Government Stimulus Package

Government announces increased tax benefits in response to the Coronavirus

The Government has announced its economic response to the Coronavirus in the form of a $17.6 billion
economic stimulus package.

The package has been marketed as a measure to protect the economy by maintaining confidence, supporting
investment and keeping people in their jobs.

It is expected that an appropriate package of Bills (which will provide further detail in relation to the
proposed measures) will be introduced into Parliament in the final sitting week in March 2020
(i.e., presumably from 23 March 2020) for urgent consideration and passage.

The Key Tax Measures include:
• From Thursday 12 March 2020, the instant asset write-off threshold has been increased from $30,000
(for businesses with an aggregated turnover of less than $50 million) to $150,000
(for businesses with an aggregated turnover of less than $500 million) until 30 June 2020.

• A time-limited 15-month investment incentive (through to 30 June 2021) which will operate
to accelerate certain depreciation deductions.
This measure will also be available to businesses with a turnover of less than $500 million, which
will be able to immediately deduct 50% of the cost of an eligible asset on installation, with
existing depreciation rules applying to the balance of the asset’s cost.
As announced, this measure is proposed to only apply to new depreciating assets first used, or
installed ready for use, by 30 June 2021.

• Tax-free payments of up to $25,000 for eligible small and medium businesses (i.e., with a
turnover of less than $50 million that employ staff) based on their PAYG withholding obligations.

• Tax-free payments of $750 to social security, veteran and other income support recipients and
eligible concession card holders. It is estimated that around half of those who will benefit will
be pensioners. These payments will commence to be automatically made from 31 March 2020.

• Administrative relief from the ATO for some tax obligations for people affected by the
Coronavirus outbreak, on a case-by-case basis. Additionally, the ATO is setting up a temporary
shop front in Cairns within the next few weeks with dedicated staff specialising in assisting small
business and is currently considering further temporary ‘shop fronts’ and face-to-face options.
In addition to these key tax measures, the Government has also announced additional economic
stimulus measures including:

• Wage subsidies to support the retention of apprentices and trainees – Employers with less
than 20 full-time employees may be entitled to apply for Government funded wage subsidies
amounting to 50% of an apprentice’s or trainee’s wage for up to nine months from 1 January
2020 to 30 September 2020. The maximum subsidy for each apprentice/trainee is $21,000.
Importantly, where an employer is not able to retain an apprentice, the subsidy will be available
to a new employer that employs that apprentice.
It is proposed that employers will be able to register for the subsidy from early-April 2020.

• Assistance to severely affected regions – The Government has also committed to set aside
$1 billion to support regions and communities that have been disproportionately affected by the
economic impacts of the Coronavirus, including those heavily reliant on industries such as
tourism, agriculture and education. This will include:

– The waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef
Marine Park and the waiver of entry fees for Commonwealth National Parks.
– The provision of additional assistance to help businesses identify alternative export markets
or supply chains.
– Further targeted measures to further promote domestic tourism.

Government Stimulus Package (1)

Can you Claim Deductions for Employee Training?

Can you Claim Deductions for Employee Training?Employees of a small business may need to develop their expertise or skills in a particular area to better perform their duties. While training courses like seminars and one-day intensives can be a worthwhile investment, there are still a few things employers should consider from a tax point of view.

Employers can generally claim deductions for the full costs incurred when providing education to employees, including aspects like course fees and travel costs. Many owners tend to forget possible FBT implications.

Paying for employee work-related course fees commonly constitutes as a fringe benefit and is subject to FBT. However, FBT law allows a full or partial reduction of FBT payable provided that the ‘otherwise deductible’ rule is met. The ‘otherwise deductible rule’ implies that if the employee had paid the expense themselves, they could claim a deduction for the expense. The business could then provide the benefit to the employee without having to pay FBT on the amounts.

An education expense is considered to be hypothetically deductible to the employee depending on the type of course or education studied. The course must have a satisfactory connection to an employee’s current employment, maintain or improve the skills or knowledge required for the employee’s current role, or result in an increase in the employee’s income.

Employees cannot claim a deduction for education expenses if there is no connection to their current employment, even if it assists them to gain new employment.

When do you need an ABN?

When do you need an ABN?An Australian business number (ABN) is a unique 11-digit number that the Australian Business Register issues to all businesses, identifying your business to the community and government whilst also making it easier to keep track of business transactions for tax purposes.

While it is compulsory for businesses with a GST turnover of $75,000 or more to have an ABN and to be registered for GST, businesses with a GST turnover of less than $75,000 can still apply for an ABN and may choose to register for GST.  You are entitled to an ABN if you are aligned with the following entitlement criteria.

Carrying on or starting an enterprise in Australia:

An enterprise includes activities done in the form of a business, as well as acting as the trustee of a super fund, operating a charity and renting or leasing property. Features of business include:

  • Significant commercial activity, involving commercial sales of products or services and is of a reasonable size and scale.
  • Intention to make a profit from the activity as demonstrated by a business plan and a set rate of pay.
  • The activity is repeated, systematic, organised and carried on in a business-like way with records being kept.
  • The activity is carried on in a similar way to that of other businesses in the same or similar industry.
  • The entity has relevant knowledge or skill.
  • The entity has the appropriate insurance, such as public liability and WorkCover.

Making supplies connected with Australia’s indirect tax zone:

Even if your business or organisation is located outside Australia, you may be entitled to an ABN if you are carrying on an enterprise in Australia or involves making supplies connected with Australia’s indirect tax zone.

A Corporations Act company:

Companies registered with the Australian Securities & Investments Commission (ASIC) are entitled to an ABN.

Tax Time Changes

Tax Time Changes ImageThe ATO start full processing 2018-19 tax returns on 5 July 2019 and are expected to start paying refunds from 16 July 2019, with the majority of electronically-lodged current year tax returns completed within 12 business days of receipt. There a few changes to tax returns individuals should take note of going into this end of financial year.

Private health insurance statements:

From 1 July 2019, health insurers are no longer required to send private health insurance statements, it is now optional to send this information. Private health insurance information will be available in the pre-fill report, expected by mid-August. If it is not populated by then, taxpayers may need to request a statement from their health insurer.

Low and middle-income tax offset:

Taxpayers may be eligible for an income tax offset if they are an Australian resident for income tax purposes or their taxable income is in the appropriate income range. It is not compulsory to claim this offset, the ATO will work it out when their tax return is lodged.

In the event the changes proposed in the 2019-20 Budget become law after 1 July 2019, the ATO will automatically amend assessments. The offset can only reduce the amount of tax paid to zero and it does not reduce Medicare levy.

Income statement:

Employers reporting through Single Touch Payroll are not required to provide a payment summary to their employees as income statements will replace them. Employees can access their income statements through ATO online services at any time. Employees will receive a notification through myGov when their income statement is ‘Tax ready’, so they can complete their tax return. Employees will be able to contact the ATO for a copy of their income statement if they do not have access to myGov.

Instant asset write-off for small businesses to be extended

instant asset write-off

As of 29 January 2019, the Instant Asset Write-Off Scheme will be extended to 30 June 2020 for assets purchased under $25,000.
The Instant Asset Write-Off affects small businesses with a turnover of up to $10 million a year. It allows business owners to immediately deduct assets costing up to $25,000 which can then be claimed for tax return in that income year. The Prime Minister’s announcement on 29 January stated that “businesses who go out and invest today, whether it’s a vehicle, whether it’s a piece of plant or equipment, all of it, up to $25,000, immediate write down.” However, there are certain assets that are excluded from the scheme so it is best to check with your accountant or financial advisor.
It is important to remember that the Instant Asset Write-Off Scheme reduces the tax your business has to pay, it is not a rebate. Your cash flow will still have to be sufficient enough to support the purchases.
With the ATO reporting that the average claimed amounts were at $11,000 in 2016-2017, there are concerns that the scheme is underutilised. Fewer than 350,000 small businesses have taken advantage of the scheme in the 2016-2017 year.
There is no guarantee that the Federal government will extend this scheme beyond 30 June 2020.

ATO Update: Tax Deduction Rules on Travel to Rental Properties

Tax Deduction RulesThe ATO has enforced strict guidelines on tax deductions for rental property owner’s travel expenses.

As a rental property owner, you are not able to claim deductions for travel expenses relating to inspecting, maintaining or collecting rent. If you have already claimed a tax deduction for the cost of travel to and from your property in your 2018 return, you will need to request an amendment. The law change came into effect on 1 July 2017 and affects tax returns from 2017-18 onwards.

Exclusions

You may claim these travel expenses on your tax return if you are carrying on a rental property business or are an excluded entity.

An excluded entity is a:

Corporate tax entity
Superannuation plan that is not an SMSF
Public unit trust
Managed investment trust
A unit trust or a partnership, all of the members of which are entities of a type listed above

Changes to FBT for Utes

Changes to FBT for Utes

The Australian Tax Office (ATO) has released draft guidelines changing its previous stance on Fringe Benefits Tax (FBT) for utes. Amendments originated from reports that dodgy tax returns were responsible for a loss of $8.7 billion in income tax due to wrongful claims. Failure to comply with the new requirements listed below may result in a 20 percent FBT imposed on the cost of the vehicle.

The requirement of a logbook

New rules require employers to ensure their workers using these vehicles keep detailed logbooks. Whether the logbooks are the electronic or hard copy, it is vital that the process be effective for returns lodged in the 2019 FBT year, when the law takes effect. Employers receive confirmation via email from employees using the vehicles at the end of the 2019 FBT year with their logbook including all regulated diversions and private use.

Diversions and private use rules

The guidelines introduce capped limits for the log books to comply with. Professional travel means that the vehicle must not deviate more than 2km from its usual route. However, 1000 km of non-work related travel is allowed, provided that there is no single trip exceeding 200 km. Such regulations provide greater flexibility than previous guidelines. What the ATO deems “minor” or “irregular trips” like carpooling the children to and from school or an occasional trip to visit relatives will not render you non-compliant so long as it is recorded as non-professional use.

Cash-only business? Consider making the switch

The Tax Office has released further findings that reveal cash-only businesses could be missing out on a significant chunk of revenue simply by not offering customers the option of electronic payment.

An ‘inconvenience’ was the most popular word consumers surveyed in the study used to describe when a business does not provide the option to pay via card.

Cash-only may also be having a direct effect on the business’s reputation. The results determined that Australian customers are twice as likely to perceive ‘cash-only’ as negative rather than positive – with many respondents questioning whether the business is honest and paying less tax (regardless of whether this may be fact or fiction).

While change may be difficult, cash-only businesses might like to consider the benefits that exist with no longer operating in cash. For instance, electronic tap-and-go payments take less time and cost around 9 cents less than payments made in cash.

By providing electronic payment only, a business can find it easier to keep more accurate record-keeping as well as help them to meet their tax and super obligations.

Hiring temporary residents: employer super obligations

Glance ConsultantsEmployers are being reminded by the Australian Tax Office (ATO) not to forget that along with permanent residents; temporary residents are also entitled to super guarantee (SG).

In most cases, an employer will be required to pay SG on top of their employee’s wages (temporary residents included) if they pay them $450.00 or more before tax in a calendar month.

Providing the temporary resident has met all the requirements, they can submit their claim for the super that their employer has paid as a ‘department Australian superannuation payment’ (DASP) once they have left Australia.

The ATO is encouraging employers to notify their temporary resident workers of the DASP application as it will be easier for these individuals to get the required supporting documents certified in Australia and then lodge once they have left the country.

Cents per kilometre rate rises for work-related car expenses

Tax accountingThe Tax Office has confirmed the rate for work-related car expenses will rise to 68 cents per kilometre for the income year beginning 1 July 2018.

The new rate will affect those eligible individuals who elect the cents per kilometre method when calculating the income tax deductions for their work-related car expenses for the 2018-19 income year. This rate also applies to the following income years until the Commissioner of Taxation deems it should be varied (these rates are reviewed each year).

Taxpayers working out their car expenses for the 2015-16 year, 2016-17 year and the 2017-18 year should remember that the previous rate of 66 cents per kilometre still applies to their calculations.

When selecting the cents per kilometre method, eligible individuals:

  • are not required to supply the ATO with written evidence of how many kilometres they have travelled;
  • may need to show how they worked out their business kilometres calculations;
  • cannot claim more than 5,000 business kilometres per car;
  • and cannot make a separate claim for depreciation of the car’s value.

It is also important to note that the amount will take into account all the vehicle running expenses.

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