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November 2020

$120m in JobKeeper clawed back by ATO, new compliance areas highlighted

 

About $120 million in JobKeeper payments have been recovered by the ATO due to businesses making deliberate or reckless mistakes, as fresh guidance on its JobKeeper extension compliance focus lands.

 

       

Fronting a Senate estimates hearing on Tuesday, ATO second commissioner Jeremy Hirschhorn said $200 million in payments had been stopped permanently, with another $100 million under review.

“We have also stopped future claims of another $350 million,” Mr Hirschhorn said.

“This is where we’ve found someone was ineligible and chopped off their future claims.”

Of the $69 billion that has since been paid out since JobKeeper began in late March, $120 million has now been clawed back.

Mr Hirschhorn told senators this was consistent with its approach in only pursuing overpayments that were not deemed to be honest mistakes made by businesses.

“We generally only claw back where there has been a deliberate or reckless mistake,” Mr Hirschhorn said.

“Where there has been an honest mistake, particularly early on, and particularly where the employer has claimed in good faith, passed it on to the employee in good faith and has not financially benefited, we made the decision to let those go but just made sure they didn’t get future claims.”

Focus areas for JobKeeper 2.0

With the JobKeeper extension now in place, the ATO has announced it will focus its compliance approach on two new areas, namely the actual decline in turnover test and the incorrect claiming of the higher-tier rate.

For the actual decline in turnover test, the ATO will pay close attention to irregularities in an entity’s current GST turnover in the September 2020 or December 2020 quarters, and any unusual amendments to their business activity statements which inflate their sales for the relevant comparison periods.

The ATO will particularly monitor businesses that omit sales from their reporting, or delay or alter the recognition of sales from normal practices.

If selected for a review, businesses will be asked to provide documentation including sales and trading records, sales contracts or customer correspondence, invoices issued and bank statements.

On the higher-tier payment rate front, the Tax Office may seek to understand how a business has assessed an individual has met the 80-hour threshold and ask for documentation as evidence.

Suitable documentation includes the declaration of the business participant; employment records, such as payroll data or time sheets and other attendance records; employment contracts; business diaries; appointment books and logbooks; records of store trading hours; hours billed; invoices issued; or records prepared for another business or statutory purposes.

These focus areas will be additional to its ongoing areas of concern since the JobKeeper payment began, including failing to meet the wage condition, claiming for more than one business participant by disguising them as employees, or claiming for individuals who are not eligible business participants.

View the ATO’s latest guidance on its JobKeeper compliance focus areas here.

 

 

Jotham Lian 
28 October 2020 
accountantsdaily.com.au

 

‘Follow the spirt of the law’, warns ATO

 

The Australia Taxation Office has cautioned businesses against taking advantage of the government’s most recent expanded asset write-off scheme and the new loss carry-back provision.

 

       

Full expensing of plant and equipment and the ability to carry back losses are two measures introduced in the budget with the aim of encouraging businesses to invest and accelerate economic growth after the COVID-19 crisis.

But speaking at an event hosted by the Australian Financial Review, ATO second commissioner Jeremy Hirschhorn expressed his concern over businesses turning to “artificial mechanisms” to take advantage of these measures.

“These measures should be embraced, but for the purpose for which they were introduced. Invest in new plant, upgrade your facilities, claim a tax offset and reinvest the money in your business and jobs!” Mr Hirschhorn said.

He also advised financial officers to do the right thing and refrain from artificially shifting profits and losses around their group to access the loss carry-back.

“At a more granular level as CFOs, make sure your business analysts are including these tax cash flow advantages in your DCF models, in conjunction with your heads of tax making appropriate variations to your tax instalments to bring home that cash flow advantage,” Mr Hirschhorn said.

“Similarly, accessing the loss carry-back to support executive bonuses, increased dividends or to repatriate cash to offshore related parties is likely to be viewed poorly by the community.”

Speaking about the “weighty” responsibility entrusted on the business community to recover the post-COVID economy, Mr Hirschhorn urged businesses to “follow the tax law, but also follow the spirit of the law”.

“I suspect the community will have even less sympathy for companies seen to be exploiting loopholes.”

Mr Hirschhorn further urged entities to consider the optics of “making a statement in your annual report noting that the pandemic has not substantially impacted the operations of your business while at the same time collecting hundreds of millions of dollars in stimulus”.

“You have been entrusted by the government with leading the economic recovery with a range of stimulus measures,” he said.

“With this comes increased expectations around corporate behaviour including tax. There is an opportunity to rise to these expectations and increase the community’s trust in large organisations.”

 

 

Maja Garaca Djurdjevic 
02 November 2020 
accountantsdaily.com.au

 

Employers cautioned over ‘hard and fast’ decline in turnover eligibility

 

Accountants assisting clients with the JobKeeper extension have been urged to pay close attention to the actual decline in turnover test, with the ATO unable to offer leeway for those who come just shy of the requirements.

 

       

With JobKeeper now requiring entities to satisfy the new actual decline in turnover test, rather than the projected decline in turnover test used earlier in the program, the ATO will be required to follow the strict letter of the law in ensuring the requisite percentage declines are satisfied.

“[In JobKeeper 1], the legislation didn’t require the actual turnover to decline, so we saw a lot of organisations make a projection in a very difficult environment… and a lot of those projections didn’t pan out and that’s fine,” said ATO assistant commissioner Sandra Farhat on a recent ChangeGPS webinar.

“But moving into the extension, that is the test; the test is an actual decline.

“There is really no discretion in relation to decline in turnover, so there is no ability for the ATO to say, ‘Well, you were close, just not close enough, but we’ll let you through’ — the 30 per cent is a hard and fast legislative requirement.

“It is a significant change from a projected decline in turnover to an actual decline in turnover.”

The approach is a shift from the “sympathetic and understanding” stance that the ATO committed to earlier in the year when queried on how it would police the projected decline in turnover estimates.

ATO second commissioner Jeremy Hirschhorn told a Senate inquiry in May that the ATO would not nitpick turnover estimates that fell just short of the requirements because the law had merely required entities to make a reasonable estimate.

“If it ultimately turns out that the estimate was overly pessimistic and a business only went down 29 per cent, instead of an estimated 35 per cent, that is OK; what the legislation requires is a reasonable estimate,” Mr Hirschhorn said earlier this year.

Clawing back JobKeeper payments

The ATO’s confirmation of its new position comes as it releases fresh guidance on how it will manage JobKeeper payments that were incorrectly paid out.

For payments that were made because of an honest mistake, the ATO will not seek to recover these payments.

The facts and circumstances of each case will be considered, including whether the mistake was made earlier in JobKeeper when there was less public guidance.

Entities that did not take reasonable steps to check their eligibility will not be considered as having made an honest mistake.

Where payments will need to be repaid, the Tax Office will write to the entity to inform it of the reasons for clawing back the payments, how much needs to be repaid, and how repayments can be made.

Objections will be considered, while payment plans will be made available to those who aren’t able to pay on time.

The ATO also notes that it will generally not impose administrative penalties for JobKeeper overpayments that were the result of a mistake.

However, administrative penalties will apply if there is evidence of deliberate actions to obtain JobKeeper payments that an entity would not have otherwise been entitled to.

 

 

Jotham Lian 
23 October 2020
accountantsdaily.com.au

 

Businesses not meeting obligations warned as ATO restarts compliance programs

 

The ATO has warned businesses not staying up to date with their obligations that it may impact their eligibility for future stimulus measures, as the Tax Office readies to recommence its work to address key risks to the tax and super system.

 

       

The ATO has warned businesses not staying up to date with their obligations that it may impact their eligibility for future stimulus measures, as the Tax Office readies to recommence its work to address key risks to the tax and super system.

While the Australian Taxation Office will continue to focus on implementing government stimulus measures, including those announced in the federal budget, it will shortly recommence its work to address key risks to the tax and super system.

Speaking at an event hosted by Chartered Accountants Australia and New Zealand, Deborah Jenkins, deputy commissioner of small business, said that businesses doing well need to resume their obligations, while those facing ongoing hardship are encouraged to get in contact with the ATO.

“Because it is hard for us to identify who is still impacted, we need to return to a normal setting for our work program. It’s not as simple as applying postcode logic — for obvious reasons. In bushfires, we can use this approach to support impacted businesses,” Ms Jenkins explained.

“We have recommenced and adapted our strategies to address compliance risks, being very conscious of the impacts still being faced by many businesses.”

Since 1 September, the ATO has stopped providing blanket extensions to small business audit cases and has recommenced activity where the business is either not adversely impacted by COVID or is now in a position to progress.

“I want to emphasise that we will continue to be empathetic to each client’s situation and provide additional time if they need it,” Ms Jenkins said.

Looking ahead, she said that the ATO will be resuming its review and audit programs addressing shadow economy behaviour. 

“We will be continuing our use of taxable payments reporting system data to check that contractors in a range of industries are lodging and meeting their income tax and GST obligations in full,” Ms Jenkins said.

“Taxable payments annual reports (TPAR) data allows us to match the payments reported by payers to contractors (payees) income tax returns to identify where contractors may have omitted income.

“We have also been piloting a nudge approach where we have contacted some contractors ahead of their 2020 tax return lodgement to remind them to include their TPRS reported income this year.”

Moreover, from November 2020, the ATO will be contacting tax agents and their clients who are contractors in the cleaning, courier and building and construction industries and may not have included all of their income in their 2019 tax return.

“We will be using a combination of emails and phone calls to contact tax agents in advance of their clients receiving letters,” Ms Jenkins continued.

In regard to the ATO’s shadow economy program more broadly, she revealed that some strategies are being reconsidered as some of the previous approaches, like visiting businesses in person, are unlikely to be possible in the coming year. 

She said: “We will continue to use a combination of review and audit programs, delivering help and education and building community awareness of our work to address the shadow economy — we will just need to do things a little differently.

“We are also applying agent-focused strategies to the black economy by taking the insights generated through our tax practitioner model and identifying agents with higher than normal levels of black economy risk in their client base.”

Other areas the ATO will be closely monitoring are loss claims and unreported fund extractions from small-business companies.

“We are currently overhauling our GST high-risk refund models to enable us to more effectively detect and action high-risk refunds before payment,” she said.

“Our broad focus now beyond the specific risks we are focused on is ensuring people are staying in the system. Businesses need to be lodging, and if they can pay, they should. Those who still need help just need to contact us and we will be here to support them. But we are conscious that many businesses are doing well, so we need to be reminding them to meet their obligations.”

 

 

Maja Garaca Djurdjevic
02 November 2020 2
mybusiness.com.au

 

Comprehensive list of COVID-19 initiatives and packages.

 

The response by our Governments to the COVID-19 crisis has been a very good one.  Following is a comprehensive listing of links to important Federal and State initiatives and programs since the pandemic began.  

 

     

 

Please click on the following links to access a wide range of Covid-19 related updates, initiatives, guidelines and resources from both Federal and State Governments.

 

Recent Updates

 

Previous Updates:

  • Articles and Updates in other Latest News articles including:
    • Stage 3 – Covid-19 $1.1billion Domestic Violence, Medicare and Mental Health.
    • Stage 2 – Covid-19 – $66 billion stimulus package.
    • Stage 1 – Covid-19 Update – Small Business
    • Stage 1 – PM launches $17.6 billion virus stimulus plan

Part 3 – Budget reminders. Under the Hood.

 

The 2020 Federal Budget was one of the most far reaching and complex ever brought in.  This is the first of three articles to remind us of important topics the budget addressed. 

 

       

Temporary full expensing of eligible capital assets

Most businesses are now able to claim full deductions for depreciation assets.

Businesses with aggregated annual turnover of less than $5 billion will be able to deduct the full cost of eligible capital assets in the year they are first used.

Full expensing in the year of first use will apply to:-

  • new depreciating assets;
  • the cost of improvements to existing eligible assets;
  • for small and medium businesses (aggregated turnover of less than $50 million – second-hand assets

Applies to eligible capital assets acquired from 7.30pm AEDT on 6 October 2020 and first used or installed by 30 June 2022

 


 

Temporary loss carry-back for companies

Eligible companies can elect to carry back tax losses from the 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in 2018-19 or later income years.

The effect of the election will be to generate a refundable tax offset and it will first be available when lodging the 2020-21 tax return, subject to the amount carried back not being more than the earlier taxed profits and not generating a franking account deficit.

The new loss carry-back measure is designed to promote economic recovery by providing cash flow support to previously profitable companies that COVID-19 has turned into loss making businesses – many such businesses might find it difficult to survive or re-employ staff if they had to wait years to get tax relief for the losses under the present system.

As with a similar scheme operated in 2012-13, the carry back is notional – it is not necessary to amend the prior year return – the benefit is received in the assessment for the year in which the election is made.

The tax refund will be available on election by eligible businesses when they lodge their 2020-21 and 2021-22 tax returns.

 


 

JobMaker Plan Boosting Apprenticeships Wage Subsidy

From 5 October 2020 to 30 September 2021, businesses of any size can claim the wage subsidy for a new, or recommencing, apprentices or trainees.

Eligible businesses will be reimbursed 50% of an apprentice or trainee’s wages, up to $7,000 per quarter, capped to 100,000 places.

 

 

 

AcctWeb

Part 2 – Budget reminders. Under the Hood.

 

The 2020 Federal Budget was one of the most far reaching and complex ever brought in.  This is the second of three articles to remind us of important topics the budget addressed. 

 

       

Changes to the JobKeeper Payment Scheme                                                         

These changes to the JobKeeper Payment schemes have been reported earlier.

After 3 August 2020 the employment reference date for assessing employee eligibility changed from 1 March 2020 to 1 July 2020.

The logic for this, is that after first lockdown, some employers hired new staff that then were stood down or disadvantaged by second lockdown.

The decline in turnover test for assessing employer eligibility for the December 2020 and March 2021 quarters, must be met only in the previous quarter – from 28 September 2020.

The decline in turnover eligibility criteria have been changed from 28 September 2020 so that employers are required to demonstrate that their actual turnover was sufficiently affected in the previous quarter (rather than in every quarter from June 2020 onwards) to be eligible for the payment in the December 2020 and March 2021 quarters.

Other aspects of scheme have been reaffirmed – end date is 28 March 2021.  Several tiers now apply, and regular reporting is required.

Note – superannuation guarantee rules still apply, although they have become more complex.

 


 

Personal Tax Reduction

A further recovery measure to encourage consumer spending is from tax cuts.  Lower personal tax occurs when tax rates apply at a higher threshold.  This change will apply immediately on PAYG (employee) deductions.

The Government has brought forward the second stage of its legislated Personal Income Tax Plan from 1 July 2022 to 1 July 2020.

The top threshold of the 19% personal income tax bracket will increase from $37,000 to $45,000.

The top threshold of the 32.5% personal income tax bracket will increase from $90,000 to $120,000.

The maximum amount of the Low Income Tax Offset will increase from $445 to $700.

The Low and Middle Income Tax Offset – capped at $1,080 – will be retained for the 2020-21 income year.

Payroll packages will implement the new rates as soon as the Australian Taxation Office provides appropriate guidance.

 


 

JobMaker Hiring Credit

Another incentive to encourage economic recovery is a subsidy for new employment.

The Government will provide $4 billion over the next three years from 2020-21 to accelerate employment growth by supporting organisations that take on additional employers through a hiring credit.

The JobMaker Hiring Credit will be available to eligible employers over 12 months from 7 October 2020 for each additional new job they create for an eligible employee.  The credit will be:-

  • $200 a week for each additional eligible employee they hire aged 16 to 29 years old
  • $100 a week for each additional eligible employee aged 30 to 35 years old

The employee must be in an additional job created from 7 October 2020.  To demonstrate this, there must be an increase in:-

  • the employer’s total employee headcount (minimum of one additional employer) from the reference date of 30 September 2020
     
  • the payroll of the business for the reporting period as compared to the three months to 30 September 2020

To be eligible, an employee must:-

  • have worked at least 20 paid hours per week on average for the full weeks they were employed over the reporting period
     
  • have commenced their employment between 7 October 2020 and 6 October 2021
     
  • have received the JobSeeker Payment, Youth Allowance (other) or Parenting Payment for a least one month within the past three months before they were hired.

This will be administered through a yet to be created Australian Taxation Office sub-system.

Eligible employers will be able to claim quarterly in arrears from the Australian Taxation Office.  Claims open from 1 February 2021.

 

 

 

AcctWeb

Part 1 – Budget reminders. Under the Hood.

 

The 2020 Federal Budget was one of the most far reaching and complex ever brought in.  This is the first of three articles to remind us of important topics the budget addressed. 

 

       

Exempting granny flat arrangements from CGT

Whilst there has been Centrelink encouragement for granny flats, the capital Gains Tax issues have prevented wider acceptance.  That may change now.

The law will be amended to provide a targeted CGT exemption for granny flat arrangements.

The CGT exemption will apply to arrangements with older Australians or those with a disability, where there is a formal written agreement in relation to the granny flat.

The new exemption is proposed to apply from the first income year after the date of Royal Asset of the enabling legislation.  This should mean the 2021 financial year.

The change will only apply to agreements that are entered into because of family relationships or other personal ties and will not apply to commercial rental arrangements.

 


 

Temporary Full Expensing of Eligible Capital Assets

Most businesses are now able to claim full deductions for depreciating assets.

Businesses with aggregated annual turnover of less than $5 billion will be able to deduct the full cost of eligible capital assets in the year they are first used.

Full expensing in the year of first use will apply to:-

  • New depreciating assets
  • The cost of improvements to existing eligible assets
  • For small and medium businesses (aggregated turnover of less than $50 million) – second-hand assets

Applies to eligible capital assets acquired after 7.30pm on 6 October 2020 and first used or installed by 30 June 2022.

In an extension to the previous rules, eligible businesses that acquire eligible new or second-hand assets under the $150,000 instant asset write-off by 31 December 2020 will have an extra six months, until 30 June 2021, to first use or install those assets.

Whilst the acquisition date is important, the asset must also be in use or ready for use.

 


 

Victoria’s business support and other State grants to be tax neutral

The Victorian Government’s business support grants for small and medium businesses, as announced on 13 September 2020, will become non-assessable, non-exempt (NANE) income for tax purposes.

The Federal Government will extend this arrangement to similar grants by all States and Territories on an application basis.

NANE income treatment is only available for grants announced on or after 13 September 2020 and paid between 13 September 2020 and 30 June 2021.

On 13 September 2020, the Premier of Victoria announced a $3 billion Business Resilience Package to help Victorian businesses impacted by the ongoing COVID-19 business restrictions and to prepare for ‘COVID Normal’ business.

The package includes grants of $10,000, $15,000 or $20,000 for eligible businesses in targeted sectors, depending on the size of annual payroll, in a third round of Business Support Fund.

State based grants without this legislation, are considered to be assessable income for income tax purposes  There is no immediate benefit, but this change will mean no 2021 income tax becomes payable.

 

 

 

AcctWeb