A stinging case for reviewing your asset protection planning

An over-riding goal of asset protection planning is to split personal wealth assets from business risks. A common strategy has therefore been to have the non-working non-risk spouse hold the family home in their name.

This strategy has worked well.

Until that is the recently decided case of the Commissioner of Taxation v Bosanac.

In this case, the Australian Taxation Office was successful in recovering tax debts of Mr Bosanac against the family home despite the fact that Mr Bosanac’s name was not listed on title. And it never was from the time the house was bought 15 years ago in 2006.

The key facts were:-

The house deposit was paid from a joint bank account.
The house was subsequently used as security for other loans.
The couple lived in the house for 9 years until they separated. Thereafter the wife continued to live in the house.
The husband subsequently used the house as security to fund share trading.

The Federal Court decided that on the basis of what they saw as objective facts, the property had always been held by both husband and wife. Moreover, it seems unlikely that the case will be appealed to the next and highest court, the High Court, as the presiding Federal Court relied on precedents from the High Court.

It is of great concern that a prime asset protection strategy may no longer be effective. Asset protection (including estate planning) is never a set and forget matter. And with so much economic harm inflicted by covid on small business around Australia solvency risks have increased, arguably greatly so for some.

Now is a great time to review your asset protection strategies. We welcome the opportunity to assist you and ensure that your family’s wealth is not left open to creditors.

State government assistance to the construction industry

Compensation is available to firms within the construction industry that were closed for the two weeks ended 4^th October 2021. Payments are tiered according to payroll size.

The compensation program is called Business Costs Assistance Program Round Four – Construction.

So how does my business qualify:-

Must have held an ABN as of 24^th September 2021.
Must have been registered for GST as of 24^th September 2021.
Have a payroll of less than $10,000,000.
If your business employs, you must be registered with WorkCover.
If your business doesn’t employ anyone, you must hold a WorkSafe Construction Induction Trading Card.
You must operate within an eligible sector – click here to check your business.
Your business must have incurred costs directly due to the lockdown and were not able to operate remotely.
Your business must have been contracted to work within a lockdown municipality.

Costs directly incurred as a result of the lockdown include such outgoings:-

Contract penalties
Equipment rental
Paid employee leave for staff who were prohibited from attending a work site.

Business that received any one of last year’s three rounds of the Business Support Fund and/or the Pay-roll Tax rebate/waiver can apply.

However, businesses do not qualify for round 4 if the received any one of:-

Business Costs Assistance Program Round Two
Business Costs Assistance Program Round Two – July Extension
Small Business COVID Hardship Fund

Those businesses still awaiting the outcome of their application to those three programs can apply for Round 4. If successful under any of the four programs, they will be paid under the grant that pays the greatest amount.

The grant amount is tiered to payroll size:-

$2,000 for non-employing businesses.
$2,800 for employers with an annual payroll of less than $650,000.
$5,600 for employers with an annual payroll between $650,000 and $3,000,000.
$5,600 for employers with an annual payroll between $3,000,000 and $10,000,000.

Applications are to be processed within 10 business days with the program closing on 9^th November or earlier of the allocated funds run out.

We welcome the opportunity to examine whether you qualify, answer any questions you may have or assist you with your application.

Does your businesses now qualify for rent relief?

Many Victoria businesses suffered through lockdown. But whilst it may have been tough from early August, many businesses did not see their turnover fall by more than 30% in a 3 month block to the end of September.

This was unfortunate as it meant rental relief could not be back-dated to 28^th July.

But what seems to have been forgotten is that, with the three months ending 31^st October being almost all in lockdown, there may have now been a greater than 30% fall in turnover. Such businesses would now qualify for rental relief until mid January 2022.

So is your business one that now qualifies?

You can test yourself against the criteria as we set out in our blog https://www.mrsaccountants.com.au/rent-relief-2021/
Or call us – we welcome your call as we are passionate about helping small business owners.

Director Identification Numbers

Over the next 13 months, every director needs to apply for what is called a Director Identification Number (aka Director ID & DIN).

The purpose is so ASIC can identify every director in Australia. This is primarily being done to prevent what is called phoenixing. Phoenixing is where one insolvent company is abandoned only for that business to suddenly be run by another company; that new company might have the same directors or relatives thereof. If your business has been dudded by such activity then you will be all in favour of this.

DIN’s are also being introduced to prevent fake identities being used.

To facilitate this, the ATO will be entrusted with the system. And what was known as the ABN registry will become the Australian Business Registry Services.

There will be a transition period with the expectation that by November 2022, all Australian directors will have been issued with their director ID.

From November, any new director will need to apply for DIN and do so within 28 days.
Current directors need to have applied for their DIN by November 2022.
By November 2022, a first time director will need to apply for a DIN before becoming a director.

So you will be issued with a unique number. You will be issued with just one number irrespective of how many companies you are a director of and it will stay with you until the grave (and never be re-assigned to anyone else).

How do you apply

Somewhat oddly, directors must apply for their own DIN; accountants and lawyers cannot do so for their clients. This seems a remarkably impractical requirement given the age and computer abilities of many directors. Furthermore, many of our clients don’t have (nor want) a MyGov account but will be forced to open one. Some clients don’t even have a computer (which is not crime). Moreover, many will feel uncomfortable providing proof of identity documents such as passports, birth certificate and drivers licence. Only those with a disability, injury or illiteracy can ask someone to ask on their behalf.

The fines for non-compliance are breath taking – 5,000 penalty units ($1,050,000 – yes more than $1mAUD) or three times any benefit derived.

This process will also clean up ASIC’s data base which is full of permutations of a director’s name and/or address. It is not uncommon to on board a new client and find there are 3 versions of their name across multiple entities due to a missing middle name or mis-spelt names. Fortunately, this is a process we have already been tidying up as part of our new corporate affairs program you have seen by virtue of the new ASIC Annual Reviews.

Whilst we are denied from being able to apply on your behalf (as we can do for Tax file Numbers, and ABN applications) we will happily answer any question you may have so we can point you in the right direction.

SG super reminder

Thursday 28^th October is the end date for satisfying Super Guarantee (SG) super obligations for the September 2021 quarter.

But as super clearing houses take up to 10 days to pass the money through to the super fund, it means that processing and payment to the clearing should be made no later than this Friday.

And please make sure you have been calculating super at 10% since it increased on 1^st July 2021.

And being the start of a new financial year, we take the opportunity t remind you that SG super is payable on all forms of remuneration including:-

Commissions.
Bonuses (but see below).
Directors’ fees and all other forms of remuneration to directors.
Allowances (except where fully expended).
Individual contractor paid mainly for their labour.

But excluding the following forms of remuneration:-

Overtime.
Reimbursements.
Unused annual leave on termination.
Remuneration of less than $450 in a month.
Bonuses that are only in respect of overtime.
Bonuses that are ex-gratia but have nothing to do with hours worked (harder to satisfy than what you might think).
In respect of employees younger than 18.
Employees carrying our duties of a private or domestic nature for less than 30 hours in a week (such as nannies).
On quarterly remuneration greater than $58,920.
Non-residents performing work for an Australian business outside Australia.

SGC super should never be paid late as late payments attract substantial interest and penalties. Furthermore, and SG (and BAS) liabilities that remain unreported and unpaid after 3 months automatically become personal debts of directors.

We welcome any question you might have.

Relief for commercial landlords

Relief is available to those commercial landlords who have given rent relief under the 2021 revised Commercial Rent Relief Scheme.

Under that scheme landlords are required to provide the following relief to their tenants:-

A reduction in rent commensurate with the decline in the business’s turnover.
Half of that reduction is to be waived permanently.
The other half is to be paid on a deferred basis.
Not evict any tenant.
Not to charge any outgoings where the tenant can’t occupy the building.
Extend the lease on the same terms as the period of rent relief.

You can read more at – https://www.mrsaccountants.com.au/rent-relief-2021/

As part of this process, landlords are required to issue an acceptance letter.

To support landlords, the State Government has announced the following relief:-

A 25% Land Tax Relief (which is additional to any previous reduction).
A deferral of any residual Land Tax for the 2020 and 2021 years until 31^st May 2022.
Small landlords who consequentially suffer hardship can receive up to $6,000 under the Commercial Hardship Fund #3. Small landlords are those with holdings of less than $3,000,000.
This grant can be increased to $10,000 where a landlord suffers acute hardship. Acute has been defined as where rent represents 70% or more of total gross income – with gross meaning income before deductions.

Applications close by 15^th January 2022.

At the time of writing, we are still awaiting the revised Land Tax application form.

We will be in touch when the Land Tax applications open.

Statutory declaration for Victorian rent relief scheme

One of the requirements for the 2021 Victorian rent relief Scheme is for the tenant to provide a Statutory Declaration.

You can access a Victorian Statutory Declaration by clicking here.

And you can read more about the scheme at https://www.mrsaccountants.com.au/rent-relief-2021/

But please do so quickly as applications lodged before Friday result in the rent relief being back dated to 28th July. Any applications lodged after that date will only receive rent relief from the date of application.

Important actions to obtain Victorian Small Business Rent Relief

A new rent relief system is now open to Victorian small businesses.

Whilst it is similar to last year’s system, there are some important differences including:-

A tightened process (partly in light of the previous scheme relying on the fall in turnover as declared within the JobKeeper application).
Deemed acceptance of application for relief.
Mandatory re-assessment of rent relief (more later).
A two stage process.

What follows is a summary of the system and what you need to action; it is not a complete summary as that would cause this summary to lose clarity in favour of obscure scenarios not relevant to our clients. Please also keep in mind that there will no doubt be changes and clarifications to this system (of which we will keep you aware by blogs on our web page).

So what is the relief available where there has been a 30% or more fall in turnover?

A reduction in rent proportional to the extent that turnover has fallen.
Half of that reduction is to be waived; the other half is to be deferred (and this will be on top of any amount deferred from last year’s program).
No rent increases during the period of relief (being from 28^th July 2021 or latter qualifying date until 15^th January 2022).
Tenants cannot be evicted.

What is turnover?

Turnover is your income – sales, fees, commissions etc.
Turnover is measured as per your GST method. That will be cash for the vast majority of small businesses.

Tips and traps in respect of calculating turnover include

Make sure you test within your accounting software on your GST basis.
State covid grants are included.
Unlike the prior scheme, supplies within a GST group are now included.
Exclude input taxed supplies.
Includes GST free supplies.
For those on accrual for GST purposes, bad debts do not reduce turnover but discounts and credits do.
Beware of adjustment events and insurance settlements.

For most it should be relatively straight forward. For others turnover for this scheme will not be the same as reported at G1 on a BAS.

What is the qualifying test?

For business trading before 1^st Aril 2019 – compare three whole consecutive calendar months from 1^st April 2021 to 30^th September 2021 to the same three months in 2019.
For business that started trading between 1^st Aril 2019 and 31^st March 2020 – compare three whole consecutive calendar months from 1^st April 2021 to 30^th September 2021 to the average monthly turnover to 31^st March 2020.
For business that started trading between 1^st Aril 2020 and 31^st March 2021 – compare three whole consecutive calendar months from 1^st April 2021 to 30^th September 2021 to the average monthly turnover to 31^st July 2021.
For business that started trading after 1^st April 2021 – parties must negotiate in good faith.
There are again alternative tests (which we briefly summarise as applying where natural disasters or sole trader unable to work).

Other key features of the system

Must be running a small business (turnover under $50,000,000).
Non for profits and charities also qualify.
Must have a lease agreement.
A business need not be registered for GST.
Landlords are under an obligation to consider waiving outgoings during the relief period if the tenant is unable to occupy the property.
A landlord must offer an extension to the lease term proportional to the period of rent relief.

What are the two steps I must satisfy in order to obtain rent relief?

Lodge an application.
Then provide
supporting evidence within 14 days of lodging the application.

The Victorian Small Business Commission has provided two letters with which to lodge an application

A letter for both applying and submitting required information – you can access it by clicking here.
A letter with which to make the initial application and a further letter with which to subsequently supply the required information – you can access it by clicking here.

We are unable to link the documents at this time so please ask us for a copy.

One or more of the following items of information need to be supplied

Extracts from accounting records.
Bank statements.
A BAS or BAS’s that cover the period
Statement from a practising accountant.
AND a statutory declaration signed by yourself attesting that the information provided is true.

It is your choice as to what you release so you can rightly elect not to release one of these items if you consider it too sensitive. Furthermore, you are not under any obligation to release financial statements if requested.

A major change within this scheme is the introduction of a mandatory re-assessment. By 31^st October the tenant and landlord must check in and assess whether circumstances have changed (such as ending or extending lockdown) and adjust the rent relief accordingly.

Of utmost importance is the need to apply by 30^th September to have any relief back dated to 28^th July. Applications after that date will only receive relief from the date of application.

Two words of warning

So what if you have only suffered a decline in turnover since July or August? You might not have qualified yet but may well do so by the end of this month. Perhaps it is best to apply to ensure you are entitled for back dated relief should you qualify. If it turns out that you don’t qualify then you can withdraw your application and/or fail to supply the required information meaning that your claim is annulled.
If this system proves to be like JobKeeper, then we can expect modifications and clarifications. Please return to our web page blogs for updates.

Please note that we will shortly set out the relief available to landlords.

Who is to apply?

As an accountant and tax agent, we are registered at act on your behalf with bodies such as the ATO and ASIC. We don’t though have any dealings, association or authority with your landlord. So as with last year’s rent relief system¸ we won’t be acting on your behalf unless you instruct us to do so and notify your landlord of our engagement. If we do assist you with one or more parts of this process you will still need to sign a statutory declaration.

Please do act promptly to ensure any current entitlement is secured by the cut off date of 30^th September.

We welcome any question you may have.

The rundown on the expanded covid business grants

In a joint press release yesterday, the state and federal governments announced an expansion to the state covid business grants.

There is no across the board support. Rather the payments to existing covid business grants will be increased.

The key takeaways are as follows.

Small Business Covid Hardship Grant

The one-off payment entitlement has been increased from $14,000 to $20,000.
The press release stated that the application deadline of this coming Friday would be extended – but then went on to say that applications will close on 10^th September! The state web page still states 10^th September (or until allocated funds run out). Whatever it is the sooner the application goes in the sooner it gets paid. And that all said, if the deadline is extended then more business will qualify.
The program was designed to cover those who “slipped through the cracks” but many small business that are suffering miss out on this as there turnover has not fallen by more than 70% over a two week period and done so due to covid. That said, if you pay your GST on cash basis, don’t assume you don’t qualify. One new client we picked up during the week was told by their accountant that they did not qualify – but they genuinely did!

Business Costs Assistance Program

Businesses that are closed and appear on set list of industries can receive weekly payments of either $2,800, $5,600 or $8,400 (depending on payroll size). The funds are paid to cover the cost of wages, rent, utilities, etc.

Licensed Hospitality Venue Fund

Payments are being automatically made to those previous recipients.

Covid Disaster Payment

Employees who have lost hours of work can receive a weekly payment under this federal payment.
It can also be claimed by micro businesses that do not qualify for the Hardship Grant.

In these difficult and uncertain times we welcome any question you may have.

In the meantime, we will continue to work through our client base to make sure all small businesses receive the grants they are entitled to.

And may I take the opportunity to remind you to support your local small businesses. Not only do they employ two-thirds of the workforce, they are the ones who support all the local sporting clubs, school fetes and the like. Now is the time to return the favour!

Welcome news for commercial landlords.

In light of the extension to the commercial rent relief scheme during the week by the state government, the following concessions were announced:-

Further Land Tax relief of up to 25% and
Small landlords suffering acute hardship can apply for payment sunder the Hardship Fund.

We welcome the opportunity to assist you with your claim.