Practice Update July 2021
24 June 2021
GROW YOUR BUSINESS WITH THE JOBMAKER HIRING CREDIT
The JobMaker Hiring Credit scheme’s second claim period is now open.
If you have taken on additional young employees between 7 January and 6 April 2021 you may be eligible to claim JobMaker Hiring Credit payments for them.
Under the scheme, eligible employers can receive payments of up to:
- $10,400 over a year for each additional eligible employee aged 16 to 29 years.
- $5,200 over a year for each additional eligible employee aged 30 to 35 years.
This can help with the cost of growing your business as you increase your employee headcount and payroll.
You can register at any time for the JobMaker Hiring Credit until the scheme ends.
You only need to register once, before the end of the claim period for the first JobMaker period you want to claim for.
If you are already participating in the scheme, make sure you still meet the eligibility criteria before claiming for this period.
FLEXIBLE SUPER – REDUCING THE ELIGIBILITY AGE FOR DOWNSIZER CONTRIBUTIONS
On 11 May 2021, as part of the 2021–22 federal Budget, the Australian Government announced it will reduce the eligibility age for downsizer contributions from 65 to 60 years old.
This measure is not yet law.
From 1 July 2022, eligible individuals aged 60 years or older can choose to make a downsizer contribution into their superannuation of up to $300,000 per person ($600,000 per couple) from the proceeds of selling their home.
TEMPORARY LOSS CARRY BACK EXTENSION
On 11 May 2021, as part of the 2021–22 federal Budget, the Australian Government announced it will extend the loss carry back measure by one year.
This measure is not yet law.
On 6 October 2020 as part of the 2020–21 federal Budget, the Australian Government announced that it will target support to businesses and encourage new investment through a loss carry back regime. Eligible corporate entities that previously had an income tax liability in a relevant year and have subsequently made taxable losses can claim a refundable tax offset up to the amount of their previous income tax liabilities.
The measure interacts with the announcement on JobMaker Plan – temporary full expensing to support investment measure. This will allow new investment to generate significant tax losses which can then be carried back to generate cash refunds for eligible businesses.
Eligible corporate entities with less than $5 billion turnover in a relevant loss year can carry back losses made in 2019–20, 2020–21 and 2021–22 income years to a prior year’s income tax liability in the 2018–19, 2019–20 and 2020–21 income years.
The amount of the tax offset is limited by the corporate entity’s income tax liabilities in the relevant gain years and its franking account balance at the end of the year in which the entity files its tax return claiming the loss carry back tax offset (that is, in the 2020–21 or 2021–22 income year).
The law commenced on 1 January 2021. If eligible, corporate entities can claim the tax offset in their tax returns for the 2020–21 and 2021–22 income years.
Further guidance on this measure including how to claim the tax offset is included in the relevant company tax returns, instruction guide.
INCREASED POWERS FOR THE AAT CONCERNING SMALL BUSINESS TAXATION DECISIONS
On 8 May 2021, as part of the 2021–22 federal Budget, the Australian Government announced it will make it easier for small businesses to pause debt recovery action.
This measure is not yet law.
The changes will allow the Administrative Appeals Tribunal (AAT) to pause or modify ATO debt recovery actions, such as garnishee notices and the recovery of general interest charges or related penalties until the underlying dispute is resolved by the AAT.
Small business entities (including individuals carrying on a business) with an aggregated turnover of less than $10 million per year will be eligible to use this streamlined approach.
Currently, small businesses are only able to pause or modify ATO debt recovery actions through the court system, which can be costly and time-consuming. These new powers for the AAT will be available for proceedings commenced on or after the date of royal assent of the legislation.
PROPOSED FRINGE BENEFITS TAX EXEMPTION – RETRAINING AND RESKILLING
The government announced it will introduce an FBT exemption for employer-provided retraining and reskilling benefits provided to redundant (or soon to be redundant) employees where the benefits may not be related to their current employment.
It is proposed that this exemption will not apply for retraining acquired by way of a salary packaging arrangement. It will also not be available for Commonwealth-supported places at universities, which already receive a benefit. It will not extend to repayments towards Commonwealth student loans.
If enacted this measure is intended to apply from the announcement (that is, from Friday, 2 October 2020). You lodge your FBT return applying the current legislation and amend, if necessary when the announced changes become law.
THE BLACK ECONOMY EXPLAINED
The ATO has maintained its focus on the Black Economy and released further information.
The ATO maintains the black economy is not limited to tax issues. It is a complex, multi-faceted phenomenon operating across Australia’s workplace relations, financial, welfare, procurement, and migration systems.
Black economy activities are not victimless crimes. They have harmful consequences such as:
- Workers missing out on their entitlements (for example, proper wages, leave, or employee protection).
- Honest businesses being undercut by dishonest businesses that do not pay the tax or superannuation they are supposed to.
- Criminals operating business models outside regulatory systems, and funding organised crime.
The black economy puts pressure on Australians who are doing the right thing. It also has broader impacts on our community by reducing funds for essential services such as health, education, transport, and infrastructure, and funding for disaster response and other community services.
Black economy behaviours include:
- demanding or paying for work cash-in-hand to avoid obligations
- not reporting or under-reporting income
- underpayment of wages
- visa fraud and bypassing visa restrictions
- identity fraud
- ABN, GST, and duty fraud
- dealing in illegal drugs and tobacco
- sham contracting – presenting an employment relationship as a contracting arrangement
- illegal phoenixing – liquidating and re-forming a business to avoid obligations
- excise evasion
- money laundering
- unregulated gambling
- dealing in counterfeit goods.
SIMPLIFIED TRADING STOCK RULES
You can use the simplified trading stock rules if you:
- Are a small business with an aggregated turnover of less than $10 million a year (or from 1 July 2021, with an aggregated turnover of less than $50 million a year).
- Estimate that the value of your trading stock changed by less than $5,000 in the year.
If you use simplified rules, you do not have to:
- Conduct a formal stocktake.
- Account for the changes in your trading stock’s value.
ATO WARNS ON ‘COPY/PASTING’ CLAIMS
The ATO is alerting taxpayers that its sights are set on work-related expenses like car and travel claims that are predicted to decrease in this year’s tax returns.
Overall, around 8.5 million Australians claimed nearly $19.4 billion in work-related expenses in their 2020 tax returns. COVID-19 has changed people’s work habits, so it is expected that their work-related expenses will reflect this.
But, if you are working at home, the ATO would not expect to see claims for travelling between worksites, laundering uniforms, or business trips.
Last year, the value of car and travel expenses decreased by nearly 5.5%. However, there was a slight increase of around 2.6% in clothing expenses. With uniform and laundry claims significantly lower, this increase was driven by frontline workers’ first-time need for things like hand sanitiser and face masks.
According to the ATO
- While it is good to see most people have been doing the right thing, ATO data analytics will be on the lookout for unusually high claims this tax time. Particularly where someone’s deductions are much higher than others with a similar job and income.
- The ATO will also look closely at anyone with significant working from home expenses, that maintains or increases their claims for things like car, travel, or clothing expenses.
- You cannot simply copy and paste previous year’s claims without evidence.
- But the ATO is aware some of these unusual claims may be legitimate. If you explain your claim with evidence, there is nothing to fear.
- The ATO also wants to reassure the community that they will be sympathetic to legitimate mistakes where good faith efforts have been made. However, where people are detected deliberately claiming things they are not entitled to, firm action will be taken.
During 2020, the ATO had to shift focus on getting stimulus benefits out the door as quickly as possible to support so many businesses in need.
In 2021, the ATO will be continuing to balance its role in supporting taxpayers through this very challenging time, while recommencing its focus on addressing overclaiming of work-related expenses.
How has COVID-19 changed work-related expenses?
Working from home expenses
The temporary shortcut method for working from home expenses is available for the full 2020-21 financial year. This allows an all-inclusive rate of 80 cents per hour for every hour people work from home, rather than needing to separately calculate costs for specific expenses.
All you need to do is multiply the hours worked at home by 80 cents, keeping a record such as a timesheet, roster, or diary entry that shows the hours you have worked.
Remember – the shortcut method is temporary. If you want to claim part of an expense over $300 (such as a desk or computer) in future years, you need to keep your receipt.
Personal Protective Equipment (PPE)
If your specific duties require physical contact or close proximity to customers or clients, or your job involves cleaning premises, you may be able to claim items such as gloves, face masks, sanitiser, or anti-bacterial spray.
This includes industries like healthcare, cleaning, aviation, hair and beauty, retail, and hospitality.
To claim your PPE, you will need to have purchased the item for use at work, paid for it yourself, and not been reimbursed. You also need a record to support your claim – a receipt is best.
Clothing and laundry, self-education, car, and travel expenses
In 2020, the ATO saw a decrease in the value of work-related expenses for cars, travel, non-PPE clothing, and self-education as a result of the introduction of travel restrictions and limits on the number of people who could gather in groups. The ATO expects this trend to continue in the 2021 tax returns.
If an employee is working from home due to COVID-19 but needs to travel to their regular office sometimes, they cannot claim the cost of travel from home to work as this is still a private expense.
Case study – overclaiming work-related expenses
A Canberra administrative worker fraudulently received nearly $7,000 in refunds after claiming work-related car, travel, clothing, and self-education expenses he was not entitled to. He had his fraudulent claims knocked back in 2014 after he could not provide any receipts, instructing the ATO to “just process the return”. He tried it on again in his 2015 and 2016 returns, this time providing a fake letter from his employer.
Given the brazen and repetitive nature of the fraud, the taxpayer was prosecuted and now has a criminal record. He was also fined $1,800.
SUPPORTING RETIREES WITH EXTENSION OF THE TEMPORARY REDUCTION IN SUPER MINIMUM DRAWDOWN RATES
On 29.5.2021 the Federal Government announced an extension of the temporary reduction in superannuation minimum drawdown rates for a further year to 30 June 2022.
As part of the response to the coronavirus pandemic, the Government responded immediately and reduced the superannuation minimum drawdown rates by 50 per cent for the 2019-20- and 2020-21-income years, ending on 30 June 2021.
Today’s announcement extends that reduction to the 2021-22 income year and continues to make life easier for our retirees by giving them more flexibility and choice in their retirement.
For many retirees, the significant losses in financial markets as a result of the COVID-19 crisis are still having a negative effect on the account balance of their superannuation pension.
This extension builds on the additional flexibility announced in the 2021-22 Budget.
The Federal Government will continue to support retirees as part of their plan to secure Australia’s economic recovery from COVID-19.
SUPER GUARANTEE RATE RISING 1 JULY
On 1 July 2021, the super guarantee rate will rose from 9.5% to 10%. If you have employees, you will need to ensure your payroll and accounting systems are updated to incorporate the increase to the super rate.
The super rate is scheduled to progressively increase to 12% by July 2025.
NEW R&D TAX INCENTIVE CUSTOMER PORTAL
The ATO has advised a new customer portal (https://incentives.business.gov.au/) has been launched to make it easier for companies to manage their applications for the Research and Development (R&D) tax incentive.
Applications can be submitted via the portal from 5 July 2021, but you can log in now to become familiar with the new portal and start drafting your application.
The portal includes:
- An online space for you, and your authorised representatives, to manage your company’s interactions with the R&D tax incentive program.
- An updated application form – making it clearer for you to understand the eligibility criteria and how to address these in your application.
- Improved security using myGovID digital identity services, linked to your company’s ABN using Relationship Authorisation Manager (RAM).
In the future, you will also be able to use the portal to apply for and manage your Advance and Overseas Finding applications, request to withdraw or vary your R&D tax incentive application, apply for an extension of time, and even check the status of your submitted applications.
The new customer portal help and support page includes videos to help you access and complete your application, including a walk-through of the portal.
COLLECTABLES AND PERSONAL USE ASSETS (SMSFs)
This issue comes up time and again for SMSFs with trustees/members wanting to invest in collectables and personal use assets including:
- artworks
- jewellery
- vehicles
- boats
- wine
Investments in such items must be made for genuine retirement purposes, not to provide any present-day benefit.
Collectables and personal use assets cannot be:
- Leased to, or part of a lease arrangement with, a related party.
- Used by a related party.
- Stored or displayed in a private residence of a related party.
In addition:
- Your investment must comply with all other relevant investment restrictions, including the sole purpose test.
- The decision on where the item is stored must be documented (for example, in the minutes of a meeting of trustees) and the written record kept.
- The item must be insured in the fund’s name within seven days of the fund acquiring it.
- If the item is transferred to a related party, this must be at market price as determined by a qualified, independent valuer.
- As with all fund assets, check prior to purchase that they are not encumbered in any way (you can use the Australian financial security authority’s personal properties security register to ensure that collectables and personal use assets have no security interests over them prior to your purchase).
For collectables and personal use assets you held before 1 July 2011 you had until 30 June 2016 to comply with these rules.
G7 NATIONS AGREE ON A 15 PER CENT GLOBAL TAX RATE FOR MULTINATIONAL COMPANIES
The G7 nations have reached a landmark deal to pursue higher global taxation on multinational businesses such as Google, Apple, and Amazon.
The group of seven large, advanced economies including the United States and the United Kingdom has agreed to back a minimum global corporate rate of at least 15 per cent and for companies to pay more tax in the markets where they sell goods and services.
The deal means hundreds of billions of dollars could flow into the coffers of G7 governments left cash strapped by the Covid-19 pandemic.
The deal sealed after years of negotiation aims to end national digital services taxes levied by Britain and other European countries that the United States considered unfair to US technology giants.
These measures will still need to be ratified at a meeting of the G20 – which includes the emerging economies – due to take place in July in Venice.
For some years G7 nations have been unable to agree on a way to raise more revenue from the likes of including Google, Amazon, and Facebook. These large multinationals often book profits in jurisdictions where they pay little or no tax.
The Joe Biden administration paved the way fresh by proposing a minimum global corporation tax rate of 15 per cent.
While Germany and France have welcomed the agreement, French Finance Minister Bruno Le Maire wants a higher global minimum corporate tax rate than 15 per cent, which he has described as a “starting point”.
The tax proposal will allow countries to tax a share of the profits earned by companies that have no physical presence but have substantial sales, for instance through selling digital advertising.
The G7 nations will then tax their home companies’ overseas profits at a rate of at least 15 per cent.
This is aimed at preventing accounting schemes to shift profits to a few very low-tax countries because earnings untaxed overseas would face a top-up tax in the headquarters country.
REMINDER…. FOR ALL EMPLOYERS FROM 01 JULY 2021
Minimum wage increases 2.5% and Superannuation Guarantee increases for all employees from 01 July 2021 to 10%.
The Fair Work Commission has handed down its decision regarding the minimum wage increases, the new minimum wage is now $772.60 or $20.33 which represents a 2.5% increase across all awards.
Most of the increases are effective from the first full pay period from 01 July 2021.
There are exceptions the General Retail Award wage increases are effective from 01 September 2021.
The following awards do not have their increases until the first full pay period from 01 November 2021:
Air Pilots Award 2020 / Aircraft Cabin Crew Award 2020 / Airline Operations – Ground Staff Award 2020
Airport Employees Award 2020 / Air services Australia Enterprise Award 2016 / Alpine Resorts Award 2020
Amusement, Events, and Recreation Award 2020 / Dry Cleaning and Laundry Industry Award 2020 / Fitness Industry Award 2020
Hair and Beauty Industry Award 2010 / Hospitality Industry (General) Award 2020 / Live Performance Award 2020
Mannequins and Models Award 2020 / Marine Tourism and Charter Vessels Award 2020 / Nursery Award 2020
Racing Clubs Events Award 2020 / Racing Industry Ground Maintenance Award 2020 / Registered and Licensed Clubs Award 2020
Restaurant Industry Award 2020 / Sporting Organisations Award 2020 / Travelling Shows Award 2020
Wine Industry Award 2020.
Please do not forget that Superannuation Guarantee increases for all employees from 01 July 2021 to 10%.
Personal super contribution and deductions
Don’t let taxes dampen your holiday spirit! Just like Santa carefully checks who’s naughty or nice, businesses need to watch the tax rules when spreading Christmas cheer. Hosting festive parties for employees or clients can lead to Fringe Benefits Tax (FBT). FBT is a tax employers pay when they provide extra perks to employees, their families, or associates. It’s separate from regular income tax and is based on the value of the benefit. The FBT year runs from 1 April to 31 March, and businesses must calculate and report any FBT they owe. With a bit of planning—just like Santa’s perfect delivery route—you can celebrate while keeping your tax worries in check! FBT exemption: A little Christmas gift from the taxman The tax rules include a “minor benefit exemption”—like a small stocking stuffer. If the benefit given to each employee costs less than $300 and isn’t a regular thing, it’s exempt from Fringe Benefits Tax (FBT). Christmas parties fit perfectly here because they’re one-off events. Businesses can avoid FBT hassles if the cost per employee stays under $300. Remember: the more often you give out perks, the less likely they’ll qualify for this exemption. Thankfully, Christmas only comes once a year! Christmas parties at the office If you host your Christmas party at your business premises during a regular workday, costs like food and drinks are FBT-free, no matter how much you spend. However, you can’t claim a tax deduction or GST credits for those expenses. If employees’ family members join and the cost per person is under $300, there’s still no FBT, but again, no tax deduction or GST credits can be claimed. However, FBT will apply if the cost is over $300 per person. The good news is that you can claim both a tax deduction and GST credits in that case. FBT check for Christmas parties at the office Who attendsCost per personDoes FBT applyIncome tax deduction/Input Tax Credit available? Employees onlyUnlimitedNoNoEmployees and their familyLess than $300NoNoMore than $300YesYesClientsUnlimitedNoNo Think of it like this: at your Christmas party, the food and drinks are like Santa’s bag of gifts – no dollar limit exists for employees enjoying them on business premises. But if you add a band or other entertainment, the costs can add up quickly, and if the total cost per employee exceeds $300, FBT kicks in. Keep it under $300 per person, and you’re in the clear. Christmas parties outside the office If you hold your Christmas party at an external venue, like a restaurant or hotel, it’s FBT-free as long as the cost per employee (including their family, if they come) is under $300. But remember, you can’t claim a tax deduction or GST credits in this case. FBT will apply if the cost exceeds $300 per person, but you can claim a tax deduction and GST credits. Good news: employers don’t have to pay FBT for taxi rides to or from the workplace because there’s a special exemption. FBT check for Christmas parties outside the office Who attendsCost per personDoes FBT applyIncome tax deduction/Input Tax Credit available? Employees onlyLess than $300NoNoMore than $300YesYesEmployees and their familyLess than $300NoNoMore than $300YesYesClientsUnlimitedNoNo Clients at the Christmas party If clients attend the Christmas party, there’s no FBT on the expenses related to them, no matter where the party is held. However, you can’t claim a tax deduction or GST credits for part of the costs that apply to clients. Christmas gifts Many employers enjoy giving gifts to their employees during the festive season. If the gift costs less than $300 per person, there’s no FBT, as it’s usually not considered a fringe benefit. FBT check for Christmas gifts Who attendsCost per personDoes FBT applyIncome tax deduction/Input Tax Credit available? Entertainment giftsLess than $300NoNoMore than $300YesYesNon-entertainment giftsLess than $300NoYesMore than $300YesYes However, FBT might apply if the gift is for entertainment. Entertainment gifts include things like tickets to concerts, movies, or holidays. Non-entertainment gifts—like gift hampers, vouchers, flowers, or a bottle of wine—are usually FBT-free if under $300. So spread the festive cheer, but keep an eye on the taxman to avoid surprises!
29 + Years of Experience
We offer specialised accounting, taxation, SMSF and bookkeeping services to our professional clients. Borg & Salce are based in Epping, Victoria and provide our service to clients around the city of Whittlesea, but also to other areas including the northern suburbs, greater Melbourne, metro and nationally.
Ph: 03 9408 9633
Fax: 03 9408 9644
9am to 5.30pm Monday to Friday and Saturday By Appt Only
738A High Street, Epping, VIC 3076