Posts Categorized: General

Super guarantee (SG) super deadline

Wednesday 28th 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.

 

Missed out on JobKeeper – may be not

To qualify for JobKeeper, you have to satisfy a decline in turnover.  That can be either under the basic test or under one of the seven alternative tests.

The problem with both the basic and alternative tests as announced is that they don’t take into account extenuating circumstances in the comparative period.

We are therefore pleased to see the ATO today released a further alternative decline in turnover test.

This additional test applies where a business temporarily ceased trading in the comparative period and did so due to:-

  1. an event or circumstance outside the ordinary course of the business and

  2. trading temporary ceased for at least a week and

  3. some or part of that closure period occurred during the comparative period and

  4. the business resume trading before September 28, 2020.

If all of these four conditions are satisfied, then a business that qualified for JobKeeper V1 gets to test their decline in turnover against the September 2018 quarter.  If a business did not qualify for JobKeeper version 1 then it can compare October 2020 to October 2018.

So what is an event or circumstance outside the ordinary course of the business?

The one event that comes to mind from the September 2019 quarter was the bushfires through New South Wales and Queensland. 

Maybe your business suffered from an event that would allow you to qualify?

Qualifying for JobKeeper is not just about receiving JobKeeper.  In Victoria, JobKeeper recipients can also apply for commercial rent relief and possibly the latest state business boost grant.

If you reckon you can qualify under this new test or have any other queries, we would be happy to assist.

 

21 tips about the new & improved instant asset write-off – part 1

In all my years as a business and tax advisor to small and medium businesses, there has never been a tax incentive that attracts as much interest as the instant asset write-off.

And now it has become even more attractive!

And what was to be until December a $150,000 limit for small businesses has now become a complete write of all equipment purchases for any business with turnover under $5 billion. 

In such difficult times as this, it can deliver even greater outcomes when combined with the carry back of company losses.

But before doing so, please ensure you have factored in the following 20 key considerations:-

  1. This concession originally only applied to the purchase of new assets.  However businesses with group turnover under $50 million can now deduct the cost of second hand assets.

  2. It does not apply to building or capital works nor software development pools or primary production assets.

  3. If your business sells expensive assets, this expanded concession should prove to be a major buying incentive for your customers; even more so if you offer funding solutions.  Ask us if you would like a worked example to use with your customers

  4. Only buy an asset if you need it. So, if a company registered for GST buys and asset for $11,000, it will get back $1,000 of GST and will have a tax deduction of $10,000. It will pay $2,600 less company income tax. It will still be $7,400 out of pocket. As tempting as this limit is, don’t get too carried away and buy assets that your cash flow cannot support.

  5. A tax deduction in the 2020/21 tax year will have a flow on effect as it will reduce the PAYG Instalments for 2021/22 and part way into 2022/23.

  6. An asset purchased in 2020/21 will also have a flow on effect for those small businesses paying GST under the instalment method. It will reduce the GST Instalments for 2021/22 and part way into 2022/23.

  7. Writing of large assets may be great for tax but can make your financials look ordinary, possibly disastrous to a current or future financier. For this reason, we now run two sets of depreciation schedules; one for tax and one for accounting / financial statements purposes. Effectively the tax rates are a nonsense and they should not make your financials misleading.

Please come back to this web page for a further 14 tips and traps.

We welcome any question you may have in the meantime.

 

Federal Budget – first impressions

Click here for our 2020 Federal Budget Guide.

The Federal Budget delivered last night was certainly unlike any other delivered in my lifetime.

There were range of significant announcements very much geared to get an economy up and running again.

Our briefing paper outlines the various announcements. And I do say announcements as that is all a budget is.  The various announcements still have to be legislated; even those that are backdated to 1st July 2020.

So far today I have read through a number of briefing papers and have attended one research house webinar with another one this afternoon.  And what is already proven to be the case yet again is that what has been discussed in the press after the budget is a rather narrow reflection of the changes and what they mean.

Over the coming days, we will learn more about these changes, we explore how you can benefit from them and will adapt our pre-year-end tax planning checklist.  So keep an eye out for further examination of the ways you can benefit from this budget.

In the meantime though I would like to highlight what I believe to be the five biggest changes for most people with a bias towards business owners:-

  1. Accelerated reduction to personal tax rates.

  2. An uncapped limit on writing off the cost of a new business asset – for all but effectively the largest businesses.

  3. Companies which made losses in the 2020 year or do so in 2021 and/or in 2022 can claim back tax paid in or after the 2019 tax year.  You will hear a lot more about this particular in conjunction with the instant asset write-off. 

  4. A JobMaker hiring credit of up to $200 per new employee.

  5. Fringe Benefits Tax announcements (which is the most misunderstood tax and an area in which the ATO is successful in 50% of their audits).

We look forward to exploring and systematically explaining to you how you will benefit from these announcements – so you will hear more from us.  Please though don’t hesitate to contact us should you have any query.

Extension of commercial rent relief scheme

It is important to understand the background to the rent relief scheme.  And as it is linked to JobKeeper, let us start there.

We have now entered what is best termed as JobKeeper Version 2.1.  Those that qualify based off the September quarter will receive payments through the December quarter.

As of Monday, this means that we now have four types of employers:-

  1. Those that qualified to continue to receive JobKeeper.

  2. Those that have now qualified to receive for JobKeeper for the first time.

  3. Those that have fallen out of the JobKeeper system and may not return for the March quarter.

  4. Those that have fallen out of the JobKeeper system and but may return for the March quarter.

Receiving JobKeeper has been critical to enabling employers to keep their employees engaged, productive and not otherwise on social security.

Having qualified for JobKeeper has also been critical to business survival as with it comes the ability to claim some state grants and qualify for commercial tenancy relief.

In itself, the rent relief scheme has been the biggest saviour of small businesses.  The scheme allows for rents to be reduced proportional to the fall in turnover.  At least half of the rent reduction must be waived, the balance is payable either over the longer of the duration of the lease or 24 months.

This scheme was due to expire on 28th September when JobKeeper was supposed to end.  However, legislation was finally passed this week by the state government which has extended this rent relief system to 31st December.

So businesses that qualify for JobKeeper through to the end of the December quarter can now re-apply for extended rent relief.

To do so, a business must provide to the landlord:-

  1. A statement confirming turnover is under $50million.

  2. A statement that the lease is eligible to be covered by the scheme.

  3. JobKeeper registration number.

  4. A statement stating decline in turnover support by one of:-

    – accounting record extracts or

     – BAS’s for the relevant periods (which means that those who lodge an Annual GST Return can’t use this method) or

     – Bank statements or

     – A letter from your accountant (for which we have supplied a number).

TIP   Make your application as soon possible as the relief only applies from application date.

Practically speaking, an application can’t fail.  It is true that a landlord can refuse an application.  But should they refuse the matter can then be referred to mediation.  And if they refuse to enter mediation, then the matter can be referred to VCAT.  Either way the landlord is bound to lose as there will be a hearing and they are acting outside the mandatory code.

It is beyond the scope of this blog to explore every nuance and possible scenario.  We do though welcome any query you may have.

 

Alternative ways to qualify for JobKeeper

Did you miss out on qualifying for JobKeeper? 

Maybe you don’t.

The 30% fall in turnover test where a small business compares its turnover for July, August and the September last year to this year is not the only test.  And yes, that test can yield some unexpected and unfair results as for most small businesses it measures what was banked during those two periods.  

There are many circumstances where that test is an improper measure.  In recognition of this, the ATO have released 7 alternative tests and include tests for:-

  1. A businesses started in the last year.

  2. Where there has been a substantial rise in turnover (which is often the case in a business progressing through its second or third year).

  3. Businesses with irregular turnover.

  4. Sole traders or small partnerships where there has been injury, illness or leave taken.

Maybe one of these four tests or the other three will see you qualify for another 7 fortnightly JobKeeper payments.

And if you do, you may then qualify for another $10,000 state grant.

And you will also qualify for extended commercial rent relief to the end of December.

Just as we achieved at the start of JobKeeper, working through these tests has resulted in clients qualifying for JobKeeper who failed the basic test.

So perhaps you do qualify for the extended JobKeeper period.  As we are passionate about helping small businesses survive (and which are after all the engine room of the economy) we welcome the opportunity to explore your situation.

 

 

 

10 key actions to claim JobKeeper v2.1

JobKeeper as we know finishes on Sunday 27th 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 28th September.

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

  1. Have your accounting file up to date with correct GST allocations

  2. Assess your decline turnover under the new definition of GST turnover

  3. If you fail re-assess under newly set alternative tests

  4. Work out which employees will qualify

  5. Work out which of the two new rates apply to each employee

  6. Issue and collect completed newly qualified employees with a JobKeeper Payment Employee Notification form

  7. Advise employees what their rate will be

  8. Register new employees

  9. Attend to same process for eligible business participants

  10. 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 28th September – to do so click here

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

 

JobKeeper – ATO’s final opinion on measuring turnover

As we all may now know, a small business can access JobKeeper reimbursements from when turnover fall by 30%.  Treasury surprisingly proposed that turnover be defined as being GST turnover. 

That’s when the confusion started!

All the big accounting firms and research houses were adamant from the start that a small business could assess a fall in turnover on either an accrual basis (when an invoice is raised) or cash basis (when money is received) where a small business reports GST on a cash basis.

The ATO appeared to agree with this.  Then they reversed their position by saying that turnover had to be assessed on the basis of the GST registration.  This meant cash for the majority of small businesses. 

A cynic would say this was done to reduce the number of firms that could receive JobKeeper. 

How would that be? 

Well cash is a lagging indicator.  A very convenient way to ignore reality – reality being that the true measure of a downturn and when it happens is when the value of invoices raised fall.

Thankfully reality has been recognised.  Last Monday the ATO officially stated that a small business that reports income on an accruals basis (as in the accounting software and Tax Return reports income when an invoice is raised) could identify a fall of more than 30% in turnover on either a cash or accrual basis.  Yes, you get to pick the best result.

We have since re-visited our clients’ positions.

Please contact us if you would like help assessing whether your turnover has fallen enough for you to know qualify.  We have read the ATO’s companion paper and are across all other considerations.  We welcome your call.

 

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.  

 

ATO crash!

Tax agents around the country currently can’t log into the Tax Agent Portal to attend to the next stage of JobKeeper reporting.

Once again ATO systems fail to handle the workload they created!  Blind Freddie should have seen and PREPARED for all agents to pretty much be logged on at once.  And who suffers – all those business owners waiting for the monetary lifeline!

It appears the ATO hasn’t appreciated in any way the rules, systems and requirements that they have put in place. 

Take for example the enrolment process. Again even Blind Freddie could have foreseen that:-

  1. Many would presume that registering their interest was actually enrolment.

  2. Seven, yes only 7 days from Monday 20th to Sunday 26th April was never going to be enough time for everyone to enrol.  And even then it took them 5 days to work out the process needed to be extended to 5 weeks. 

It reminds me of the ATO’s 5 in 5 service when GST was introduced.  They promised to reply to any question within 5 days.  5 weeks was quickly the norm; then followed in time by being lucky if ever got an response.

As it is their JobKeeper support is poor – to say the least.  We have ATO staff simply hang up or refer us to a link (that didn’t answer the question) and then promptly hang up.

So we will just keep trying to log in and stay back as long as is necessary.

Why didn’t they just adopt the UK system which sounded much simpler and appears to have fewer anomalies?