JobKeeper payments are available to entities that have ‘eligible employees’ or ‘eligible business participants’ (eg sole traders, partners in partnerships, adult beneficiaries of a trust and shareholders in or directors of a company), if the entity suffers a decline in turnover of at least 30% where the annual turnover is no more than $1b or 50% otherwise.
The decline in turnover is measured by comparing projected GST turnover for a month or quarter in 2020 (the test period) with actual GST turnover for the comparable period in 2019, eg the September 2020 quarter with the same quarter in 2019.
Alternative decline in turnover tests are available where it is not appropriate to compare the test period with the comparison period. This includes where:
If you are enrolling for JobKeeper payments for the first time, you must enrol your business and notify the employee or business participant (if appropriate) by the end of the month you wish to claim for.
You must also make a monthly business declaration (no later than the 14th day) to claim JobKeeper payments for the previous month.
Sole traders and other eligible business participants
If you are a sole trader or other business participant (eg a company director or a partner), you cannot claim JobKeeper payments unless you are actively engaged in the business carried on by the entity (this includes a sole trader). You cannot be an employee of the particular business entity or a permanent employee of any other entity. There are also age and residency requirements that must be satisfied.
Only one payment per entity can be claimed. For example, in the case of a partnership, only one partner can claim JobKeeper.
Extension of JobKeeper scheme – and other changes
The JobKeeper scheme was due to end on 27 September 2020. However, the Government has announced that the scheme will continue for an additional 6 months until 28 March 2021.
The Government is in the process of making the necessary legislative amendments.
Other changes have also been announced:
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 payments 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 payments from 4 January to 28 March 2021.
Revised payment rates – from 28 September 2020
The amount of the JobKeeper payment is presently $1,500 a fortnight for each eligible business participant (or employee). If you are an employer, you must pay each eligible employee at least $1,500 per fortnight before tax.
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 business participants/employees.
Eligible employees – from 3 August 2020
The eligible employee test has been revised, so that a person employed on 1 July 2020 may also qualify as an eligible employee (from 3 August 2020). This includes long term casual employees (those employed on a regular and systematic basis during the 12-month period that ended on 1 July 2020). There are also age and residency requirements that must be satisfied.
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.
JobKeeper payments are assessable and should be included in your tax return (or business’ tax return) as assessable income. If you pay salary or wages to employees, the wages that are effectively subsidised by JobKeeper payments are still deductible.
Tip! The JobKeeper scheme is complicated. Talk to your tax adviser to see if you or your business is eligible.
An alienated personal services payment is, broadly, 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 (PSI) rules (and has not been promptly paid to the individual as wages or salary). The PSI rules are relevant if your services are hired out through a company or trust – please see more information on page 13.
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 change in the law 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.
The deadline for making an application is now 31 December 2020 (it was originally 24 September 2020). Applications received before 31 December 2020 may be processed after that date.
Applications for COVID-19 early release of super in the 2019-20 financial year closed on 30 June 2020.
To apply for early release, you must:
You can make an application using ATO online services (through myGov). If you have more than one super fund, there are no restrictions on the amount you can request for release from any account, except the $10,000 overall yearly limit.
You can only apply for one determination for 2020-21. You can request (say) $1,000 from one fund and (say) another $9,000 from another fund as long as it is in the same application.
You cannot make a subsequent application if you do not request or receive the full amount that has been approved in your first application for 2020-21.
You self-assess your eligibility for COVID-19 early release of super. You must be certain you are eligible. If the ATO subsequently determines you were not eligible, the amount of super released to you will be included in your assessable income and taxed at your marginal tax rate.
Tip! Use this measure as a last resort. Money taken from your super fund now will reduce the amount available once you retire.
Don’t forget SMSF trustees are responsible for the members’ retirement savings. If you are an SMSF trustee, please make sure the member is eligible for early release of super before you release any funds.
Pensions and annuities – minimum drawdown amounts
To assist retirees, the government has reduced the minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities. The minimum amounts have been reduced by 50% for the 2019-20 and 2020-21 financial years.
If the minimum drawdown amount has already been paid, payments can be stopped for the remainder of the year. If you have received more than the minimum drawdown amount, you can recontribute these amounts if you are eligible to make superannuation contributions (subject to other rules or limits such as contributions caps).
Tip! Speak to your financial adviser before making any decisions affecting your super.
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?
Tip! Registered tax and BAS agents can help you with your tax obligations.
Instant asset write-off
As discussed in the April 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 businesses (total annual turnover under $10m), including sole traders, are:
Cap (asset must cost less than)
1 July 2019 – 11 March 2020
12 March 2020 – 31 December 2020
You should note that:
The April 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.
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 commencing in Australia in 2019-20 are not taxable (they are non-assessable non-exempt income).
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.
2019-20 was a difficult year for many businesses and you 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 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.
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, especially if you provide your services through a company or trust. Talk to your tax adviser if you have any questions.
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.
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.
It was recently Scams Awareness Week and the ATO published a reminder about keeping personal and financial information safe.
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.
You should ensure your computer security systems are up to date.
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
14 Sep 2020
August JobKeeper monthly business declaration 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
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
*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.