TAX SAVING STRATEGIES

 

Even with the final day of the financial year to go, traditionally, year-end tax planning for small businesses is based around two simple concepts (i.e., Accelerating business deductions and deferring income).  Consideration will obviously also need to be given to the impact of the  COVID-19 pandemic on specific businesses as in itself has had the effect of reducing incomes and therefore tax payable.

Small Business Entities (‘SBEs’)  (i.e., Businesses with an aggregated turnover of less than $10 million) often have greater access to year-end tax planning due to particular concessions that only apply to them.  Taxpayers that qualify as an SBE can generally pick and choose which of the concessions they wish to use each year (although see below regarding the simplified depreciation rules).  The following are a number of areas that may be considered for all business taxpayers.

Maximising deductions for non-SBE taxpayers

Non-SBE business taxpayers should endeavour to maximise deductions by adopting one or more of the following strategies:

  • Prepayment strategies;
  • Accelerating expenditure; and
  • Accrued expenditure.

Prepayment strategies – non-SBE

Any part of an expense prepayment relating to the period up to 30 June is generally deductible.

In addition, non-SBE taxpayers may generally claim the following prepayments in full:

  • expenditure under $1,000;
  • expenditure made under a ‘contract of service’ (e.g., salary and wages); or
  • expenditure required to be incurred under law.

Note:  Prepayments can be a little confusing, so before you commit to making a payment please feel free to email SMB Accounting with any queries or assistance if required.

Accelerating expenditure – non-SBE

This is where a business taxpayer brings forward expenditure on regular, on-going deductible items.  Business taxpayers are generally entitled to deductions on an ‘incurred basis’.  Therefore, there is generally no requirement for the expense to be paid by 30 June 2020 (i.e., as long as the expense has genuinely been ‘incurred’).

Checklist

The following may act as a checklist of possible accelerated expenditure:

  • Depreciating assets – Non-SBEs that have an  aggregated annual turnover of less than $50 million can claim an immediate deduction for eligible assets costing less than $30,000 for any assets acquired and first used (or installed ready for use) from 7:30pm (AEDT) 2 April 2019 to before 12 March 2020.
    From 7:30pm (AEDT) on 2 April 2019 and first used (or installed ready for use) from 12 March 2020 to 30 June 2020 this has been increased to $150,000.
    Depreciating assets costing $100 or less can be written off in the year of purchase and depreciating assets costing less than $1,000 can be allocated to a low value pool and depreciated at 18.75% (which is half of the full rate of 37.5%) in their first year, regardless of the date of purchase.
    Finally, a 50% accelerated depreciation concession may apply for new eligible assets that start to be held and used (or installed ready for use) from 12 March 2020 to 30 June 2021.
  • Repairs.
  • Consumables/spare parts.
  • Advertising.
  • Superannuation – contributions to a complying superannuation fund, to the extent contributions are actually made (i.e., they cannot be accrued but must be paid by 30 June).

Accrued expenditure

Non-SBE taxpayers (and many SBE taxpayers – refer below) are entitled to a deduction for expenses incurred as at 30 June 2020, even if they have not yet been paid.

The following expenses may be accrued:

  • Salary or wages and bonuses – the accrued expense for the days that employees have worked but have not been paid as at 30 June 2020.
  • Interest – any accrued interest outstanding on a business loan that has not been paid.
  • Commissions – where employees or other external parties are owed commission payments.
  • Directors’ fees – where a company is definitively committed to the payment of a director’s fee as at 30 June 2020, it can be claimed as a tax deduction.

Maximising deductions for SBE taxpayers

Deductions can be maximised for SBE business taxpayers by accelerating expenditure and  prepaying deductible business expenses.

Accelerating expenditure – SBE 

In addition to accelerating other expenditure items, SBE taxpayers can choose to write-off depreciating assets costing less than $30,000 (or potentially  $150,000) in the year of purchase.*

Assets costing more than the relevant immediate asset write-off threshold are allocated to an SBE general pool and depreciated at 15% (or potentially at 57.5% for eligible new assets subject to the 50% accelerated depreciation concession) in their first year.  Therefore, where appropriate, SBE business taxpayers should consider purchasing/installing these items by 30 June 2020.

(*) The immediate asset write-off threshold was originally increased to ‘less than $30,000’, for eligible assets first used or installed ready for use between 7:30pm (AEDT) 2 April 2019 and 30 June 2020. 

The threshold was subsequently increased to $150,000 for eligible assets first used or installed ready for use from 12 March 2020 to 30 June 2020 as a result of the Government’s response to the COVID-19 pandemic.

Prepayment strategies – SBE

SBE taxpayers making prepayments before 1 July 2020 can choose to claim a full deduction in the year of payment where they cover a period of no more than 12 months (ending before 1 July 2020).

Otherwise, the prepayment rules are the same as for non-SBE taxpayers.

The kinds of expenses that may be prepaid include:

  • Rent on business premises or equipment.
  • Lease payments on business items such as cars and office equipment.
  • Interest – check with your financier to determine if it’s possible to prepay up to 12 months interest in advance.
  • Business trips.
  • Training courses that run on or after 1 July 2020.
  • Business subscriptions.
  • Cleaning.

 

Information Required

This is some of the information we will need to help us prepare your income tax return:

  • Stock-take details as at 30 June 2020.
  • Debtors listing (including a list of bad debts written off) as at 30 June 2020.
  • Note: In order to claim a deduction, the debt must be written off on or before 30 June.
  • Creditors listing as at 30 June 2020.

 

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 stephen@smbaccounting.com.au

 P 1300 854 159

JobKeeper Alternative Turnover Tests

The ATO has now determined alternative tests for various businesses in relation to the fall in turnover where there is not an appropriate relevant comparison period.

If your business satisfies the basic test, you do not need to go to any of the alternative tests as outlined.

The alternative tests can apply in the following circumstances:

1. the entity commenced business after the relevant comparison period (the business did not exist in that period)

2. the entity acquired or disposed of part of the business after the relevant comparison period (the business is not the same business in that period as it is now)

3. the entity undertook a restructure after the relevant comparison period (the business is not the same business in that period as it is now)

4. the entity’s turnover substantially increased by:

      • 50% or more in the 12 months immediately before the applicable turnover test period; or
      • 25% or more in the 6 months immediately before the applicable turnover test period, or
      • 12.5% or more in the 3 months immediately before the applicable turnover test period.

5. the entity was affected by drought or other declared natural disaster during the relevant comparison period

6. the entity has a large irregular variance in their turnover for the quarters ending in the 12 months before the applicable turnover test period, or

7. the entity is a sole trader or small partnership where sickness, injury or leave have impacted an individual’s ability to work which has affected turnover.

The Commissioner cannot determine an alternative decline in turnover test in all circumstances. It is only where there is an event or circumstance that is outside the usual business setting for entities of that class which results in the relevant comparison period in 2019 not being appropriate for measuring decline in turnover.

The Commissioner can also only determine a test for a class of entities and cannot make discretionary decisions for individual entities.

If you fall into more than one of the classes of entities covered by the alternative test, you can choose which alternative decline in turnover test to apply. You only need to satisfy one of the tests (it does not matter if you do not satisfy one of the other tests that applies to you).

We are providing calculation and enrollment into the JobKeeper system as a free complimentary service to our clients in order that those businesses survive these uncertain times.

DOWNLOAD ARTICLE – Jobkeeper Payment Alternate test – Update 4

 

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JobKeeper Guidance and Payment

Further information has now been released by Treasury to clarify the comparison period is for either;

      1. any monthly period from March 2020 to the end of September 2020 OR
      2. any quarterly period from April to June or July to September, compared to the same monthly or quarterly period in 2019.

Importantly, once this self-assessed test is met for either;

(a) a monthly period OR

(b) any quarterly period,

there is no requirement to re-test in later months or quarters.

Eg, if a business assesses that its turnover will fall by 30% in April 2020 compared to April 2019, the business retains its eligibility until the JobKeeper payments stop for all businesses at the end of September 2020, rrespective of its turnover in the months subsequent to April 2020. It is not required to estimate or determine turnover for subsequent periods.

In addition, where an entity does not qualify in the month eg April 2020, or the April to June quarter, it can re-test in later months or quarters.

The information acknowledges that comparing monthly or quarterly periods from April 2020 and onwards, to April 2019 and onwards, may not always be possible or may lead to unfair outcomes.

The result is, where the ATO is satisfied that there is no such comparison period in 2019 or there is not an appropriate relevant comparison period, the ATO Commissioner may, by legislative instrument, determine an alternative decline in the turnover test.

The two examples that have been given in the information release relate to;

  • businesses that were not in existence for the whole of the comparison period in 2019. (In the explanatory materials, the business is permitted to average its actual turnover, from October 2019 when it came into existence, to March 2020, and then compare that average to its estimated turnover in April 2020).
  • businesses that were impacted by a natural disaster during the 2019 comparison period

On a positive note, the ATO Commissioner will retain flexibility to apply other alternative tests and take into account other unique circumstances (aside from natural disaster and start-up businesses) confronted by a business (should the 2019 comparison period not be reflective of typical turnover).

Treasury, in a separate fact sheet, Supporting Business to Retain Jobs, has stated that these alternative tests may include eligibility being established as soon as a business temporarily ceased trading or where a business significantly curtails its operations.

The JobKeeper payments package began on 30 March 2020, legislation was only passed last week, and the pay periods prescribed relate to fortnightly pay periods and the ATO’s guidance has come during the second fortnightly pay period running from 13 April to 26 April.

Hence, the ATO will assume that the minimum payment of $1,500 (before tax) has been paid for each of the first two fortnights, even if it has been paid late, provided it is paid to the employee by the end of April.

Important: If employers do not continue to pay their employees for each pay period, they will cease to qualify for the JobKeeper payment.

“This means that employees can make two fortnightly payments of at least $1,500 per fortnight before the end of April, or a combined payment of at least $3,000 before the end of April,” the ATO said.

While the ATO has set out guidance on determining the decline in turnover test for businesses, it has yet to reveal the alternative tests for businesses where turnover periods are not appropriately comparable.

This will be passed on ASAP as soon as we receive such information.

Guidance for sole traders and businesses that operate in the form of a company, trust or partnership will also soon be provided by the Tax Office.

It is also important to note, it has been confirmed that the payment will be limited to one entitlement for each director of an entity, even if there are multiple business owners or participants.

How To Enrol and Apply for JobKeeper

There are eight (8) steps that businesses or their advisors have to take to enrol for JobKeeper:

  1. Register your interest and subscribe for JobKeeper payment updates
  2. Check your employees meet the eligibility requirements.
  3. Continue to pay at least $1,500 to each eligible employee per JobKeeper fortnight (the first JobKeeper fortnight is the period from 30 March to 12 April).
  4. Notify eligible employees that you are intending to claim the JobKeeper payment on their behalf and check they aren’t claiming JobKeeper payment through another employer or have nominated through another business. If they are receiving JobSeeker they need to notify Centerlink to cancel.
  5. Send the JobKeeper employee nomination notice to your nominated employees to complete and return to you by the end of April if you plan to claim JobKeeper payment for April.
  6. From 20 April 2020, I can enrol clients or you can enrol yourself with the ATO for the JobKeeper payment. You must do this by the end of April to claim JobKeeper payments for April.
  7. In the online form, provide your bank details and indicate if you are claiming an entitlement based on business participation, for example if you are a sole trader.
  8. Specify the estimated number of employees who will be eligible for the first JobKeeper fortnight (30 March – 12 April) and the second JobKeeper fortnight (13 April – 26 April).

Download Article – Jobkeeper Guidance

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If you need any assistance, please get in contact with us at

 stephen@smbaccounting.com.au

 P 1300 854 159

You may now be working from home more than ever and you will be incurring costs of working from home, outlined below are various details as to  what you can claim and how to claim those deductible expenses at tax time

In order to be able to claim, all of the following must apply:

      • You must have spent the money.
      • The expense must be directly related to earning your income.
      • You must have a record to prove it.

No deduction can be claimed for items that your employer has provided or where you have been reimbursed for the expense.

If you are not reimbursed by your employer, but instead receive an allowance from them to cover your expenses when you work from home, you:

      • must include this allowance as income in your tax return.
      • can claim a deduction as outlined.

Expenses you can claim

You will be able to claim a deduction for the additional running expenses you incur if you work from home,. These include:

      • electricity expenses associated with heating, cooling and lighting the area from which you are working and running items you are using for work
      • cleaning costs for a dedicated work area
      • phone and internet expenses
      • computer consumables (for example, printer paper and ink) and stationery
      • home office equipment, including computers, printers, phones, furniture and furnishings – you can claim either the:
        • full cost of items up to $300
        • decline in value for items over $300.

The  tracking of all of these expenses can be challenging so the ATO  will accept a temporary simplified method (or shortcut method) of calculating additional running expenses for the period starting 1 March 2020 until at least 30 June 2020. The ATO has also indicated they  may extend this method, depending on when work patterns start to return to normal (whatever that may be in the future).

Expenses you can’t claim

If you are working from home only due to COVID-19, you:

      • cannot claim occupancy expenses such as mortgage interest, rent and rates
      • cannot claim the cost of coffee, tea, milk and other general household items your employer may otherwise have provided you with at work.

Calculating running expenses

Additional Running Expenses can be claimed in 3 different methods:

      • shortcut method ─ claim a rate of 80 cents per work hour for all additional running expenses
      • fixed rate method ─ claim all of these:
        • a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value 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 the decline in value of 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.

For more information on how to calculate and claim a deduction under the actual cost method or fixed rate method see Employees Working Working From Home

Shortcut method

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,
      • 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.

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
      • the decline in value and repair of capital items, such as home office furniture and furnishings
      • cleaning expenses
      • your phone costs, including the decline in value of the handset
      • your internet costs
      • computer consumables, such as printer ink
      • stationery
      • the decline in value of a computer, laptop or similar device.

You do not have to incur all of these expenses, but you must have incurred additional expenses in some of those categories as a result of working from home due to COVID-19.

If you use the shortcut method to claim a deduction for your additional running expenses, you cannot claim a further deduction for any of the expenses listed above.

You must keep a record of the number of hours you have worked from home as a result of COVID-19. Examples are timesheets, diary notes or rosters.

If you use the shortcut method to claim a deduction and you lodge your 2019-20 tax return through myGov or a tax agent, you must include the note ‘COVID-hourly rate’ in your tax return.

Records you must keep

If you use the shortcut method, you only need to keep a record of the hours you worked at home, for example timesheets or diary notes.

If you use the other methods, you must also keep a record of the number of hours you worked from home along with records of your expenses. For more information on what those records are see Employees Working Working From Home.

 

 

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If you need any assistance, please get in contact with us at

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 P 1300 854 159

JobKeeper

In the third and largest economic stimulus package up to 6 million workers are set to be eligible for the $130 billion wage subsidy, known as the JobKeeper payment.

The flat $1,500 payment, which will be delivered by the ATO, will be paid to businesses, and will include businesses which have been structured through companies, partnerships, trusts and sole traders.

The full $1,500 a fortnight, before tax, to eligible employees will be required to pass on by employers.

Eligibility – businesses with a turnover of < $1 billion will need to self-assess a reduction in revenue of 30 per cent or more, relative to a comparable period a year ago.

Qualified employees will include those employed by the employer as at 1 March 2020, including those who have been stood down and retrenched workers can be re-employed to qualify for the JobKeeper payment.

How to apply and Participation in JobKeeper

  • Eligible businesses, will need to register an intention to apply on the ATO’s website. and additional information will come from the ATO about how and when claims for JobKeeper can be made.
  • A payment period is a rolling 14 day period commencing Monday 30 March 2020 and ending on Sunday 27 September 2020 (6 Months)
  • Information on the number of eligible employees engaged as at 1 March 2020 and those currently employed by the business, including those stood down or rehired, will need to be provided to the ATO, although the Tax Office will look to use Single Touch Payroll data to pre-populate the employee details for the business.
  • The ATO will make payments to the employers monthly in arrears, but the first payment will be sent in the first week of May and will be backdated to 30 March 2020 to allow employers to start paying their workers now.
  • Employers will be required to report the number of eligible employees employed by the business to the ATO on a monthly basis.
  • A normal payroll is run for employees and reported via Singe Touch Payroll (STP). The claims process will then be linked to STP to support the JobKeeper payment to the employer. If you do not use STP (eg Sole Trader, Trust Beneficiary, Director Fee, Dividend in Lieu of Labour etc) A manual claim process will apply.
  • The payment is treated as ordinary income for an employee and is subject to PAYG withholding tax.
  • An employer will be required to advise an employee if they have been nominated as an eligible employee for which an employer will be reimbursed a JobKeeper payment.

 

Contrived schemes and consequences

The legislation also makes clear that anyone who enters into or carries out a scheme for the sole or dominant purpose of obtaining a corona virus economic response payment will face a wide range of administrative and criminal sanctions, including up to 10 years’ imprisonment.

However, the legislation empowers the commissioner to call out any change in the financial position of any entity as part of a scheme designed to improperly pocket JobKeeper cash, and the ATO has extensive payback powers.

The legislation has clawback rules empowering the ATO to recover overpaid amounts and target those who weren’t entitled to payments received, plus interest.

 

Eligibility for employers

Definition of turnover:

For existing business:-

  • works on your BAS – if you are cash or accrual preparer. If you prepare your BAS as cash then you look at your Profit and Loss under a cash basis. If you are accrual then you check your PL as accrual. looking at the same period eg. Jan – March compared 2019 to 2020.

For the Start up business that has not been trading for over a year:

  • the ATO is working out how to report.

 

If your business turnover has not declined by 30% or 50% but is expected to at some point?

  • YES – Still go in and register.

I am self-employed Sole Trader, do I qualify?

  • YES – meeting some criteria – your 2019 income tax has been lodged prior to 12th of March 2020, Your BAS have been lodged

If I operate as a partnership, can each partner receive JobKeeper?

  • NO – only one (1)  partner can receive the JobKeeper payment

If I operate my business through a trust, can I receive the JobKeeper payment?

  • YES – but still only one (1) person can receive the JobKeeper

I operate as a company and usually pay myself a director fee. Can I receive JobKeeper payments?

  • YES –  One (1) shareholder or director can claim

As one of these types of businesses, how do I apply for the JobKeeper program?

  • it will be an online application

 

 Employees will be eligible if:

They are currently employed by an eligible employer or who were in that employment on 1 March 2020 and continue to be employed (even if currently stood down)

  • Is full-time, part-time or a casual who is employed on a regular and systematic basis or longer than 12 months as at 1 March 2020
  • Aged 16 years or older at 1 March 2020
  • An Australian citizen, a permanent visa holder or a special category holder ) eg 444 subclass) as at 1 March 2020.
  • Is a resident for Australian Income Tax purposes
  • Not in receipt of a JobKeeper payment from another employer.

I started with my employer after 1 March 2020 am I eligible for JobKeeper?

  • NO – only if you have been stood down

As a casual employee, how does JobKeeper affect me?

  • You need to be with the same employee for over 12 months.

If I am an employee on a fixed-term contract, how does JobKeeper affect me?

  • You are eligible if the contract started before the 1 March 2020

If my employer has put me on paid or unpaid leave can I still receive JobKeeper?

  • YES

If I am receiving Workers Compensation, can I receive Job Keeper payments?

  • YES – if you are doing light duties while still receiving Work Cover and some wages
  • NO – if you are only receiving work cover payments

What if I am on Parental Leave?

  • NO – You are not eligible to receive the JobKeeper

Where I have a salary sacrifice arrangement in place, how does the Job Keeper payment impact such an arrangement?

  • It does not any effect to your arrangement

 

Payments:

I have paid my employees, when does my business get reimbursed the JobKeeper payment?

  • The first week of May 2020

How often will the ATO make payments to my business?

  • Monthly in ARREARS

What is if pay my employees monthly not fortnightly?

  • the ATO will average it to fortnightly amounts, to make sure it has been passed on to the employee

If I have stood employees down after 1 March 2020 what do I do for these employees?

  • register and start paying the min $1500 per fortnight to the employees that are eligible

If my business is still operating and my employees are working do I still get a JobKeeper reimbursement?

  • Yes – please register

If I currently pay an employee less the $1500 per fortnight how am I impacted by the JobKeeper arrangement?

  • You must top up there pay to match the JobKeeper payment

If I currently pay an employee more than $1500 per fortnight how am I impacted by the JobKeeper arrangement?

  • the difference of their pay is out of the business
  • You must top up there pay to match the JobKeeper payment

If I currently pay an employee more than $1500 per fortnight how am I impacted by the JobKeeper arrangement?

  • the difference of their pay is out of the business

If I let my employees go after 1 March 2020, re-hire them and then immediately stand them down, what is the JobKeeper impact?

  • YES – they are eligible for JobKeeper when you bring them back, the employee must de-register from JobSeeker payments.

I don’t have enough funds to pay eligible employees until I receive the reimbursement, what should I do?

  • The JobKeeper must be paid in Arrears, there are many loans that you can apply for

If an employee resigns after I receive a JobKeeper payment, what must I do?

  • When you submit that months report to the ATO you take them off the list, if you employ a new person to replace them that employee is not eligible

How does PAYG withholding and Superannuation apply to a JobKeeper payment that I make to an employee?

  • PAYG is to be deducted from the employee and paid to the ATO via your BAS as per normal pay run.
  • Super is payable if the employee is still working.
  • Super is NOT payable if you are paying the JobKeeper to the employee as a stand-down (not working)
  • Super does not need to be paid on the difference of the employees pay if you are topping them up with the JobKeeper payment, eg. employee normally gets $1000 FT now gets $1500 super is only on the $1000 as per normal. It is up to the employer if you pay super on the extra $500.

If an employee I had to let go or was stood down is receiving a JobSeeker payment, how does JobKeeper impact both me and my employee?

  • Once you have advised the employee that they are on JobKeeper payments, the employee needs to tell Centerlink to cancel the JobSeeker payments. There will be data matching, note, the employee cannot claim both and they will need to pay back any amount they received unlawfully.

 Timing

The JobKeeper program is effective from 30 March 2020 and runs for 6 months until 27 September 2020. They will be made to eligible employers monthly in Arrears, with the first payment being made in the first week of May 2020.

Compliance and other issues

The JobKeeper program will be subject to ATO audit activity and there will be obligations on employers to establish their eligibility as well as that of their employees.

The ATO will cross-check payments with Services Australia data as well as other agencies to identify any multiple payments made.

There is further guidance coming from the ATO to assist businesses to assess eligibility, in particular, the ATO focus will be on ‘manipulation’ of turnover for a business that seeks to qualify. Businesses that are identified as ‘manipulation’ will face penalties.

Examples:

  1. Employer with employees on different wages

Greg owns a travel business with two employees. The business is still operating at this stage, but Greg expects that turnover will decline by more than 30 per cent in the coming months. The employees are:

  • Brooke, who is a permanent full-time employee on a salary of $2,000 per fortnight before tax and who continues working for the business; and
  • Zac, who is a permanent part-time employee on a salary of $800 per fortnight before tax and who continues working for the business.

Greg is eligible to receive the JobKeeper payment for each employee, which would have the following benefits for the business and its employees:

  1. The business continues to pay Brooke her full-time salary of $2,000 per fortnight before tax, and the business will receive $1,500 per fortnight from the JobKeeper payment to subsidise the cost of Brooke’s salary and will continue paying the superannuation guarantee on Anne’s income;
  2. The business continues to pay Zac his $800 per fortnight before tax salary and an additional $700 per fortnight before tax, totalling $1,500 per fortnight before tax. The business receives $1,500 per fortnight before tax from the JobKeeper payment which will subsidise the cost of Zac’s salary. The business must continue to pay the superannuation guarantee on the $800 per fortnight of wages that Zac is earning. The business has the option of choosing to pay superannuation on the additional $700 (before tax) paid to Nick under the JobKeeper payment.

Greg can register his initial interest in the scheme from 30 March 2020, followed subsequently by an application to the ATO with details about his eligible employees.

In addition, Greg is required to advise his employees that he has nominated them as eligible employees to receive the payment. Greg will provide information to the ATO on a monthly basis and receive the payment monthly in arrears.

2. Self-employed

Sienna is a sole trader running a florist. She does not have employees. Sienna’s business has been in operation for several years. The economic downturn due to the coronavirus has adversely affected Sienna’s business, and she expects that her business turnover will fall by more than 30 per cent compared to a typical month in 2019.

Sienna will be able to apply for the JobKeeper payment and would receive $1,500 per fortnight before tax, paid on a monthly basis.

 

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If you need any assistance, please get in contact with us at

 stephen@smbaccounting.com.au

 P 1300 854 159

 

On 7th April 2020, the Government announced SME Commercial Leasing Principles During CoVid 19 that is to be implemented between landlords and tenants through the COVID-19 crisis.

Throughout the pandemic and a reasonable recovery period the document appears to be very supportive of the Tenants (which is usually the business)

“Reasonable recovery period” is a term that is very noticeable throughout the document, and this flags the government’s aim to support businesses long term. Further provisions are to ensure that any agreed repayments can be stretched out over 24 months (or further if required) and are not onerous. Note this can even apply if the lease term has ended.

Basically, if your turnover is less than the $50M threshold and in addition the JobKeeper system applies, then the code should be applied to you as a tenant.

At the moment it is unclear how the code is going to be upheld in a legal sense as it is not intended to supersede legislation in each state, but it aims to compliment such legislation

It specifies that the landlords are to agree tailored, bespoke and temporary arrangements for each tenant

The code specifies:

    1. A lease cannot be terminated by the landlord due to non payment of rent during the period. This also includes for a reasonable subsequent recovery period
    2. The offer must be proportionate reductions up to 100% of any amount payable and refers to the pandemic period as well as the subsequent period
    3. At a minimum, the rent reduction should be the equivalent of the % decline in turnover (ie decrease of 50% in turnover, reduction in rent a minimum of 25%)
    4. Deferral

a) The repayment of this deferred amount should be over the great of the lease term remaining or 24 months

b) Any repayments should not start until the earlier of the Government ending the pandemic or the lease finishing

    1. Any discounts/decreases in statutory charges must be passed on (eg rate, land tax, or insurance proceeds)
    2. No fees/charges/interest can be applied
    3. Landlord cannot recover amounts owing from Security Bond
    4. Complete freeze on rental increases

Example: If your rent is $3,000

  • a 80% loss in turnover would result in a guaranteed 80% cash flow relief of $2,400 net rent $600.
  • At a minimum, half is provided as rent free/rent waiver ($1,200) for the proportion of which the qualifying tenant’s revenue has fallen.
  • Up to half ($1,200) could be through a deferral of rent, with this to be recouped over at least 24 months in a manner that is negotiated by the parties

Based on the examples provided, it appears that for whatever total % cashflow relief is agreed, the application of that % is for 50% rent abatement and 50% rental deferral.

The deferred payments are to be recouped over at least a 24 month period that would begin when the COVID-19 pandemic is officially over. This is in line with what we have been expecting and discussing with you all.

To know more about claiming a tax deduction for any of your expenses, or for help filling out the paperwork, please get in contact with us at

Please feel free to share to any person you may think may benefit 😊

If you need any assistance, please get in contact with us at

 stephen@smbaccounting.com.au

 P 1300 854 159

Just understand this is going to be tough, and when it gets tough you either dive, survive or thrive. It is our mission to ensure you thrive once the crisis is past and hopefully grow bigger and stronger on the other side.

You need to be proactive now! Hard decisions aren’t easy to make, that is why they are HARD. If you don’t make the decisions now, there will be others that make them for you, either your landlord, bank, tax office or a supplier) Get on top of those decisions first.

As they say “Be the first to the table!”

Step 1 – Approach your landlord

Yes you have signed your lease to pay an amount of rent per week, per month etc and you are liable for it. But if you are a business that has either been closed down by the Government or your income has fallen drastically, your landlord should understand. If you don’t pay, what can they do? They cant replace you with a like tenant as they can’t open due to closures. You will find that your landlord should/will work with you as they have cashflow problems as well.

Your landlord may have a repayment deferral with the bank, hence they can pass some of that on to you for the term of that deferral. It is in their BEST interest to have a tenant than not have one at all and try to replace you.

Step 2 – Your Bank is in the mood to assist

As with your landlord, it is in the banks BEST interest to provide assistance for both business loans and your private house mortgages. You need to initiate the contact as they generally won’t come to you. Most of the major banks have announced a 6 month deferral on loan repayments and various other cost saving measures eg merchant terminal fees.

Not only are there these announcements by the banks, there are also financial hardship provisions which are available to use. YOU JUST NEED TO CONTACT YOUR BANK before its too late

Step 3 – Government Assistance is coming

By now you would have received a few emails and blogs from our firm regarding  Federal Government stimulus packages 1 and 2, as well as the various state governments and councils are Australia have announced their own packages to assist in these bizarre times.

The largest stimulus announced to date is the 100% PAYGW refund back to your ATO tax account. Most businesses with a turnover of less than $50Mil and you had to be registered for PAYG as at 12th March 2020, and pay wages during either March Qtr or month of March for monthly lodgers, generally will have access toa minimum of $20,000 to a max of $100,000 to be paid over 6 months

These payments are tied to your BAS lodgements so so important to keep them up to date

At this stage however, we have not received any legislation, but from the details and examples issued by treasury the amount will be applied to your ATO account. If there is a credit, this will be refunded within 14 days

There are other measures including government guarantee to banks for small business loans up to $250k unsecured with repayment holidays for 6 months. At this stage unless your business is strong and basically untouched, we would advise any further borrowings should be considered carefully.

In addition to all this the ATO has established the following support;

  • Deferral of ATO Payments (these are for debts after 23rd January 2020)
  • Remitting interest & penalties
  • Low interest payment plan (for debts incurred prior to 23rd January 2020)

Again the ATO won’t come to you automatically so if need be get in touch with them on 1800 806 218 and see what assistance you can get to help with your cash flow. From the experience to date it only takes a few minutes and they are granting payment deferrals for up to 13th July initially

Step 4 – Keep staff informed

Your staff are and will be your biggest asset, both now and once we are through this downturn. Speak to them. Keep them informed. They are just as anxious as you are in these uncertain times. Be open and honest, be compassionate – everyone is feeling the pain.

Try to reduce their hours as opposed to letting them go altogether as the above assistance is in place (maybe a little slow in coming), but they are coming to assist with retaining your staff.

Step 5 – Speak to us

We have spoken to a large number of clients and still have to, but we are working tirelessly to work through and advise on how best to approach in a methodical manner. We will be in contact. We understand the stresses that as business owners or employees or contractors you are going through hence this 5 step process we have put together is for your assistance.

 

Please feel free to share to any person you may think may benefit 😊

If you need any assistance, please get in contact with us at

 stephen@smbaccounting.com.au

 P 1300 854 159

Wow! This week has been extraordinary since the initial announcement by the Government of the initial stimulus on March 12, added is the extra social distancing measures as well as the associated health actions and the suspension of the AFL competition, having a substantial impact on business in Australia.

 SMB Accounting will be working overtime to ensure that all our clients are supported. Whether it is discussing strategies to smooth cashflows, revising forecasts/budgets, looking at re-evaluating your costs structure.

For all we are concentrating a great deal of time working through the various state and federal stimulus/rescue packages to ensure a maximum support is provided. To this end we have over the weekend preparing a comprehensive Booklet which we have consolidated the known support from federal and state governments, banks, insurance companies and  energy companies which will be available for download from our website in the near future

Firstly here is a quick overview of the announcement yesterday (22nd March 2020)

 Support For Individuals including Sole Traders

The Government is temporarily expanding eligibility to income support payments and establishing a new, time-limited Corona virus supplement to be paid at a rate of $550per fortnight.

This then being a total of $1,100 (including the Jobseeker payment)

This supplement will be paid to both existing and new recipients of the eligible payment categories. These changes will apply for the next six months.

For the period of the Corona virus supplement, there will be expanded access to the income support payments listed above there is expanded access to Jobseeker Payment and the criteria will provide payment access for permanent employees who are stood down or lose their employment; sole traders; the self-employed; casual workers; and contract workers who meet the income tests as a result of the economic downturn due to the Corona virus. This could also include a person required to care for someone who is affected by the Corona virus.

 Eligible small business to receive up to $100,000

The previously announced $25k has been upsized now to maximum of $50k and will provide 100% of the PAYGW from March to June 2020 period. The second $50k is exactly the same, just to be claimed from July to October 2020 period.

They have also said that these payments will only be available to active eligible employers established prior to 12 March 2020.

Your turnover must be less than $50m to be eligible and you simply need to have employees for whom you withhold tax on wage payments.

Apprentices and Trainees

50% of the apprentice or trainee’s wage paid will be subsidised by the government during the 9 months from 1 January 2020 to 30 September 2020, up to $21,000 per eligible apprentice or trainee. It will be capped at $7,000 per quarter.

The business must have had the apprentice or trainee in training with a small business as of 1 March 2020 and is available for business employing less than 20 full-time employees.

You will be required to have an eligibility assessment undertaken by an Australian Apprenticeship Support Network (AASN) provider.

Employers can register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020.

Here are links for additional information:

SME Lending Guarantee

The Scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.

The federal government will provide a guarantee of 50% to SME lenders for new unsecured 3 year loans of up to $250k per borrower to be used for working capital and these loans will not require any repayments for 6 months.

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

Other measures announced

 Temporary relief for financially distressed businesses

  • Increase in the threshold for creditors to issue statutory demands from $2k to $20k for the next 6 months.
  • Increase in the threshold for initiating bankruptcy proceedings from $5k to $20k for the next 6 months.
  • Plus an increase in timeframe whereby you are required to respond to a bankruptcy notice or a statutory demand from 21 days to 6 months.
  • Directors will be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business. Egregious cases of dishonesty and fraud will still be subject to criminal penalties.

 Temporary early access to superannuation

Eligible individuals will be able to apply online through myGov to access up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020.

  • To apply you must satisfy on or more of the following:
    • You are unemployed; or
    • your working hours were reduced by 20 per cent or more; or
    • if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more.
  • No tax will be payable on these amounts
  • You can apply directly to the ATO through the myGov website: my.gov.au

As said above there is much more available and in place and this cannot be an exhaustive list as well as the continued fluid nature of the circumstances unfolding, and we will continue to monitor announcements etc as they happen

 

### Please note we have made every attempt  to confirm this information is correct and complete as of the moment  of publication ####

 

Please send an email stephen@smbaccounting.com.au if you have any questions

 

Below we have provided a briefing of the stimulus package which the government announced last week in response to the difficult times which are affecting all of us

As a business owner or employee of a business, you may/will confront the possibility of yourself or members of your team being isolated from the work environment, supply issues as well as a decrease in the demand for the services/goods over the coming 3-9 months.

Tax incentives for business investment

Increase in Instant asset write-off

From 12 March until 30 June 2020, for new or second-hand assets first used or installed ready for use, the instant asset write-off threshold will be increased from $30,000 to $150,000 for businesses with aggregated annual turnover of less than $500 million (up from the current $50 million threshold).The threshold applies on a per asset basis, so eligible businesses can immediately write-off multiple assets. The threshold will revert to $1,000 for small businesses (turnover less than $10 million) from 1 July 2020, however businesses not entitled to the instant asset write off from 1 July 2020 may be entitled to the 50% investment incentive as below.

Backing business investment incentive

The Government is introducing 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 aggregated annual turnover of less than $500 million per annum will be able to deduct 50 per cent of the cost of an eligible asset upon installation, provided it was acquired after 12 March 2020 and first used or installed by 30 June 2021.

There is no asset value threshold for this 50% investment incentive. Existing depreciation rules applying to the balance of the asset’s cost.

Cash flow assistance for businesses

Increasing cash flow for employers

Up to a $25,000 tax-free payment to small and medium-sized businesses with aggregated annual turnover of less than $50 million that employ workers, between 1 January 2020 and 30 June 2020.
These eligible businesses will receive a payment equal to 50% of their PAYG withheld, delivered as a credit in their BAS from March to June 2020, with a minimum $2,000 payment and up to a cap of $25,000.

Keeping apprentices and trainees employed

Eligible small business employers will be able to apply for a wage subsidy of 50% of the apprentice’s or trainee’s (in training as at 1 March 2020) wage for up to 9 months from 1 January to 30 September 2020, up to $21,000 per apprentice. Employers can register for the subsidy from early April 2020 with final claims for payment due by 31 December 2020.

Non-tax measures

Stimulus payments

Social security, veteran and other income support recipients and eligible concession cardholders including pensioners will receive a one-off $750 payment will be available from 31 March 2020.
There will be one payment per eligible recipient.

Assistance for severely affected regions

The Government has set aside $1 billion to support those regions and communities that have been disproportionately affected by the economic impacts of COVID-19, including those heavily reliant on industries such as tourism, agriculture and education.

ATO relief measures

On 12 March 2020, the Australian Taxation Office (ATO) announced a series of administrative concessions to assist businesses impacted by COVID-19, which include:
• up to 4 months the payment deferral of tax amounts due through the BAS (including PAYG instalments), income tax assessments, FBT assessments and excise by affected businesses;
• allowing affected businesses on a quarterly reporting cycle to opt into monthly GST reporting to get quicker access to any GST refunds;
• allowing affected businesses to vary PAYG instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters;
• remitting any interest and penalties, incurred by affected businesses on or after 23 January 2020, that have been applied to tax liabilities; and
• allowing affected businesses to enter into low-interest payment plans for their existing and ongoing tax liabilities.
The ATO assistance is not automatic, taxpayers must first contact the ATO to request assistance, and if eligible, the ATO will ‘tailor the assistance package for the relevant taxpayer.

To know more about the application of these measures, please get in contact with us at support@smbaccounting.com.au or

P 1300 854 159.

There are a number of critical parts to your invoicing in order to make sure your invoices are tax compliant.

What are the must haves?

  1. Ensure the words ‘Tax Invoice’ are prominent
  2. Clearly display your full business name and address
  3. Your ABN (Australian Business Number) must be on the document
  4. The date of invoice is displayed
  5. The description of the product purchased by your customer, quantity and of course the price
  6. Display the total and the GST amount. You have 2 options of how to display this.
  • Display the GST separately and then the total value of what is sold (including GST) – Called a GST Exclusive Invoice
  • Total price of sale (including GST) with the wording “Total price including GST” – Called a GST inclusive invoice

 

NOTE: If you have sales of more than $1000 on your tax invoice you are also required to add your customer’s identity and their address or ABN.

 

If you would like any further information, please do not hesitate to conact our office 0437 726 731