New working from home tax rate.

New working from home tax rate.

On 7th April 2020, the Australian Taxation Office (ATO) announced special arrangements this year, due to COVID-19, to make it easier for people to claim deductions for working from home. The new arrangement will allow people to claim an increased rate of 80 cents per hour for all their running expenses incurred during the period 1 March 2020 to 30 June 2020, including;

  • Electricity expenses associated with heating, cooling and lighting the area at home which is being used for work.
  • Cleaning costs for a dedicated work area.
  • Phone and internet expenses.
  • Computer consumables (e.g., printer paper and ink) and stationery.
  • Depreciation of home office furniture and furnishings (e.g., an office desk and a chair).
  • Depreciation of home office equipment (e.g., a computer and a printer).

Multiple people living in the same house can claim this new rate. For example, a couple living together could each individually claim the 80 cents per hour rate. The requirement to have a dedicated work from home area has also been removed and now you will only be required to keep a record of the number of hours worked from home. The new rate does not prohibit people from making a working from home claim under existing arrangements, where you calculate all or part of your running expenses. Claims for working from home expenses prior to 1 March 2020 cannot be calculated using the new rate, and must use the pre-existing working from home approach and requirements. For more please click here.

As always, please don’t hesitate to contact the team 02 9415 1511 or email us reception@primeadvisory.com.au to see how this may apply to you.

Read More
Second $66.1 bn stimulus package

Second $66.1 bn stimulus package

On Sunday 22nd March, the Government released a second, far reaching $66.1 bn stimulus package that boosts income support payments, introduces targeted changes to the superannuation rules, provides cash flow support of up to $100,000 for small business employers, and relaxes corporate insolvency laws.

The Prime Minister has warned that there are no “quick solutions” and that business should prepare for 6 months of disruption. Bear in mind that as stimulus packages are released or new measures announced we will be updating you via our blogs, newsletter or email.

In Summary

Business

  • Tax-free payments up to $100,000 for small business and not-for-profit employers. An increase in the previously announced initial tax-free payments for employers to a maximum of $50,000. In addition to this, a second round of payments will be made up to a maximum of $50,000, accessible from July 2020.
  • Solvency safety net – temporary 6 month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000, and an increase in the time companies have to respond from 21 days to 6 months. Directors also are provided with temporary relief from personal liability for trading while insolvent for 6 months.
  • Access to working capital – Introduction of a Coronavirus SME guarantee scheme protecting financial institutions by guaranteeing 50% of new loans to SMEs.
  • Sole traders and self-employed eligible for Jobseeker payment – the eligibility criteria to access income support relaxed for the self-employed and sole traders.
  • Temporary relief from some Corporations Act requirements

Individuals

  • Early release of superannuation – individuals in financial distress able to access up to $10,000 of their superannuation in 2019-20, and a further $10,000 in 2020-21. The withdrawals will be tax-free and will not affect Centrelink or Veterans’ Affairs payments.
  • Temporary reduction in minimum superannuation draw down rates – superannuation minimum drawdown requirements for account based pensions and similar products reduced by 50% in 2019-20 and 2020-21.
  • Deeming rates reduced – from 1 May, superannuation deeming rates reduced further to a lower rate of 0.25% and upper rate of 2.25%.
  • Supplements increased, access extended and eased – for 6 months from 27 April 2020:
    • A temporary coronavirus supplement of $550 will be paid to existing income support recipients (people will receive their normal payment plus $550 each fortnight for 6 months).
    • A second one-off stimulus payment of $750 will be paid automatically from 13 June 2020 to certain income support recipients (in addition to the payment made from 31 March 2020).
    • Eligibility for access to income support eased to include sole traders and the self-employed, and to those caring for someone infected or in isolation.
    • Waiting periods and assets tests temporarily waived.
  • Bankruptcy safety net – temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor from $5,000 to $20,000.

The Government has flagged that additional stimulus packages will be required.

In detail – Support for business

Tax-free payments up to $100,000 for employers

  • From: 28 April 2020
  • Eligibility: Small and medium business entity employers and not-for-profit entities, with an aggregated annual turnover under $50 million.

The Government has increased the previously announced measures to provide cash flow support to business.

Now, eligible businesses with a turnover of less than $50 million will initially be able to access tax-free cash flow support, with the minimum amount being increased to $10,000 and the maximum amount increased to $50,000 (previously $2,000 to $25,000). However, additional support will be provided in the July – October 2020 period so that eligible entities will receive total minimum support of $20,000 and up to $100,000.

In order for a business to qualify for this support it must have been established prior to 12 March 2020. The rules are more flexible for charities because the Government recognises that new charities might be established in response to the pandemic.

The cash flow support measures will be provided in the form of a credit in the activity statement system. The support will be provided in two phases.

  • The first phase ensures that eligible employers receive a credit equal to 100% of the PAYG amounts withheld from salary and wages paid to employees during the relevant period, up to the maximum amount of $50,000.
  • The second phase ensures that eligible employers receive another series of credits, equal to the credits that were received under the first phase. For example, if a business received $40,000 of credits in the first phase it will receive a further $40,000 of credits in the second phase. These additional credits will be spread over two or four activity statement periods, depending on whether the employer lodges on a quarterly or monthly basis.

If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $10,000 will be made in the first phase and a further payment of $10,000 will be made in the second phase.

The credits are automatically calculated by the ATO and employers will need to lodge an activity statement to trigger the entitlement. If the credit puts the business in a refund position the excess amount will be refunded by the ATO within 14 days.

Businesses that lodge activity statements on a quarterly basis will be eligible to receive credits in the first phase for the quarters ending March 2020 and June 2020. Credits in the second phase will be available for the quarters ending June 2020 and September 2020. The minimum $10,000 payment will be applied to the first lodgement.

Business that lodge on a monthly basis will be eligible for the credits in the first phase for the March 2020, April 2020, May 2020 and June 2020 lodgements. Credits in the second phase will be available for the June 2020, July 2020, August 2020 and September lodgments. The minimum $10,000 payment will be applied to the first lodgement.

Eligibility for the measure will be based on prior year turnover. We will have to wait for the legislation for the finer details.

Not-for-profit employers, including charities, with an aggregated turnover under $50 million will also be able to access the cash flow support.

More: Cash flow assistance for businesses

Solvency safety net

A safety net has been put in place to protect businesses in temporary financial distress as a result of the pandemic by lessening the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business. These include:

  • A temporary 6 month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000.
  • The time a company has to respond to statutory demands will increase from 21 days to 6 months.
  • For 6 months, directors will be provided with temporary relief from personal liability for trading while insolvent.
  • See also bankruptcy safety net below

It will be more important than ever for business to stay on top of their debtors. Debts incurred will still be payable by the business. Only those debts incurred in the ordinary course of the business will be subject to the safety net measures.

More: Temporary relief for financially distressed businesses

Access to working capital for SMEs – supporting lenders

The Government has announced a Coronavirus SME guarantee scheme that will guarantee 50% of new loans to SMEs up to $20 billion. These loans are new short-term unsecured loans to SMEs.

SMEs with a turnover of up to $50 million will be eligible to receive these loans. The Government will provide eligible lenders with a guarantee for loans with the following terms:

  • Maximum total size of loans of $250,000 per borrower.
  • The loans will be up to three years, with an initial six month repayment holiday.
  • The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.

Loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look through the cycle to sensibly take into account the uncertainty of the current economic conditions.

This latest measure builds on the previous initiatives to ensure small business can access capital, including:

Sole traders and self-employed eligible for Jobseeker payment

The eligibility criteria to access income support payments will be relaxed to enable the self-employed and sole traders whose income has been reduced, to access support.

More: Income support for individuals,
More: Financial support for coronavirus affected job seekers

Temporary relief from Corporations Act requirements

The Treasurer has been given a temporary instrument-making power to amend the Corporations Act to provide relief or modifications to specific compliance obligations.

ASIC has announced measures for those companies with a 31 December financial year that need to hold their AGMs by 31 May 2020, providing a two month no action period and enabling hybrid virtual AGMs.

Individuals

Early release of superannuation

From mid-April, individuals in financial distress will be able to access up to $10,000 of their superannuation in 2019-20, and a further $10,000 in 2020-21. The withdrawals will be tax free and will not affect Centrelink or Veterans’ Affairs payments.

To be eligible to access your superannuation you need to meet the following requirements:

  • you are unemployed; or
  • you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
  • on or after 1 January 2020:
    • you were made redundant; or
    • your working hours were reduced by 20% or more; or
    • if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20% or more.

For those eligible to access their superannuation, you can apply directly to the ATO through the myGov website from mid-April.

More: Early access to superannuation

Temporary reduction in minimum superannuation draw down rates

Superannuation minimum drawdown requirements for account-based pensions and similar products will be reduced by 50% in 2019-20 and 2020-21.

Age Default minimum drawdown rates (%) Reduced rates by 50 per cent for the 2019-20 and 2020-21 income years (%)
Under 65 4 2
65-74 5 2.5
75-79 6 3
80-84 7 3.5
85-89 9 4.5
90-94 11 5.5
95 or more 14 7

The upper and lower social security deeming rates will be reduced further. As of 1 May 2020, the upper deeming rate will be 2.25% and the lower deeming rate 0.25%.

More: Providing support for retirees

Time limited fortnightly $550 ‘coronavirus supplement’

For the next 6 months, the Government is introducing a new Coronavirus supplement to be paid at a rate of $550 per fortnight. This supplement will be paid to both existing and new recipients in the eligible payment categories.

The payment will be made to those receiving:

  • Jobseeker payment (and those transitioning to the jobseeker payment)
  • Youth allowance jobseeker
  • Parenting payment
  • Farm household allowance
  • Special benefits recipients

In addition, eligibility to income support payments will be expanded to:

  • Permanent employees who are stood down or lose their job
  • Casual workers
  • Sole traders
  • The self-employed
  • Contract workers who meet the income test

The Government notes that these criteria could include those required to care for someone affected by the Coronavirus. Asset testing has also been reduced and will be waived for 6 months. Income testing will still apply. The payment is not available if you have access to any employer entitlements such as annual or sick leave or income protection insurance.

More: Income support for individuals

Second $750 payment to households

The Government is now providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders residing in Australia (see the full list here). The payment will be exempt from taxation and will not count as income for the purposes of Social Security, Farm Household Allowance and Veteran payments.

  • Payment 1 from 31 March 2020 (previously announced on 12 March): Available to people who are eligible payment recipients and concession card holders at any time between 12 March 2020 to 13 April 2020;
  • Payment 2 from 13 July 2020: Available to people who are eligible payment recipients and concession card holders on 10 July 2020.

The payments will be made automatically to those that meet the criteria.

More: Payments to support households 

Bankruptcy safety net

A temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will increase from $5,000 to $20,000. In addition, the time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.

Where someone declares their intention to enter voluntary bankruptcy, the period of protection from unsecured creditors will be extended from 21 days to 6 months.

More: Temporary relief for financially distressed businesses

More information:

Read More
Superannuation guarantee amnesty September deadline

Superannuation guarantee amnesty September deadline

The long-awaited superannuation guarantee amnesty bill has now passed both houses and received royal assent. Employers will have until 7 September to disclose historical non-compliance before tougher penalties apply.

  • One-off opportunity to fix historical SG problems
  • What to do and when to do it
  • Avoid higher penalties that apply if you don’t use the amnesty

As previously spoken of in a blog on 29th of October the Superannuation Guarantee (SG) Amnesty has now officially passed legislation in Parliament and received royal assent. This SG amnesty provides for a one-off amnesty to encourage employers to self-correct historical SG non-compliance dating from 1 July 1992 to 31 March 2018.

The amnesty period will begin from 24 May 2018 to 7 September 2020, giving employers six months to get their SG affairs in order before a 100 percent minimum penalty applies. The new legislation will also impose minimum penalties on employers who fail to come forward during the amnesty period by limiting the commissioner’s ability to remit penalties below 100 per cent of the amount of SG charge payable.

Around 7,000 employers have since come forward to voluntarily disclose historical unpaid super since the amnesty was first announced on 24 May 2018. Treasury estimates an additional 7,000 employers will come forward during the six-month amnesty period, returning $230 million of superannuation to employees who may have otherwise completely missed out.

Given the complexity of the SG system and how difficult it can be to determine whether a worker is an employee, we expect many businesses are likely to have SG problems but don’t know it yet. As the amnesty period will end six months after receiving Royal Assent we urge you to get in touch with your accountant to begin taking advantage of the amnesty before harsher penalties apply.

Please contact us on 02 9415 1511 or email reception@primeadvisory.com.au.

Read More
Support to get on track after the bushfires

Support to get on track after the bushfires

This 2019-2020 Australian bushfire season has seen over 18 million hectares burnt, destroying over 5,900 buildings including 2,800 homes. Lives and wildlife have been lost and the cost runs into the billions in lost revenue and clean-up costs.

With approximately 3.5 million businesses, individuals, and self-managed superfunds in the bushfire affected areas, the ATO have granted the following special concessions and relief to the affected postcodes;

  • An automatic extension until 28 May 2020 to lodge and pay activity statements, income tax, SMSF and FBT lodgements. The deferral does not apply to: Superannuation guarantee payments or lodgements, Large PAYG withholders (although they will be assessed on a case by case basis if they apply for relief from the ATO)
  • Fast tracking of refunds due
  • Income tax instalments able to be varied to nil without penalty
  • Tax debt recovery on hold until 28 May 2020.
    • Impacted taxpayers need to apply for special consideration. The ATO has stated they will, “consider releasing individuals and businesses from income tax and fringe benefits tax debts if they are experiencing serious hardship.”
    • Interest and penalties accrued by taxpayers in affected areas since the bushfires commenced will be remitted

Support for individuals and families is also provided through the disaster recovery payments, (a tax exempt Federal Government payment), available for those who are seriously injured, have lost an immediate family member or have lost or had significant damage to their home or major assets. Relief includes;

  • $1,000 for each eligible adult, and
  • $400 for each dependent child under the age of 16.
  • An additional $400 to help with education expenses for eligible children. These payments are automatic if you are the primary carer of a child affected by the bushfires after 30 June 2019.

Businesses are also eligible for support if they have suffered direct or indirect economic losses and may be eligible to access;

  • Recovery grants of up to $50,000 (tax free)
  • Concessional loans of up to $500,000 for eligible small businesses (including farmers, fishers and foresters) and non-profit organisations who have suffered significant asset loss or significant loss to revenue. The loan would be for up to 10 years and used for the purposes of restoring or replacing damaged assets and for working capital.
  • A range of State Government grants are also available.

The brave volunteer firefighters in NSW and QLD will also be eligible for payments of up to $300 per day, with a cap of $6,000. The payments will not be means tested and are tax-free, NSW and QLD.

If you have been affected by the fires this bushfire season and would like assistance in claiming and understanding your eligibility, please get in touch with the team today on 9415 1511 or email reception@primeadvisory.com.au.

Read More
‘Lifestyle assets’ – the next ATO target

‘Lifestyle assets’ – the next ATO target

As the ATO cracks down on taxpayers with their recent data matching program rollout,  this will now allow the matching of “lifestyle assets” such as yachts, fine arts and thoroughbred horses by requesting insurance policy information from 30 insurers which will assist to automate compliance activity.  The existence of an insurance policy could alert the ATO of the taxpayer’s wealth and identify where the taxpayer has non disclosure their all their assets.   

The ATO expect 350,000 taxpayers to be impacted by this review as they reveal undisclosed or unreported income from the 2015-16 financial year to today. Deputy Commissioner Deborah Jenkins says, “If a taxpayer is reporting a taxable income of $70,000 to us but we know they own a three million dollar yacht then this is likely to raise some red flags,” Deputy Commissioner Deborah Jenkins said. 

The ATO is looking for: 

  • under-reporting of income and mismatches between lifestyle assets and reported income,  
  • the purchase of assets in a company name but where those assets are used for private purposes (incorrect claims or non-reporting of GST credits, FBT, Division 7A, capital gains tax), and
  • lifestyle assets purchased by self-managed superannuation funds that might breach the sole purpose test. 

Unsure what that may mean for you and need some advice? Get in touch today 02 9415 1511 or email reception@primeadvisory.com.au. 

Read More

SIGN UP

For our free e-newsletter

TAKE A HEALTH CHECK

For our free e-newsletter

Personal