Element Business & Accounting Solutions Blog




 

 

 

Lessons From Lockdown

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Why Every Business Needs a Continuity Plan

Keeping your business alive during these difficult times is surely every business owner's main focus now. It's not all doom and gloom either – consider how the external environment has highlighted areas for improvement and opportunity in your business.

 

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We just thought we would remind you about the instant asset write off that the Government released in their economic stimulus package. The package was marked as a measure to protect the economy by maintaining confidence, supporting investment and keeping people in their jobs.



JobKeeper 2.0 Revamped

JobKeeper 2.0 revamped!


The government has announced updated eligibility rules for JobKeeper 2.0.


  1. Turnover test now only focused on September and December 2020 quarters.
  2. Eligible employee start date now 1 July 2020.

The Superannuation Guarantee Amnesty



JobKeeper 2.0

 

JobKeeper Payments

JobKeeper Payments

Much anticipated legislation for the above was finally passed on Wednesday 8 April 2020!

As you can imagine given its quick turnaround, the legislation has actually turned out to be quite complicated.

We have attempted to put a bit of a summary together for you.


General overview

The JobKeeper Payment scheme will commence on 30 March and finish on 27 September 2020 (a period of 26 weeks) for eligible employers.  It will operate on a fortnightly basis (i.e. the first fortnight commenced on 30 March and will end with the fortnight ending on 27 September).

Businesses (including sole traders and charities) must have suffered a "substantial decline" in turnover to be entitled to the payment of $1,500 for each eligible employee.

A business is not eligible for the JobKeeper Payment if another business has claimed it for the same employee.

 

Businesses that qualify for JobKeeper Payments

There are tests that must be met as at 1 March 2020 and there are other tests that must be satisfied on a rolling fortnightly basis.


Decline in turnover test

To meet this test the employer must (for businesses < $1 billion) have suffered a decline in turnover that exceeds 30%.  Turnover is based on GST turnover, in particular projected GST turnover - which is used when calculating a decline in revenue.

For not for profits the threshold is reduced to 15%.

The turnover test period must be:

·         a calendar month that ends after 30 March and before 1 October 2020, or; 

·         a quarter that starts on 1 April or 1 July 2020.

 

The relevant comparison period must be the corresponding period in 2019.  For example, an employer can make the comparison by comparing the whole of the month of March 2020 with March 2019, or by comparing the quarter beginning on 1 April 2020 with the quarter beginning on 1 April 2019.

Once the decline in turnover test is satisfied, the employer does not need to retest its turnover in later months.  However, if an employer fails the test in the first month (or quarter), it can test in a later month to determine if the test is met and become eligible from that time on.


Reporting

Despite the fact an employer does not need to retest its turnover once the decline in turnover test is satisfied, an employer qualifying for the JobKeeper Payment must, within 7 days of the end of that month, notify the ATO of its current turnover for that month and its projected turnover for the following month.

This seems like overkill given that the same turnover is reported in the employer's BAS.

There is scope for the Commissioner to apply an alternative test to different classes of entities, by way of legislative instrument.  For example, a business that commenced mid-way through the previous year. There will undoubtedly be more ATO guidance on this.

 

Eligible employees

An individual must be employed for a JobKeeper fortnight to be eligible.  In addition, as at 1 March 2020 the employee must:

 

·         be aged 16 or over;

·         be an employee or a long-term casual employee of the entity (12 months of regular and systematic employment);

·         be an Australia resident.  This is determined by reference to the Social Security Act or by the ITAA 1936 where the person holds a Subclass 444 (Special Category) visa; and

·         employees who were retrenched after 1 March 2020 but then were subsequently re-hired

However, if an employee was only engaged after 1 March, that employee would not be eligible for the JobKeeper Payment.

There are some specific exclusions to the definition of an eligible employee and those relate to recipients of parental leave pay, dad and partner pay and specified recipients of worker's compensation.

There is a requirement that eligible employees have provided a notice to their employer agreeing:

 

·         to be nominated by the employer as an eligible employee under the JobKeeper scheme as the employer with which the employee will participate in the JobKeeper scheme;

·         that they confirm they have not agreed to be nominated by another employer; and

·         that they do not have permanent employment with another employer if they are employed as a casual employee with this employer. 

 

An eligible employee who is employed by one or more qualifying employers will need to choose one employer that will receive the JobKeeper Payments for their employment.  Once an employer is nominated by an employee it cannot be changed and that employee will not be eligible for the JobKeeper Payment if this occurs.


Wage condition

Employers must satisfy what is termed the "wage condition" to be entitled for a JobKeeper Payment. This is satisfied in respect of an individual for a fortnight if the sum of the amounts specified below equals or exceeds $1,500. The amounts are:

·         salary, wages, commission, bonus or allowances;

·         amounts withheld by the employer from payments made to the individual in the fortnight under the PAYG provisions e.g. HECS / HELP loan;

·         contributions made by the employer in the fortnight to a superannuation fund if the contributions are made under a salary sacrifice arrangement;

·         other amounts that, in the fortnight, are applied or dealt with in any way if the individual agreed

 

If the regular payment period is longer than a fortnight, the above payments are allocated to each fortnight on a reasonable basis.  For example, if an employee is paid monthly, it would presumably be reasonable to multiply the monthly amount by 12 and then divide that amount by 26.

 

The effect of these rules is:

·         if the employer pays the employee $1,500 or more in income per fortnight before tax, the JobKeeper Payment will assist the employer to continue operating by subsidising all or part of the employee's income;

·         if the employer would otherwise pay the employee less than $1,500 in income per fortnight before tax, the employer must pay the employer, at a minimum, $1,500 per fortnight before tax; and

·         if the employee has been stood down, the employer must pay the employee, at a minimum, $1,500 per fortnight before tax.

 

Sole traders, Partnerships and Trusts

There are special rules that enable sole traders, i.e. entities that do not have employees as such, to obtain the JobKeeper Payment.

Eligible trusts, companies and partnerships will also be eligible for the payment for one individual who is not an employee but is actively engaged in the business.  In summary the individuals that can be nominated for the payment are as follows:

·         Trusts - one individual beneficiary

·         Companies - one director or shareholder

·         Partnerships - one partner

 

To qualify, the business entity must satisfy the decline in turnover test (see above), must have an ABN on 12 March 2020 and must either have included a business receipt in assessable income for the 2018-2019 income year or have made a taxable supply during the period from 1 July 2018 to 11 March 2020.

 

Payment

Qualifying employers must do the following in order to obtain payment:

 

1.       Apply in the approved form and register their interest via the ATO website.  If not done already we can assist you with this process.  Just give us a call.

2.       Notify all employees in writing that they have elected to participate in the scheme and that their eligible employees will all be covered by the scheme.

 

The Government must pay the JobKeeper Payment within 14 days of the end of the calendar month in which the fortnight(s) end.  According to the Fact Sheets, employers will be paid "shortly after the end of each calendar month", for fortnights ending in that month.  This means that the first JobKeeper Payment will not be made until the first week of May.

 

The amount of an entity's JobKeeper Payment for an individual for a fortnight is $1,500.

No payment will be made after 30 September 2021 (i.e. next year).  Entitlement to a payment may be cancelled, revoked, varied etc by later legislation.

 

JobKeeper Payment and superannuation

There are no changes to the superannuation rules in the JobKeeper Rules, but the explanatory statement does flag amendments will need to be made.  The JobKeeper Payment of $1,500 per fortnight is a gross payment and employers must withhold tax from these payments.

 

An employer will only need to make superannuation contributions for any amount payable to an employee in respect of their actual employment.  For example, if an employee is to be paid $1,000, but the employer instead paid them $1,500 to satisfy the wage condition for a JobKeeper fortnight, then the employer will only be required to make superannuation contributions in relation to $1,000.

 

An employer will still be required to make the same superannuation contributions for an employee whose pay exceeds the JobKeeper Payment.  For example, if an employee is to be paid $2,000, the employer will continue to be required to make contributions in relation to that amount, irrespective of whether they were eligible to receive the JobKeeper Payment in relation to the employee.

 

Transitional rules

There is a transitional rule that allows the Commissioner to make an "advance payment" for the JobKeeper fortnights ending in the month of April without being satisfied that the entity is entitled to that payment.  This is necessary to ensure that payments in respect of the first and second JobKeeper fortnights (being the fortnights starting on 30 March 2020 and 13 April 2020 respectively) can be made quickly to assist entities affected by the Coronavirus.  Otherwise, entitlement only arises for those JobKeeper fortnights and later fortnights in which eligible employers are registered under the scheme prior to the end of a JobKeeper fortnight.

 

However, before the Commissioner can make such an advance payment:

·         the entity must have notified the Commissioner in the approved form of its election to participate in the scheme; and

·         the Commissioner is satisfied, based on the information provided by the entity in the approved form, that it is reasonable in the circumstances make the payment.

 

Integrity issues

Businesses, individuals and entities that deliberately enter into contrived arrangements with the sole or dominant purpose of reducing their turnover in order to gain access to JobKeeper Payments, or increase the amount of JobKeeper Payments they receive, will not be entitled to the payment or the increased payment.  The GIC and significant administrative and criminal penalties may apply.

 

Tax consequences

The JobKeeper Payment is assessable as a subsidy.  However, as a payment forms part of wages paid to the employee, a deduction for the payment to employees is also available. 

GST does not apply in relation to JobKeeper Payments made to employers because the payments are not consideration for supplies made by employers to the Government.

 

 

 

Home Office Running Costs

Home Office Running Costs

 

With the significant move to people working from home, the Australian Taxation Office ("ATO") has announced a temporary simplified short cut method to make it easier for individual taxpayers to claim deductions for additional running expenses incurred (e.g. lighting and power costs).

 

The ATO are allowing individuals to claim a deduction of all running expenses incurred during the period 1 March 2020 to 30 June 2020, based on a rate of 80 cents for each hour an individual carries out genuine work duties from home. This is an alternative method to claiming home running expenses under existing arrangements, which generally are more onerous to calculate and support.

 

The ATO's 80 cents per hour method covers all running costs.

 

An individual does not have to have a separate or dedicated area of your home set aside for working, such as a private study.

 

The shortcut method rate covers all deductible running expenses, including:

 

electricity for lighting, cooling or heating and running electronic items used for work (for example your computer), and gas heating expenses

cleaning expenses

your phone and internet costs

computer consumables, such as printer ink

stationery

depreciation on home office equipment(computer) and furniture (eg desk and chair).

 

To make a claim an individual does not have to incur all these expenses, but they must have incurred additional expenses in some of these categories as a result of working from home due to COVID-19.

 

If the 80 cents per hour method is used, a separate claim cannot be made for any of the above running expenses.  As a result, using the 80 cents per hour method could result in a claim for running expenses being lower than a claim under existing arrangements (including the existing 52 cents per hour method).  Therefore, our view is this announcement provides relief with respect to the documentation requirements to support working from home tax claims, as opposed to increasing tax deductions available.

 

Additionally, under the 80 cents per hour method:

 

a)       multiple people living in the same household can make a claim; and

b)      an individual will only be required to keep a record of the number of hours worked from home as a result of the Coronavirus, during the above period. This record can include timesheets, diary entries/notes or rosters.

 

Working from home running expenses that are incurred before 1 March 2020 must be claimed using the existing claim arrangements. These are:

 

fixed rate method:

a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and depreciation of office furniture,

the work-related portion of your actual costs of phone and internet expenses, computer consumables, stationery, and

the work-related portion of depreciation on a computer, laptop or similar device.

 

actual cost method:

claim the actual work-related portion of all your running expenses, which you need to calculate on a reasonable basis.