ATO Advice on Covid-19

The following is an extract from ATO

On 12 March 2020, the government announced a package of measures to help the economy withstand and recover from the economic impact of coronavirus. The following measures will be administered by the ATO.

The government intends to introduce legislation in late March 2020 to implement its Economic Response to Coronavirus.

Enhancing the instant asset write-off

The government is increasing the instant asset write-off (IAWO) threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million).

Timing

This proposal applies from 12 March 2020 until 30 June 2020, for new or second-hand assets first used, or installed ready for use in this timeframe.

Enhancing the IAWO will require legislative changes before it can take effect.

Backing business incentive

The government is introducing a time limited 15-month investment incentive to support business investment and economic growth over the short-term, by accelerating depreciation deductions.

A deduction of 50% of the cost of an eligible asset on installation will apply, with existing depreciation rules applying to the balance of the asset’s cost.

Eligibility

Eligible businesses – businesses with aggregated turnover below $500 million.

Eligible assets – new assets that can be depreciated under Division 40 of the Income Tax Assessment Act 1997 (that is, plant, equipment and specified intangible assets, such as patents). Does not apply to second-hand Division 40 assets, or buildings and other capital works depreciable under Division 43.

Timing

Assets acquired after announcement and first used or installed by 30 June 2021.

Boosting Cash Flow for Employers

The Boosting Cash Flow for Employers measure will provide up to $25,000 back to business, with a minimum payment of $2,000 for eligible businesses. The payment will provide temporary cash flow support to small and medium businesses that employ staff during the economic downturn associated with coronavirus. The payment will be tax free.

Eligibility

Small and medium business entities with aggregated annual turnover under $50 million and that employ workers will be eligible. Eligibility will generally be based on prior year turnover.

The payment will be delivered by the ATO as a credit in the activity statement system from 28 April 2020 when eligible businesses lodge (see below) upcoming activity statements.

Eligible businesses that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 50% of the amount withheld, up to a maximum payment of $25,000.

Eligible businesses that pay salary and wages will receive a minimum payment of $2,000, even if they are not required to withhold tax.

This measure will benefit around 690,000 businesses employing around 7.8 million people.

Timing

The Boosting Cash Flow will be applied for a limited number of activity statement lodgments. The ATO will deliver the payment as a credit to the business upon lodgment of their activity statements. Where this places the business in a refund position, the ATO will deliver the refund within 14 days.

Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020.

Monthly lodgers will be eligible to receive the payment for the lodgment months of March 2020, April 2020, May 2020 and June 2020. To provide a similar treatment to quarterly lodgers, the payment will be calculated at three times the rate (150%) in the March 2020 activity statement.

The minimum payment will be applied to the business’ first lodgment.

Further Information

For more information on the Australian Government’s Economic Response to Coronavirus visit treasury.gov.au/coronavirusExternal Link.

Businesses can visit business.gov.auExternal Link to find out more about how the economic response complements the range of support available to small and medium businesses.

ECONOMIC STIMULUS PACKAGE

The economic stimulus package has been announced today and we have been receiving a lot of calls and emails from our clients, asking whether they will be entitled to receive some of the cash assistance that the stimulus package includes.

At this stage, as far as we are aware, the stimulus package is only announced in the PMs Media Release, and has not been given royal assent. Given the urgency of this package, it should pass through as legislation fairly soon. However, there is not enough information from the government at this stage, regarding how this stimulus package will be implemented and who will be entitled to receive a payment.

Here is the official information available from the PM’s website:

The Morrison Government has today announced a $17.6 billion economic plan to keep Australians in jobs, keep businesses in business and support households and the Australian economy as the world deals with the significant challenges posed by the spread of the coronavirus.

Our targeted stimulus package is focused on keeping Australians in jobs and helping small and medium sized businesses to stay in business. 

The package has four parts:

• Supporting business investment

• Providing cash flow assistance to help small and medium sized business to stay in business and keep their employees in jobs

• Targeted support for the most severely affected sectors, regions and communities;

• Household stimulus payments that will benefit the wider economy

The measures are all temporary, targeted and proportionate to the challenge we face.  Our actions will ensure we respond to the immediate challenges we face and help Australia bounce back stronger on the other side, without undermining the structural integrity of the Budget.

Prime Minister Scott Morrison said as part of the plan up to 6.5 million individuals and 3.5 million businesses would be directly supported by the package.

“Just as we have acted decisively to protect the health of the Australian people, based on the best evidence and medical advice, our support package responds to the economic challenges presented by this pandemic in a timely, proportionate and targeted way,” the Prime Minister said.

“Our plan will back Australian households with a stimulus payment to boost growth, bolster domestic confidence and consumption, reduce cash flow pressures for businesses and support new investments to lift productivity.

“Australia is not immune to the global coronavirus challenge but we have already taken steps to prepare for this looming international economic crisis.

“We’ve balanced the budget and managed our economy so we can now use this to protect the health, wellbeing and livelihoods of Australians.

“Our targeted stimulus package will focus on keeping Australians in jobs and keeping businesses in business so we can bounce back strongly.

“The economy needs temporary help right now to bounce back better so the livelihoods of all Australians are protected.”

Treasurer Josh Frydenberg said Australia is approaching the economic challenge from the Coronavirus from a position of strength with IMF and the OECD both forecasting Australia to grow faster than comparable countries including the UK, Canada, Japan, Germany and France.

“Our plan keeps businesses operating, supports jobs and provides a stimulus to households,” the Treasurer said.

“The Government has worked hard over the last six and a half years to return the budget to balance so we have the flexibility to respond to the serious economic challenges posed by the Coronavirus.”

“Given Australia’s strong economic and fiscal position, the international credit rating agency Standard and Poor’s indicated that temporary stimulus would be “unlikely to strain Australia’s creditworthiness.

“In our response, we have been very careful not to repeat the mistakes of previous stimulus programs and not undermine the structural integrity of the budget.

“Today’s announcement will provide the support businesses need to stay in business and keep Australians in a job.

“By acting decisively this package will put Australia in the strongest possible position to deal with the economic challenges we face and to make sure our economy bounces back even stronger.”

Delivering support for business investment

• $700 million to increase the instant asset write off threshold from $30,000 to $150,000 and expand access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020. For example, assets that may be able to be immediately written off are a concrete tank for a builder, a tractor for a farming business, and a truck for a delivery business.

• $3.2 billion to back business investment by providing a time limited 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct an additional 50 per cent of the asset cost in the year of purchase.

These measures start today and will support over 3.5 million businesses (over 99 per cent of businesses) employing more than 9.7 million employees or 3 in every 4 workers. The measures are designed to support business sticking with investment they had planned, and encouraging them to bring investment forward to support economic growth over the short term.

Cash flow assistance for businesses

• $6.7 billion to Boost Cash Flow for Employers by up to $25,000 with a minimum payment of $2,000 for eligible small and medium-sized businesses. The payment will provide cash flow support to businesses with a turnover of less than $50 million that employ staff, between 1 January 2020 and 30 June 2020. The payment will be tax free. This measure will benefit around 690,000 businesses employing around 7.8 million people. Businesses will receive payments of 50 per cent of their Business Activity Statements or Instalment Activity Statement from 28 April with refunds to then be paid within 14 days.

• $1.3 billion to support small businesses to support the jobs of around 120,000 apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.

Stimulus payments to households to support growth

• $4.8 billion to provide a one-off $750 stimulus payment to pensioners, social security, veteran and other income support recipients and eligible concession card holders. Around half of those that will benefit are pensioners. The payment will be tax free and will not count as income for Social Security, Farm Household Allowance and Veteran payments. There will be one payment per eligible recipient. If a person qualifies for the one off payment in multiple ways, they will only receive one payment.

Payments will be from 31 March 2020 on a progressive basis, with over 90 per cent of payments expected to be made by mid-April.

Assistance for severely-affected regions

• $1 billion to support those sectors, regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on industries such as tourism, agriculture and education. This will include the waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and Commonwealth National Parks. It will also include additional assistance to help businesses identify alternative export markets or supply chains. Targeted measures will also be developed to further promote domestic tourism. Further plans and measures to support recovery will be designed and delivered in partnership with the affected industries and communities.

The Government is also offering administrative relief for certain tax obligations, including deferring tax payments up to four months. This is similar to relief provided following the bushfires for taxpayers affected by the coronavirus, on a case-by-case basis.  The ATO will set up a temporary shop front in Cairns within the next few weeks with dedicated staff specialising in assisting small business. In addition, the ATO will consider ways to enhance its presence in other significantly affected regions to make it easier for people to apply for relief, including considering further temporary shop fronts and face-to-face options.

The Government’s economic support package is proportionate, timely and scalable to respond to the economic challenges presented by the spread of the coronavirus.

Through our response today and the actions we have taken to bring the Budget back to balance over the last six and a half years, Australians can be confident that our nation is one of the best prepared to respond to the economic impacts of the coronavirus.

We can assure you that once we know more about which taxpayers and businesses will be entitled to grants, payments or tax concessions, we will send an announcement about this through our newsletter. Please sign up to the newsletter here to stay informed.

CGT Main Residence Exemption

In December 2019, new legislation was passed regarding the CGT Primary Place of Residence (PPR) exemption for non-resident taxpayers.

Effective from 1st July 2020, if you are a non-resident for tax purposes and you dispose of an Australian real property asset (which you held prior to 9th May 2017 (7.00pm AEST) you will have to pay CGT on the entire capital gain, even if the property was used as your PPR. There are a few exceptions that may apply in limited circumstances, but generally speaking, if you are planning to sell your property while living overseas, you should consider whether the timing of the sale will be affected by the change in legislation.

Please note that the absence rule still applies if you do not dispose of your property. Generally speaking, you can maintain the PPR status of your home after you move out for up to 6 years while it is used to produce income, and indefinitely if you never use it to produce income. This rule applies even if you are living overseas, as long as you do not treat any other dwelling as your PPR during that time.

For properties purchased on or after 9th May 2017 (7.00pm AEST), the PPR exemption is not available.

For more information about foreign residents and main residence exemption, please click here.

Auskey to be replaced by myGovID

ATO has advised that the way you access government online services is changing. Together, myGovID and Relationship Authorisation Manager (RAM) will replace AUSkey in March (you will need to register for myGovID before 11.59pm AEDT on Friday 27 March).

If you are currently using Auskey credentials to access your business portal on ATO’s website or other government services, please register for myGovID before the cut-off date.

More information about these changes can be found here - CLICK

Changes to Superannuation Guarantee legislation

From 1 January 2020, salary sacrifice amounts can no longer be used to reduce employers’ SGC obligations. Prior to this date, salary sacrificed amounts to super reduced the employer obligation of 9.5% of gross salary.

For example, an employee receiving $100,000 salary would ordinarily be entitled to $9500 superannuation guarantee. If they salary sacrificed $10,000 into Super, the gross salary would be reduced to $90,000 and the employer obligation would be $8550 (9.5% of $90,000). Under the new legislation, the obligation would still be $9500 despite the reduced wage after salary sacrifice.

For more information regarding these changes, please visit ATO website here:

https://www.ato.gov.au/Business/Super-for-employers/In-detail/Salary-sacrifice/Salary-sacrificing-super---information-for-employers

Annual Holiday Closure

Please note that our offices will be closed over the Christmas and New Year period, including the first 2 weeks of January. We will have minimal admin support during this period, attending to post, banking and urgent emails only. Please do not drop off documents at our office, as there won’t be anyone available for collection.

Our official closure dates are 21st Dec 2019 - 19th January 2020.

Joel & Dorin will return to the office in late January 2020.

All emails should be directed to

We want to take this opportunity to thank all of our clients for another year with us, and wish you all a happy and safe festive season.

Instant write-off for assets over $30,000

From 2nd April 2019, the instant asset write-off threshold increased to $30,000 (prior to this, it was $25,000).

This means that if your business purchases an asset that costs less than $30,000 (net of GST), you can claim an immediate deduction for it, instead of depreciating the asset over it’s useful life.

With the end of financial year approaching, now is a good time to have a think about whether your business needs new assets or replacement of old assets. Consider if the timing is right - look at your business profit - is it higher than expected? If you have extraordinary profit this year, it might be a good idea to utilise this tax concession in order to save your business some tax this year.

More information about the instant asset write-off can be found here.

Closely-Held Entities & Available Cash

Closely-held entities are businesses that only pay salaries to associates of the business. Examples of associates include the directors and shareholders (of a company) and their relatives. If your business is a closely-held entity, your reporting requirements for STP and PAYG is slightly different to businesses with arms-length employees (or “external employees”).

Reporting Requirements

Firstly, you are not required to report to ATO using STP until 1st July 2020.

You also do not have to submit PAYG Payment Summaries or PAYG Payment Summary Annual statements to ATO by the regular due dates. They can be submitted up until the due date of your business tax return.

You also have flexibility with regard to salaries and income distribution. It is important to plan ahead with your accountant to make sure you are distributing business profit in the most tax effective way, whether that is by way of wages, dividends or trust distributions.

Available Funds

A lot of our clients who run their own business through a company want to know what they can do with the money in the bank.

The answer will largely depend on 2 things:

1. Does the company owe you any money?

2. Was there any profit reported in the company, and did the company pay tax?

If the company owes the associates money, then they can withdraw this money at any time without any tax consequences. Examples of how a company may come to owe the associate director money, is when the director pays for business expenses out of their personal funds (e.g. from a personal credit card), or where a personal asset has been transferred to the company, but the company did not transfer cash to the associate director in exchange for the asset (e.g. when a car is transferred into the company name).

Transfer of this kind are treated as loan repayments (from the company to the director). You can also think of them as reimbursements.

If financial statements have already been prepared, have a look at the Notes to the Financial Statements, under Liabilities, and look for “Loans - Unsecured”. Assuming there have not been any withdrawals from the company account since the last reporting date, you can assume that this figure is accurate, and you can withdraw this amount from the bank if the funds are available.

It is important to note that any withdrawals made from the company must be made with the company’s solvency position in mind. Directors should not clear out the bank balance if the company has outstanding current debts, e.g. to ATO or Superannuation.

If profit was reported and tax was paid, then there are franked dividends available to distribute from the company to shareholders. These dividends can be paid at any time, but a resolution must be passed during a directors’ meeting and this must be recorded in writing. Click here for a sample document you can use to pass a resolution to pay Franked dividends.

Before making a decision to pay dividends, please send me an email to discuss this strategy so we can determine whether this is the most tax effective way of accessing your company funds.

If neither of the above applies to your business, then you can take money out as wages (please note, superannuation obligations and workers’ compensation will apply). You will need to withhold the correct amount of tax before paying yourself a wage. To work out the tax, you can use ATO’s online calculator or you can use payroll software to help you produce payslips with the correct amount of withholding tax and superannuation obligation.

If none of the above options meet your requirements (for example, you need to withdraw a large amount of cash), you can borrow funds from the company. Please note, special rules will apply to this arrangement under Division 7A of the ITAA 1936. Please contact us for more information to make sure you are meeting your obligations.

Single Touch Payroll

Single Touch Payroll (STP) will be mandatory for all employers from 1st July 2019 (previously it was only applicable to businesses with 20 or more employees). If your business is a closely-held entity, then you do not need to start using STP until 1st July 2020.

If your business is not a closely-held entity, you need to be ready (more info about Closely-held entities here). It is a good idea to get it set up now so that you are compliant by 1st July. However, ATO has confirmed that they will be lenient toward small businesses during the initial transition to STP.

This extension of the legislation to include small businesses could be very daunting for employers who are not already using an online payroll solution. Our clients can be assured that we will help them through the set up process if they require guidance.

What is Single Touch Payroll?

When you use a payroll management software (either online or using an installed program that can send data to ATO electronically), you are able to communicate data to ATO every time you process a payslip for an employee. This eliminates the need to report wages on a Quarterly basis in the BAS or to send ATO payment summaries and annual PAYG statements. While the set up and transition can cause smaller employers some confusion and anxiety, using this system on a regular basis is incredibly simple and efficient.

Does your business need to use it?

From what we have read on ATO’s guidelines and press releases, ALL (non-exempt) employers will need to use STP from 1st July 2019, even if they are considered “micro employers” with 4 or less employees.

If you are a micro-employer, you can report to ATO quarterly (same as BAS cycle). You would therefore be submitting quarterly payslips through STP software instead of a more regular cycle such as weekly or fortnightly. However, Micro-employers can still choose to report on a more frequent pay cycle if they wish.

How to get set up:

The first step is to have a cloud-based payroll management system.

Some software providers have developed a low cost cloud based software for micro-employers who only need to be STP compliant but do not want any other cloud-based software for their business. Our recommended provider is Xero ($10 per month), which we can assist our clients to set up. If you want to shop around, the ATO has listed these providers as well.

Once you have set up your account online, you will need to register an Auskey for your business. This is a relatively simple process. If your business is a company, you will need one of the directors to register (have your TFN at hand).

After you have registered your Auskey, you can go to ATO’s Access Manager and log in using your Auskey.

1. Click on the link from the left-hand menu titled “My Hosted SBR Software Services”.

2. Find your software provider from the list (or search by name or ABN) and select

3. Add your software ID# (this can be found when you are logged in to your payroll software during the STP set up).

4. You will need to confirm and save.

5. Go to your software provider website, log in and go to STP set up

6. Make a declaration that you have “advised ATO” about your SBR Service Provider and follow the steps to complete the set up (the steps will be different for each software provider, but it should all be fairly straight forward).

Now you are ready to report your wages and super to ATO using STP.

To view ATO’s step by step guide for adding Software Services on access manager, please click here.

Can SJB set this all up for your business?

Yes, we can certainly help you. We can also set up the software package for you, using your banking details for the subscription. If you opt to use Xero and are switching from MYOB or Reckon and want to get your whole business set up on this platform, there are financial rebates you can receive as a client of SJB. Please contact us for more information about this and to discuss our set up fees.

If you need help with STP set up, please get in touch with us ASAP, as we will not be able to provide this service between 1st July and 31st December 2019 (due to “Tax Time”).

2018-2019 Office Closure

It is that time of the year again - the most wonderful time of the year - when we close down our office for the Xmas and New Year break. Our office will be closed from Monday 24th December 2018 and will re-open on Monday 21st January 2019.

During this time, we will still have a small group of admin staff collecting mail and processing payments. Please do not call the office during this time.

Joel and the rest of the team wish all our clients a very happy holiday season, Merry Christmas, Happy Hanukkah and have a fun and safe New Year.