COVID-19 – Additional Economic Stimulus package

Today the Federal Government announced further economic stimulus measures in an attempt to help small businesses survive the economic impact of COVID-19. Below are details of these additional measures.

Our earlier articles in relation to the stimulus measures can be accessed here:

Big 4 Banks response to COVID-19 (20/3/20)

Queensland Government – COVID-19 response (17/3/20)

Federal Government – Initial Stimulus package (13/3/20)

Tax-free cash payments – up to $100,000

Today the Government expanded the previously announced PAYG withholding measures. Eligible businesses will be entitled to a rebate of 100% of the taxes withheld on employees’ salary and wages. The minimum rebate entitlement will be $10,000 up to a maximum of $100,000.

Eligibility

To be eligible for the PAYG withholding rebate, a business must:

  • Have turnover under $50 million (generally based on prior year turnover);
  • Be an active employer established prior to 12 March 2020.

Boosting Cash Flow for Employer Payments

100% of the tax withheld on salary and wages will be rebated up to a maximum of $50,000 for the period from January to June 2020. The minimum rebate for this period will be $10,000. This rebate is a tax free payment and is automatically calculated by the ATO.

Additional payment

An additional payment is also being introduced in the July – October 2020 period. Eligible entities will receive an additional payment equal to the Boosting Cash Flow for Employers payment they have received in the January to June 2020 period (outlined above).

Summary

Overall, eligible businesses may receive tax free payments of between $10,000 and $100,000 over the period January to September 2020.

Bank loan guarantee scheme

The Federal Government will guarantee half of a bank loan to small and medium business. Businesses with a turnover under $50 million will be eligible for the guarantee and it will apply to loans granted within six months, starting 1 April 2020.

The Government will provide eligible lenders with a guarantee for loans with the following terms:

  • Maximum total loan of $250,000 per borrower;
  • The loan is up to 3 years, with an initial 6 month repayment holiday;
  • The loan is in the form of unsecured finance, meaning borrowers will not have to provide an asset as security for the loan.

Insolvency and bankruptcy flexibility

The Government announced greater flexibility in the insolvency and bankruptcy requirements, including:

  • Temporarily increasing the threshold at which creditors can issue a statutory demand on a company (from $2,000 to $20,000) and the time companies have to respond to statutory demands (from 21 days to 6 months);
  • Temporarily increasing the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings (from $5,000 to $20,000);
  • Temporarily increasing the time a debtor has to respond to a bankruptcy notice (from 21 days to 6 months);
  • Temporary relief from directors’ personal liability for trading while insolvent (though egregious cases of dishonesty and fraud will still be subject to criminal penalties). Any debts incurred by the company will still be payable by the company;

Relief for individuals

The Government also announced additional relief for individuals.

Coronavirus Supplement

A new time-limited Coronavirus supplement is to be paid at a rate of $550 per fortnight (paid to existing and new recipients of JobSeeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit).

Househouse Support

The Government will be providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders.

Temporary Early Release of Superannuation

Individuals affected by Coronavirus will be allowed to access up to $10,000 of their superannuation in 2019-20 and a futher $10,000 in 2020-21. These payments will be tax-free and will not affect Centrelink or Veterans’ Affairs payments.

Temporary Reduction to Superannuation Minimum Drawdowns

The minimum pension drawdowns for superannuation will be reduced by 50% for the 2019-20 and 2020-21 financial years.

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.

Big 4 Banks – response to COVID-19

Today the banking industry announced their response to help small businesses affected by COVID-19 (and they indicated that more relief will be coming for residential mortgages).

We note that NAB have also announced measures for personal customers.

Below we have summarised the initiatives announced by the Big 4 banks.  Other lenders will also be providing support packages.  Please contact your bank immediately if you need financial assistance for your business.

As always, please feel free to contact us if you want to discuss the impact of COVID-19 on your business.

Westpac

The COVID-19 support measures announced on the Westpac website include:

* Fee free redraws;
* Business loan deferred repayments up to 3 months;
* Option to extend business loan terms by up to 3 months;
* Restructuring and consolidating loans;
* Access to term deposit funds without reduction in interest rate;
* Deferred payments for business credit cards;
* Business financial counselling access;
* Merchant terminal rental fee waivers for up to 3 months;
* $0 establishment fee for equipment finance loans.

Westpac has indicated that Westpac Assist may be able to help any customer experiencing financial hardship at any time.

To find out more information, please speak with your Westpac Relationship Manager or call Westpac on 1800 067 497.

Commonwealth Bank

The Commonwealth’s bank response includes:

* Reducing rates on Better Business Loans, Business Overdrafts and other products by 25 basis points, effective as at 24 March 2020;
* Deferring repayments on business loan and overdraft products, for 90 days;
* Waiving merchant terminal fees for impacted customers with CommBank merchant terminals, for 90 days;
* Waiving early redraw fees on business term deposit accounts (including Farm Management Deposit accounts);
* Waiving establishment fees and excess interest on Temporary Excess products;
* Deferring repayments on vehicle and equipment finance loans, and providing tailored restructuring options that meet individual customer needs.

If you have a Relationship Manager, they will be able to assist you at this time.  Otherwise you can contact a dedicated Business Financial Assistance team member on 13 26 07 (open 24 hours 7 days a week).

National Australia Bank

NAB business customers experiencing financial difficulty are able to:

 * Defer principal and interest for up to six months on a range of business loans, including floating and variable rates and equipment finance loans;
* Receive an interest rate cut on QuickBiz loans and overdrafts, effective March 30;
* Receive an interest rate cut on variable rates for small business loans, effective March 30;
* Access up to $65 billion of additional secured limits to pre-assessed customers, with $7 billion currently available for fast assessment process;
* Access up to $9 billion in additional limits for unsecured lending for existing customers via QuickBiz;
* Defer business credit cards repayments.

Business customers should contact their relationship banker or call the Business Banking support team on 13 10 12 for further assistance.

NAB personal customers experiencing financial difficulty are able to:

* Pause home loan repayments for up to six months, including a three-month checkpoint (for a customer with a typical home loan of $400,000, this will mean access to an additional $11,006 over six months, or $1,834 per month);
* Access fixed home loan rates of 2.39% p.a. for 1-year, 2.29% p.a. for 2- and 3-years, and 2.79% p.a. for 5-year (owner-occupied, P&I), effective March 30.  First home buyers will have access to a rate of 2.19% p.a., fixed for two years.
* Access funds in loan redraw accounts and offset accounts;
* Reduce repyaments on variable rate loans;
* Access a 10-month term deposit rate of 1.70% pa for 10 months, effective March 24.  This is for personal customers only, with deposits of $5,000 to $2 million.

Personal customers can submit a request for online support or can call 1300 683 106 if they require further assistance.

ANZ

Financial support for ANZ customers includes:

* Suspending interest repayments;
* Early access to term deposits without incurring break fees;
* Access to additional credit subject to approval.

Please contact ANZ or your relationship manager if you have been affected by the financial impacts of COVID-19.

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.

Queensland State Budget 2019-20

The Queensland State Budget was handed down on 11 June 2019. 

We have outlined below some of the changes that will affect Queensland businesses.

Payroll tax

 

The following changes are proposed for payroll tax:

 

  • The payroll tax tax-free threshold will increase from $1.1 million to $1.3 million.  This means that approximately 1,500 businesses will no longer have to pay payroll tax.

 

  • The payroll tax rate for businesses with payroll up to $6.5 million will remain at 4.75%.

 

  • The payroll tax rate for businesses with payroll above $6.5 million will increase to 4.95% (up 0.2%).

 

  • There is a payroll tax discount of 1% for regional businesses (that is, businesses with a registered business address in a regional area and where 85% of taxable wages are paid to employees who reside in regional Queensland).

 

  • A rebate of payroll tax of up to $20,000 is also available to employers who have a net growth in full-time employees over a year.

 

  • The budget also provided two more years of the Apprentice and Trainee payroll tax rebate (which is paid at 50% of the apprentice and trainee wages).

 

Land tax

 

From 30 June 2019, land tax rates will increase as follows:

 

  • for companies and trusts with landholdings of more than $5 million but less than $10 million – the rate increases to 2.25%

 

  • for companies and trusts with landholdings of more than $10 million – the rate increases to 2.75%.

 

Australian citizens and permanent residents living overseas will now be assessed as resident individuals from 30 June 2019 (so they will benefit from the higher tax-free threshold and lower rates of land tax that apply to resident individuals).

 

The absentee surcharge will increase to 2%.  This applies to foreign individuals who own land and do not ordinarily reside in Australia (except for Australian citizens and permanent residents).

 

From 30 June 2019, a new land tax foreign surcharge of 2% will apply to foreign companies and trustees of foreign trusts that own land.  The surcharge will apply to the portion of the taxable value of the land that is over $350,000.

If you would like to discuss the impact of the Queensland state budget on your business, 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 2019-20

Last night Federal Treasurer Josh Frydenberg had his turn at the wheel and handed down his first Federal Budget.

So what did we like in the Budget?  We liked that there were no new taxes or increases to tax rates.  We liked the proposed bring forward of the reduction to the company tax rate.  We also like the increased threshold of the instant asset write-off to $30,000 and the expansion of the write-off to apply to more businesses.  The proposed income tax cuts are also welcomed and may help relieve some family financial stress. 

We’ve outlined below some of the main tax and other 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.  As such, it is important that you use caution in acting on these measures until they have become law.  We will keep you updated on the status of these proposed measures.

Businesses

  • Instant Asset Write-off – The instant asset write-off will be increased to $30,000 for assets that are acquired between 2 April 2019 and 30 June 2020.  More businesses will also be able to access the write-off with the turnover eligibility increasing from $10 million to $50 million.  We note that there is currently legislation before Parliament to increase the current asset write-off threshold from $20,000 to $25,000 to take effect from 29 January 2019, once passed.  As such, if all of the relevant legislation is passed to implement the increased thresholds, the instant asset write-off will be available as follows

  • Corporate Tax Rates – From 1 July 2021, businesses operating in a company structure with a turnover of less than $50 million will have their tax rate lowered to 25% (this is 5 years earlier than original planned).

  • ABN integrity measures – The Government will look to strengthen the ABN system by requiring ABN holders to lodge their income tax returns and verify their details on the Australian Business Register annually. 

 

Individuals

The Government has gone back to their seven-year personal income tax plan (announced in the 2018-19 budget) and made changes and updates as detailed below:

 

  • Seven year personal income tax plan

    • Step one – Tax Offset: A low and middle income tax offset will apply from 1 July 2018 to 30 June 2022.  The offset will give taxpayers back up to an extra $1,080 if they earn less than $90,000.  The offset then reduces and is completely phased out at $126,000 taxable income.  This offset will exist in addition to the Low Income Tax Offset.

    • Step two – Tax Rates: From 1 July 2022, the 19% tax bracket will increase from $37,000 to $45,000.  The low income tax offset will be raised to $700.

    • Step three – Simpler System: From 1 July 2024, the 32.5% marginal rate will be decreased to 30%.  A summary table of the new tax rates is below:

Superannuation

The superannuation sector remains largely unchanged in the Budget.  The main changes are:

  • Work test – From 1 July 2020, it is proposed that people aged 65-66 will be able to make voluntary contributions to super without having to meet the work test.  Currently, people over 65 must work a minimum of 40 hours over a 30 day period in order to make a contribution.
     

  • 3 year bring forward for non-concessional contributions – People aged 65 and 66 will also be able to access the 3 year bring forward provisions to make 3 years worth of non-concessional contributions to their super in a single year.

We will keep you up-to-date with the progress of the implementation of these proposed 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 election 2019 – Labor’s Franking Credit Policy

In the lead up to the 2019 Federal election, we will seek to provide you with as much information about the fiscal policies of both the Liberal party and the Labor party to ensure you can make a fully informed decision on election day.  We will not provide any judgements or comments in relation to the proposed policies. 

Labor’s Franking Credit Policy

What is the policy?

 Franking credits (or imputation credits) are credits that accompany franked dividends.  They represent the income tax that the company has already paid on the underlying profit supporting the dividend.  Currently, taxpayers receive a credit against their tax bill for the franking credits received from franked dividends.  Taxpayers can receive a cash refund of the franking credits if these credits exceed their tax bill.

The Labor party is seeking to stop the cash refund for the excess franking credits.  The franking credits can be used to reduce an existing tax liability, but cannot be used to generate a cash refund.  Excess and unused franking credits will be lost.

 

Exemptions

Labor’s policy will only apply to individuals and superannuation funds (and therefore will not apply to income tax exempt charities and not-for-profit institutions with deductible gift recipient status).

The policy also will not apply to taxpayers who are receiving an Australian Government pension or allowance.  This includes individuals receiving Age Pension, Disability Support Pension, Carer Payment, Parenting Payment, Newstart and Sickness Allowance.

The policy will also not apply to self-managed superannuation funds with at least one recipient of an Australian Government pension or allowance as at 28 March 2018.

 

When will the policy start?

The proposed start date of the policy is 1 July 2019.

 

Who is most affected?

Labor’s proposed Franking Credit Policy will impact on any taxpayers that are currently receiving a tax refund that is based on franking credits received on dividends (so superannuation funds that have an investment in Australian shares). 

Most significantly, superannuation funds will be impacted where at least one of the members is in pension phase (as earnings on pension income is tax-free).  If all members of a superannuation fund are in pension phase, the fund will not be paying any income tax on its earnings.  Consequently, the fund will presently be receiving a full cash refund of any franking credits attached to dividends. 

As noted above, however, the policy will not apply to self-managed superannuation funds where at least one member is in receipt of an Australian Government Pension or Allowance.

Individuals on low taxable incomes will also be affected where they receive a refund from franking credits.  This may, for example, impact on self-funded retirees where they have investments in Australian shares in their individual name.

In a press release on 21 January 2019, Josh Frydenberg MP (current Treasurer and member of the Liberal Party) argued that more than 900,000 individuals, 200,000 self-managed superannuation funds and 2000 super funds will be affected by this policy.

 

More information

You can access Chris Bowen MP’s statement regarding Labor’s franking credit policy here.

 

Important points to note

  1.  Implementation of the above policy would require Labor to win the 2019 election;

  2. Implementation of the above policy would require Labor to have the relevant legislation passed through the upper and lower houses of Parliament;

  3. The final legislation may differ to the above policy after a period of consultation with relevant community stakeholders.

 

What should you do if you’re concerned?

If you are concerned about your current tax or financial strategy as a result of the above proposed policy, we recommend you call us as soon as possible 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 2018-19

Last night Federal Treasurer Scott Morrison handed down his third budget.  While there were no shocks or great surprises in the announcements, there were some welcome tax reform measures.

A shared feeling among most budget commentators is that this was a “victimless” budget – that is, no one particular group suffered from the announcements.

So what did we like in the Budget?  Individual taxpayers will appreciate tax cuts via a low and middle income tax offset and the changes to the tax brackets.  Small businesses will get an advantage from the extension of the $20,000 instant asset write-off (and the proposed reduction to the company tax rate as announced in previous Budgets).  Retirees have not had any significant changes made to superannuation – which is a welcome change for an industry still trying to come to grips with the superannuation changes made from previous budgets.  Scott Morrison also confirmed that the Government will not be making any changes to the current franking credit regime (we await the opposition’s Budget response to see if they will continue with their suggested changes to franking credits).

The tax changes proposed in last night’s Budget will now become part of the upcoming federal election battleground.  We hope that the proposed cuts to the company tax rate and the removal of the 37% individual tax bracket will be high on the Government’s agenda.

We’ve outlined below some of the main tax and other 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.  As such, it is important that you use caution in acting on these measures until they have become law.  We will keep you updated on the status of these proposed measures.

 

Businesses

  • Instant Asset Write-off – The $20,000 instant asset write-off for small businesses (who have an aggregated annual turnover less than $10 million) has been extended to 30 June 2019.  Assets acquired for more than $20,000 will be pooled and depreciated at 15% in the first year then 30% each year thereafter.  The balance of this pool can be written off when it is less than $20,000.

  • Taxable Payments Annual Reporting System – From 1 July 2019, the taxable payments annual reporting system to be expanded to the following industries:

    • Security providers

    • Investigation services

    • Road freight transport

    • Computer system design and related services.

 

The taxable payments annual reporting system already applies to the building industry and will extend to the cleaning and courier industries from 1 July 2018.

  • Non-compliant payments – From 1 July 2019, businesses will not be able to claim deductions for payments to their employees, such as wages, where they have not withheld any amount of PAYG from the payments, despite the PAYG withholding requirements applying.

  • Non-compliant payments – From 1 July 2019, businesses will not be able to claim deductions for payments to contractors where the contractor does not provide an ABN and the business does not withhold any amount of PAYG despite the withholding requirements applying. 

  • Director Penalty Notices – Currently, under the Director Penalty Regime, the ATO can make directors personally liable for superannuation and PAYG withholding.  The Director Penalty Regime is set to extend to GST, luxury car tax and wine equalisation tax potentially making directors personally liable for these debts also.

  • Corporate Tax Cuts – The Government is committed to its Ten Year Enterprise Tax Plan of company tax cuts announced in the 2016-17 Federal Budget (which will see the corporate tax rate cut to 25% for all companies by 2026-27).

 

Individuals

  • Medicare Care Levy –

    • The Medicare levy low-income thresholds increased from the 2017-18 income year. 

    • The Medicare levy rate will remain at 2%.  The Medicare levy rate was previously budgeted to increase to 2.5% to pay for the NDIS.  However, the Government has been able to fund the NDIS through the budget without increasing the Medicare levy.

  • Seven year personal income tax plan –

    • Step one – Tax Offset: A low and middle income tax offset will apply from 1 July 2018 to 30 June 2022.  The offset will give taxpayers up to an extra $530 of their tax back if they earn less than $90,000.  The offset then reduces and is completely phased out at $125,333 taxable income.  This offset will exist in addition to the Low Income Tax Offset.

    • Step two – Tax Rates: Individual tax brackets are being changed to prevent more Australians from moving into higher tax brackets. See the table of the new tax rates below.

    • Step three – Simpler System: The personal tax system will be simplified by removing the 37% tax bracket entirely from 1 July 2024.  The highest marginal rate of 45% will apply to taxable income exceeding $200,000.  A summary table of the new tax rates is below:

Superannuation

  • Protecting Your Super – From 1 July 2019, the Government will ban exit fees on all superannuation accounts.  This gives superannuation members greater flexibility to change funds.

  • Protecting Your Super – From 1 July 2019, the Government will introduce a 3% annual cap on passive fees charged by superannuation funds on accounts with balances below $6,000. 

  • Protecting Your Super – From 1 July 2019, all inactive superannuation accounts with a balance less than $6,00 will be transferred to the ATO.  The ATO will use data matching to reunite these funds with the member’s active accounts, where possible.

  • Insurance – From 1 July 2019, insurance will be offered on an “opt-in” basis to superannuation members with balances of less than $6,000, members under 25 years of age or members who have not made a contribution for 13 months and are inactive.

  • Work test exemption – From 1 July 2019, the Government will introduce an exemption from the work test for voluntary contributions to super for people aged between 65-74 with superannuation balances below $300,000 in the first year that they do not meet the work test. 

  • SMSF – The maximum number of members for self-managed superannuation funds will increase from 4 to 6 from 1 July 2019.  This will give SMSFs greater flexibility and allow for better succession planning for larger families.

  • SMSF – A 3 yearly audit cycle will be introduced for SMSFs from 1 July 2019 for funds that have a history of 3 consecutive years of clear audit reports and have lodged the fund’s annual returns in a timely manner.

 

Research and development

  • The R&D tax incentive is to be amended to improve its integrity.  The proposed changes will apply from 1 July 2018.  The R&D tax offset will be 13.5% above the claimant company’s tax rate.  Further, there will be a cap of $4 million per annum for the cash refunds from the R&D tax offset.  

We will keep you up-to-date with the progress of the implementation of these proposed 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,

Renting out your house (or part of it) on Airbnb?

With the Commonwealth Games coming up for the Gold Coast, some locals have chosen to rent out part or all of their house to visitors using Airbnb and other online platforms.  If you are renting out your house (or part of it) even for a short period of time, there are tax and other consequences you need to consider.

 

Tax consequences

If you are renting out your home (or a part of it), any income earned will need to be declared as assessable income in your tax return.  You may also be eligible to claim a proportion of the expenses for the property.

You will need to keep all of your receipts and records showing:

  • Total income earned for the property; and

  • Total expenses for the property (eg. rates, interest, insurance, cleaning, internet, repairs, fees charged by Airbnb or other rental platform).

If you only rented out a part of your house (eg. one room) you can only claim the expenses relating that proportion of the house plus a share of common areas (eg. bathrooms).  These costs are generally apportioned on the basis of floor area – so you will need a floor plan for your property showing the total area and the area of the relevant rooms.

If you are earning income from your property, there may also be capital gains tax implications for your property when you sell it.  You should seek advice regarding the capital gains tax implications before renting out your property.

 

Other consequences

You should check your insurance policy and make sure that the policy covers you if a tenant is injured on your property or your property is damaged or stolen by a tenant.

You should also review your local council regulations to ensure that short term letting is permissible in your local area.  You may also be required to notify your local council that you are renting out your property.

If you are already renting your property, you need to check your lease to see whether a sub-lease is permissible.

If you would like to discuss the tax implications of renting out your property, 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,