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April 2020

COVID-19: Early Childhood Education and Care Relief Package

From Monday 6 April additional support for Early Childhood Education and Child Care Services and their families.

       

On 2 April 2020, the Australian Government announced the new Early Childhood Education and Care Relief Package. From Monday 6 April 2020 weekly payments will be made directly to early childhood education and care services in lieu of the Child Care Subsidy and the Additional Child Care Subsidy, to help them keep their doors open and employees in their jobs.

Payments will be made until the end of the 2019-20 financial year and families will not be charged fees during this time. These payments will complement the JobKeeper Payment announced by the Prime Minister on 30 March 2020.

Early childhood education and child care services do not need to apply for the payments, they will be paid automatically.

In addition, up to and including 5 April 2020, services can now waive gap fees for families due to the impact of COVID-19. This can go back as far as 23 March 2020 and is in addition to changes already announced..

For more information:

 

 

Source: education.gov.au

Now I’m working from home, what can I claim?

As more people are now working from home many are wondering what can and can’t be claimed and what records they need to keep. The following information, plus some tools and fact sheets, will help but your accountant and financial planner can help you the most with this question.

         

What tax deductions can you claim?

If you work from home, you can claim the work-related proportions of household costs such as:

  • Heating, cooling and lighting bills
  • Costs of cleaning your home working area
  • Depreciation of home office furniture and fittings
  • Depreciation of office equipment and computers
  • Costs of repairing home office equipment, furniture and furnishings
  • Small capital items such as furniture and computer equipment costing less than $300 can be written off in full immediately (they don’t need to be depreciated)
  • Computer consumables (like printer ink) and stationery
  • Phone (mobile and/or landline) and internet expenses

Ideally, you should have a specific room set aside as a home office. If you are using a room with a dual purpose (e.g. dining room), or a room shared with others (e.g. lounge room) you can only claim the expenses for the hours you had exclusive use of the area.

How do you claim?

You can use either of these methods:

Diary method/actual running expenses

Keep a diary to work out how much of your household running expenses relate to doing work in your home office. The diary needs to detail the time you spend in the home office, compared with other users of the home office. Keep your diary record for a representative four-week period. The ‘work-use proportion’ can then be used to determine your work-related claim, for whatever period of time they are required by the Government or Employer regulation to work from home. Of the two methods this usually produces the larger deduction, but the record-keeping requirements are more stringent.

It may well be that you are already working from home from time to time but that the amount of remote working will spike over the next few weeks or months. If that’s the case, keep a separate diary for the period of your ‘corona-induced’ home working to justify the larger claim for this period – but don’t try to apply this larger work-related proportion to the whole year!

ATO rate per hour method

Alternatively, you can use a fixed rate of 52 cents per hour for home office expenses for heating, cooling, lighting and the decline in value of furniture, instead of keeping details of actual costs. You just need to keep a record of the number of hours you use the home office and multiply that by 52 cents per hour.

In addition to claiming 52 cents per hour, you can also make a separate claim for:

  • phone and internet expenses;
  • computer consumables and stationery; and
  • depreciation of computers or other equipment.

Finally, a word of warning: it is quite common for people to have insufficient documentation to support a home office claim, particularly around the proportionate split between business use and personal use so be sure to keep records.

The ATO have calculators (at present only the 2018/19 is available) available to assist you with calculating these deductions and links below for more information.

 

 

Based on ATO information and resources.

 

Global statistics plus Covid-19 updates

The following website gives the running totals for many everyday categories and the numbers are almost, if not, overwhelming when seen on a global scale.

         

Click on the image below to link to a website that collects data from sources all over the globe and simply counts the numbers.  Global births and deaths, for example.  How much is spent on health and public education.  Be prepared though for how much is spent on illegal drugs or how many cigarettes are smoked every day.  Included is a link to the latest Coronavirus statistics as well. 

Mind blowing stuff.

 

 

ATO clarifies COVID-19 rent relief concerns

The Australian Taxation Office has responded to widespread concerns on whether SMSF landlords providing rent relief to tenants due to the financial impacts of the novel coronavirus is a contravention of the SIS Act.

         

The national cabinet has considered issues relating to commercial tenancies as well as residential tenancies.

“The most significant of those is that state and territories will be moving to put a moratorium on evictions of persons as a result of financial distress if they are unable to meet their commitments,” Mr Morrison said.

“And so there will be a moratorium on evictions for the next six months under those rental arrangements.”

The industry has been seeking clarity from the ATO around whether SMSF landlords can legally provide rent relief to tenants as a result of the impacts of COVID-19.

In response, the ATO has sought to allay concerns from SMSF trustees around whether charging a tenant rent that is less than market value contravenes the SIS Act, and whether it would take action given the impacts of COVID-19.

The ATO’s response is as follows:

  • “Some landlords are giving their tenants a reduction in or waiver of rent because of the financial impacts of COVID-19 and we understand that you may wish to do so as well.
     
  • “Our compliance approach for the 2019–20 and 2020–21 financial years is that we will not take action where an SMSF gives a tenant — who is also a related party — a temporary rent reduction during this period.”

SMSF administrator SuperConcepts backed the ATO announcement, saying it has been inundated with calls and emails from concerned clients who have an SMSF which owns a business premise that is being leased to a related party.

“SuperConcepts fully supports this relief measure which provides certainty and much-needed relief for a growing number of SMSFs that own a business premise, and have been caught in the economic turmoil caused by COVID-19,” said SuperConcepts general manager of technical education services Peter Burgess.

Interpreting the ATO concession

SMSF law firms have also come out with their interpretations of the ATO’s concession for landlords.

According to CGW Lawyers partner Clint Jackson, the only requirement of the ATO’s concession is that the rent reduction must be temporary.

“Given the current business challenges, the ATO’s position is that there is no need for the rent reduction provided to be justified by market evidence (the SMSF can determine the reduction in its absolute discretion),” Mr Jackson said.

“The ATO’s concession does not apply to any other lease incentives or relief — just a ‘temporary rent reduction’.”

Mr Jackson said that while the ATO concession is “extremely broad”, it is also important that landlords not abuse the concession.

“This rent reduction should be reasonable and measured to the COVID-19 impact suffered by the tenant. Best practice is that it is consistent with the approach taken by arm’s-length landlords,” he said.

“The rent reduction agreed to by the SMSF should be properly documented, as this is an amendment to the lease terms.

“It is likely that SMSF auditors will be required to report any rent reductions, although the exact parameters of what will be reported in relation any rent reductions are still being determined.”

However, Daniel Butler and Bryce Figot of DBA Lawyers said that while the ATO will not actively seek out cases where an SMSF gives a related-party tenant a temporary rent reduction during the remainder of FY2020 or FY2021, the usual position for such practical approaches previously issued by the ATO is that if it does come across contraventions from other sources through its usual data detections, reviews or auditor contravention reports (ACR), it will usually apply the legislation in the normal manner.

“In short, SMSF trustees should not rely on the ATO’s non-binding practical guidance above, given the substantial downside consequences and given these situations may be legitimately resolved with appropriate action as outlined below,” said Mr Butler and Mr Figot.

“We do understand, however, that some SMSF trustees or businesses may not have the time or the funding to obtain proper advice and work through the appropriate steps to soundly position themselves to minimise future risk that will simply rely on the ATO practical approach at their own risk.”

Further, Mr Butler and Mr Figot said the ATO website does not provide any express relief for an SMSF that owns property via an interposed unit trust, such as a non-geared unit trust (NGUT).

“Once a contravention of one of the criteria relating to a NGUT is triggered under reg 13.22D of SISR, the trust is ‘forever’ tainted and the SMSF must dispose of its units in that unit trust to comply with the SISR,” they said.

“In particular, if the lease is not legally enforceable or if rent owing by a related-party tenant accrues and constitutes a loan under the lease, the unit trust will cease to comply with the criteria in division 13.3A of SISR.”

 

 

Adrian Flores
30 March 2020
smsfadviser.com

 

Banks to defer small-business loan repayments for 6 months

Small businesses will be allowed to defer loan repayments for six months under new emergency measures announced by the Australian Banking Association.

         

Australian Banking Association chief executive Anna Bligh said the relief package is expected to apply to $100 billion of existing small-business loans and said it could put “as much as $8 billion back into the pockets of small businesses as they battle through these difficult times”.

“This is a multibillion-dollar lifeline for small businesses when they need it most, to help keep the doors open and keep people in jobs,” Ms Bligh said.

The ABA’s announcement comes after the Reserve Bank announced an emergency cash rate cut to a record low of 0.25 of a percentage point.

The central bank also announced it would set up a $90 billion term funding facility for banks to specifically support their small-business clients.

According to Ms Bligh, the banks will put in place a fast-tracked approval process.

“Small businesses can rest assured that if they need help, they will get it. Banks are already reaching out to their customers to offer assistance, and packages will start rolling out in full on Monday,” she said.

‘“While this is first and foremost a health crisis, this pandemic has begun to have serious impacts across the economy, with small businesses beginning to feel the devastating effects.

“Small businesses are the most vulnerable part of economy and present the most pressing need for assistance in the economy today.”

Ms Bligh has advised that any small business who has not already been contacted should contact their bank to apply.

 

 

Jotham Lian 
20 March 2020
accountantsdaily.com.au

Covid-19 resources

Multiple sources of help and further explanations are available below regarding the relief packages and programs recently released by our Governments. All relate to Covid-19 and are grouped here so you don’t have to go searching for the information. If you have any questions, or require further assistance, please send us an email or phone.

Please click on the following links to access a wide range of resources. Once done, click on the X (top right) to close the article and you’ll return to this list.

  • Breakdown of Federal Government Covid-19 support. Click here.
  • 12 Treasruy Fact Sheets on Covid-19 releif measures. Click here.

Historic $130bn wage subsidy to cover 6 million workers

Prime Minister Scott Morrison has now unveiled an extraordinary $130 billion wage subsidy which will see businesses receive $1,500 a fortnight per employee for the next six months.

In the third and largest economic stimulus package announced by the government in response to the coronavirus pandemic, 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, including businesses structured through companies, partnerships, trusts and sole traders.

Employers will be required to pass on the full $1,500 a fortnight, before tax, to eligible employees.

To qualify, businesses with a turnover of less than $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.

Businesses with a turnover of more than $1 billion will need to demonstrate a loss of 50 per cent of revenue.

Eligible employees will include those employed by the employer at 1 March 2020, including those who have been stood down. Retrenched workers can be re-hired to qualify for the payment.

How to apply

Eligible businesses, including not-for-profits, charities, and self-employed individuals, will need to register an intention to apply on the ATO’s website.

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 lifeline’

According to Mr Morrison, the wage subsidy is meant to prop up businesses by paying for their employees even as the economy comes to a standstill.

“We will pay employers to pay their employees and make sure they do,” said Mr Morrison.

“This plan is about keeping those businesses together, by keeping these employees in these businesses.

“We want to keep the engine of our economy running through this crisis. It may run on idle for a time, but it must continue to run.”

What employees will get

Businesses must pay their employees a minimum of $1,500 per fortnight, before tax.

According to Treasury’s fact sheet, if an employee ordinarily receives $1,500 or more in income per fortnight before tax, they will continue to receive their regular income according to their prevailing workplace arrangements, with the JobKeeker payment to subside all or part of their income.

If an employee ordinarily receives less than $1,500 in income per fortnight before tax, their employer must pay their employee, at a minimum, $1,500 per fortnight, before tax, meaning employers will not be able to pocket the difference.

If an employee has been stood down, their employer must pay their employee, at a minimum, $1,500 per fortnight, before tax.

The $1,500 will be taxed as ordinary income but employers can choose to pay superannuation on the amount.

Employees who receive the JobKeeker payment will not be allowed to double dip with the recently expanded JobSeeker payment, which is paid through Services Australia.

The latest package by the government brings the total amount thrown at the coronavirus crisis to $214 billion, including the $66.1 billion second tranche support package and the initial $17.6 billion.

Mr Morrison said the government is currently in discussions with Labor to reach agreement over the latest announcement and will be looking to recall Parliament shortly to speed through legislation as it did with the first two packages.

Treasury example:

Employer with employees on different wages

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

Anne, who is a permanent full-time employee on a salary of $3,000 per fortnight before tax and who continues working for the business; and
Nick, who is a permanent part-time employee on a salary of $1,000 per fortnight before tax and who continues working for the business.
Adam is eligible to receive the JobKeeper Payment for each employee, which would have the following benefits for the business and its employees:

The business continues to pay Anne her full-time salary of $3,000 per fortnight before tax, and the business will receive $1,500 per fortnight from the JobKeeper Payment to subsidise the cost of Anne’s salary and will continue paying the superannuation guarantee on Anne’s income;
The business continues to pay Nick his $1,000 per fortnight before tax salary and an additional $500 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 Nick’s salary. The business must continue to pay the superannuation guarantee on the $1,000 per fortnight of wages that Nick is earning. The business has the option of choosing to pay superannuation on the additional $500 (before tax) paid to Nick under the JobKeeper Payment.
Adam can register his initial interest in the scheme from 30 March 2020, followed subsequently by an application to ATO with details about his eligible employees. In addition, Adam is required to advise his employees that he has nominated them as eligible employees to receive the payment. Adam will provide information to the ATO on a monthly basis and receive the payment monthly in arrears.

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

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

Jotham Lian
31 March 2020
accountantsdaily.com.au