These three areas cover all you will need to know but the accompanying two articles cover more specific topics and they might help you better understand how the Budget affects you.
The 80 cents per hour work-from-home deduction method has now been extended for a further three months to the end of the year.
The temporary shortcut method for calculating home office expenses has now been extended to 31 December 2020, after it was due to expire at the end of September.
Taxpayers have been able to apply the 80 cents per hour method since March, after the ATO introduced the temporary method in light of COVID-19 restrictions forcing many workers to adopt remote working practices.
The extension comes as most workers in metropolitan Melbourne continue to be barred from returning to their workplace as the Victorian government works through its reopening roadmap.
The ATO’s updated Practical Compliance Guideline 2020/3 notes that the 31 December end date will be revisited and may be further extended.
Tax & Super Australia tax counsel John Jeffreys welcomed the extension but urged taxpayers to ensure they were not accidentally double dipping on other working-from-home expenses.
“Employees working from home should note that if they use the ATO’s shortcut method for home office expenses, they can’t claim other home office-related items, such as technology, desks, monitors and chairs. It’s a one or the other approach. Some may be mistaken about this,” Mr Jeffreys said.
“Finally, when the ATO outlined its shortcut method, it noted that taxpayers should keep adequate records — diary notes, timesheets or rosters — to substantiate work.
“It’s unlikely the ATO would audit this, but it’s worth employees having this evidence just in case. It could be that significantly higher claim by an employee compared to benchmark claims for same hours worked would be a red flag to the ATO.”
The temporary shortcut method will continue to be supplementary to the 52 cents fixed rate method and the actual cost method of calculating running expenses, with taxpayers able to choose the appropriate method for their circumstances.
View the ATO’s updated PCG 2020/3 here.
30 September 2020
The legislative instrument implementing the changes to the JobKeeper scheme over the extended period was registered on 15 September 2020.
The extension of JobKeeper applies to qualifying entities in respect of their eligible employees and business participants. The changes in the Rules build more flexibility into the JobKeeper scheme recognising that circumstances can change quickly. Thus, there is the requirement to reassess an entity's actual decline in turnover for two set periods and a two-tiered payment based on hours of work or engagement.
Nevertheless, the changes do not affect any entitlements payable under the original JobKeeper scheme prior to 27 September 2020. Similarly, the changes to do not provide the opportunity for entities to change any elections they have previously made under the JobKeeper scheme.
For an entity to continue to receive the JobKeeper payments over the extended period, the entity must satisfy the actual decline in turnover test (section 8B of the Rules):
This mean entities on JobKeeper do not have to satisfy the actual decline in turnover test for both the September quarter and December quarter to be able to receive payments for the JobKeeper fortnights beginning 4 January 2021. Furthermore, according to the explanatory statement to the Rules, an entity that drops out of the JobKeeper scheme after 28 September 2020 and then requalifies in the next period, does not need to notify the Commissioner again that it elects to participate in the scheme.
The actual decline in turnover test applies the same thresholds for the original decline in turnover test (i.e. the percentage decline for the quarter must be equal to or greater than 30% for entities with $1 billion or less aggregated turnover and 50% for entities with over $1 billion aggregated turnover) but uses current GST turnover rather than projected GST turnover. According to the explanatory statement, it does not matter for the purposes of the new test whether the entity was required to use a different percentage in applying the original decline in turnover test at an earlier time (e.g. because it applied the original test in the previous income year).
Entities can still use the Commissioner's alternative decline in turnover test (for specified situations where using the 2019 period as a comparison is not appropriate) and the modified decline in turnover test (for group structures with employer entities) in assessing whether they qualify for the JobKeeper scheme – current GST turnover is to be used in place of the projected GST turnover.
Entities that have not previously participated in the JobKeeper scheme are required to satisfy both the original decline in turnover test and the new decline in turnover test. However, the Rules have modified the original decline in turnover test to give entities the choice to compare the 'projected GST turnover' of:
with a relevant comparison period.
This extension of the testing period ensures that JobKeeper can still be accessed by entities that first experience a significant decline in turnover during the December quarter.
The Rules sets out two tiers of payment rates for eligible employees and business participants which have not changed from the Government's announcement. To recap:
However, whether an individual is eligible for the higher rate depends on whether the individual worked or was actively engaged for 80 hours or more for a reference period. Otherwise, the individual is eligible for the lower rate.
Reference period means for (section 4A):
Entities applying the 80 hour test for:
If the standard reference period is not suitable, the Commissioner has made a determination, to provide an alternative reference period for the 80 hour test for particular employees.
Employers already on JobKeeper and are eligible for the first extension period can notify the ATO whether their eligible employees are on the higher rate or lower rate in their business monthly declaration in November 2020.
The ATO has allowed employers until 31 October 2020 to meet the wage condition for all employees on JobKeeper for JobKeeper fortnights starting on 28 September and 12 October 2020.
Although JobKeeper has been in place for many months and is now scaling back, all eligible participants may not have enrolled. The program is targeted to workers in the broad sense.
An “eligible business participant” is an individual who’s not an employee of the business but is actively engaged (i.e. a worker).
The eligible business participant must be an individual, who could be:-
They must be actively engaged in the business, – although recently this does not include providers of childcare.
Even if the business has several people who meet the criteria (e.g. two or three partners or directors), only one can be nominated as the participant.
Whilst there are now continuing reporting obligations, which means you may not always be a “worker”- even a few fortnights JobKeeper receipts can be significant – check your enrolment basis regularly.
The Commissioner of Taxation has now released the updated alternative decline in turnover tests for the JobKeeper extension.
The Coronavirus Economic Response Package (Payments and Benefits) Alternative Decline in Turnover Test Rules (No. 2) 2020 legislative instrument has now been registered by the commissioner, setting out the revised alternative tests for JobKeeper fortnights from 28 September onwards.
The new alternative tests remain broadly in line with the original, with the same seven circumstances available to entities where there is not an appropriate relevant comparison period in 2019.
These include businesses that started after the comparison period, businesses that acquired or disposed part of the business, and where a business restructure changed the entity’s turnover.
The alternative tests also account for businesses that had a substantial increase in turnover, were affected by drought or natural disaster, have an irregular turnover, and had sole traders or small partnerships that experienced sickness, injury or leave during the comparable period.
A key difference in the updated alternative tests is that current GST turnover is now used in place of projected GST turnover, in line with the basic decline in turnover test for the JobKeeper extension from 28 September.
Knowledge Shop tax director Michael Carruthers told Accountants Daily the new legislative instrument also confirms that the commissioner’s rules in determining the timing of supplies for the JobKeeper decline in turnover tests apply to these new alternative tests.
“This should mean that if an entity is registered for GST, it needs to calculate current GST turnover using the same accounting method that is used for GST reporting purposes (i.e. cash or accruals). Entities that are not registered for GST can choose which method but must use a consistent approach,” Mr Carruthers said.
Changes to the ‘substantial increase in turnover test’
Entities that experienced a substantial increase in their current GST turnover will now be able to choose between using the period immediately before the turnover test period or before 1 March 2020.
“Under the original version of the rules, you had to start by checking if there was an increase in turnover of at least 50 per cent, 25 per cent or 12.5 per cent in the 12, six or three months before the test period,” Mr Carruthers explained.
“While this is still possible under the updated version of this test, an entity can also access the test if there was an increase in turnover of at least 50 per cent, 25 per cent or 12.5 per in the 12, six or three months before 1 March 2020.”
Changes to the ‘irregular turnover test’
A similar change has been made for businesses looking to access the irregular turnover test, with a choice of now using the period immediately before the applicable turnover test period or before 1 March 2020.
“Under the original version of the rules, you started by looking at whether the entity’s lowest turnover quarter was no more than 50 per cent of the highest turnover quarter for the quarters ending in the 12 months immediately before the applicable turnover test period,” Mr Carruthers said.
“However, under the updated version, you look at whether the entity’s current GST turnover for any consecutive three-month period before the applicable test period or 1 March 2020 is no more than 50 per cent of the highest of the entity’s current GST turnover for any other of those three-month periods.”
Changes to multiple disposals, acquisitions and restructures
The new alternative test removes the requirement for entities with multiple acquisitions, disposals and restructures to use the period after the last of the sequential transactions.
Where an entity has had multiple acquisitions, disposals or a sequence of restructure transactions at or after the start of the relevant comparison period but before the applicable turnover test period, the entity may apply these tests to each acquisition, disposal or restructure separately.
Sole trader or small partnership with sickness, injury or leave
The new alternative test for sole traders or partnerships affected by the sole trader or a partner not working for all or part of that period due to sickness, injury or leave has also been updated.
The revised test now uses the current GST turnover for the month immediately before the month in which the sole trader or partner did not work, rather than the turnover for the month immediately after the month in which they returned to work.
ATO web guidance is expected to be published shortly.
View the new alternative tests legislative instrument here.
View the accompanying explanatory statement here.
23 September 2020
The first instalment of 2021 income tax, due for quarterly taxpayers on 28th October may be varied down.
If your business or investment income has been affected by covid-19 (or any other factors) and has reduced, the instalment can be varied.
You must make a variation on or before the payment due date. An estimate of tax payable for the year, based on the current circumstances, will result in a reduced instalment.
You can vary instalment amounts multiple times throughout the year, reflecting current income and legislation announcements (e.g. new depreciation write offs, new incentives).
The varied amount will apply for the remaining instalments for the year, or until another variation is made.
Importantly, it should be done before the payment due date – and payment made of the recalculated amount.
An estimate of next years tax payable during this pandemic can be extra-ordinarily difficult, but the Australian Taxation Office have advised that no penalties will be imposed if a best attempt is made, although general interest charges may apply to outstanding PAYG.
A warning to taxpayers who may be considering cancelling private health insurance because of higher premiums starting for many on 1st October 2020.
You could become liable for a surcharge in its place – and have no benefits.
A single taxpayer will be liable for MLS for the number of days you do not have an appropriate level of private patient hospital cover (unless exempt), if your adjusted income was more than $90,000. Taxpayer with spouse or dependent children threshold is joint $180,000.
A couple includes taxpayers living together on a genuine domestic basis.
Income is a complicated calculation with reportable fringe benefits, first home saver super, net financial investment losses, net rental property losses, reportable employer superannuation contributions, deductible personal superannuation contributions, some trust distributions and some superannuation lump sums, included in the calculation.
Private patient hospital cover is provided by registered health insurers for hospital treatment in an Australian hospital or day hospital. Singles must have an excess of $750 or less.
Extras cover (e.g. optical, dental) is not private patient hospital cover.
The single levy is:-
$90,000 + 1%
$105,000 + 1.25%
$1,40,000 + 1.5%
Family income is double these thresholds,
If you have two or more dependent children, the family income is increased by $1,500 for each dependent child after the first child.
Hence, cancelling private health insurance will save the insurance outlay, (with no insurance fund benefits ) but it may increase the tax payable. Do your sums.
And then consider whether your health is something you should insure – even in preference to some other insurance.
With the ending of a number of the original COVID-19 relief and stimulus initiatives, August and the beginning of September has seen the release of new plans to move into the post-September period. Links to these updates and changes are listed below.
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.
Jobkeeper Update – Extension to March 2021. Read more ….
Victorian Government Stage 4 Restrictions. Read more ….
Victoria – Health and Human Services – Stage 4 restrictions. Read more ….
Victoria – State Revenue Office – Land Tax. Read more ….
Federal Government COVID-19 Updates. Read more ….
NSW – New round of small business grants. Read more ….
Qld – Round 2 of Small Business COVID-19 Adaption Grant Program opens. Read more ….
Vic – Range of videos explaining topics effected by COVID-19 such as Land tax and Payroll Tax. Read more ….
Tas – An update on all COVID-19 matters in Tasmania. Read more ….
ACT – Updated 30-6-2020. Read more ….
SA – Updates for Land tax deferrals and Job Accelerator Grants. Read more ….
NT – COVID-19 Update. Read more ….
Myths about COVID-19 are all over social media. Here is the our Government's mythbusting response. Read more ….
$131.4 million Federal funding to help Public Hospital fight effects of COVID-19. Read more ….
$48.1 million for mental health & wellbeing pandemic response plan. Read more ….
State and Territory Government websites. Their latest responses to the coronavirus pandemic.
3 Step Framework for a Covidsafe Australia. Click here.
Easing of coronavirus (Covid-19) restrictions. Read more …
The Tax Office has published preliminary guidance on the extension of JobKeeper as the profession continues to wait on the amended rules to be registered.
Following the passage of legislation extending JobKeeper for a further six months to 28 March 2021 this week, the ATO has now published guidance on the changes.
The updated guidance comes despite amendments to the JobKeeper Rules, which will set out the new two-tiered payment rates, yet to be issued by the Treasurer.
Amended rules notwithstanding, the ATO has now detailed the payment rates for the two extension periods, the first running from 28 September 2020 to 3 January 2021, and the second running from 4 January 2021 to 28 March 2021.
For the first extension period, employees who worked for 80 hours or more in the four weeks of pay periods before either 1 March 2020 or 1 July 2020 will receive $1,200 per fortnight, while all other employees will receive $750.
For the second period, the rate will drop to $1,000 per fortnight and $650 per fortnight, respectively.
The ATO noted that businesses currently enrolled in JobKeeper will not need to re-enrol for JobKeeper 2.0, nor will they need to provide an employee nomination notice again.
However, businesses will need to satisfy the decline in turnover test for the September quarter, and subsequently the December quarter, with the ATO stating that it will soon provide further information on how to undertake the calculation.
“For many businesses registered for GST, this calculation will match the ‘total sales’ reported at G1 on your BAS minus GST payable (1A), where applicable,” the ATO said.
“You can provide additional turnover information to demonstrate that you satisfy the actual fall in turnover test for the September quarter from the start of October onwards. You must provide it before you complete your November monthly declaration.”
View the updated ATO guidance here.
View the Treasury JobKeeper Fact Sheets here.
04 September 2020
One of the conditions of deductibility of travel expenses, is that the expense is not a private or domestic nature.