Director ID Regime

The Australian Business Registry Services (ABRS) will start the director ID Regime from 1 November 2021.

What is a director ID?

A director ID is a 15 digit unique identifier that will help prevent the use of false or fraudulent director identities. Directors will only ever have one director ID (much like a tax file number).  They will keep it forever even if they:

  • change companies
  • stop being a director
  • change their name
  • move interstate or overseas.

Who needs a director ID?

You need a director ID if you’re an eligible officer (director or alternate director) of:

  • a company, registered Australian body or registered foreign company under the Corporations Act 2001;
  • an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006.

A director must apply for their director ID themselves because they need to verify their identity.  No one can apply on their behalf.

What do you need to do from 1 November 2021?

Individuals who are currently a director or who will be acting as a director in the future must apply for a director ID in the timeframes outlined below:

Director on or before 30 November 2021: You must apply by 30 November 2022

Director between 1 November 2021 and 4 April 2022: You must apply within 28 days of appointment

Director from 5 April 2022: You must apply before appointment

How do individuals apply for a director ID?

Step one: Setup myGovID

Please note that myGovID is different from myGov.  myGovID is an app you download to your smart device.  It lets you prove who you are and log in to a range of government online services, including myGov. 

If you have myGovID, you do not need to do anything until 1 November when you can apply for your director ID.

If you do not have myGovID, you can find information on how to download the app at How to Setup myGovID.

Step two: Gather your documents

You will need to have some ATO information ready when you apply for your director ID:

  • Your tax file number
  • Your residential address as held by the ATO
  • information from two documents to verify your identity, including:
    • bank account details
    • an ATO notice of assessment
    • super account details
    • dividend statement
    • Centrelink payment summary
    • PAYG payment summary

Step three: Complete your application

From November 2021 you can log in at the ABRS website and apply for your director ID.

For more information

Please do not hesitate to contact us if you require any further information about the director ID regime.  You can also visit Australian Business Registry Service.

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.

$1,000 QLD COVID-19 – Non-employing “sole trader” Grant

Details for the Queensland $1,000 non-employing sole trader COVID-19 grant have been released and applications are now open.  Applications close on 30 November 2021.
 
We have outlined below the eligibility criteria and the application process for the $1,000 grant.
 

Eligibility Criteria

To be eligible for the $1,000 non-employing “sole trader” grant, your business will need to satisfy the following eligibility criteria:

1. You are an individual operating as a sole trader (this includes businesses operating through a company, trust or partnership structure).

The grant will be available to all operating structures (not just sole traders).  The description of the grant a “sole trader” grant is misleading as the grant extends to all operating structures.

2. You do not employ staff

3. You are registered for GST

4. You have a principal place of business in Queensland

5. Your business was based and trading in Queensland on 31 July 2021

6. The owners/directors/partners/trustees are not insolvent or an undischarged bankrupt

7. You have a turnover of more than $75,000 for any of the 2018/19, 2019/20 or 2020/21 financial years.

If you have not been trading for a full financial year – you need to be able to prove that you would reasonably meet this turnover for the 2021/22 financial year.

8. You had to stop operating or had limited operations because of a Queensland lockdown event, or you have been affected by a Queensland lockdown event.

9. You had a reduction in turnover of 30% or more during a nominated 7 day period.

This is a 7 day period that includes at least one lockdown day.  It must be compared to the same period from 2019.  However, if your business was not trading in 2019, or the 2019 period does not reflect your typical weekly turnover, you may use another comparable 7-day period.

Ineligibility considerations

You will be ineligible for the grant if:

  • Your application details cannot be verified by 30 November 2021;
  • Your income is solely rent from rental properties, interest on investments or dividends;
  • You received an Australian Government COVID-19 disaster payment; or
  • You have received or are eligible for another COVID-19 business support grant.

Application process

You will need to apply for the Grant via the QGrants website: https://qgrants.osr.qld.gov.au/appl_direct?program=0050560103891EEC82A959B17EB77A92

While applications close on 30 November 2021, only grants that can be verified by 30 November 2021 will receive grant funds.  If you consider that it may take a few days for your information to be verified, you will need to lodge your application prior to 30 November 2021.

More information

For more information, go to the Business Queensland website: https://www.business.qld.gov.au/starting-business/advice-support/grants/covid19-support-grants

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.

$5,000 QLD COVID-19 Business Support Grants

Breaking news

15 August 2021

The Federal Government has announced a 50/50 funding agreement with Queensland to extend the original COVID-19 Business Support Grant.  The Grant will now be extended to provide:

  • A $1,000 one-off grant to non-employing sole traders across Queensland that have had a decline in turnover of more than 30%.
  • Payroll-based support for all businesses across Queensland, that have had a decline in turnover of more than 30%:
    • A $5,000 one-off, top-up grant to small business with a payroll of less than $1.3 million (this is in addition to the $5,000 already offered under the Business Support Grant);
    • A $10,000 one-off, top-up grant to medium sized business with payroll between $1.3 million and $10 million (again, this is in addition to the $5,000 already offered under the Business Support Grant);
    • A $25,000 one-off, top-up grant to large sized tourism and hospitality focused businesses only with payroll of greater than $10 million.

Businesses that are eligible for the payroll-based support will simply apply as outlined below.

We do not yet have details for how non-employing sole traders can apply for the $1,000 grant.  We will update this post as soon as the information is released.

14 August 2021

Guidelines for the $5,000 COVID-19 Business Support Grants were released by the Queensland Government on 13 August 2021. All eligible applicants will receive the $5,000 grant.

Applications for the grant open at midday on Monday 16 August 2021.  We have outlined below the key details of the grant.

You can also use the Queensland Government’s Eligibility Checker to see if you satisfy the eligibility criteria.

Eligibility Criteria

To be eligible for the $5,000 grant, your business will need to satisfy the following eligibility criteria:

1. You employee staff and have a payroll of less than $10 million per annum

To be eligible for the grant, your businesses must employ staff (in addition to the business owners).  These staff must be on the business’s payroll.  Your total payroll must not be more than $10 million per annum for each of the 2018-19, 2019-20 and 2020-21 financial years.

You can use the following evidence to prove these criteria:

  • business financial statements, business payroll records, payroll tax return; or
  • a letter from your accountant, tax agent or BAS agent.

2. Annual turnover of at least $75,000

To be eligible for the grant, your businesses must have a turnover of at least $75,000 for either the 2018-19, 2019-20 or 2020-21 financial year.

For recently started businesses, you can still be eligible if you can prove that you will reasonably meet this turnover threshold for the 2021-22 financial year.

The evidence to prove your turnover may include:

  • business activity statements or ATO records; or
  • a letter from your accountant, tax agent or BAS agent.

3. Your business turnover suffered a 30% reduction as a result of a lock down event (either directly or indirectly)

30% reduction in turnover
The 30% reduction in tunover is calculated comparing sales from the following two periods:
  • A nominated 7 day period which includes at least one full day of a lock down event
  • The same period from 2019 (or, if 2019 is not indicative of a typical weekly turnover, a comparable 7 day period)
Directly or indirectly impacted by a lock down event

You must also show that your business was directly or indirectly impacted by a lock down event:

  • Directly impacted: Your business was directly impacted if it could not operate as specified in the lock down events;
  • Indirectly impacted: Your business was indirectly impacted if:
    • it was able to operate for a limited purpose during the lock down events; or
    • its activities were not specified in the health directions for the lock down events but were impacted by lock down events; or
    • it was located outside of the lock down areas.
Supporting evidence
If your business was directly impacted by the lock down (that is, it could not operate), you need to complete a declaration in your application.
 
If your business was indirectly impacted by the lock down, you will need to provide the following information to show the required reduction in turnover:
  • sales turnover information from your business records;
  • a letter from your accountant, tax agent or BAS agent.

4. Have a Queensland headquarters

To be eligible for the grant, your business must have a Queensland headquarters – that is, your principal place of business is located in Queensland and the impacted business was based and trading in Queensland on 31 July 2021.

You can prove this by using publicly available web information (eg. website or social media information) or utility bills for the business location.

5. Have an ABN and be registered for GST

Your business must have an Australian Business Number (ABN) which has been continuously held since 30 June 2021.  It also needs to be registered for GST.  These criteria can be evidenced by ABN Lookup Search.

6. Not insolvent or undischarged bankrupt

The business owners/company directors must not be insolvent or undischarged bankrupts.

Application process

To apply for the grant, you will need do the following:

1. Set up a QRIDA account

Queensland Rural and Industry Development Authority (QRIDA) will be administering the grant.  If you haven’t already done so, you can go to QRIDA to set up an account.  This can be done at any time.
 

2. Collate all of your supporting information

We have outlined above the supporting information that you will need for each eligibility criteria. You will need to have all of this information ready before lodging your application.  For more information, also visit: https://www.business.qld.gov.au/starting-business/advice-support/grants/covid19-support-grants

2. Lodge your application

Applications open at midday on Monday 16 August 2021.  They will remain open for 3 months until 16 November 2021.  If QRIDA requests additional information, applicants must provide this information.

You will be notified by email of the outcome of your application.

Approved applicants will receive the $5,000 grant funds into their nominated bank account within 2 weeks of approval.

More information

For more information, go to the Business Queensland website: https://www.business.qld.gov.au/starting-business/advice-support/grants/covid19-support-grants

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.

Employer Superannuation Obligations

Employer Superannuation Obligations

As an employer, you have many employment obligations.  One of those is to pay your employees’ superannuation on time.  There are significant penalties for failing to comply with your superannuation obligations.  Below we have outlined your superannuation obligations, the implications of failing to comply with these obligations and what you should do if you need to get your superannuation liability up-to-date.

If you are behind in your superannuation obligations, the best thing you can do is contact a tax professional who can help you get up-to-date and make the relevant disclosures to the ATO.

When is superannuation due?

Employers are required to pay their employees super into their choice or default superannuation fund no later than the 28th day after the end of the quarter.  The relevant cut-off dates are therefore 28 April, 28 July, 28 October and 28 January.

How much super do you need to pay?

The superannuation guarantee rate has been increasing in recent years – see summary below. 

Superannuation Guarantee Rates

  • 1 July 2022 – 30 June 2013 -> 9.0%
  • 1 July 2013 – 30 June 2014 -> 9.25%
  • 1 July 2014 – 30 June 2021 -> 9.5%
  • 1 July 2021 – 30 June 2022 -> 10.00%
  • 1 July 2022 – 30 June 2023 -> 10.50%
  • 1 July 2023 – 30 June 2024 -> 11.00%
  • 1 July 2024 – 30 June 2025 -> 11.50%
  • 1 July 2025 – 30 June 2026 and onwards – 12.00%

As an employer, your superannuation liability will be calculated as the superannuation guarantee rate (per above) multiplied by all ordinary times earnings payments* you make to your employees.

The date of the payment determines the rate of the superannuation payable, regardless of when the work was performed.

* The ATO have a list of what payments constitute ordinary times earnings here.

What if you can't (or don't) pay your super liability by the due date?

You will need to lodge a Superannuation Guarantee Charge Statement (SGC Statement) if any of the following apply to you:

  • You have failed to pay your employees’ superannuation;
  • You have paid your employees’ superannuation after the relevant due date;
  • You have paid your employees’ superannuation to the incorrect fund.

Once you have lodged the SGC Statement, you may be able to arrange a payment plan with the ATO for any outstanding superannuation liability.

Superannuation Guarantee Charge Statement

An SGC Statement must be lodged one calendar month after your superannuation liability is due (so 28 May, 28 August, 28 November, 28 February).

The SGC Statement can be lodged electronically with the ATO.

The amount due under the SGC statement will be:

  • The unpaid superannuation; plus
  • Any choice liability (based on the shortfall and capped at $500); plus
  • Nominal interest of 10% per annum (which accrues from the start of the relevant quarter until the statement is lodged); plus
  • An administration fee of $20 per employee, per quarter.

It is important to note that, even where you have paid your employee super after the due date, interest will continue to accrue until you have lodged your SGC statement.  For example, if you pay your employee super one week late, but lodge your SGC statement 2 months later, you will incur interest up until the date that you lodge the statement. 

What are the implications of not complying with your super liabilities?

If you do not comply with your super liabilities, the following implications may arise:

  1. Any superannuation payments made after the due date are not tax deductible;
  2. Failure to lodge an SGC statement by the relevant due date is liable to a penalty calculated at 200% of the superannuation liability (so you will be liable to pay the original liability which is not tax deductible plus 2 times the liability as a penalty);
  3. If the superannuation remains unpaid, the ATO may issue a Director Penalty Notice which means the directors of the company will be personally liable for the outstanding superannuation and associated penalties and interest.  This places the directors’ personal assets at risk.

There are also penalties for failing to pay superannuation into the correct fund, failing to keep appropriate records and failing to provide your employee’s TFN to the superannuation fund.

As you can see, there are significant financial penalties that can be imposed for failing to comply with your superannuation obligations.  These financial penalties can also impact on your personal assets (even if you run your business through a company).  If you are behind on making superannuation payments, we recommend that you contact us as soon as possible.

What to do next?

We recommend that you take the following action (even if you think your business is complying with its superannuation obligations):

  1. Check that your accounting software is correctly calculating your superannuation liability using the 10% superannuation guarantee rate;
  2. Check your accounting software is correctly calculating your superannuation liability on all relevant salary and wage payments;
  3. Check that your superannuation has been paid on time and to the correct superannuation funds;
  4. If you haven’t paid the right amount of super, on time and to the correct superannuation fund, you need to lodge a superannuation guarantee charge statement as soon as possible;
  5. Once the superannuation guarantee charge statement has been lodged, you can negotiate a payment plan with the ATO for the payment of the outstanding super.

We can assist you with any (and all) of the steps above.  It is important to get help as soon as possible with outstanding super.  The longer the liability is left unremedied, the higher the potential interest and penalties.

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.

New measures commencing 1 July 2021

There are a number of new changes taking place from 1 July 2021.  We have outlined some of the key changes below for you.

Superannuation guarantee rate increasing to 10%

The superannuation guarantee (SG) rate will increase to 10% from 1 July 2021 and will continue to increase by 0.5% each financial year until it reaches 12% on 1 July 2025.

Business impact

The increase in the SG rate may have the following impacts on your business:

  1. An increase in your superannuation expense – if your employees are paid their super on top of their hourly rate or salary, then an increase in the SG rate will increase your superannuation liability.
  2. An increase in your workcover cost – workcover is calculated based on wages and superannuation that you pay to your employees so an increase in the superannuation will increase the total wages declared to workcover.
  3. A liability to payroll tax – if your business is near the payroll tax thresholds, an increase in your superannuation expense may result in you becoming liable to payroll tax.
  4. An increase to your payroll tax liability – if your business is already liable for payroll tax, an increase your superannuation expense will increase your overall payroll tax liability.

Action to take

To ensure your business takes into account the implications of the increase in the SG rate, we recommend that you:

  1. Review your employee contracts or awards to determine if their wages include or exclude superannuation;
  2. Calculate your increased liability for superannuation, workcover and payroll tax and factor this into your business’ budget and cashflow forecasts;
  3. Review your method of recording and reporting employee superannuation and ensure that the increased rate will be reflected in your reporting system (most online accounting software – Xero, Reckon, MYOB etc – should be automatically updated to take into account the increased rate);
  4. Ensure you pay your employee superannuation by the relevant due dates (28 July, 28 October, 28 January, 28 April) to avoid a potential 200% penalty for late payment.

Concessional (deductible) superannuation contributions cap increasing to $27,500

The concessional (deductible) superannuation contribution cap is increasing from $25,000 to $27,500 from 1 July 2021.

The increase in this cap means that most taxpayers can contribute up $27,500 into superannuation and claim a tax deduction for the contribution. 

Planning opportunities

There may be some planning opportunities that you may wish to utilise:

  • If you have maximised your contributions for the 2021 financial year, you could contribute the $27,500 for the 2022 in June 2021.  This is a reserving strategy and only provides you with a tax advantage in the first year (due to the double contributions in the first year).  It may be effective, however, if you have an unusually high income in one particular year (eg. due to the sale of your business).
  • If your superannuation balance is below $500,000, you may wish to use the unused concessional cap provisions that enable you to use up the caps from prior years where you previously haven’t maximised your contributions.  We have discussed this in more detail here.

Action

If you want to make additional concessional superannuation contributions in the current financial year, we recommend that you:

  1. Talk to us about the maximum concessional contributions you can make in the current financial year; and
  2. Talk to your financial adviser about whether additional contributions are right for you and your personal wealth creation plan.

Non-concessional (undeducted) superannuation contributions cap increasing to $110,000

The non-concessional (undeducted) superannuation contribution cap is increasing from $100,000 to $110,000 from 1 July 2021.

The increase in this caps means that you may be able to contribute up to $110,000 into superannuation in one financial year (which is not deductible).  You may also be eligible to use the 3 year bring forward rules to contribute 3 years in one year (so $330,000 in one financial year).

Planning opportunities

There may be some planning opportunities available to you:

  • If you are looking to contribute more into superannuation, the increase in the caps means that there is an increase in the 3 year bring forward balance.  If you trigger the 3 year bring forward rules before 30 June 2021, the total is $300,000.  If you trigger the 3 year bring forward rules after 1 July 2021, the total is $330,000.

Action

If you want to make additional non-concessional superannuation contributions in the current financial year, we recommend that you:

  1. Talk to us about the maximum non-concessional contributions you can make in the current financial year; and
  2. Talk to your financial adviser about whether additional contributions are right for you and your personal wealth creation plan.

Company tax rate decreasing to 25% for base rate entities

For base rate entities (entities with a turnover of less than $50 million and 80% or less passive income), the company tax rate will decrease from 26% to 25%.

Tips and Traps

Some tips and traps to be aware of with a decreasing company tax rate:

  • Deferring income from the 2021 to the 2022 financial year will result in a lower tax liability due to the decreasing tax rate.
  • Similarly, bringing deductions forward from the 2022 financial year to the 2021 financial year will increase the tax effect of these deductions.
  • However, franked dividends will only be able to be paid at the prevailing company tax rate.  So dividends paid after 1 July 2021 can only be franked at the company tax rate of 25% (even where the underlying tax was paid at a higher tax rate).

Superannuation – transfer balance cap increasing to $1.7 million

The transfer balance cap for superannuation is increasing from $1.6 million to $1.7 million from 1 July 2021.

The transfer balance cap is a lifetime limit on the total amount of superannuation that can be transferred into a superannuation pension (and therefore generate tax-free earnings).

If you have previously utilised the whole of the $1.6 million cap when establishing your pension accounts, you cannot take advantage of the $100,000 increase.

Single touch payroll

Closely held payee exemption ceases

The single touch payroll reporting exemption for closely held payees ceases on 30 June 2021.  From 1 July 2021, small employers with closely held employees can report payments to these employees using single touch payroll every payday or every quarter.  If these employers have other payees (ie. arm’s length employees), payments to these arm’s length employees must be reported to the ATO using single touch payroll every pay day.

Micro employers quarterly concession ceasing

Up to 30 June 2021, micro employers had a quarterly reporting concession which enabled them to report their payroll data quarterly through their registered tax or BAS agent.  From 1 July 2021, only micro employers experiencing “exceptional circumstances” will be eligible for the concession. 

Our comment

Generally, from 1 July 2021, all employers will now be required to report their payroll data to the ATO via single touch payroll every pay period.  You need to ensure your systems are setup to enable this reporting.  Please contact us if you need advice regarding any changes to your payroll systems to enable STP reporting.

Minimum wages to increase by 2.5%

Following the Annual Wage Review 2021, the Fair Work Commission have announced a 2.5% increase to the national minimum wage (to $772.60 per week or $20.33 per hour).  It will apply to anyone who is paid minimum award wages or the national minimum wage.  The new national minimum wage will apply from 1 July 2021 but will happen in 3 stages.  Most awards will increase from 1 July 2021.  Wages in the Retail Award will increase from 1 September 2021 and other awards affected by exceptional circumstances will increase from 1 November 2021.

Refer to the Fair Work website for more information and/or contact your relevant HR adviser for advice regarding the impact of this wage increase on your employees: https://www.fairwork.gov.au/about-us/news-and-media-releases/website-news/annual-wage-review-2021

 

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.

New Business Grants in Queensland

The Queensland Government have recently announced new grants to help Queensland small businesses continue to recover and grow.

Small Business – Business Basics Grant – $5,000

The Business Basics grant provides up to $5,000 to help businesses increase core skills and adopt best practice. 

Activities financed:

The grant will fund activities from one of the following priorities:

  1. Training and coaching
  2. Website build or upgrades
  3. Professional business advice
  4. Strategic marketing advice
  5. Business continuity and succession planning.

Eligibility:

To be eligible for the grant, your businesses must:

  • have fewer than 20 employees at the time of applying for the grant;
  • have an active ABN and be registered for GST;
  • have a Queensland headquarters;
  • have a turnover of $300,000 or less in the current financial year;
  • not be insolvent or have owners/directors that are an undischarged bankrupt.

Key details:

  • Funding available: up to $5,000
  • Opens: 31 May 2021
  • Closes: When funds are exhausted or 30 June 2021 (whichever is first)

To apply (and for more details) go to: https://www.business.qld.gov.au/starting-business/advice-support/grants/business-basics-grant

Business Growth Fund – $50,000 to purchase specialised equipment

The Business Growth Fund provides businesses with a single upfront payment of $50,000 (excluding GST) to buy specialised equipment.

Businesses that receive the grant are expected to:

  • increase confidence for growth, transitioning from small to medium-sized
  • increase productivity, turnover, profit and employment by 20%
  • improve confidence to automate, scale up, increase market share, diversify and/or exploit exporting opportunities.

Key details:

  • Funding available: Up to $50,000 (excluding GST)
  • Applicant commitment: To fund at least 25% of project costs to buy and implement the specialised equipment
  • Opened: 11 May 2021
  • Closes: When funds are exhausted

To apply (and for more details) go to: https://www.business.qld.gov.au/starting-business/advice-support/grants/growth-fund

Small Business – Business Boost Grant – $15,000

The Small Business – Business Boost Grant is set to open mid-July 2021.

For more details go to: https://www.business.qld.gov.au/starting-business/advice-support/grants/schedule

 

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.

Federal Budget 2021-22

On Tuesday night, 11 May 2021, Federal Treasurer Josh Frydenberg handed down his third Federal Budget.  In a pre-COVID world, we were told to celebrate “Back in Black” surpluses.  Those days are now gone.  But so too, are the economic deficits forecast during the height of COVID-19.  The underlying deficit for the 2020-21 year will be $161.0 billion (that is $52.7 billion less than expected and forecast only 6 months ago).  The forecast deficit for the 2021-22 financial year is $106.6 billion with forward estimates suggesting a deficit of $57 billion by 2024-25 (nearly one-third of the deficit in 2020-21).

The Australian economy outperformed all major advanced economies for 2020.  Real GDP has been resilient.  The unemployment rate has not blown out as perhaps expected. In fact, the unemployment rate is expected to fall below 5% by 2023.  Confidence is also continuing in the equity and property markets.

Key budget measures that will impact on our clients include:

  • Continued access to low income tax offsets and lower tax rates for individuals;
  • The extension of the temporary full expensing of assets until 30 June 2023; and
  • The extension of the loss carry-back rules for companies also to 30 June 2023.
Once again, however, we have failed to see any substantial debate around the change or movements to GST or significant tax reform.

We’ve outlined below some of the main tax 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.  We will keep you updated on the status of any proposed measures.

Superannuation guarantee - minimum earnings threshold abolished

The Government is proposing to remove the current $450 per month minimum income threshold, under which employees do not have to be paid the superannuation guarantee by their employer.  It is expected this will take effect from 1 July 2022.

This measure will benefit taxpayers with lower income.  It is estimated that around 300,000 individuals will receive additional superannuation guarantee payments each month, 63% of whom are women.

Low and Middle Income Tax Offset

The Low and Middle Income Tax Offset (LMITO) will remain for the 2021-22 income year.  This provides a tax rebate of up to $1,080 for individuals or $2,160 for couples. 

Individual income tax rates

There were no changes announced to the individual tax rates as these tax cuts were brought forward in the October 2020 budget and backdated to 1 July 2020.

The table above shows the tax thresholds for the 2021 and the 2022 financial years.

For companies with a turnover of less than $50 million, the company tax rate will drop to 25% from 1 July 2021 (down from 26% in the 2021 financial year).  This is a tax cut was implemented by an earlier budget.

Deduction for depreciable assets

The temporary full expensing of assets will be extended to 30 June 2023.

As such, from 6 October 2020 to 30 June 2023 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.  

Loss carry-back for companies

The loss carry-back provisions for companies have been extended to the 2022-23 financial year.  Companies that make a loss in the 2019-20, 2020-21, 2021-22 and/or 2022-23 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.

Superannuation contributions

Work test – abolished

It is proposed that from 1 July 2022, the work test will be abolished for voluntary non-concessional or salary sacrifice superannuation contributions.  This will enable taxpayers aged between 67 and 74 to make more non-concessional contributions to superannuation.  Individuals aged between 67 and 74 will still have to meet the work test to make personal deductible contributions.

Downsizer contributions – expanded

The eligible age for the downsizer superannuation contributions will also be reduced to 60 (currently 65).  As such, taxpayers aged 60 or older, will be able to make a one-off post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home.  Both members of a couple can contribute in respect of the same home, and contributions do not count towards non-concessional caps.

Other changes commencing 1 July 2021

While not part of the budget, a reminder of the following changes that will commence from 1 July 2021:

  • The superannuation guarantee rate increases to 10%;
  • The concessional superannuation cap increases to $27,500;
  • The non-concessional superannuation cap increases to $110,000 per annum or $330,000 over 3 years;
  • The total superannuation balance limit increases to $1.7 million.

Individual tax residency rules

The Government is proposing to replace the existing individual tax residency rules with a new framework.  The primary test will be a simple, ‘bright line’ test – a person who is physically present in Australia for 183 days or more in any income year will be an Australian resident.  Individuals who do not meet the primary test will be subject to secondary tests that depend on a combination of physical presence and measurable, objective criteria.

The budget papers acknowledge that Australia’s current tax residency rules are difficult to apply in practice, creating uncertainty and resulting in high compliance costs for individuals and their employers.

Self education expenses

The Government is proposing to remove the exclusion of the first $250 of deductions for prescribed education costs.  Currently, the first $250 of a prescribed course of education expense is not deductible.  Removing the $250 exclusion will reduce compliance costs for individuals claiming self-education expense deductions

Increased powers of AAT

The Government is proposing to increase the powers of the Administrative Appeals Tribunal to pause or modify ATO debt recovery action in relation to disputed debts that are being reviewed by the Small Business Taxation Division of the AAT.

SME Recovery Loan Scheme

The Government is proposing to support the economic recovery of businesses affected by COVID-19 or flood. 

The Government will provide participating lenders with a guarantee for 80% of secured or unsecured loans of up to $5 million for a term of up to 10 years with interest rates capped at 7.5%.

To be eligible, SMEs (including self-employed individuals and non-profit organisations) will have a turnover of up to $250 million and have either been:

  • recipients of the JobKeeper Payments between 4 January 2021 and 28 March 2021; or
  • located or operating in a local government area that has been disaster declared as a result of the March 2021 New South Wales floods and were negatively economically impacted.

Other measures of interest

Some other measures of interest from a tax perspective include:

  • A Digital Games Tax Offset to provide a 30% refundable tax offset for qualifying Australian digital games expenditure from 1 July 2022.
  • A tax rate of 17% for income from eligible medical and biotechnology patents.  Consultation will be undertaken to see if the concession will be extended to income from clean energy patents.
  • Increased Child Care Subsidy from 11 July 2022.
  • $506.3 million will be provided to extend the JobTrainer Fund. This is estimated to deliver 163,000 additional low fee and free training places in areas of skills need (including 10,000 places of digital skills courses).
  • An additional $2.7 billion over four years will be applied to expand the Boosting Apprenticeship Commencements wage subsidy to support businesses and Group Training Organisations to take on new apprentices and trainees.
  • A new Family Home Guarantee with 10,000 places from 2021-22 to support single parents with dependants to enter, or re-enter, the housing market with a deposit of as little as 2%.

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.

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.