Posts Categorized: News

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.

Extended rental assistance for small businesses

During the week, the Victorian state government announced extended rent relief for small businesses.

Businesses can now choose any three consecutive months between 1^st April to 30^th September 2021 and compare that to the same period in 2019.

So should there be a fall in turnover of more than 30% then the rent is to be reduced accordingly. This means say where there is a 60% fall in turnover, a small business owner can request the landlord to reduce the rent to 40%. In other words, you as a small business owner won’t ever pay 30% of the rent with the other 30% deferred.

The scheme applies retrospectively from 28^th July 2021 to 15^th January 2022.

The sooner you make the request of your landlord, the more you stand to benefit.

We welcome the opportunity to discuss this with you even if just to work out whether you qualify.

Small Business Adaption Program extended

Good news in that Victorian Government’s Small Business Adaption Program has been extended.

The Small Business Adaption Program is a reimbursement scheme – you spend the money then get refunded $1,200 for 12 months access.

Software providers haven’t exactly jumped at this scheme as only 14 have registered.

But that said, there are key players on the list including:-

Service M8 (for tradies)
Shopify
Square
Squarespace
And accounting programs MYOB, QuickBooks Online, Reckon & Xero.

Key requirements are:-

Business must have been operating by 13^th September 2019.
Your business doesn’t already use the program.

Sounds good? If so get cracking as applications are taken until 5th December (or earlier if the allocated program funds are exhausted).

Want to know more – click here.

Issues with qualifying for the Small Business Covid Hardship Grant

It should be straight forward.

But it isn’t.

Whether you qualify or not depends on which state government publication you read.

Let me explain why first before I set out how we plan to navigate conflicting government announcements.

The qualifying test is a 70% fall in turnover over a minimum two week period as compared to 2019 as measured by your GST turnover method.

Now the fun begins.

The Program Guidelines states that:-

Select a … period where the impacted period…was most impacted by Covid.
Select a … period as a comparison point.
The comparison period for businesses should generally be the same time of year {it’s bad enough they use a vague word as should but adding generally is open to liberal interpretation}.
And goes on to state that … unless there are exceptional reasons as to why a different time is chosen noting that slight adjustments for trading days are acceptable. Exceptional reasons are not defined which probably helps more than hinders.
With the overriding statement being that …as a direct consequence of Covid.

The application form contains statements such as:-

You must identify a date range … in turnover compared to a similar date range in the benchmark period.
You must choose similar dates for the benchmark period … unless there are exceptional reasons as to why a different period is chosen.
If you choose a starting date in 2019 that is more than 3 days earlier than the starting date in 2019 …. This makes sense as 27^th May in 2019 was a Monday and a Thursday in 2021 – so it is simply a way to align the weeks.
It then goes on to state that … your application may require further information to substantiate the exceptional circumstances.
With one of the attestations being … that the benchmark period selected is representative of normal business operations.
Another attestation is that … as a direct consequence of Covid.

But when you get to the FAQ sheet (not that any questions had been asked by the time this was released early on the afternoon of Thursday 12^th August as the program was nothing more than a name by noon on that day despite it being heralded some 3 weeks beforehand).

The FAQs start clearly with a statement that:-

As a direct consequence of Covid.
But then goes on to state that … businesses should compare their best consecutive two week trading period … 2019 … with their worst consecutive … period … 2021.
And then states later that … this two week period can be any two consecutive weeks within the benchmark period. This cannot be read in isolation nor definitive given the comments in the guidelines that there must be exceptional circumstances.

It is all unnecessarily inconsistent.

So we are going to proceed as follows:-

We will first seek a period/periods of two weeks or longer where there is a drop in turnover in 2021 compared to the same period in 2019. The test period is a minimum of two weeks but can be longer. We have built a rolling spreadsheet to test for this. If you satisfy this test, we will then seek your assurance that the decline is due to Covid and then proceed to application.
If you don’t pass this then we will seek a different comparative period where turnover was sufficiently high and then we will seek your assurance that the decline is due to Covid AND that exceptional circumstances exist before proceeding to application.
As most businesses will be assessed on a cash basis, you will need to form that opinion more on the pattern of customers paying you than when the invoices were raised.

Other points to note:-

It is a tougher test than for JobKeeper – under JobKeeper, it was assumed the fall in turnover was due to Covid. With this, you have to justify your opinion as to why it is due to Covid.
There is no going back and claiming later. If you are eligible and an application is not lodged by 10^th September (or earlier if the allotted funds run out) then you miss out.
What we will be required to attest to and sign off on may well prove to be a very subjective matter. As such, we will be assessing all turnover testing ourselves and in doing so running all clients through our assessment spreadsheet. If you do appear to qualify then a separate fee will be levied for the application process.
All of this has added a couple of extra steps to the process but we will keep our prices the same as announced on Monday.
JobKeeper was an exception to what our preferred audit insurer covers as it does not cover grants such as this.
Please remember that one does not qualify for this grant if you have already received recent state industry specific government grants.
And please make sure your accounting file is up to date and the bank account reconciled.