This special edition of TaxWise Business contains information about government and ATO measures in response to the Coronavirus (COVID-19) crisis. But we have also taken the opportunity to tell you about the super guarantee amnesty.
COVID-19 stimulus measures
The main tax measures are:
Other measures include relief for financially stressed businesses and a guarantee of lending to SMEs.
We will look at these measures in more detail but contact your tax agent if you have any questions.
Instant asset write-off changes
There are 2 changes:
This means that a small business with an aggregated turnover of less than $10 million can write-off in the current income year the total cost of a depreciating asset costing less than $150,000, provided the asset is first used or installed ready for use in the business on or after 12 March 2020 and before 1 July 2020.
The increased threshold also applies to assets a small business (but not a medium business) acquired before 12 March but had not used, or installed ready for use, by that date.
Remember that if you purchase a car for your business, the instant asset write-off is limited to the business portion of the car limit of $57,581.
You cannot claim the instant asset write-off for an asset costing between $30,000 and $150,000 if you had used it, or installed it ready for use, before 12 March. For example, if you sell an asset you are already using and buy it back (for between $30,000 and $150,000) you won’t be able to claim the instant asset write-off for the re-purchase.
Small and medium businesses may also be able to claim a deduction for an amount included in the second element of the cost of a depreciating asset. The amount of the cost must be less than $150,000 and the cost must be incurred on or after 12 March 2020, but before 1 July 2020.
If you are a small business, only assets costing $150,000 or more, and costs of $150,000 or more relating to depreciating assets, need be allocated to the general small business pool. If the balance of the pool falls below $150,000 at the end of the current income year, the entire balance of the pool can be deducted.
Instant asset write-off – medium businesses
The instant asset write-off turnover threshold has been extended from $50 million to $500 million.
This means that a medium sized business that has an aggregated turnover of $10 million or more but less than $500 million can immediately deduct the cost of an asset if the asset:
If a medium sized business that has an aggregated turnover of $10 million or more but less than $50 million has depreciating assets that do not meet the timing requirements for the $150,000 threshold, the earlier $30,000 threshold continues to apply prior to 12 March 2020. Note also that you can’t claim the instant access write-off if you sell an asset you already use in your business and buy it back.
Tip! If you are planning to buy a depreciating asset for use in your business, talk to your tax agent first. There is only a 3-month window of opportunity – to 30 June this year – to take advantage of the increased thresholds.
Another COVID-19 measure is an accelerated rate of depreciation for businesses with an aggregated turnover less than $500m. To be eligible for the accelerated depreciation, the depreciating asset must:
A depreciating asset will not qualify for the accelerated depreciation if:
You cannot split an asset or merge assets to try to qualify for the accelerated depreciation.
The rules for working out the accelerated depreciation vary depending on whether or not you use the simplified depreciation rules.
In all cases, you cannot deduct more than what you pay for the asset.
Small business using simplified rules
If you are a small business and you use the simplified depreciation rules, those assets over the instant asset threshold which are eligible for the accelerated depreciation are added to the general small business pool. You can deduct an amount equal to 57.5% (rather than 15%) of the business portion of a new depreciating asset in the year you add it to the pool. In later years the asset will be depreciated as part of the general small business pool rules.
Other businesses with an aggregated turnover less than $500m – including small businesses that do not use the simplified depreciation rules – will be able to deduct in the income year the asset is first used or installed ready for use:
Tip! The rules for working out the accelerated depreciation are fairly complicated so speak to your tax agent before investing in new depreciating assets.
Boosting cash flow for employers
The ATO will provide temporary cash flow support (called the cash flow boost) to small and medium businesses and not-for-profit organisations that employ staff during the economic downturn associated with the COVID-19.
Cash flow boosts are tax free and not subject to GST. You will still be entitled to a deduction for PAYG withholding paid. There is no effect on tax paid by employees in respect of their salary and wages.
Cash flow boosts will not have to be repaid once times improve (although if you are overpaid, the excess will have to be repaid).
How does the cash flow boost work?
You will be eligible to receive the cash flow boost if you are a small or medium business (whether a sole trader, company, partnership or trust) that:
Eligible payments include:
In addition, you must also have either:
To be eligible, not-for-profit organisations (excluding charities) must have all of the following:
Charities registered with the Australian Charities and Not-for-profits Commission are eligible, regardless of when they were registered, if they meet the other eligibility requirements.
Initial cash flow boost
You will receive a credit equal to 100% of the amount withheld, up to a maximum of $50,000. The minimum credit will be $10,000, even if the amount required to be withheld is zero. However, you will not be eligible to receive any more cash flow boosts until your PAYG withholding exceeds $10,000 over the relevant periods.
Monthly lodgers will receive a credit that is calculated at three times the rate (300%) in the March 2020 activity statement, to align with quarterly lodgers.
The total of all initial cash flow boosts across all of the relevant periods cannot exceed $50,000.
The initial cash flow boost will be delivered as a credit in the activity statement system from 28 April 2020. If you lodge early (i.e. before 28 April 2020), you will not receive the cash flow boost before that date.
If you lodge quarterly, you will be eligible to receive the credit for:
If you lodge monthly, you will be eligible to receive the credit for the March, April, May and June lodgment periods.
As the cash flow boost is generated on lodgment of an eligible activity statement, if the ATO has granted a lodgment deferral, the cash flow boost will generally be made at the time of the deferred lodgment.
Additional cash flow boosts
If you receive an initial cash flow boost, you will receive additional cash flow boosts, for the periods June to September 2020. The amount received will be equal to the total amount of the initial cash flow boost.
The additional cash flow boosts will be delivered in 2 or 4 instalments, depending on your reporting period. If you report quarterly, you will receive 50% of the initial cash flow boost for each BAS.
Delivery of the cash flow boost
You do not need to apply for the cash flow boosts. If you are eligible, the cash flow boosts will be automatically applied to your account when you lodge your BAS for the relevant period. The cash flow boosts will be applied to reduce liabilities arising from the same BAS. This will result in eligible entities being required to pay less to the ATO.
The ATO has said that if you do not need to lodge a BAS in respect of your PAYG withholding, it is working through a solution and will update its website with more information on what you need to do.
Where a credit exceeds your other tax liabilities, the excess amount will be refunded.
You may also receive a refund if you overpay because your system was unable to take the cash flow boost into consideration when working out how much was payable.
The ATO has said that it will generally deliver any refund within 14 days.
You will not be eligible for cash flow boosts if you (or a representative) take steps to make you eligible for cash flow boosts, or to increase the amount of your cash flow boosts.
This may include restructuring your business or the way you usually pay your workers, as well as increasing wages paid in a particular month to maximise the cash flow boost amount.
Tip! Talk to your tax agent before restructuring your business. There will be other tax issues you need to know about, such as capital gains tax.
If your business has been significantly impacted by the Coronavirus you will be able to access a wages subsidy to continue paying your employees. Under the JobKeeper program, you will be able to claim a fortnightly payment of $1,500 per eligible employee from 30 March 2020, for a maximum of 6 months.
Employers will be eligible for the subsidy if:
The reduction in turnover is relative to a comparable period a year ago (of at least a month).
Not-for-profit organisations are eligible for the JobKeeper payment, but not the major banks.
You will have to apply to the ATO to participate in the scheme. You will need to demonstrate the appropriate downturn and you will have to report the number of eligible employees on a monthly basis.
If you are an eligible employer, you will receive the payment for each eligible employee that was on your books on 1 March 2020 and you continue to employ. Part-time employees, stood down employees and long-term casuals are all eligible, as well as full-time employees.
A long-term casual is one employed on a regular basis for at least the previous 12 months as at 1 March 2020.
An employee must be an Australian citizen or the holder of a specified class of visa. Working holiday makers are not covered.
Other Federal government measures
Other government measures to assist financially distressed individuals and businesses include:
The government will also enter into risk-sharing agreements with financial institutions to ensure that credit continues to flow to small and medium enterprises so they can continue to meet their immediate financing needs during the uncertain economic conditions caused by COVID-19.
The government also announced that individuals may access their super if adversely affected by COVID-19 (up to a maximum of $20,000 in 2 instalments) and a reduction by 50% in the minimum annual payment required for certain pensions and annuities.
What is the ATO doing?
PAYG instalment variations
The ATO will allow businesses impacted by COVID-19 to vary PAYG instalment amounts as from the March 2020 quarter.
A quarterly PAYG instalments payer can vary their PAYG instalments on their BAS for the March 2020 quarter. This can be done by lodging a revised BAS before an instalment is due, and before the business lodges its income tax return for the year.
Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
Changing to monthly reporting
The ATO will allow businesses on a quarterly reporting cycle to opt into monthly GST reporting to get quicker access to any GST refunds. Changing the GST reporting cycle to monthly doesn’t mean that a business has to change its PAYG withholding reporting cycle. Rather, business can manage this by specifying the roles it is changing.
Once a business chooses to report and pay GST monthly, the ATO says it must keep reporting monthly for 12 months before it can elect to revert to quarterly reporting.
Other ATO administrative measures to assist businesses impacted by COVID-19 are:
These assistance measures will not be implemented automatically by the ATO (unlike the relief measures for the 2019-20 bushfires – see below). Therefore, if you are an individual, sole trader, small or medium business and you need further assistance managing your tax and super obligations, contact the ATO Emergency Support Infoline (tel: 1800 806 218) or talk to your tax agent. Once you or your agent contacts the ATO, a support plan will be tailored for you.
The ATO has set up a “one stop shop” on its website for essential tax and super info on Coronavirus stimulus measures.
State and Territory Coronavirus measures
The States and Territories have also announced various measures to help people and businesses during the COVID-19 epidemic, including waiving various government fees and charges, providing grants and interest-free loans and providing rent relief for tenants in government owned properties.
Various revenue related measures are listed below. For full details, however, talk to your tax agent or visit the relevant government website.
Super guarantee amnesty
The super guarantee (SG) amnesty is now official. Under the amnesty, employers have a 6-month window until 7 September this year to disclose, lodge and pay unpaid SG amounts for their employees.
To be eligible for the amnesty, you must declare and pay your SG shortfalls and interest charges. Payments made during the amnesty can be claimed as tax deductions.
SG shortfalls for any quarter between 1 July 1992 and 31 March 2018 may be eligible for the amnesty if they haven’t been disclosed previously or aren’t subject to a current or previous audit.
Applications for the amnesty close at 11.59pm on 7 September 2020. The closing date cannot be changed, even if you are impacted by bushfires or COVID-19.
After the amnesty ends, the ATO’s ability to remit penalties applied as a result of an audit is limited by law. This means shortfalls will have a minimum penalty of 100% applied but can be as much as 200%.
The ATO has also said that its audit program will continue during the amnesty period.
How to apply for the amnesty
To apply for the amnesty, you must:
Do not use the SGC calculator in the Business Portal if you want to apply for the amnesty.
To ensure the correct calculation of the amount of SGC you owe and efficient processing of your amnesty application you need to:
The ATO will tell you which quarters are eligible for the amnesty once they receive the forms.
If you are eligible for the amnesty, you:
The ATO has said that it will work with employers to establish a payment plan that is flexible to help them to continue making payments. These arrangements include:
It is important to note that if you agree a payment plan with the ATO, but you are unable to maintain payments, you will be disqualified from the amnesty and the amnesty benefits will be removed. The disqualification will only apply to any unpaid quarters – the administration component of $20 per employee will be re-applied. The ATO will take your circumstances into account when deciding whether a Part 7 penalty should be applied.
If you previously lodged an SGC statement
If you previously disclosed unpaid SG to the ATO in anticipation of the SG amnesty, you don’t need to lodge again or apply on the SG amnesty form.
The ATO will review all disclosures received between 24 May 2018 and 6 March 2020 and advise you of your eligibility. The $20 per employee per quarter administration charge will be refunded if you meet the amnesty criteria.
If you have made payments of SGC or contributions to employee super funds in 2017-18 or 2018-19 that are eligible for income tax deductions, you should include this deduction in your tax return for the relevant year. Once the ATO has amended your return it will pay any refund due as soon as possible (generally within 14 days).
Tip! Your professional advisor can provide further advice on participating in the amnesty, based upon your particular circumstances.
Key tax dates
21 Apr 2020
Lodge and pay March 2020 monthly BAS
28 Apr 2020
Lodge and pay March 2020 quarterly BAS
Pay March 2020 quarterly instalment notice
Employee super guarantee contributions due
21 May 2020
April monthly BAS due
Lodge and pay annual FBT return (if your business lodges one)
28 May 2020
Lodge and pay March 2020 quarterly SGC (if required)
21 June 2020*
May monthly BAS due
30 June 2020
Super guarantee contributions must be paid by this date to qualify for a tax deduction in 2019-2020
21 July 2020
June 2020 BAS due
28 July 2020
Lodge and pay June 2020 quarterly BAS
Pay June 2020 quarterly PAYG instalment
Employee super guarantee contributions due
June quarter SG due
*Next business day
Talk to your tax agent to confirm the correct due dates for your own tax obligations. For example, you may have more time to lodge and pay if impacted by bushfires.
TaxWise® News is distributed by professional tax practitioners to provide information of general interest to their clients. The content of this newsletter does not constitute specific advice. Readers are encouraged to consult their tax adviser for advice on specific matters.