COVID-19.

tip: A “small employer” is one that has 19 or fewer employees, and a “closely held payee” is someone who is directly related to the business, company or trust that pays them, such as family members of a family business, directors or shareholders of a company or beneficiaries of a trust.

This STP exemption for closely held payees applies automatically and small employers do not need to apply to the ATO to access it. However, employers should keep records to support their decision to apply the concession.