Practice Update May 2020

3 May 2020

Coronavirus: Government’s JobKeeper Payment

A major part of the Government’s response to the Coronavirus (or 'COVID-19') pandemic is the ‘JobKeeper Payment’ Scheme.
The JobKeeper Payment is a wage subsidy that will be paid through the tax system (i.e., it will be administered by the ATO) to eligible businesses impacted by COVID-19.
Under the scheme, eligible businesses will receive a payment of $1,500 per fortnight per eligible employee and/or for one eligible business participant (i.e., an eligible sole trader, partner, company director or shareholder, or trust beneficiary).
The subsidy will be paid for a maximum period of six months (i.e., from 30 March 2020 up until 27 September 2020). It will be paid to eligible businesses monthly in arrears, with the first payments to employers commencing from the first week of May 2020.
The JobKeeper Payment will ensure that eligible employees (and, where applicable, eligible business participants) receive a gross payment (i.e., before tax) of at least $1,500 per fortnight for the duration of the scheme.

An employer will only be eligible to receive a JobKeeper Payment in respect of an ‘eligible employee’ if, at the time of applying:

 for employers with an aggregated annual turnover of $1 billion or less - the employer estimates that their projected GST turnover has fallen (or is likely to fall) by 30% or more; or
 for employers with an aggregated annual turnover of more than $1 billion - the employer estimates that their projected GST turnover has fallen (or is likely to fall) by 50% or more; and
 the employer is not specifically excluded from the scheme (e.g., one that is subject to the Major Bank Levy, one that is in liquidation, etc.).
For an employer that is registered as a charity with the Australian Charities and Not-for-Profits Commission (excluding universities and non-government schools registered as charities, which are subject to the 30% or 50% decline in turnover tests, as outlined above), a 15% decline in turnover test applies.
Importantly, eligible employers must actually elect to participate in the JobKeeper Scheme via an application to the ATO. In making such an application, an employer will also need to:
 Provide information to the ATO on all eligible employees (i.e., confirming the eligible employees were engaged as at 1 March 2020 and are currently employed by the business, including those who have been stood-down or re-hired). Treasury has indicated that, for most businesses, the ATO will use Single Touch Payroll (‘STP’) to pre-populate these details.
 Continue to provide information to the ATO on a monthly basis, including the number of eligible employees employed by the business and details of its turnover.
The ATO has available on its website an online form which can be used by employers to register their interest in the JobKeeper Payment Scheme.
Editor: Please contact our office If you have any queries in relation to the JobKeeper Scheme.
 
Shortcut method to claim deductions if working from home
As the situation around COVID-19 continues to develop, the ATO understands many employees are now working from home. To make it easier when claiming a deduction for additional running costs you incur as a result of working from home, special arrangements have been announced.
A simplified method has been introduced that allows you to claim a rate of 80 cents per hour for all your running expenses, rather than having to calculate the additional amount you incurred for specific running expenses.
This simplified method will be available to use from 1 March 2020 until 30 June 2020. You may still use one of the existing methods to calculate your running expenses if you would prefer to.

You can claim a deduction of 80 cents for each hour you work from home due to COVID-19 as long as you are:

 Working from home to fulfil your employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls; and
 Incurring additional deductible running expenses as a result of working from home.
You do not have to have a separate or dedicated area of your home set aside for working, such as a private study.
Editor: Please contact our office if you need more information about this deduction.

SMSFs may be able to offer rental relief to related party tenants
As a result of the financial effects of the COVID-19 pandemic, some self-managed superannuation funds (‘SMSFs’) which own real property may want to give a tenant – who is a related party – a reduction in rent because the related party tenant has had a collapse in revenue.
Charging a related party a price that is less than market value is usually a contravention of the strict legislative rules SMSFs and their trustees are required to follow. 
The ATO has recently advised that its approach for the 2019–20 and 2020–21 financial years is that it will not take action if an SMSF gives a tenant – even one who is also a related party – a temporary rent reduction, waiver or deferral because of the financial effects of COVID-19 during this period.
If there are temporary changes to the terms of the lease agreement in response to COVID-19, it is important that the parties to the agreement document the changes and the reasons for the change. You can do this with a minute or a renewed lease agreement or other contemporaneous document.  
Editor: Please contact our office if you have an SMSF that could be impacted by a lease with a tenant, where the tenant cannot afford to pay some or all of its rent because of the economic consequences of COVID-19.
 
ATO reminder about salary packaged super
The ATO has provided employers with a recent reminder that, from 1 January 2020, there has been a legislative change to ensure that when an employee sacrifices pre-tax salary in return for an additional concessional contribution into superannuation, it will not result in a reduction in the 9.5% Superannuation Guarantee (‘SG’) obligation their employer has even though doing so reduced their Ordinary Time Earnings.
The ATO has provided information for employers, payroll software providers and intermediaries who may need to change the way they calculate SG.
The ATO advises that, from 1 January 2020, you calculate the minimum amount of SG on the employee's ‘OTE base’. This is the sum of the employee's OTE and any OTE amounts they sacrifice in return for super contributions.
Additionally, super contributions to an employee's fund under an effective salary sacrifice arrangement no longer count towards an employer’ super guarantee obligations.
Editor: If your business allows for salary sacrifice arrangements, feel free to contact our office to ensure that you are calculating SG correctly.
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

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18 December 2024
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!

Christmas hours

28 November 2024
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