A few words from Guy Biran:
How does one describe the current situation of world? The words that came to my mind are baffling, challenging, frustrating, interesting, aggravating, infuriating but most of all confusing. As trusted advisers, we should be able to base our assumptions on knowledge and experience. Considering the current events, we have never experienced a pandemic on this level. We are completely putting our faith in politicians; without knowing what will happen in the coming months / years. Someone once told me ”if you can do… do, if you cannot do….. teach… if you cannot do or teach … go into politics, and we are trusting them without livelihoods.
What do we know as facts? We know the unemployment rate (as of today) is 7.4% (which means about a million people are unemployed). We know that JobKeeper and JobSeeker are not going to continue forever. We know massive amounts of small businesses (and large) are suffering financial hardship. We know more than 1000 people took their own lives in the last few months (a massive increase compared with previous periods). We know mental health issues are staggeringly higher than ever before.
I certainly do not have the solutions and I am sure people who are experts in their field are trying the best they can to help us all. Saying that, I certainly know that giving up or doing nothing and hoping for handouts, will end in disappointment. I have seen businesses transforming overnight, to make sure they can survive. I have seen business people thinking outside the box and creating opportunities. I have seen great business opportunities and I have seen great determination to succeed. At the same time, I have seen the depression in people’s eyes. I have seen the shock that people had when they did not have a job to go to.
Considering so many people are finding the situation almost impossible to manage, the most extremely disappointing thing, is to see people trying to take advantage of others. From people not paying the rent when they can and should to people intentionally ripping other people off. At the other extreme, some people are looking after others like never before.
There is no point in politicising the situation. Everyone has an opinion about the way forward and about what other people did or did not do. I hate the thought of stopping seeing our loved ones because some long terms unemployed are actually better off financially in the current situation. I hate the thought of some people are going to lose their livelihood because some politician was more concerned about votes than the economy… and most of all I hate the feeling that the cure is much worse than the disease.
We should be grateful for living in a country with the best health services possible. We should be grateful that the government understands that everyone needs to put bread on the table and that small to medium sized businesses are a crucial part of the economy. We should be also grateful that we are alive and doing the best we can. We always need to remember; that this is not a test run. These are our lives and we need to do the best we can as long as we can.
Part of our experience is that when people are working, they have a purpose which is one of the most important things we have. If any of you are reading this and are looking for purpose, contact us. We have hundreds of people on our contact list. We have businesses that are hiring people as we speak (for example, if you have a forklift licence and need work – contact us). If you just want to have a chat and maybe some guidance please think of us first. If we cannot help, I am sure we know someone who can. Guy Biran
JOBKEEPER 2.0 – OVERVIEW OF THE CHANGES
The Australian Government has announced cuts to payments under the JobKeeper and JobSeeker schemes but has extended their life spans. JobKeeper 1.0 will remain till 27 September 2020 and thereafter, JobKeeper 2.0 will continue for a further six months till 28 March 2021. The temporary JobSeeker coronavirus supplement will be extended to 31 December 2020. The changes to JobKeeper are:
There will be two rates of JobKeeper payments for eligible businesses (including self-employed) and not-for-profits:
1. From 28 September 2020 to 3 January 2021:
for eligible employees and business participants who worked 20 hours or more a week on average in the month of February 2020 – A$1200 per fortnight
for eligible employees and business participants who worked less than 20 hours a week on average in the month of February 2020 – A$750 per fortnight.
2. From 4 January 2021 to 28 March 2021:
for eligible employees and business participants who worked 20 hours or more a week on average in the month of February 2020 – A$1000 per fortnight
for eligible employees and business participants who worked less than 20 hours a week on average in the month of February 2020 – A$650 per fortnight.
The JobKeeper payment will be tapered in the December and March quarters to encourage businesses to adjust to the new environment, supporting a gradual transition to economic recovery. The two-tiered payment aims to better align the payment with the incomes of employees before the onset of the COVID-19 pandemic.
The thresholds for the decline in turnover test will remain the same but now the test must be applied at several points:
To be eligible for the JobKeeper payments from 28 September 2020 to 3 January 2021, businesses and not-for-profits must satisfy the relevant decline in turnover test for the June quarter and for the September quarter based on actual GST turnover.
To be eligible for the JobKeeper payments from 4 January 2021 to 28 March 2021, businesses and not-for-profits must satisfy the relevant decline in turnover test for each of the June, September and December quarters based on actual GST turnover.
The requirement to reassess the eligibility for the JobKeeper payments over the extension period is to ensure that only the businesses that need the most help will continue to receive the payments. The JobKeeper payment will remain open to new recipients provided they meet the existing eligibility requirements and the additional turnover tests during the extension period. The Commissioner of Taxation will have discretion to set alternative tests where an employee’s or business participant’s hours were not usual during the February 2020 reference period. Employers will continue to be required to make payments to employees equal to, or greater than, the amount of the JobKeeper payment (before tax), based on the payment rate that applies to each employee (i.e. the wage condition). The changes are expected to be implemented through amendments to the legislative instrument, Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 Changes to the JobSeeker program include:
The JobSeeker coronavirus supplement will decrease to A$250 a fortnight from A$550. Therefore, people on JobSeeker will receive a decrease from A$1100 to A$800 (base rate of A$550 plus the coronavirus supplement) per fortnight after September.
Recipients will be allowed to earn A$300 a fortnight before facing a reduction in their Government payment.
Easing of restrictions for sole traders.
Well what a year! We hope this newsletter finds all our clients and friends safe and healthy, and we look forward to catching up with you during 2020/21. Due to the COVID-19 Pandemic the Government postponed the 2020/21 Budget until 6 October 2020 so most changes resulting from the Federal budget will not be in this year’s Tax Time. Also, with the disruption to Parliament some budget measures from last year remain to be passed through parliament.
Things to consider for 2019/20
The Tax Office is continuing to focus on employees work related deductions. They have issued a new tax ruling TR 2020/1 “Income tax: employees: deductions for work related expenses”. The ruling reiterates when an expense is tax deductible and offers an extensive list of further references. You could be excused for thinking this has come out to ensure there are no excuses for getting it wrong. One of the main messages from the ruling is regardless of substantiation concessions for some tax deductions, proof of expenditure is still required.
As some of you may have already experienced the Tax Office is continuing to utilise technology to help with data matching using a process they call “Income Tax Return Profile Compare”. They are comparing individual job codes/ descriptions and work-related expenses within their data base, preparing a profile of expected claims for a profession/ occupation and reviewing individuals that they believe are outside the normal profile. Tax agents will now need to provide more description for work related claims when preparing tax returns to ensure their work papers can support a client’s claim.
The Tax Office is looking for evidence when claiming work related deductions for the following:
Use of internet
Mobile phone
Home office running expenses
Similarly, the Tax Office is focussing on Motor Vehicle expense claims. You will need a valid logbook to support any claims if you are not using the cents per kilometre method. Within the logbook the Tax Office is not satisfied with descriptions such as “reason for journey –work”. The reason for journey must be more specific e.g. the customer’s name or the name of the institution. The Tax Office will be looking to see if the taxpayer has odometer readings at the start and end of each year.
When claiming the cents per kilometre method the Tax Office may request evidence as to how the number of kilometres was calculated. The cents per kilometre rate for MV claims remains at $0.68 per kilometre. Maximum kilometres are still 5,000Km.
REMEMBER: Motor vehicles that are not cars, e.g. Utilities with a carry capacity of more than 1 tonne, are not able to use the cents per kilometre method. Logbooks are not required however it is the only practical way to support the work-related percentage. Claims for fuel costs MUST be supported by receipts. Estimates are NOT allowable.
The Home Office rate has been varied due to Covid-19 and the requirement for many employees to work from home. There are three methods:
Short cut ($0.80/hour). Only from 1 March 2020 to 30 June 2020 and includes phones, internet, computer consumables and decline in value of computer/ laptop.
Fixed rate ($0.52/hour). Can apply all year and DOES NOT include phones, internet, computer consumables and decline in value of computer/ laptop. These can be claimed using your own method for calculating work related portion and receipts.
Actual cost method. This requires you to work out your own apportionment method for all relevant home office running expenses and receipts.
The Low-Income Tax Offset remains at a maximum of $445. The Low and Middle Income Tax Offset (LAMITO)also remains at a maximum of $1,080. When combined with the tax-free threshold of $18,200 effectively means those eligible for both tax offsets will not pay tax until their taxable income exceeds $21,884.
Senior Australians eligible for the Senior Australian & Pensioners Tax Offset (SAPTO) will not pay tax on “rebate income “up to $32,279 for singles and $28,974 each, for couples living together because of the combined effect of the Senior Australians Tax Offset, the Low Income Tax Offset and the Low and Middle Income Tax Offset.(The max offset for 2019/20 remains at $2,230 for singles or $1,602 for each couple).
Invalid and Invalid Carer Tax offset is available for taxpayers who maintain:
a spouse who is an invalid or who cares for an invalid
your or your spouse’s parent, who lives in Australia
Your or your spouse’s invalid child, brother or sister aged over 16
The maximum rebate for 2020 is $2,766 (Note: Other conditions apply, and a means test for the taxpayer claiming is $100,000 Adjusted taxable income).
Small business concessions: The instant asset write-off threshold for assets costing less than $30,000 was increased to $150,000 on 12 March 2020.The $150,000 threshold will remain until 31December 2020.
Business: Effective 1 July 2019, no longer able to claim a tax deduction for the following payments:
Payments for wages or directors’ fees where no PAYG tax has been withheld when it should have been
Payments to contractors who did not provide an ABN and the payer did not withhold any PAYG when they should have.
Business: Covid-19:
JobKeeper is assessable income (but GST free).
Cash Boost is NOT assessable income (and is GST free).
If rental income is reduced due to Covid-19, expenses will still be fully deductible.
Accessing super up to $10,000 in 2020 and again in 2021 under Covid-19 compassionate grounds is tax free.
Minimum annual pension payments from superannuation for those in retirement have been cut by 50% for 2020 and 2021 income years.
Rental properties: A reminder for Depreciation on plant and equipment (e.g. Dishwashers, Air conditioners, Carpets, Hot water systems etc.). Depreciation will be limited to the taxpayer(s) who actually bought the equipment new. Subsequent owners of the property will NOT be able to continue to claim depreciation on the existing plant & equipment. They will be able to claim depreciation on any NEW plant & equipment they buy, but NOT second-hand equipment they buy. Properties owned prior to 9 May 2017 will not be affected unless the property was owned before 9 May 2017 but not used as a rental property any time before or during 2017.
To substantiate your expenses, you must retain all your receipts for five years from date of lodgement
New for 2020/21 and beyond (SOME CHANGES ARE SUBJECT TO PASSING OF LEGISLATION)
Small business concessions: Company income tax rate will be 26% starting 1 July 2020 (down from 27.5%).
Small business concessions: The small business income tax offset for sole traders is expected to increase to 13% (up from 8%) in the 2020/21.
Income tax: Personal income tax cuts are in place to commence 1 July 2022 with increases in the 19% and 32.5% tax brackets. From 1 July 2024 further changes will see the 32.5% bracket dropped to 30% and the 37% bracket removed as well as the top marginal tax bracket increased to $200,000.
Superannuation: If your total superannuation balance is less than $500,000 you will be able to carry forward any unused concessional contributions cap of $25,000 into the next year for up to 5 years.
Superannuation: There will be a work test exemption for voluntary contributions by individuals aged 65-74 if you:
Satisfied the work test in the financial year preceding the year in which you made the contribution
Have a superannuation balance below $300,000 at the end of the previous financial year
Have not previously utilised this exemption.
Superannuation: The work for non-concessional contributions has been extended to age 67 (from age 65). This means you can continue to make non-concessional contributions (provided your total super balance is under $1.6Mil) up to age 67 without needing to satisfy the work test.
Superannuation: The “bring forward rule” allowing non-concessional contributions up to $300,000 before reaching age 65 (now age 67) has not yet been passed by parliament.
Business: Single Touch Payroll (STP) for businesses that are “closely held entities” e.g. where the owner is the only employee, was to become mandatory from 1 July 2020 but has now been extended to July 2021
As always, you are welcome to contact our office if you want to discuss any of the above content or any other matters at all. Best regards and Stay Safe!! JMP Accountants