Federal Budget 2020-21

On Tuesday night, 6th October 2020, Federal Treasurer Josh Frydenberg handed down his second Federal Budget.  A long way from his “Back in the Black” surplus forecasts for this year, his second budget predicts a total budget deficit for 2020-21 of over $213 billion.  Easily the biggest budget deficit we have seen since World War II, it’s a necessary requirement to alleviate the continuing negative effects of COVID-19 on business confidence and profits.  We think it is safe to say that this is the most important Federal budget of our lifetime.

There are always winners and there are always losers when dissecting budget announcements.  So some of the winners from this budget include:

  • Individual taxpayers with cuts to individual tax rates being backdated to 1 July 2020. 
  • Businesses with the introduction of a temporary immediate deduction for the full cost of eligible depreciating assets.
  • Companies with the announcement of a temporary loss-carry back allowance.
  • Unemployed individuals also win with a JobMaker hiring credit being provided to employers that create new jobs for those people currently out of the workforce.

What wasn’t in the budget?  This budget lacked any incentive for individuals to increase their wealth in superannuation and any real debate around change or movements in the GST. 

We’ve outlined below some of the main and business measures that were announced in the Budget.

As with all budgetary measures, these measures are not final until the relevant legislation has been passed by the Government.  Although the Federal Opposition has already professed support for the main tax changes announced, it is important that you use caution in acting on these measures until they have become law.  It is our understanding that the Federal Government will be introducing an omnibus bill to Parliament today (7 October 2020) that will encompass most of the proposed tax changes.  We will keep you updated on the status of these proposed measures.

JobMaker Hiring Credit

The hiring credit is aimed at increasing the employment of young people currently out of the workforce.  It is available to employers for each new job they create over the next 12 months, for which they hire an eligible young person aged 16 to 35 years old.

Amount of credit

From 7 October 2020, eligible employers will be able to claim:

  • $200 a week for each eligible employee they hire aged 16 to 29 years old; and/or
  • $100 a week for each eligible employee they hire aged 30 to 35 years old.

New jobs created until 6 October 2021 will attract the JobMaker Hiring Credit for up to 12 months from the date the new position is created.

Eligible employers

Employers will be eligible for the JobMaker Hiring Credit if they:

  • have an Australian Business Number (ABN);
  • are up-to-date with tax lodgement obligations;
  • are registered for Pay As You Go (PAYG) withholding;
  • are reporting through Single Touch Payroll (STP);
  • are claiming for an eligible employee;
  • the eligible employee was hired for an additional job created from 7 October 2020 (employer’s total employee headcount and payroll cost must increase);
  • have kept adequate records of the paid hours worked by the employee.

Entities who are claiming the JobKeeper Payment are ineligible for the JobMaker Hiring Credit.

Eligible employees

To be eligible, the new employee must:

  • be aged between 16 – 29 (for $200 credit per week) or 30 – 35 (for $100 credit per week);
  • have worked at least 20 paid hours per week on average for the full weeks they were employed over the reporting period;
  • commenced their employment between 7 October 2020 and 6 October 2021;
  • have received JobSeeker Payment, Youth Allowance or Parenting payment for at least one of the previous three months at the time of hiring;
  • be in their first year of employment with this employer.

Employees will be ineligible where the employer is also receiving a wage subsidy under another Commonwealth program for that employee.

How does it work?

The JobMaker Hiring credit will be claimed in arrears from the ATO.  Registrations will open for eligible employers on 7 December 2020.  (Employers do not need to be registered at the time they hire an employee in order to be eligible.)

Claims for the credits can be lodged from 1 February 2021.  The credit will be paid quarterly in arrears.

JobMaker - Apprentice Wage Subsidy

Businesses of any size can claim the new Apprentices Wage Subsidy for new apprentices or trainees who commence between 5 October 2020 and 30 September 2021.  Eligible businesses will be reimbursed 50% of an apprentice or trainee’s wage up to $7,000 per quarter (capped at 100,000 places). 

Lower taxes

Previously legislated cuts to individual income tax rates have been brought forward and will be backdated to 1 July 2020.  The table above shows the new tax thresholds.

We note that the company tax rate for the 2020/21 financial year has already been reduced to 26% for base rate entities (turnover less than $50 million).

Deduction for depreciation assets

From 6 October 2020 to 30 June 2022 businesses with a turnover up to $5 billion can deduct the full cost of eligible depreciating assets of any value in the year they are first used or installed ready for use.  This applies to new and second-hand assets if the turnover of the business is less than $50 million.  Small businesses with a turnover of less than $10 million can write-off the full balance of their simplified depreciation pool at the end of the year in which this measure applies.

Loss carry-back for companies

Companies that make a loss in the 2019-20, 2020-21 and/or 2021-22 financial year can carry this loss back to reduce taxable profits made on or after 2018-19.  The company can elect to receive a refund of the tax paid when lodging the later year tax return.  This measure will enable companies to take advantage of full expensing of depreciating assets while it is available.

Other measures

Other measures announced in the budget include:

  • Additional $2 billion for R&D tax incentive;
  • Small business tax concessions available to more businesses with the turnover threshold increasing from $10 million to $50 million;
  • Granny flats exempted from CGT where certain conditions are met;
  • Measures to be introduced to stop new superannuation accounts being created every time you start a new job.  Existing superannuation accounts to be attached to taxpayers and employers will have access to this information to enable payments of employee superannuation.
  • Two $250 economic support payments made in November 2020 and early 2021 to pensioners;
  • Reforms to lending laws to reduce the regulatory burden on consumers and small businesses;
  • $7 million allocated to support the mental health and financial well-being of small businesses impacted by COVID-19.

We will keep you up-to-date with the progress of the implementation of these Budget measures.

If you would like to discuss the tax implications of the budget proposals, please call us on (07) 56656469.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

JobKeeper 2.0

** The current JobKeeper scheme remains in place, as originally advised, until 27 September 2020. **

Legislation was passed on 3 September 2020 to extend the JobKeeper payment to 28 March 2021.  The eligibility and administration details of the JobKeeper extension were released, in part, by the ATO on 4 September 2020.

Rates of pay

 
From 28 September 2020, the rate of JobKeeper Payment will depend on the number of hours an eligible employee works or an eligible business participant is actively engaged in the business.  It will be split into two rates:

Tier 1 rate

This rate is expected to apply to:

  • Eligible employees who worked for 80 hours or more in the four pay periods before either 1 March 2020 or 1 July 2020; and
  • Eligible business participants who were actively engaged in the business for 80 hours or more in February and provide a declaration to that effect

Tier 2 rate

This rate is expected to apply to:

  • Any other eligible employees and eligible business participants.

Extension 1 - 28 September 2020 to 3 January 2021

Eligibility

 
To be eligible to receive payments under the first JobKeeper extension period between 28 September 2020 and 3 January 2021, businesses need to show a decline in their actual turnover of 30% or more for the September 2020 quarter only (compared to the September 2019 quarter).  A business may be eligible for JobKeeper payments during this period even if they haven’t been eligible for earlier JobKeeper payments.
 

The decline in turnover is calculated by reference to the actual GST turnover for the relevant quarter.

Fortnightly payment rate

If your business meets the eligibility criteria for JobKeeper Extension 1, the payment rates are as follows:

  • Tier 1 employees: $1,200 per fortnight (before tax)
  • Tier 2 employees: $750 per fortnight (before tax)

Extension 2 - 4 January 2021 to 28 March 2021

Eligibility

 
To be eligible to receive payments under the second JobKeeper extension period between 4 January 2021 and 28 March 2021, businesses need to show a decline in their actual turnover of 30% or more for the December 2020 quarter only (compared to the December 2019 quarter).  A business may be eligible for JobKeeper payments during this period even if they haven’t been eligible for earlier JobKeeper payments.
 
The decline in turnover is calculated by reference to the actual GST turnover for the relevant quarters.
 

Fortnightly payment rate

If your business meets the eligibility criteria for JobKeeper Extension 2, the payment rates are as follows:

  • Tier 1 employees: $1,000 per fortnight (before tax)
  • Tier 2 employees: $650 per fortnight (before tax)

Employee eligibility

From 3 August 2020, the reference date for assessing which employees are eligible for the JobKeeper payment is now 1 July 2020. This will increase the employee eligibility for the existing scheme and the extended JobKeeper scheme.

The reference period for employees regarding their hours worked (to determine their tier of JobKeeper payment) will be the four weeks of pay periods prior to 1 March 2020 and 1 July 2020.  The period with the higher number of hours is used for employees who were eligible at 1 March 2020.

The Commissioner of Taxation will have discretion to set out alternative tests where an employee or business participant’s hours were not usual during the February and/or June 2020 reference period.

In summary, employees are eligible in the extension period if they satisfy all of the following conditions:

  • are currently employed by an eligible employer;
  • were either:
    • Full time, part-time or fixed-term employee as at 1 July 2020; or
    • A long-term casual employee (employed on a regular or systematic basis for at least 12 months) as at 1 July 2020 and not a permanent employee of any other employer.
  • were aged 18 years or older as at 1 July 2020 (if you were 16 or 17 you can also qualify if you are independent or not undertaking full time study);
  • were an Australian resident (within the meaning of the Social Security Act or the Income Tax Assessment Act) or a holder of a Subclass 444 (Special Category) visa as at 1 March 2020; and
  • did not receive any of the following payments during the JobKeeper fortnight:
    • Parental leave or Dad and partner pay under the Paid Parental Leave Act 2020
    • Workers compensation payment for total incapacity for work.

Decline in turnover calculation

For most businesses that are registered for GST, the “turnover” used to calculate the decline in turnover will be your sales reported at G1 on your BAS minus the GST payable reported at 1A on your BAS.

The Commissioner of Taxation may also set out alternative turnover tests where it is not appropriate to compare actual turnover in 2020 to actual turnover in 2019.

What do you need to do now?

If you are already registered for the current JobKeeper program, you will need to undertake the following steps:

  1. Ensure any outstanding activity statements are lodged prior to 30 September 2020.
  2. On 1 October 2020 and 1 January 2021, review the turnover for the September 2020/December 2020 quarter to see if you meet the 30% decline in turnover test (if you do not meet this test, you will not be eligible for the JobKeeper extension).
  3. Review your employees to determine:
    • Whether they are eligible for the JobKeeper payment; and
    • If they are eligible, whether they qualify for Tier 1 or Tier 2 payment.
  4. Notify the ATO what payment rate applies to each of your eligible employees and eligible business participants (this is likely to be via your STP system).
  5. Ensure the minimum fortnightly payments are made to your employees and declared to the ATO via Single Touch Payroll.
If you are not already registered for the current JobKeeper program but become eligible for one (or both) of the Extension periods, you will also need to register your business and eligible employees for JobKeeper.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Current JobKeeper payments – extension to eligible employees

On 7 August 2020, further changes were announced to extend the JobKeeper scheme beyond 28 September 2020.  These changes also expand employee eligibility for the current JobKeeper payments.
 
We note that legislation has not yet been passed to give effect to these changes.  We will keep you updated on the progress of this legislation.

Eligible employees

From 3 August 2020, the date for assessing whether an employee is an eligible employee has changed from 1 March 2020 to 1 July 2020.
 
This means that some staff that were not eligible on 1 March 2020, may now be eligible for JobKeeper with effect from JobKeeper Fortnight 10 (which is the fortnight commencing 3 August 2020 and ending 16 August 2020).
 
This includes:
 
  • Casuals who have achieved 12 months service by 1 July 2020;
  • Staff who have achieved permanent residency by 1 July 2020;
  • Staff who have turned 18 years of age by 1 July 2020 (who were previously ineligible under the minor dependency rules); and
  • Permanent staff employed between 2 March 2020 and 1 July 2020.

What should you do?

We recommend that you undertake the following actions as soon as possible to determine if you have additional staff that may be eligible for JobKeeper:

  1. Review your employment records to identify any employees who are newly eligible for JobKeeper (see points above);
  2. With your employee, complete a JobKeeper Employee Nomination Notice;
  3. Update your payroll system to bring in any new employees from the relevant JobKeeper Fortnight (which can be as early as JobKeeper Fortnight 10 – which is the fortnight commencing 3 August 2020);
  4. Ensure that any participating employees are paid the $1,500 (before tax) minimum by no later than 16 August 2020 (the last day of JobKeeper fortnight 10);
  5. Continue to pay all eligible employees the $1,500 (before tax) each fortnight (including the newly eligible employees);
  6. Make sure that you declare your new eligible employees in your August JobKeeper declaration (to be lodged at the start of September).

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

JobKeeper 2.0 Extension

This article has been superceded. Click here to access the latest information on JobKeeper 2.0.

The current JobKeeper scheme remains in place, as originally advised, until 27 September 2020.

JobKeeper 2.0 was introduced on 21 July 2020 to extend the JobKeeper payment to 28 March 2021 (see https://www.tjnaccountants.com.au/jobkeeper-2-0/)

Further changes were announced on 7 August 2020 to make it easier for organisations to qualify for the JobKeeper payment extension from 28 September 2020.  The changes also expand employee eligibility for JobKeeper.

December 2020 quarter payments - JobKeeper 2.0

Eligibility

 
To be eligible to receive payments under the JobKeeper 2.0 scheme between 28 September 2020 and 3 January 2021, businesses need to show a decline in their actual turnover of 30% or more for the September 2020 quarter only (compared to the September 2019 quarter).

The decline in turnover is calculated by reference to the actual GST turnover for the relevant quarter.

(Under the original JobKeeper 2.0 eligibility criteria, businesses had to have a decline of 30% or more for both the June and September quarters).

Fortnightly payment rate

If your business meets the eligibility criteria for the December 2020 quarter JobKeeper payments, the payment rates are as follows:

  • $1,200 per fortnight for employees that worked (on average) 20 hours per week (or business participants who were actively engaged in the business for 20 hours or more per week);
  • $750 per fortnight for employees that worked (on average) less than 20 hours per week in February 2020 (or business participants who were actively engaged in the business for less than 20 hours per week).

March 2021 quarter payments - JobKeeper 2.0

Eligibility

 
To be eligible to receive payments under the JobKeeper 2.0 scheme between 4 January 2021 and 28 March 2021, businesses need to show:
 
  • a decline in their actual turnover of 30% or more for the September 2020 quarter (compared to September 2019 quarter); AND
  • a decline in their actual turnover of 30% or more for the December 2020 quarter (compared to December 2019 quarter).
The decline in turnover is calculated by reference to the actual GST turnover for the relevant quarters.
 

Fortnightly payment rate

If your business meets the eligibility criteria for the March 2021 quarter JobKeeper payments, the payment rates are as follows:

  • $1,000 per fortnight for employees that worked (on average) 20 hours or more per week (or business participants who were actively engaged in the business for 20 hours or more per week);
  • $650 per fortnight for employees that worked (on average) less than 20 hours per week in February 2020 (or business participants who were actively engaged in the business for less than 20 hours per week).

Employee eligibility

From 3 August 2020, the reference date for assessing which employees are eligible for the JobKeeper payment is now 1 July 2020. This will increase the employee eligibility for the existing scheme and the extended JobKeeper scheme.

The reference period for employees regarding their hours worked (to determine their tier of JobKeeper payment) will be the two fortnightly pay periods prior to 1 March 2020 and 1 July 2020.  The period with the higher number of hours is used for employees who were eligible at 1 March 2020.

The Commissioner of Taxation will have discretion to set out alternative tests where an employee or business participant’s hours were not usual during the February and/or June 2020 reference period.

In summary, employees are eligible in the extension period if they satisfy all of the following conditions:

  • are currently employed by an eligible employer;
  • for the eligible employer they were either:
    • Full time, part-time or fixed-term employee as at 1 July 2020; or
    • A long-term casual employee (employed on a regular or systematic basis for at least 12 months) as at 1 July 2020 and not a permanent employee of any other employer.
  • were aged 18 years or older as at 1 July 2020 (if you were 16 or 17 you can also qualify if you are independent or not undertaking full time study);
  • were an Australian resident (within the meaning of the Social Security Act or the Income Tax Assessment Act) or a holder of a Subclass 444 (Special Category) visa as at 1 March 2020; and
  • did not receive any of the following payments during the JobKeeper fortnight:
    • Parental leave or Dad and partner pay under the Paid Parental Leave Act 2020
    • Workers compensation payment for total incapacity for work.

Alternative turnover tests

The Commissioner of Taxation will also have discretion to set out alternative turnover tests where it is not appropriate to compare actual turnover in 2020 to actual turnover in 2019.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Superannuation Amnesty

There is currently a superannuation guarantee (SG) amnesty which allows employers to disclose and pay previously unpaid employee superannuation guarantee for quarters between 1 July 1992 to 31 March 2018.

Disclosures made under the amnesty will not incur the administration charge ($20 per employee per quarter) or the Part 7 penalty.

Also, payments made under the amnesty and before 7 September 2020 will be tax deductible.

Employers seeking to participate in the superannuation amnesty need to apply by 7 September 2020.

Eligibility

To be eligible for the amnesty, you must meet the following criteria:

  • you have not been advised that the ATO is examining or is intending to examine your SG obligations for the quarter(s) your disclosure relates to;
  • you have disclosed an SG shortfall for an employee you haven’t already disclosed to the ATO;
  • you disclose a shortfall for the quarter(s) starting from 1 July 1992 to 31 March 2018;
  • you lodge your completed SG amnesty form with the ATO so it is received no later than 7 September 2020

You will also need to pay the amount owing to the ATO (or set up a payment plan) after lodging the SG amnesty form.

Benefits of the amnesty

If you qualify for the amnesty, you:

  • Will be able to claim a tax deduction for SG amounts covered by the amnesty that are paid by 7 September 2020;
  • Won’t be required to pay the administration component ($20 per employee per quarter)
  • Won’t have a Part 7 Penalty applied.

Failure to disclose unpaid super

The ATO will continue to conduct audits of employers not paying their employees’ superannuation.  If these employers are identified (before they voluntarily disclose their liability), they will not be eligible for the benefits of the amnesty.  They will be required to pay:

  • The superannuation shortfall
  • The nominal interest charge of 10%
  • The administration charge ($20 per employee per quarter)
  • The Part 7 penalty (up to 200% of the superannuation guarantee charge)

What should affected employers do?

You need to act immediately to determine whether you have underpaid your employees’ superannuation for any previous quarter.

For unpaid quarters within the amnesty period, you apply for the amnesty by lodging an approved SG amnesty form.

If you are eligible, you will receive written notification from the ATO within 14 days of lodging the amnesty form. 

In order to claim a tax deduction for amnesty-related payments, you must make the relevant payments by 7 September 2020.

Free ATO Online Course – employer SG obligation

The ATO also have a free online course designed to educate employers about their superannuation guarantee responsibilities for their employees.  You can access the course here.

If you would like to discuss how to apply for the amnesty, please call us on (07) 56656469.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our consent,

JobKeeper 2.0

This article has been superceded. Access latest information here: https://www.tjnaccountants.com.au/jobkeeper-2-0-2/

The current JobKeeper scheme remains in place, as originally advised, until 27 September 2020.

JobKeeper 2.0 will commence on 28 September 2020 and will continue until 28 March 2021.  Businesses will need to reassess their eligibility to JobKeeper 2.0.

The JobKeeper Payment will continue to remain open to new recipients, provided they meet the existing eligibility requirements and the additional turnover tests during the extension period.

December 2020 quarter payments - JobKeeper 2.0

Eligibility

 
To be eligible to receive payments under the JobKeeper 2.0 scheme between 28 September 2020 and 3 January 2021, businesses need to show:
  • a decline in their turnover of 30% or more for the June 2020 quarter (compared to June 2019 quarter); AND
  • a decline in their turnover of 30% or more for the September 2020 quarter (compared to September 2019 quarter).

The decline in turnover is calculated by reference to the actual GST turnover for the relevant quarters.

Fortnightly payment rate

If your business meets the eligibility criteria for the December 2020 quarterly payments, the payment rates are as follows:

  • $1,200 per fortnight for employees that worked (on average) 20 hours or more per week in February 2020 (or business participants who were actively engaged in the business for 20 hours or more per week);
  • $750 per fortnight for employees that worked (on average) less than 20 hours per week in February 2020 (or business participants who were actively engaged in the business for less than 20 hours per week).

March 2021 quarter payments - JobKeeper 2.0

Eligibility

 
To be eligible to receive payments under the JobKeeper 2.0 scheme between 4 January 2021 and 28 March 2021, businesses need to show:
  • a decline in their turnover of 30% or more for the June 2020 quarter (compared to June 2019 quarter); AND
  • a decline in their turnover of 30% or more for the September 2020 quarter (compared to September 2019 quarter); AND
  • a decline in their turnover of 30% or more for the December 2020 quarter (compared to December 2019 quarter).
The decline in turnover is calculated by reference to the actual GST turnover for the relevant quarters.
 

Fortnightly payment rate

If your business meets the eligibility criteria for the March 2021 quarterly payments, the payment rates are as follows:

  • $1,000 per fortnight for employees that worked (on average) 20 hours or more per week in February 2020 (or business participants who were actively engaged in the business for 20 hours or more per week);
  • $650 per fortnight for employees that worked (on average) less than 20 hours per week in February 2020 (or business participants who were actively engaged in the business for less than 20 hours per week).

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

2020 End of Year Tax Planning

Now is the time for taxpayers to consider their current tax positions to see if there are steps they can take to minimise their tax liability prior to 30 June. 

We have outlined below some of the main tax planning ideas that you can consider.

$150,000 instant asset write-off for businesses

The instant asset write-off threshold for businesses increased to $150,000 for the period 12 March 2020 to 30 June 2020 (with a further extension to 31 December 2020 pending the passing of the relevant legislation).  See our separate article about the $150,000 instant asset write-off.

Superannuation contributions

The June quarter superannuation guarantee liability is required to be paid by 28 July.  However, a business can only claim a tax deduction for employees’ superannuation when it is actually paid.  As such, to ensure you get a deduction in the current year, you need pay your employees’ June superannuation guarantee liability prior to 30 June (cashflow permitting).  We recommend that the payment be made by 20 June (to ensure it is processed by the recipient superfund). 

If you use the ATO’s superannuation clearing house, they have recommended paying no later than 23 June.

Personal superannuation

You may also want to make personal contributions to super.  For the 2019/20 financial year, the maximum concessional (deducted) contribution is $25,000.

However, for the 2019/20 financial year, if your superannuation balance was less than $500,000 as at 30 June 2019, it may also be possible for you to take advantage of the new unused concessional cap carry forward rules.  Please see our separate article regarding personal superannuation contributions.  

Trade debtors

You should review your trade debtors as at 30 June.  You must ensure that any debts that are uncollectible are written off prior to 30 June in order to claim a tax deduction for the write-off in the current financial year.  This is particularly important given the effect of COVID-19 on many businesses. It is likely that many businesses will have higher bad debts during the 2020 financial year than in prior years.

Prepay or bring forward your expenses

Make sure you review all of your expenses and bring forward any expenses to June (where possible).  For example, stock up on stationery and office consumables, prepay your insurance and interest (if applicable) and look at any other expenses you may be able to pay in June.  By bringing these expenses forward to June, you are obtaining a tax deduction in the current financial year which will reduce your overall tax bill for the 2020 year.  However, depending on the status of your business given the impact of COVID-19, if your business is in a loss position, bringing forward expenses may not be advantageous.

Defer assessable income

Consider whether it is possible to defer the derivation of your assessable income (being mindful of cashflow implications).  Again, depending on the effect of COVID-19 on your business, you may want to realise more income in the 2020 financial year to utilise losses from COVID-19.  This will vary from business to business.

Motor vehicles

If you are using a vehicle for a high percentage of work-related travel, make sure you keep a logbook.  Without a logbook, an individual is limited to claiming a maximum of 5,000km at $0.68 (or $3,400).  If you keep a logbook, you can claim the business percentage of the operating costs of the vehicle (petrol, registration, servicing, depreciation, interest etc).

Working from home

If you worked from home during the 2020 financial year (which is very likely during the COVID-19 pandemic), you may be able to claim a deduction for a percentage of the running costs of your home.  The ATO have provided a shortcut method for you to calculate the deduction for your operating expenses using a cents per hour calculation:

  • $0.52 / hour from 1 July 2019 to 29 February 2020
  • $0.80 / hour from 1 March 2020 to 30 June 2020

If you would like to discuss end of year tax planning for your personal situation, please call us on (07) 56656469.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our consent,

Instant asset write-off

As part of the Federal Government’s COVID-19 relief package, they increased the instant asset write-off threshold to $150,000 and expanded its application to businesses with a turnover of up to $500 million.

When considering asset acquisitions prior to year end, this means that your business may be able to obtain an immediate tax deduction for the purchase of an asset up to the following deduction thresholds:

  • From 1 July 2019 to 11 March 2020: $30,000
  • From 12 March to 30 June 2020: $150,000

Both of these thresholds are available to businesses with a turnover of $50 million or less (with the $150,000 threshold available to businesses with a turnover up to $500 million).

On 6 June 2020, the Government announced that the $150,000 threshold will be extended to 31 December 2020.  However, this extension has not yet been legislated.  

The deduction applies on a per asset basis.  This means you claim an immediate deduction for multiple assets provided each costs less than $150,000.  For example, if your business acquired 3 forklifts for $100,000 each between 12 March 2020 and 30 June 2020, you can claim a deduction for each of these forklists in the 2020 financial year (a total deduction of $300,000).

The assets can be new or second hand.  However, they must be installed and ready for use when you are claiming the deduction (ie. before 30 June 2020 if you would like to claim the deduction in the 2020 financial year).  

Motor vehicles

The deduction available for motor vehicles is capped at the car limit ($57,581 in the 2019/20 financial year).  This is the maximum amount that can be claimed as a deduction for the purchase of a car, regardless of how much it actually cost the business. 

In addition to this, if the vehicle is only used proportionally for business purposes, you can only claim the business proportion of the car limit.  For example, if you only used the car for 75% business use, the total you can claim under the instant asset write-off is 75% of $57,581, which is $43,186.  

Assets acquired for more than the threshold

If your business acquired an asset for more than the instant asset write-off threshold, the asset will be placed into a small business pool.  Under the simplified depreciation rules, the asset will be depreciated at 15% in the first year and then 30% in subsequent years.

New threshold from 1 July 2020 (or potentially 1 January 2021)

Once the $150,000 instant asset write-off finishes (which is currently 30 June 2020, or 31 December 2020 after the relevant legislation is passed), the instant asset write-off threshold will reduce to $1,000 and will only be available to businesses with a turnover of less than $10 million.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our consent.

Concessional Superannuation Contributions

For the 2019/20 financial year, the concessional (deducted) superannuation contribution cap is $25,000.

Concessional contributions include:

  • Employer contributions (including contributions made under a salary sacrifice arrangement); and
  • Personal contributions claimed as a tax deduction.

If you have more than one fund, all of your concessional contributions made to all of your funds are added together and counted towards the concessional contributions cap.

This means, during the 2019/20 financial year (subject to our comments below regarding unused concessional caps), you are generally limited to $25,000 in concessional (deducted) contributions in a financial year.

Unused concessional cap carry forward

From the 2019/20 financial year onwards, if your total superannuation balance is less than $500,000 at the end of the previous financial year, you may be able to contribute more than your $25,000 concessional cap by using up prior year unused cap.  Any unused cap from the 2018/19 financial year onwards can be carried forward for up to 5 years.  After 5 years, if the unused cap is not utilised, it will be lost.

For example, in the 2018/19 financial year, if you only made concessional contributions of $12,000, you have $13,000 unused cap.  If your total superannuation balance is less than $500,000 as at 30 June of the prior year, you can carry forward the $13,000 unused cap to be used at any time between the 2019/20 financial year to the 2023/24 financial year.  For example, in the 2019/20 financial year, you could contribute a total of $38,000 ($25,000 for the 2019/20 cap plus $13,000 for the unused 2018/19 cap).

Making superannuation contributions

Please call us if you are considering making personal contributions superannuation to check whether:  

(a) you can claim a tax deduction for making personal contributions

(b) how much you may be able to claim as a deduction

(c) whether it is tax effective for you to make the personal contribution

(d) what process needs to be followed in order to make the contribution

You also need to consider whether making a contribution fits within your overall financial plan as advised by your financial advisor.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our consent.

Small Business Adaption Grant

Applications are now open for the Queensland State Government’s Small Business Adaption Grant.

The purpose of the grant is to help small businesses in Queensland to adapt and sustain their operations and build resilience.

How much can you apply for?

Each eligible business can apply for a grant between $2,000 and $10,000.

What can the grant be used for?

The grant funds can be used towards the following activities:

  • financial, legal or other professional advice;
  • strategic planning, financial counselling or business coaching;
  • marketing and communications activities, such as content development (eg. web pages, mobile apps, visual and audio media);
  • digital/technological strategy development;
  • digital training or re-training to adapt to new business models;
  • capital costs associated with meeting COVID-19 safe requirements;
  • specialised digital equipment or business specific software to move business operations online;
  • meeting business costs (eg. utilities, rent).

Eligibility criteria

To be eligible, the small or micro business must:

  • have been subject to closure or otherwise highly impacted by COVID-19;
  • demonstrate business revenue has had a decline of at least 30% over a one month period;
  • employ staff and have fewer than 20 employees at the time of applying;
  • have a valid ABN (active at 23 March 2020);
  • be registered for GST;
  • have a Queensland headquarters;
  • have an annual turnover over $75,000 for the last financial year;
  • have a payroll of less than $1.3 million; and
  • not be insolvent or have owners/directors that are undischarged bankrupt.

Where to apply?

You can apply now at: https://www.business.qld.gov.au/starting-business/advice-support/grants/adaption?fbclid=IwAR0rbYUVlB1RRN-KwA4yQgADTOUPj1j0gyouBS56S-Tn1SN5Ng3R0EnobuE

Applications will close when the funds have been exhausted.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN
Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our consent.