Changes to JobKeeper
The JobKeeper scheme was discussed in the June 2020 edition of TaxWise News. Since then, the Government has announced a number of changes.
At the date of publication of this edition of TaxWise News, not all of the changes had been implemented.
Eligible employees – from 3 August 2020
A person is an eligible employee for a JobKeeper fortnight starting on or after 3 August 2020 if they are:
To meet the 1 July 2020 employment test, the employee must, on 1 July 2020:
The employee must also meet the existing residency tests and not be in receipt of parental leave, dad and partner pay or workers compensation for total incapacity for work.
If a person started work with their current employer after 1 July 2020, the employer will not be eligible to claim JobKeeper payments for that employee.
Additional turnover test – from 28 September 2020
From 28 September 2020, your business (including if you are a sole trader) will be required to re-assess its eligibility with reference to actual GST turnover in the September 2020 quarter. The business will need to demonstrate that it has met the relevant decline in turnover test in this quarter to be eligible for JobKeeper from 28 September 2020 to 3 January 2021.
Your business will need to further reassess its eligibility in January 2021. The business will need to demonstrate that it has met the relevant decline in turnover test in the December 2020 quarter to remain eligible for JobKeeper from 4 January to 28 March 2021.
Revised payment rates – from 28 September 2020
The JobKeeper payment rates will reduce from 28 September 2020 as shown in the table below.
Full rate per fortnight
Lower rate per fortnight
28 Sep 2020 to 3 Jan 2021
4 Jan 2021 to 28 Mar 2021
The full rate applies to:
The lower rate will apply to all other eligible employees/business participants.
If you are enrolling for JobKeeper payments for the first time, you must enrol your business and business participant (if appropriate) by the end of the month you wish to claim for.
Don’t forget you must make a business declaration each month (no later than the 14th day) to claim JobKeeper payments for the previous month.
Don’t forget to include JobKeeper payments in your business’ tax return (or your tax return if you’re a sole trader) as assessable income. But the wages that are effectively subsidised by JobKeeper payments are deductible.
JobKeeper payments received by your business are not subject to GST, and do not have to be taken into account in working out the decline in turnover.
Tip! The JobKeeper scheme is complicated. Talk to your tax adviser to see if your business is eligible.
Cash flow boost change
Legislation has been enacted to clarify that the cash flow boost is available to eligible small and medium businesses that are required to pay an amount to the ATO because they receive an alienated personal services payment. Broadly, this is a payment received by a personal services entity (eg a company or trust) that is ultimately treated as forming part of the income of an individual under the personal services income rules and has not been promptly paid to the individual as salary or wages.
Payment of an amount to the ATO in these circumstances gives rise to an entitlement to the cash flow boost in the same way as payment to the ATO of an amount withheld from an employee’s salary or wages.
As discussed in the April 2020 edition of TaxWise News, the cash flow boost allows eligible small and medium businesses to receive up to a maximum of $100,000 in total in cash flow boost amounts by lodging their activity statements up to the month or quarter of September 2020.
Cash flow boosts are tax-free and not subject to GST. However, this can give rise to later tax consequences when the tax-free amounts are paid out of companies and unit trusts. This is complicated so talk to your tax adviser.
No GDP adjustment to PAYG instalments for 2020-21
The GST and PAYG instalment amounts are usually adjusted every year using a formula known as the gross domestic product (GDP) adjustment.
A recent law change means there is no GDP adjustment to work out quarterly GST and PAYG instalment amounts for the 2020-21 income year. This change is in response to the COVID-19 pandemic.
Superannuation guarantee amnesty expires soon
The superannuation guarantee amnesty is your chance to catch up on unpaid super without incurring penalties or paying administration fees. But you don’t have long to apply for the amnesty as it ends on 7 September 2020.
Once you’ve applied, the ATO will advise you within 14 days which quarters are eligible for the amnesty. You will be given a payment reference number (PRN) to make amnesty payments.
Any amnesty amounts you pay before 7 September 2020 are tax deductible. Payment arrangements may be available if you’re having difficulty paying but only payments made by 7 September are deductible.
It’s Tax Time again!
Your business has to lodge its income tax return for the 2019-20 tax year by 31 October 2020 – unless you use a registered tax agent (your tax agent will be allowed to lodge your return at a later date, even as late as May next year in some cases).
This edition of TaxWise News outlines some tax changes for 2019-20 and provides a few tax tips.
Lodging a tax return
Are you a sole trader?
Are you a partnership?
If you operate your business in a partnership:
As an individual partner, you report on your individual tax return:
The partnership doesn’t pay income tax on the income it earns. Instead, you and each of the partners pay tax on the share of net partnership income you receive.
Are you a trust?
Are you a company?
The company’s income is separate from your personal income.
Tip! Registered tax and BAS agents can help you with your tax obligations.
Tax changes for 2019-20
Some of the 2019-20 tax changes for small businesses include:
Instant asset write-off
As discussed in the June 2020 edition of TaxWise News, the instant asset write-off (IAWO) for depreciating assets has been expanded. Since then, the IAWO has been extended by 6 months to 31 December 2020.
The cost caps for small and medium businesses (total annual turnover under $50m) are:
Cap (asset must cost less than)
1 July 2019 – 11 March 2020
12 March 2020 – 31 December 2020
You should note that:
The cost caps for larger businesses (total annual turnover $50m or more and under $500m) are:
Date asset first used or installed ready for use by a large business
The June 2020 edition of TaxWise News also discussed the accelerated rate of depreciation. This applies to new depreciating assets first held on or after 12 March 2020 and first used or installed ready for use on or after 12 March 2020 and before 1 July 2021. The asset must be used principally in a business in Australia or located in Australia.
The accelerated rate for small businesses is 57.5% (instead of 15%). The accelerated rate does not apply if you deduct immediately the cost of the asset using the instant asset write-off.
Failure to comply with PAYG withholding obligations
If your business fails to comply with a PAYG withholding obligation, eg failing to withhold an amount from an employee’s salary or wages or failing to report the withheld amount to the ATO, your business won’t get a deduction for the relevant amount (eg the amount not withheld or the amount not paid to the ATO).
You may be able to reinstate the lost deduction by making a voluntary disclosure to the ATO.
Restructuring a small business
If you are a small business owner and you restructure the business, capital gains or losses that would arise from transferring the business assets to another entity are deferred where there is no change in the ultimate economic ownership of the asset. This is called the small business restructure roll-over. It may apply where, for example, you are a sole trader and you transfer the business to a company you control.
Roll-over relief can apply to an asset used in a business carried on by your affiliate or a connected entity (that is also a small business).
A legislative amendment in 2020 fixed up a drafting error which incorrectly set the turnover threshold for an affiliate or entity connected with a small business at $2 million instead of $10 million. The change to set the threshold at $10 million goes back to 1 July 2016, which is when this roll-over commenced.
Government payments and non-cash benefits (including local government payments and benefits) made directly as a result of bushfires in Australia in 2019-20 are not taxable (they are what is called non-assessable non-exempt income).
The director penalty regime has been extended to cover unpaid GST, luxury car tax and wine equalisation tax owed by a company, in relation to GST instalment quarters and tax periods (as appropriate) that start on or after 1 April 2020. The ATO has issued guidelines (PCG 2020/2) explaining how it intends to administer these changes.
Closely held trusts
A “closely held trust” is a discretionary trust or a trust where 20 or fewer individuals have between them, directly or indirectly, and for their own benefit, fixed entitlements to 75% or more of the income or capital of the trust.
Family trusts and trusts that are interposed entities are now classified as closely held trusts (from the 2019-20 tax year) for the purposes of applying a set of complex integrity rules.
The effect of the change is that the trustee of a closely held trust may be liable to pay trustee beneficiary non-disclosure tax (TBNT) in relation to a “circular trust distribution”. This is where a share of the net income of a trust is included in the assessable income of a trustee beneficiary, the trustee of the closely held trust becomes presently entitled to an amount that is reasonably attributable to the whole or a part of the untaxed part of that share and TBNT has not previously been payable in respect of that share, and that pattern continues through a chain or trusts. This is not a common arrangement.
Tip! Contact your tax adviser to find out about all the tax changes in 2019-20 that might affect your business.
This has been a difficult year, and your business may have made a tax loss.
A tax loss is when the total deductions you can claim, excluding gifts, donations and personal super contributions, are greater than your total income for an income year.
If your business makes a tax loss, you may be able to:
If you’re a sole trader or in a partnership and want to offset a tax loss, first check if the business activity meets at least one of the “commerciality” tests under the non-commercial loss rules. (Those rules do not apply to losses made by primary producers and professional artists whose income from other sources is less than $40,000.)
If you do meet one of the “commerciality” tests, then you can offset the loss against other assessable income (such as salary or investment income) in the same income year.
If you don’t meet the “commerciality” tests, you can defer the loss or carry it forward to future years. For example, you can offset it when you next make a profit.
Non-commercial losses made by an individual with adjusted taxable income exceeding $250,000 are quarantined.
If your business is a company, you can generally choose the year you want to claim a loss.
If your business has made more than one tax loss in a year, you will need to consider each tax loss separately.
The rules for record keeping still apply when it’s related to business losses. You need to keep records for five years for most transactions. However, if you fully deduct a tax loss in a single income year, you only need to keep records for four years from that income year.
Personal services income
If you operate your business through a company or a trust, income earned by the company or trust from the provision of your personal services (personal services income or PSI) will be attributed to you unless:
The company or trust will be conducting a PSB if at least one of a number of tests are satisfied. These are:
If 80% or more of your PSI (with certain exceptions) is income from one client (or the client and their associate(s)) and the results test is not met, the company or trust will need to obtain a PSB determination from the ATO. Otherwise, the company or trust will not be conducting a PSB.
The company or trust cannot deduct amounts that relate to gaining or producing your PSI, unless you could have deducted the amount as an individual or the company or trust received the PSI in the course of carrying on a PSB.
If the company or trust does not conduct a PSB, additional PAYG withholding obligations can arise.
Even if you don’t use a company or trust to derive your PSI, there are limitations on the deductions that you may claim against your PSI. For example, you may not be able to deduct certain home office expenses, eg occupancy expenses such as mortgage interest or rent.
Tip! The PSI rules are complicated so talk to your tax adviser if you provide your services through a company or trust.
A lot more people are working from home because of the COVID-19 pandemic. If you operate your business from a home office, you can deduct the expenses of running that office. A home office is a room in your home that is used exclusively (or almost exclusively) for business activities.
Expenses you can claim a deduction for include:
If you are an employee working from home, you may be able to claim a portion of your running expenses and work-related phone and internet expenses.
To make it easier for people to claim deductions for working from home due to the COVID-19 pandemic, the ATO will allow a rate of 80 cents per hour from 1 March 2020 until 30 September 2020 for all additional running expenses. This also applies to anyone working from home, even if not operating a business.
This is different from the 52 cents per hour claim that covers fewer types of expenses. Talk to your tax adviser about what method is most appropriate for your circumstances.
If your business has received a grant or payment from the Australian Government or a State or Territory government, you will need to include it in your tax return if it is assessable.
Grants and payments that are assessable income include:
There are some government grants and payments that you do not need to pay tax on. One example of this is the cash flow boost.
Company tax rate
The 2019-20 tax rate for a company whose total annual turnover is less than $50m (called a “base rate entity”) is 27.5%. This rate reduces to 26% for 2020-21.
However, if more than 80% of the company’s assessable income is “base rate entity passive income” (eg dividends, rent, interest, royalties and net capital gains), the standard 30% rate applies.
Small business tax offset
A sole trader, an individual who is a partner in a partnership or an individual who is a beneficiary of a trust may qualify for the small business tax offset if the sole trader, partnership or trust qualifies as a small business entity (total annual turnover less than $10m). The offset is not available to an individual acting as a trustee of a trust.
The offset for 2019-20 is equal to 8% of the income tax payable on the sole trader’s or other individual’s taxable income that qualifies as their net small business income (the offset rate is 13% for 2020-21). The offset is capped at $1,000.
Taxable payments annual report
Businesses that pay contractors for certain services may need to lodge a taxable payments annual report (TPAR) with the ATO. This is the first year that businesses that pay contractors to provide road freight, information technology, security, investigation, or surveillance services may need to lodge a TPAR with the ATO. This is in addition to those businesses providing building and construction, cleaning, or courier services that are already required to report.
The TPAR for 2019-20 should have been lodged by 28 August 2020.
Scammers will often try to “phish” for information by impersonating government agencies like the ATO. They can use the information to drain their victim’s bank account, take out loans in their name, or gain access to their online government services. Besides having a devastating financial impact, it can take years to recover a stolen identity.
The ATO said that scammers have more opportunities than ever to trick people into handing over their valuable information.
Check out the Scamwatch website for helpful tips and resources.
Key tax dates
7 Sep 2020
Deadline for application for superannuation guarantee amnesty
14 Sep 2020
August JobKeeper monthly business declaration due
21 Sep 2020
August monthly BAS due
30 Sep 2020
Finalisation due date by payers of PAYG withholding payments reporting through STP for closely held payees where the employer has 20 or more employees.
Small employers (19 or fewer employees) who only have closely held payees have until the payee’s income tax return due date to lodge their STP finalisation for the financial year ended 30 June 2020.
6 Oct 2020
2020-21 Federal Budget
14 Oct 2020
September JobKeeper monthly business declaration due
21 Oct 2020
September monthly BAS due
Payment of annual PAYG instalment for 2019-20
28 Oct 2020
September quarter BAS due
Payment of first PAYG instalment for 2020-21 by quarterly payers
31 Oct 2020*
2019-20 income tax return due
PAYG withholding annual reports due (no ABN withholding; interest, dividend and royalty payments paid to non-residents; and payments to non-residents)
14 Nov 2020*
October JobKeeper monthly business declaration due
21 Nov 2020*
October monthly BAS due
*Next business day.
Note! 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 or COVID-19.
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.