Small Businesses: Don’t Forget Your FBT Concessions

If you own a small business still recovering from the COVID-19 induced downturn, remember that you can take advantage of FBT concessions to lower the amount of FBT you may need to pay. The concessions include exemptions for car parking in some instances, and work-related portable electronic devices.

All this could mean more cash to invest in the revitalisation and ultimate success of your business.

Tip: Even if your business was not considered a “small business entity” a few years ago, it may be worth a reassessment, because the turnover threshold has recently changed, and will soon increase once more.

For small business employers, the car parking benefits provided to employees could be exempt if the parking is not provided in a commercial car park and the business satisfies the total income or the turnover test. This is the case if the business is not a government body, listed public company or a subsidiary of a listed public company.

The second exemption relates to work-related devices. Small businesses can to provide their employees with multiple work-related portable electronic devices that have substantially identical functions in the same FBT year, with all devices being exempt from FBT. Note, however, that this only applies to devices that are primarily used for work, such as laptops, tablets, calculators, GPS navigations receivers and mobile phones.


JobMaker Hiring Credit Rules and Reporting

With a range of government COVID-19 economic supports such as the JobKeeper and JobSeeker schemes winding down in the next few months, businesses that are seeking to employ additional workers but still need a bit of help can now apply for the JobMaker Hiring Credit Scheme. Unlike the JobKeeper Payment, where the money has to be passed onto your employees, the JobMaker Hiring Credit is a payment that your business gets to keep. Depending on new employees’ ages, eligible businesses may be able to receive payments of up to $200 a week per new employee.

TIP: The scheme started on 7 October 2020, and employers will be able to claim payments relating to employees hired up until 6 October 2021. The first claim period for JobMaker starts on 1 February 2021 and businesses must first register with the ATO. To claim the payment in the first JobMaker period, your business must register by 30 April 2021.

To be eligible for the scheme, you need to satisfy the basic conditions of operating a business in Australia, holding an ABN, and being registered for PAYG withholding. Your business will also need to be up to date with its income tax and GST obligations for two years up to the end of the JobMaker period you claim for, and satisfy conditions for payroll amount and headcount increases. Non-profit organisations and some deductible gift recipients (DGRs) may also be eligible.

Beware, however, that businesses receiving the JobKeeper Payment cannot claim the JobMaker Hiring Credit for the same fortnight.

For example, businesses that wish to claim the payment for the first JobMaker period must not have claimed any JobKeeper payments starting on or after 12 October 2020, and employers currently claiming other wage subsidies – including those related to apprentices, trainees, young people and long-term unemployed people – cannot receive the JobMaker subsidy for the same employee.

If you think your business may be eligible, the next step is to determine whether you are employing eligible additional employees.

Generally, the employee needs to:

  • be aged 16–35 when their employment started (payment rates are $200 per week for 16 to 29 year-olds and $100 for 30 to 35 year-olds);
  • be employed on or after 7 October 2020 and before 7 October 2021;
  • have worked or been paid for an average of at least 20 hours per week during the JobMaker period;
  • have not already provided a JobMaker Hiring Credit employee notice to another current employer; and
  • received a JobSeeker Payment, Parenting Payment or Youth Allowance (except if they were receiving Youth Allowance due to full-time study or as a new apprentice) for at least 28 consecutive days in the 84 days before to starting employment.

Since the aim of JobMaker is to subsidise an increase in the number of employees a business hires – not to reduce the cost of replacing employees – businesses wishing to claim the payment must also demonstrate increases in both in headcount and employee payroll amount.

This is meant to reduce instances of rorting by businesses that might replace existing non-eligible employees with eligible employees. Employers will need to send information such as their baseline headcount and payroll amounts to the ATO for compliance purposes.


Working From Home Deductions: “Shortcut” Rate Until 30 June 2021

There has been some good news out of the ATO recently with the “Shortcut” method for calculating a tax deduction for running costs incurred while working from home being extended to the 30th June 2021.  This was originally provided to cover the period from 1st March 2020 to 30th June 2020 however with the ongoing battle against COVID-19 keeping many employees and business owners working from home, this shortcut method has now been extended to cover the full 2021 financial year too.

Eligible employees and business owners therefore can choose to claim additional running expenses incurred between 1 March 2020 and 30 June 2021 at the rate of 80 cents per work hour, provided they keep a record (such as a timesheet or work logbook) of the number of hours worked from home during the period.

The expenses covered by the shortcut rate include lighting, heating, cooling and cleaning costs, electricity for electronic items used for work, the decline in value and repair of home office items such as furniture and furnishings in the area used for work, phone and internet expenses, computer consumables, stationery, and the decline in value of a computer, laptop or similar device.

It is important to note that the “Fixed Rate” method is still available to use for this same period which allows eligible employees and business owners to claim home office costs at a flat rate of 52 cents per work hour.  This method covers the same the additional running costs as the shortcut method but specifically excludes costs associated with phone and internet, computer consumables and stationery, and the depreciation of office equipment.  These additional costs can be claimed based on the work-related portion of each item which must be supported by written records.

The “Fixed Rate” method may therefore be a better alternative for those with large work-related usage of phone, internet and electronic devices provided sufficient supporting documentation is available.

It is important to note that in most cases, if you are working from home as an employee and claiming a deduction under either of these methods, there will be no adverse impact on the Capital Gains Tax (CGT) treatment of your home.

Tip: This shortcut rate will suit many people, but if you choose to use it for your additional work-from-home running expenses, you cannot also claim any further deductions for the same items. We can help you decide whether the shortcut rate is the best option for your situation.


COVID-19 Supplement Extension to 31 March 2021

The Federal Minister for Families and Social Services has now registered the legal instrument that ensures the COVID-19 Supplement will continue to be paid until 31 March 2021 for recipients of:

  • JobSeeker Payment;
  • Parenting Payment;
  • Youth Allowance;
  • Austudy Payment;
  • Special Benefit;
  • Partner Allowance; and
  • Widow Allowance.

It will be paid at the rate of $150 a fortnight (down from the previous $250 a fortnight) from 1 January 2021 to 31 March 2021.

The period for which people are considered as receiving a social security pension or benefit at nil rate, meaning they keep their access to benefits such as concession cards, has also been extended until 16 April 2021.

A number of other temporary social security measures will also remain until 31 March 2021, including waivers of waiting periods for certain payments, some requirement changes and exemptions, and more permissive income-free areas and payment taper rates.


ATO Warning: Watch Out For Tax Avoidance Schemes

Tax planning or tax avoidance – do you know the difference? Tax planning is a legitimate and legal way of arranging your financial affairs to keep your tax to a minimum, provided you make the arrangements within the intent of the law. Any tax minimisation schemes that are outside the spirit of the law are referred to as tax avoidance, and could attract the ATO’s attention.

The ATO has outlined some common features of tax avoidance schemes, and we can help you to steer clear of them. While it’s not always easy to identify these schemes, the old adage of “if it seems too good to be true, it probably is” is a good rule of thumb.

Tax avoidance schemes range from mass-marketed arrangements advertised to the public, to individualised arrangements offered directly to experienced investors. Other schemes exploit the social/environmental conscience of people or their generosity. As different as these schemes are, the common threads involve promises of reducing taxable income, increasing deductions, increasing rebates or entire avoidance of tax and other obligations.

Schemes may include complex transactions or distort the way funds are used in order to avoid tax or other obligations. They may also incorrectly classify revenue as capital, exploit concessional tax rates, or inappropriately move funds through several entities including trusts to avoid or minimise payable tax.

Currently, the ATO has its eyes on retirement planning schemes, private company profit extraction and certain problematic financial products.

Tip: If you’ve come across something that seems too good to be true, or you’re considering an investment or arrangement, we can help you decipher whether it could constitute a tax avoidance scheme. Don’t risk a penalty – contact us today.


Digital AGMs and signatures: legislative determination

The Government has formally extended the ability for companies to convene annual general meetings (AGMs) and other prescribed meetings entirely online until March 2021.

This extension allows company boards to:

  • provide notice of AGMs to shareholders using email;
  • achieve a quorum with shareholders attending online; and
  • hold AGMs meetings online, with shareholders able to put questions to board members online and vote online.

Company officers are also permitted to use electronic signatures to meet the relevant legal requirements.


SMSF Asset Valuations: Concession During COVID-19

The ATO has advised that it will not apply a penalty for self managed super fund (SMSF) trustees that have difficulty obtaining evidence to support market valuations of assets due to COVID-19.

SMSF trustees are required to provide objective and supportable evidence to their auditor each year to establish that assets of the fund are valued at market value.

During the 2020 and 2021 financial years, the ATO will not apply a penalty if it is satisfied that the difficulty in obtaining valuation evidence is due to COVID-19. Instead, the ATO will send the SMSF trustee a letter advising them to ensure they comply with the ATO’s valuation guidelines and have supporting valuation evidence by the time of their next audit if possible. However, the ATO warns that repeated contraventions of the valuation evidence requirements could lead to future penalties.


Job Keeper Payments Satisfy “work Test” for Super Contributions

The Australian Prudential Regulation Authority (APRA) has published new guidance on the interaction between JobKeeper payments and satisfying the “work test” for the purpose of voluntary superannuation contributions.

Where an individual is aged 67–74 and is stood down from their employment due to the impacts of COVID-19 but is in receipt of the JobKeeper payment, APRA says a super fund trustee can accept a personal contribution from that individual under the super “work test” rules. APRA’s view is that where an employer is receiving the JobKeeper wage subsidy for an individual, registrable superannuation entity (RSE) licensees should consider the individual to be “gainfully employed” for the purposes of the “work test”, even if that individual has been fully stood down and is not actually performing work. In APRA’s view, this is appropriate because the individual is still employed and is obtaining a valuable benefit from their employer.


Insolvency Reforms Announced for Small Businesses

The Government has announced that it will introduce insolvency reforms to help small businesses restructure in response to COVID-19, including:

  • the introduction of a new debt restructuring process for incorporated businesses with liabilities of less than $1 million, drawing on key features from Chapter 11 of the US Bankruptcy Code;
  • moving from a one-size-fits-all “creditor in possession” model to a more flexible “debtor in possession” model;
  • providing a rapid 20-business day period for the development of a restructuring plan by a small business restructuring practitioner, followed by 15 business days for creditors to vote on the plan; and
  • creating a new, simplified liquidation pathway for small businesses to allow faster and lower cost liquidation.

Safeguards will be included to prevent companies from using the new processes to undertake corporate misconduct, including firms seeking to carry out illegal phoenix activity.

The new insolvency processes are proposed to be available from 1 January 2021.


Small Business Tax Options During COVID-19: ATO Reminder

The ATO has reminded businesses impacted by COVID-19 that they have a range of tax options to consider, including claiming a deduction for any losses. And for businesses finding it difficult to estimate income for the purposes of PAYG instalments, the ATO will not apply penalties or interest for excessive variations where businesses make a “best attempt” to estimate their end-of-year tax.

Tip: If you need additional time or support to get your tax return in order or work out what’s next for your business, we can help. Contact us, or phone the ATO on 1800 806 218.

Tax losses

Sole traders and individual partners in a partnership who meet certain conditions can offset current year losses against other assessable income (such as salary or investment income) in the same income year. Otherwise, the loss can be deferred or carried forward and offset in a future year when the business next makes a profit. Businesses set up under a company structure that have made a tax loss in a current year can generally carry forward that loss for as long as they want. Of course, it’s crucial to keep proper records when claiming a deduction for losses.

Closing a small business

The ATO has acknowledged that some businesses may need to close their doors – either temporarily or permanently – due to COVID-19, particularly in Victoria. It calls on such businesses to “do their best to keep up with tax and super obligations”.

If a business is forced to close permanently as a result of COVID-19, or for any other reason, it must still lodge any outstanding activity statements and instalment notices, make GST adjustments on the final activity statement and lodge final tax returns. This will enable the ATO to finalise the tax account and issue any refunds that might be owed.