Posts Categorized: Employment matters

Reducing the tax on Christmas

Entertaining and providing gifts at Christmas time to staff, customers and suppliers is a cost of doing business. However, there are some important FBT, GST and income tax considerations and outcomes.

As an employer, you need to be careful at what you provide at Christmas. The rules are complex and the costs of getting it wrong can prove very expensive.

We will outline some of the more common scenarios and what to be careful of.

Under-pinning the implications are the following key points:-

Christmas parties, entertainment and gifts are all treated under entertainment tax rules.
FBT applies to benefits given to employees.
There are no FBT implications on entertainment and gifts given to customers, clients and suppliers.
There are three methods under which an employer can quantify the taxable components of any entertainment expenditure – in fact there are 38 permutations depending on who is entertained where, how and with whom. We will largely address the actual method which is the one used by most small businesses (as it usually results in the best outcome). It is beyond the scope of this briefing to address the 12 week log method and we will only touch upon the 50/50 method where relevant.
Christmas comes but once a year and to the best of my knowledge and experience does so on 25^th December. Nevertheless, the ATO treats Christmas parties and gifts as being what are called minor, infrequent and irregular benefits.
Such minor benefits are FBT exempt where they cost less than $300 (including GST) provided the actual method is used to quantify entertainment.

The Christmas party

Where entertainment is calculated under the actual expenditure method (which is the most common method for small businesses):-

If a Christmas party is held on-site on a work day, the whole cost for each employee will be an exempt fringe benefit. So too will the spouse’s cost provided the cost per spouse is less than $300. No income tax deduction can be claimed for the cost of the party including that in respect of any family members that may attend. Taxi travel to or from the workplace (not both ways) will be exempt from FBT and not tax deductible.
If a Christmas party is held off the work premises, then the whole cost will be exempt from FBT provided the party costs less than $300 per person (employees and their spouses). No income tax deduction can be claimed for the cost of the party including that in respect of any family members that may attend.
If an external Christmas party costs more than $300 or more per person then the total cost is subject to FBT.
The cost of any entertainment provided during the party (whether that be at the work premises or outside) will be exempt if it costs less than $300 per head – for example a DJ, musician, clown and comedian.
The cost of entertaining clients, customers and suppliers is not subject to FBT and is not tax deductible.
If any exemption is exceeded then FBT is payable. Consequently, an FBT Tax Return must be lodged and FBT paid (the FBT tax rate being the same as the top marginal tax rate). Please keep this in mind when completing the 2018/19 FBT Questionnaire in early April 2019.
All other entertainment during the year will be subject to FBT on a case by case basis.

Where entertainment is calculated under the 50/50 method:-

50% of the cost will be subject to FBT and this portion will be tax deductible. The other 50% will not be subject to FBT and will not be tax deductible. An FBT Tax Return must be lodged and FBT paid.
Only taxi travel from home to the venue will be FBT exempt and not deductible for tax.
50% of all other entertainment during the year will be subject to FBT.

Gifts

The following gifts are exempt from FBT and are tax deductible:-

Hampers, bottles of wine, gift vouchers, a pen set costing less than $300 (inclusive of GST).

The following gifts are subject to FBT and are not tax deductible:-

Tickets to a sporting event or theatre, holiday, accommodation, etc.

The GST treatment of gifts is:-

The GST component of any tax deductible portion can be claimed back.
The GST component that relates to the non tax deductible portion can’t be claimed.

Please do not hesitate to call us should you have any queries.

Can your business benefit from JobMaker

JobMaker is an additional incentive which was announced in the October Federal Budget. Employers will be paid a generous incentive which take on additional young employees between October 2020 and October 2021.

JobMaker payments will be paid quarterly and will start from February.

Payments will made for up to 12 months from an employee’s start date. This means entitlements run through to September 2022 for those employees employed as late as September 2021.

Registrations opened on 7^th December and you need to be registered by 30th April. Those employers who would have been entitled to claim JobMaker will miss out on 3 months of payments if not registered by then. That could be as much as $2,600 per qualifying employee!

Registered employers will receive:-

$200 per week for each eligible employee aged between 16 and 29
$100 per week for each eligible employee aged between 29 and 35

JobMaker is not available to employers who are receiving JobKeeper.

To qualify, employers must:-

Have an ABN
Up to date with tax lodgements
Registered for PAYG WH
Be reporting through Single Touch Payroll
Have employed an additional employee – and not just replaced one employee with another
Had an increase in the payroll amount.

Qualifying employees must have been in receipt of JobSeeker, Youth Allowance or Parenting Payment for at least one month of the three months preceding their being employed. They must also have worked an average of 20 hours per week.

There are many other criteria and considerations. Please fill in the contact form if you would like a copy of our JobMaker white paper.

We welcome any questions you may have.

And like JobKeeper you have to register to receive anything so don’t let this opportunity, or moreover the money, pass you by.

Fair Work Australia relaxations for JobKeeper employers

First the background and then the good news.

Employers who qualified for the initial JobKeeper system were able to avail themselves of relaxed Fair Work Australia provisions.

Such employers were able to:-

Stand down employees.
Direct employees to change duties or work location.
Change their days of work.
Request employees to take annual leave at half rate.

The good news for employers still doing it tough (as in they qualify for JobKeeper past 27^th September) is that all but the fourth relaxation can still be utilised.

So employers who have qualified for JobKeeper for this December quarter can use these concessions until 28^th February 2021.

But there is good news for some employers who dropped out of JobKeeper after 27^th September.

Such employers who suffered at least a 10% decline in turnover for the September 2020 quarter can continue to apply these concessions. Such employers are called legacy employers.

But it is not automatic. Such employers must:-

Have a certificate completed by their accountant or
For small businesses with less than 15 employees, complete a statutory declaration.

You can access a statutory declaration here.

That’s the short story. There are a number of other requirements and paperwork to attend to.

If you want to know more then please ask us.

Wages & JobKeeper trap

The cuts announced in the Federal Budget to personal income taxes were well covered in the press.

Not so well publicised was an inadvertent trap that many small businesses may fall into.

Those tax cuts are now law. Over recent days, cloud software providers have been migrating new tax scales into their cloud programs.

The trap is that employers who receive JobKeeper can’t continue to pay the same amount. Those employers paying tier 2 employees the minimum gross wage of $750 now have to pay $746 after tax and not $742 (as it was last fortnight). It doesn’t sound like much. But it means the world as an employer has to pay the base amount. If they do, they satisfy the wage condition and only then are entitled to receive JobKeeper.

So what if you have already paid employees for the fortnight ending Sunday 25^th October?

Don’t panic.

Employers have until Friday 30^th October to ensure they have met the minimum wage condition for these first two fortnights of JobKeeper Extension period 1.

What if I am on a desktop accounting program?

Then you are going to need to install an update. We can attend to this if you wish.

Want to know more about JobKeeper? Then check our other posts including:-

10 key actions to claim JobKeeper V2.

Missed out on JobKeeper – may be not

We also welcome any other other question you have.

Super guarantee (SG) super deadline

Wednesday 28^th October is the end date for satisfying Super Guarantee (SG) super obligations for the September 2020 quarter.

But beware as some of the clearing houses have a submission and payment deadline well before then. May be even today!

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).
Contractors paid mainly for their labour.

But excluding the following 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 $57,090.
Non-residents performing work for an Australian business outside Australia.

SG 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.

The SG rate remains at 9.50%.

So if you haven’t paid your employer super obligations already, we recommend doing so today.

10 key actions to claim JobKeeper v2.1

JobKeeper as we know finishes on Sunday 27^th Sep.

It is not automatic that current recipients will continue to receive this valuable government support. On the other hand, employers who did not qualify previously may now do so.

You now have just 9 days to be able to claim from Monday 28^th September.

To claim for JobKeeper v2.1, you will need to have 10 key actions completed (and pronto):-

Have your accounting file up to date with correct GST allocations
Assess your decline turnover under the new definition of GST turnover
If you fail re-assess under newly set alternative tests
Work out which employees will qualify
Work out which of the two new rates apply to each employee
Issue and collect completed newly qualified employees with a JobKeeper Payment Employee Notification form
Advise employees what their rate will be
Register new employees
Attend to same process for eligible business participants
Update payroll system

If you want to know more, you can enrol in our free webinar which will be held at 5.30pm on Monday 28^th September – to do so click here

We welcome any question you may have – please e-mail accountants@mrsaccountants.com.au

JobKeeper money flowing!

Today we have the distraction of ATO systems crashing and not being able to complete the JobKeeper enrolment process. That said, we are however pleased to report that some of our clients have today received the JobKeeper payments for the first two fortnights.

Being a reimbursement process, many businesses will be using that to fund the balance of the JobKeeper fortnight ending Sunday, particularly those that have casuals earning less than $1,500pf.

And whilst on the matter of Sunday, please ensure you have topped up employees’ pays where their gross is under $1,500. Our clients will know this given the educational program we have delivered. If we are not your accountant, then we suggest it is time you were.

JobKeeper payment bridging finance

There are a number of oddities about the JobKeeper system. Whilst designed to support businesses in stress retain their employees, it is a reimbursement system – it requires the employer to pay the employee first and then receive a reimbursement in the following month.

It particularly tough on those with a casual workforce where the average pay is under $1,500 per month. For a casual earning say $600pf, an employer must top it by $900 to $1,500 in order to qualify for a reimbursement. That is a very significant cash hit for a business that is already stressed! No wonder why so many businesses who registered interest haven’t enrolled into the system.

Following a fair amount of political pressure, the four major banks have been requested to provide bridging finance. They will not be giving money away; they will be assessing applications with a short term focus and presumably with some level of security.

As a side point, I have yet to hear of any business yet take out one of the government backed loans.

The four major banks (as well as the next tier of Westpac subsidiaries ) have set up dedicated JobKeeper support hotlines.

They can be contacted on the following numbers:-

CBA: 13 26 07
ANZ: 1800 571 123
NAB: 1800 JOBKEEPER
Westpac: 1300 731 073 and Westpac’s subsidiaries;
– St George: 1300 730 196
– Bank of Melbourne: 1300 784 873
– Bank SA: 1300 669 472

They will of course not consider a bridging application without:-

Confirmation of JobKeeper entitlement, and
At a minimum a detailed cash flow projection, but also expect to be asked for forecast Profit & Loss and Balance Sheet. That said, a business receiving JobKeeper will have to provide the ATO with projected turnover by the 7^th day of every month.

JobKeeper tasks

So past, current and future JobKeeper tasks can be summarised as follows:-

Determined your turnover in accordance with the modified GST turnover definition.
Assessed yourself against any 9 of the testing periods (or 18 depending on accounting and GST recognition methods).
Assessed against alternative tests when a new business or abnormal period(s).
If you don’t qualify now based off months, monitor when you may apply.
Prepared a full and proper forecast where claiming for June quarter.
Determined eligible employees.
Determined eligible business participant.
Enrolled for JobKeeper.
Pay each eligible employee $1,500 within each JobKeeper fortnight. There is an extension to 30^th April for the two fortnights ending 27^th April.
Notify each employee that they will receive JobKeeper.
Amend your payroll system.
Consider changing your payroll periods.
Continue to report required information to the ATO.

If I can leave you three thoughts they would be:-

Don’t proceed unless you are 100% certain as to what you are doing, AND
This has been formulated and introduced in a hurry so be up to date with all the changes and clarifications, AND
To quote Donald Rumsfeld, be very mindful that there may be unknown unknowns.

JobKeeper Business Participant Nomination form

The problem with the first stimulus package with its pay-as-you-go withholding relief (Cash Flow Boost) was that it excluded more than 75% of businesses in Australia.

This problem has been overcome with JobKeeper as it applies to not only employees, but business owners as well. JobKeeper allows a business participant, being either:-

a sole trader
a partner in a partnership
a beneficiary of trust, or
a director of the company

to be able to apply for the JobKeeper as well (subject to additional tests)

The form can be accessed or from the following link:-

https://tinyurl.com/yaa2jzbn

You will note however that the form cannot be used by sole traders – sole traders have to register separately as per the shaded box in the top left-hand corner of the form.

We do not recommend filling this form or completing the enrolment process yourself without speaking to your accountant first as there are a number of traps and considerations which are not readily apparent. You also need to be aware that the whole regime is very fluid and far from finalised with some of the information from both the Tax Office and respected sources being incorrect or in dispute.

And please remember enrolments close on Sunday for the first two JobKeeper fortnight payments.