As of 23 March 2020, the Australian Federal Government had legislated its first and second sets of economic stimulus packages in response to the rapidly deteriorating economic effects of the coronavirus (COVID-19). The various draft bills to implement these stimulus responses passed both Houses of Parliament and received royal assent on 24 March 2020 (collectively the new tax legislation).
In addition, the Government announced its third set of stimulus measure, JobKeeper (Wage Subsidy) Payment on 30 March 2020.
This latest measure was enacted into legislation which received royal assent on 9 April 2020. Our answers below to questions on this subject reflect the Treasury’s Rules subsequently made in accordance with the legislation.
If you are an eligible employer, the first “cash flow boost” payments will automatically be credited to your activity statements when you lodge them for the March 2020 and June 2020 quarters (or the months of March 2020, April 2020, May 2020 and June 2020 if you are on a monthly lodgement cycle). The earliest time when the Australian Taxation Office (“ATO”) will give you the credit is 28 April 2020.
You will receive a credit equal to 100% of the PAYG withheld in the relevant activity statement however the total initial “cash flow boost” payments cannot exceed $50,000. Where you are not required to withhold any PAYG (e.g. due to employee’s salary/wages being below tax free threshold), you will get a minimum credit of $10,000.
In addition, you will get additional “cash flow boost” payments for the periods June to September 2020, equal to the total initial “cash flow boost” payments received. Quarterly lodgers will receive 50% of the total initial cash flow boosts in each quarterly activity statement, while monthly lodgers 25% in each monthly activity statement.
Where the cash flow boost exceeds your other tax liabilities in the relevant activity statement, you will receive a refund within 14 days. If it is less than other tax liabilities, it means you will pay less to the ATO.
However, to be eligible, it is important to note that not only does your employing business need to have an aggregated (prior year) annual turnover of less than $50 million, it must also have:
If you did not have a lodgment deferral in place, you will not become eligible if you lodge or amend returns for those periods now.
According to the explanatory memorandum to the new tax legislation, companies will be able to include the tax depreciation calculated under this accelerated depreciation measure as part of their eligible expenditure claimable in their Research and Development Tax Incentive, provided the depreciating asset meets the requirements in section 355-305 of the Income Tax Assessment Act 1997 (“ITAA 1997”).
(a) Payment Deferral & Payment Plan
If your business or yourself has been affected by COVID-19, the ATO generally may grant you an extension to pay your income tax, PAYG income tax instalments, PAYG tax withholding, GST, FBT and excise by up to 6 months.
In addition, the ATO will consider remitting interest and penalties incurred after 23 January 2020.
Furtermore, the ATO may enter into a low interest payment plan with you to help you pay your existing and ongoing tax liabilities.
(b) GST
You can consider temporarily changing your reporting cycle to improve your cash flow.
If you report quarterly and are due for a GST refund, moving to monthly reporting means you can get the refund sooner rather than having to wait till after the end of the relevant quarter.
However, before you make the change, please be aware that
(c) Pay As You Go (PAYG) Instalments
You can vary / reduce your PAYG income tax instalment in your current activity statement, as well as claiming a refund of any previous instalments made for the 2020 financial year.
(d) Superannuation Guarantee
Unfortunately, you will still need to meet any superannuation guarantee obligations for your employees as the Law does not allow any variation of due date or wavier of super guarantee charge (where contributions are late or unpaid).
(e) Payroll Tax
In New South Wales (NSW), payroll tax for businesses with grouped Australian wages of less than $10 million will be waived for 3 months (i.e. the rest of year ending 30 June 2020).
When you lodge your annual reconciliation due on 28 July 2020, your annual payroll tax liability will be reduced by 25% of the amount of tax you would have had to pay for the 2020 year.
As part of the NSW stimulus package (Stage 2), payroll tax for these businesses can also be deferred for 3 months. Further details are yet to be published by NSW Revenue.
For businesses with grouped Australian wages over $10 million, payroll tax can be deferred (up to $4 billion) for 6 months from the month of March 2020 (normally due on 7 April 2020).
When you lodge your annual reconciliation due on 28 July 2020, your annual payroll tax liability will be reduced by 25% of the amount of tax you would have had to pay for the 2020 year.
In addition, the NSW payroll tax tax-free threshold will increase from $900,000 to $1 million for the financial year commencing on 1 July 2020.
If your business operates in another State or Territory, there may also be payroll tax deferral or concessions in that State or Territory, please refer to our stimulus packages summaries COVID-19 State/Territory Stimulus Packages
Please contact us to discuss further or assist you with any of the above options.
If you are an eligible individual, you will be able to apply online through myGov to access up to $10,000 of your superannuation from mid-April 2020 to 30 June 2020, and a further $10,000 from 1 July 2020 until 24 September 2020, in order to temporarily access your superannuation (before retirement age).
Once the ATO has approved the application, it will notify your superannuation fund without the need for you to also apply to the fund.
Please refer to our Australian Federal Stimulus Package summary for eligibility requirements.
If you are an eligible small business, you must have your eligibility assessed by an Australian Apprenticeship Support Network (AASN) provider. You can register for the wage subsidy from early April 2020 to 31 December 2020.
The registration application is yet to be released however you can monitor the progress on: Apprenticeship Support
The increased instant asset write off can be claimed on luxury cars if they are purchased from 12 March 2020 to 20 June 2020. However, our view is that the amount of immediate tax deduction will still be subject to the luxury car limit of $57,581 for the year ending 30 June 2020. The new tax legislation has not temporarily removed the car limit adjustment required under section 40-230 and section 328-200 of the ITAA 1997.
(a) Aggregated Turnover
To determine whether your business turnover needs to fall by 30% or 50% (unless you are a charity, in which case 15%), it relies on the concept of aggregated turnover for income tax purposes (in Division 328 of the Income Tax Assessment Act 1997). To calculate the aggregated (annual) turnover of your business, the annual turnover of its connected entities and affiliates must also be counted. Generally, turnover means ordinary income derived in the ordinary course of carrying on a business, as well as income from activities ancillary to the business (e.g. interest income), and one-off business activities for profit making purposes.
A 50% decline in turnover is a condition that large businesses with actual aggregated turnover of $1 billion or more in the prior income year (or projected turnover in the current income year) must satisfy. If you are not a large business by this definition, then a 30% decline in turnover will be required.
This aggregated turnover definition does not distinguish between Australian and foreign sourced income and therefore would include your overseas operations and/or foreign entities in your group (depending on ownership percentage and control).
Please note that “small and medium business entities” eligible to claim the Boosting Cash Flow are also defined with reference to the same concept of aggregated turnover for income tax purposes, with the turnover threshold being set at $50 million.
(b) GST Turnover
To determine how much your business’ projected GST turnover has or will decline by, it relies on the concept of Australian turnover for GST purposes which is reported in your business activity statements. GST turnover includes all taxable supplies and all GST free supplies but excludes input taxed supplies (e.g. residential rent, financial products).
For registered charities, it may also include donations they have received or are likely to receive for purposes of determining whether they have been adversely affected.
However, under the Australian GST law, only Australian based sales are relevant. Where your business includes overseas operations, overseas turnover will not be counted in your decline in turnover test.
The basic decline in turnover test requires a comparison of your business’ projected GST turnover (including supplies already made) in the turnover test period with its current GST turnover for the corresponding period in the 2019 year. The turnover test period can be 1 month (in any months from March to September 2020) or 1 quarter (starting on 1 April 2020 or 1 July 2020) relative to the corresponding period 1 year ago.
Where an entity is a member of a larger group (whether for accounting or tax purposes), decline in turnover is tested on an individual employer entity basis. That is, it only takes into account the GST turnover of the employer entity and not other members of the group.
The Commissioner of Taxation has determined alternative tests for fall in turnover for classes of entities where there is no such corresponding or appropriate comparison period in 2019 by the legislative instrument dated 23 April 2020. He does not have the power to make discretionary decisions for any individual entities though.
It will be necessary for your business to provide the Commissioner with appropriate evidence that it satisfies the alternative test for the class of entities to which it belongs.
The classes of entities for which an alternative test is available are:
The Treasurer’s Explanatory Statement gave an example of a farming and retail flower sales business whereby the current (2019) GST turnover in the corresponding quarter last year was not representative of the usual turnover due to severe drought. In this case, the Commissioner has determined an alternative test for which the relevant comparison period is the corresponding quarter in 2017.
Another example is a new start-up technology company that sells products mainly to cafes and restaurants. It only began to carry on a business in October 2019 and despite strong initial sales, its sales have declined substantially since March 2020. As there is no corresponding period in 2019, the Commissioner has determined an alternative test under which the relevant comparison period is the average of actual GST turnover in all of the months prior to the turnover test period.
There will be some tolerance where employers, in good faith, estimate at least a 30% or 50% turnover decline but actually experience a slightly smaller fall.
As there are variations in the alternative test that applies to each class of entities above, please contact us for advice.
If your business does not meet the turnover test at the start of JobKeeper scheme on 30 March 2020, it can still qualify for JobKeeper Payment from that later point in time (when it meets the basic decline in turnover test) up to 27 September 2020.
If you reasonably expect that your business’ GST turnover will fall by at least 30% (for a business with an aggregated annual turnover of less than $1 billion) in comparison with its actual GST turnover in the corresponding period in 2019, you would meet the basic decline in turnover test subject to the satisfaction of other requisite conditions.
However, JobKeeper Payment will not be backdated to the start of the scheme.
For employees you had as at 1 March 2020 but terminated after that time, you will need to re-hire them (even if you need to stand them down immediately), and pay them at least $1,500 (before tax) per fortnight from 30 March 2020.
Similarly, for employees you had as at 1 March 2020 but stood down (or their working hours reduced) after that time, you will need to pay them a minimum of $1,500 (before tax) per fortnight from 30 March 2020, irrespective of whether they normally earn more than $1.500 (before tax) per fortnight or not.
JobKeeper Payment is a reimbursement scheme that will be paid by the ATO monthly in arrears. As such, you must pass on the payment to each eligible employee in full before receiving it from the ATO.
Businesses are encouraged to talk to their banks to discuss their options. Generally, banks have indicated that businesses may be able to use the upcoming JobKeeper payment as a basis to seek credit in order to pay their employees until first payments are received in the first week of May 2020.
Self-employed people will be eligible for JobKeeper Payment provided the following conditions are satisfied in addition to the basic conditions (such as age and Australian tax residency):
However, if your business is a partnership, only 1 partner can be nominated to receive JobKeeper Payment along with any eligible employees.
Similarly, if your business is in a trust, only 1 individual beneficiary (i.e. not a corporate beneficiary)can be nominated to receive JobKeeper Payment along with any eligible employees.
If your business is in a company, only 1 shareholder (who may receive dividend income) or 1 director (who may receive director's fee) can be nominated to receive JobKeeper Payment along with any eligible employees.
In summary, a self employed business can only be entitled to JobKeeper Payment for 1 individual non-employee "owner" and that individual cannot be entitled to JobKeeper payment from any other business.
Your eligibility to receive JobKeeper Payment will not be affected by income support payments (such as Jobseeker payment, family tax benefit, child support and child care subsidy).
However, the former will be treated as ordinary income(i.e. taxable income) for social security payments and thus may affect your eligibility to receive some or all income support payments (at full or reduced rates). You must report your change in circumstances to Services Australia.
For the period that you receive Parental Leave Pay or Dad and Partner Pay, you will be ineligible to receive JobKeeper Payment.
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