Quill is a financial services business with a team of passionate professionals who are committed to working with family businesses, working families and retired families.
The 2020-21 Federal Budget is all about jobs, jobs and jobs. COVID-19 has resulted in the most severe global economic crisis since the Great Depression. The 2020-21 Budget provides an additional $98 billion of response and recovery support under the COVID-19 Response Package and the JobMaker Plan.
The single biggest measure in the budget is designed to turbocharge business investment by allowing almost every company in Australia to immediately write off in full any eligible depreciable asset. The measure, which has no limit in value, is forecast to cost $26.7 billion over four years.
Other big measures in the budget include backdating income tax cuts (at a cost of $17.8 billion over the next four years) and the extension of the JobKeeper Payment scheme (at a cost of $15.6 billion).
Article Contents
Personal income tax cuts 2020-21
In the 2020-212 Budget the Government will lower taxes for individuals by bringing forward its ‘stage two’ tax cuts that were due to start in July 2022.
This means from 1 July 2020, the 32.5% tax rate will apply to incomes up to $120,000 (previously $90,000). The ‘stage three’tax cuts will continue on its legislated timeline of 1 July 2024 which will repeal the 37% tax rate and impart a 30%tax rate for all individuals earning between $45,000 and $200,000.
In 2020–21, low–and middle–income earners will receive tax relief of up to $2,745 for singles, and up to $5,490 for dual income families, compared with 2017–18 settings.
Temporary full expensing of eligible capital assets
The Government will support businesses with aggregated annual turnover of less than $5 billion by enabling them to deduct the full cost of eligible capital assets acquired from 7:30pm AEDT on 6 October 2020 (Budget 2020-21 night) and first used or installed by 30 June 2022.
Full expensing in the year of first use will apply to new depreciable assets and the cost of improvements to existing eligible assets. For small and medium sized businesses (with aggregated annual turnover of less than $50 million), full expensing also applies to second-hand assets.
Businesses with aggregated annual turnover between $50 million and $500 million can still deduct the full cost of eligible second-hand assets costing less than $150,000 that are purchased by 31 December 2020 under the enhanced instant asset write-off. Businesses that hold assets eligible for the enhanced $150,000 instant asset write-off will have an extra six months, until 30 June 2021, to first use or install those assets.
Small businesses (with aggregated annual turnover of less than $10 million) can deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies. The provisions which prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended.
In-house software development
If you’re wondering whether this 2020-21 Budget measure also covers in-house software development costs, than the answer is yes.
The definition of in-house software contained in Section 40 of the Tax Act is broad and includes the right to use computer software or software that is acquired from third parties. More on in-house software development costs can be found on the ATO website here: In-house software.
Temporary loss carry-back to support cash flow
The 2020-21 Budget announced that eligible companies will be allowed to to carry back tax losses from the 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in 2018-19 or later income years.
Corporate tax entities with an aggregated turnover of less than $5 billion can apply tax losses against taxed profits in a previous year, generating a refundable tax offset in the year in which the loss is made. The tax refund would be limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry back does not generate a franking account deficit. The tax refund will be available on election by eligible businesses when they lodge their 2020-21 and 2021-22 tax returns.
Currently, companies are required to carry losses forward to offset profits in future years. Companies that do not elect to carry back losses under this measure can still carry losses forward as normal.
Importantly, the loss carry-back measure and full expensing measure work together. For example if your business purchases and fully expenses an eligible asset in the 2020-21 financial year, and the deduction from that purchase (or purchases) creates a tax loss, this loss can be used to generate a refund of prior year company tax paid when your 2020-21 return is lodged.
Increase the small business entity turnover threshold
The Government will expand access to a range of small business tax concessions by increasing the small business entity turnover threshold for these concessions from $10 million to $50 million.
We cover this change in more detail in our article: Small Business Tax Concessions Expanded
JobMaker Hiring Credit
The Government will provide $4.0 billion over three years from 2020-21 to accelerate employment growth by supporting organisations to take on additional employees through a hiring credit. The JobMaker Hiring Credit will be available to eligible employers over 12 months from 7 October 2020 for each additional new job they create for an eligible employee.
Eligible employers who can demonstrate that the new employee will increase overall employee headcount and payroll will receive $200 per week if they hire an eligible employee aged 16 to 29 years or $100 per week if they hire an eligible employee aged 30 to 35 years. The JobMaker Hiring Credit will be available for up to 12 months from the date of employment of the eligible employee with a maximum amount of $10,400 per additional new position created.
To be eligible, the employee will need to have worked for a minimum of 20 hours per week, averaged over a quarter, and received the JobSeeker Payment, Youth Allowance (other) or Parenting Payment for at least one month out of the three months prior to when they are hired.
The 2020-21 Budget JobMaker factsheet can be downloaded here: JobMaker Hiring Credit
Research and Development Tax Incentive
The 2020-21 Budget has announced further enhancements to the 2019-20 MYEFO measure Better targeting the research and development tax incentive — refinements to support business Research and Development (R&D) investment in Australia and help businesses manage the economic impacts of the COVID-19 pandemic.
For small companies, those with aggregated annual turnover of less than $20 million, the refundable R&D tax offset is being set at 18.5 percentage points above the claimant’s company tax rate, and the $4 million cap on annual cash refunds will not proceed.
For larger companies, those with aggregated annual turnover of $20 million or more, the Government will reduce the number of intensity tiers from three to two.
The R&D premium ties the rates of the non-refundable R&D tax offset to a company’s incremental R&D intensity, which is R&D expenditure as a proportion of total expenses for the year. The marginal R&D premium will be the claimant’s company tax rate plus:
- 8.5 percentage points above the claimant’s company tax rate for R&D expenditure between 0 per cent and 2 per cent R&D intensity for larger companies
- 16.5 percentage points above the claimant’s company tax rate for R&D expenditure above 2 per cent R&D intensity for larger companies.
The Government will defer the start date so that all changes to the program apply to income years starting on or after 1 July 2021.
Fringe Benefits Tax Changes Budget 2020-21
Exemption to support retraining and reskilling
The Government will introduce an exemption from the 47 per cent fringe benefits tax (FBT) for employer provided retraining and reskilling benefits provided to redundant, or soon to be redundant employees where the benefits may not be related to their current employment. This measure applies from announcement.
Reducing the compliance burden of record keeping
The Government will provide the Commissioner of Taxation with the power to allow employers to rely on existing corporate records, rather than employee declarations and other prescribed records, to finalise their fringe benefits tax (FBT) returns. The measure will have effect from the start of the first FBT year (1 April) after the date of Royal Assent of the enabling legislation.
CGT exemption for granny flats
The Government will provide a targeted capital gains tax – CGT exemption for granny flat arrangements where there is a formal written agreement. The exemption will apply to arrangements with older Australians or those with a disability. The measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.
CGT consequences are currently an impediment to the creation of formal and legally enforceable granny flat arrangements. When faced with a potentially significant CGT liability, families often opt for informal arrangements, which can lead to financial abuse and exploitation in the event that the family relationship breaks down. This measure will remove the CGT impediments, reducing the risk of abuse to vulnerable Australians.
For more information on this measure, read out article: CGT exemption for granny flats
Stapled super accounts
In a welcome change that will reduce the number of people with duplicate superannuation accounts, the Government has announced that from 1 July 2021 an employees super account will be ‘stapled’ to them when they change jobs.
In addition a YourSuper comparison tool will be developed to enable easy comparison of superannuation funds based on fees and performance and poor performing funds will have to notify members of their poor performance.
More on this measure can be found in the following article: Stapled super accounts to become default
Summary of 2020-21 Budget measures
In a welcome change that will reduce the number of people with duplicate superannuation accounts, the Government has announced that from 1 July 2021 an employees super account will be ‘stapled’ to them when they change jobs.
In addition a YourSuper comparison tool will be developed to enable easy comparison of superannuation funds based on fees and performance and poor performing funds will have to notify members of their poor performance.
More on this measure can be found in the following article: Stapled super accounts to become default
The 2020-21 Budget is very much a business friendly budget designed to encourage business confidence and investment to create jobs. A budget deficient of $213.7 billion or 11% of GDP is expected this financial year and total Government debt will exceed $1 trillion dollars. Fortunately for the Government the cost of servicing this debt is at historically low levels.
If you have any questions or would like further information on any of these measures and how they may benefit you or your business, please get in touch.
Elderly Australians and their families will benefit from a new capital gains tax – CGT exemption for granny flats, under changes to be included in today’s federal budget.
Treasurer Josh Frydenberg and Housing Minister Michael Sukkar have announced plans to either waive or reduce the CGT currently paid on value added to a home by building a granny flat, but only where a formal written agreement is in place between the occupant of the flat and the owner of the main home.
CGT exemption for granny flats
The government expects that about 3.9 million pensioners and 4 million Australians with a disability will become eligible for the new CGT exemption for granny flats.
The rules, which are set to apply from July 1, 2021, and are subject to legislation passing Parliament, will cover agreements entered into because of family relationships or other personal ties. Commercial rental arrangements are excluded.
Does CGT currently apply to granny flats?
Under current tax laws, a homeowner may have to pay CGT where there is an agreement for a family member to reside in their home, such as when an older parent lives with a child, either in the same home or a separate building such as a granny flat.
The tax consequences have been a deterrent to some families establishing a formal and legally enforceable agreement, leaving no protection for the elderly if a relationship breakdown takes place.
Interests in granny flats can affect social security entitlements, so those entering into accommodation arrangements are encouraged to document them fully in writing.
Benefits of the CGT exemption
The budget move is designed to address the tax consequences, which the government believes can be an impediment to families creating formal and legally enforceable granny flat arrangements.
‘‘When faced with a potentially significant CGT liability, families may opt for informal arrangements which can leave open the risk of financial abuse and exploitation, for example following a family or relationship breakdown,’’ Mr Frydenberg said in his press release.
‘‘Under the measure, CGT will not apply to the creation, variation or termination of a formal written granny flat arrangement providing accommodation for older Australians or people with disabilities.’’
It stems from moves to simplify granny flat taxation arrangements, as recommended by a 2019 Board of Taxation report, and amid efforts to end elder abuse and financial crimes targeting older people.
What the experts say
Tax Institute senior advocate Robyn Jacobson said the announcement of the CGT exemption for granny flats was welcome after years of concern and uncertainty for taxpayers.
‘‘It is a shame the changes won’t be given immediate effect from today, as this would provide peace of mind to older Australians and those living with a disability. It would also relieve their adult child of adverse tax consequences,’’ she said.
But Ms Jacobson said only one of two CGT issues was being addressed and she questioned whether the legislation would preserve the main residence exemption in CGT rules. ‘‘One hopes the exemption will be broad enough to cover all of the various arrangements that apply to granny flats because not all are straightforward,’’ she said. ‘‘Some are paid upfront, some are paid over time, some are paid for later once the older parent receives funds such as an inheritance.’’
Tax and Super Australia tax counsel John Jeffreys said the exemption would be popular. ‘‘Granny flats enable a family to care for an older or disabled family members. Yet building this second dwelling usually increases the overall value of the family’s home and … the family then has CGT on this gain if they later sell their home,’’ he said.
CGT exemption for granny flats information
If you need clarification or assistance with the CGT exemption for granny flats, please contact one of our tax accountants.
Quill Group is extremely proud to announce that Rachel Hunter has been has been named as a finalist in the 2020 Women in Finance Awards in the Accountant of the Year category.
The Accountant of the Year award category recognises the accountant who has most effectively shaped their business’s performance and delivered value to their organisation.
About the Women in Finance Awards
The Women in Finance Awards showcases the industry’s most prestigious accolades recognising excellence across the entire financial services industry. The awards pinpoint professional development and innovation, showcasing the female individuals leading the way in the industry.
Award recipients represent a true cross section of the financial services industry, recognising the contributions of the profession’s most senior ranks through to its rising stars.
The finalist list, which was announced over several weeks beginning on 3 August 2020, features over 240 high-achieving professionals across 28 submission-based categories. To be eligible for an awards a nomination must be received, then the individual nominated must complete a detailed submission answering all key criteria items.
“This year’s Women in Finance Awards is our biggest yet, with new categories introduced to capture a wider demographic of outstanding female talent,” said Emma Ryan, deputy head of content at Momentum Media.
“The event represents a fantastic opportunity to shine a spotlight on those going above and beyond for their respective organisations, all while breaking down barriers and cementing themselves as among the top professionals across Australia.”
About Rachel Hunter
For those of you fortunate to have worked with Rachel Hunter, this nomination will come as no surprise. Rachel goes above and beyond for her clients every day and has received an average feedback score of 9.7/10 with feedback like the following coming through regularly:
“I must say the service and communication by Rachel Hunter has been exceptional. We have only been a customer for a little over 12 months but advice Rachel has provided has been treated with the utmost urgency. I feel our business relationship has been very personal in this short time period which I am appreciative of. I would highly recommend Rachel and Quill Group to anyone seeking not only great professional advice but someone who takes a vested interest in your business and it’s success. I truly wish we would have met Rachel years ago.
Thank you Rachel.”
– Chris G. (Business Owner Gold Coast)
Rachel’s Qualifications and Experience
- Position: Relationship Manager / Associate Director
- Current Practice Areas: Tax, Business Consulting
- Qualifications: Bachelor of Business (Accounting) – Griffith University Gold Coast
- Post-Graduate Qualifications: CPA Australia
- Year Entered Industry: 1998
- Personal Mantra: Aim for the stars and if you hit the clouds, you have still reached the sky.
- LinkedIn: linkedin.com/in/rachhunter/
The winners of the awards will be announced via a virtual event on Thursday 10th of September 2020. We wish Rachel all the best!
To speak to Rachel Hunter and learn more about how she and the Quill Group team can assist you and your business, please get in touch.
The Government has passed new laws that will require all current and new company directors will to verify their identity and get a Director Identification Number (DIN) for life under new anti-phoenixing laws. The DIN will act as a unique identifier that will be kept permanently even if the individual ceases to be a director.
“Mega-Registry” to be created for business
The new director identification number system is expected to begin in the first half of 2021, once the application system has been developed and deployed. A “mega-registry” will also be created from 32 different corporate and business registries as part of a program to simplify and streamline business reporting and licensing.
The program will consolidate 31 ASIC business registers including the Companies Register, with approximately 2.6 million registered companies, and the Australian Business Register, with approximately 7.9 million active ABNs.
The Australian Taxation Office will be the operator of the new super registry which will provide a powerful foundation to both manage fraud and to build regulatory functions.
The aim is to also link the new super registry into private business systems to automate compliance and other requirements.
The ATO allows private accounting systems to integrate with its single touch payroll reporting system, creating a powerful platform of services and applications.
The ATO will also manage the administrative data associated with the registries. Near real-time ATO payroll data has been used during the pandemic to better understand the impact of business closures.
The passage of the business registration bill (Treasure Laws Amendment [Registries Modernisation and Other Measures] Bill 2019 through Parliament late last week comes as the Deregulation Task Force reviews electronic communications laws.
The aim is to enable businesses to lawfully transact with government and each other using digital communications and applications, including block chain and other technologies.
Assistant Minister to the Prime Minister Ben Morton is leading the government’s deregulation program.
He announced Treasury will be working with the states to simplify occupational licensing and promote national recognition of qualifications.
“Twenty per cent of workers in the economy are required to be licensed or registered, while there are in excess of 800 licences in manual trades across states and territories,” Mr Morton said.
Transition period for directors to verify for director identification number (DIN)
Under the transition rules for the new director identity system, for the first 12 months of the system new directors will have 28 days to verify themselves and obtain a directors identity number. After that period, new directors will have to have a director identification number before they can be registered.
Current directors are to be given 18 months to verify their identity.
Directors currently do not have to verify identity, leading to many false names being used, such as Elvis Presley, Bob Marley and Homer Simpson.
The new directors identity number (DIN) laws follow a 2015 Productivity Commission report highlighting the practice of phoenixing. The government announced it would roll out the DIN in 2017. Phoenixing is when companies deliberately avoid paying liabilities by shutting down an indebted company and transferring assets to another company.
This hurts trade creditors, employees and the public through lost taxes.According to the explanatory memorandum, phoenixing costs the Australian economy between $2.9 billion and $5.1 billion a year.
The DIN is a unique identifier that a director will keep forever, enabling regulators to better track directors of failed companies who use fictitious identities.
Director Identification Number Frequently Asked Questions (FAQs)
The following are common questions regarding director identification numbers (DIN):
What documents are required when applying for a DIN number?
Although not specifically mentioned in the Explanatory Memorandum, it’s likely that the document requirements will be similar to that of the existing and commonly used 100 point identification system, where primary and secondary documents such as driver’s licence, passport, birth certificate and medicare card are used to verify a directors identity.
It’s also possibly the Registrar will leverage the existing myGovID system to in regards of the documents required for a new or existing director to obtain a director identification number.
How can you apply for a Director Identification Number (DIN) online?
At this stage it’s unknown how the application process will work for a DIN, however it will likely be online either via MyGov and will likely leverage the existing MyGovID system.
More detailed questions and answers will be available when the new registration system for DINs is up and running. If you have any specific questions on how the director identification number system may impact you, please contact us.
Each financial year ASIC indexes the fees applicable to register a company as well as the annual review fees to key a company registered. The ASIC fee increases 2020 are as follows:
ASIC fee increases 2020 – company registration fees
The following fees apply from 1 July 2020:
| Company Registration Fees | Current Fee | From 1 July 2020 |
| Application for registration as an Australian Company (proprietary company that has share capital) | $495 | $506 |
ASIC annual review fees 2020
From 1 July 2020, the annual review fee for an existing company upon the anniversary of their incorporation (or date of registration) is as follows:
| Company Registered As | Current Fee | From 1 July 2020 |
| A proprietary company (except a special purpose company) | $267 | $273 |
| A special purpose company (proprietary)* | $54 | $55 |
*This fee applies for a special purpose SMSF trustee company.
Upfront annual review fees 2020 – 10 year pre-payment
A company or registered scheme may elect to pay the fee specified above as an upfront or advance payment for fees in relation to review dates for a period of 10 years. The ASIC fee increases 2020for upfront annual review fees are as follows:
| Company Registered As | Current Fee | From 1 July 2020 |
| A proprietary company (except a special purpose company) | $1977 | $2020 |
| A special purpose company (proprietary)* | $375 | $383 |
*This fee applies for a special purpose SMSF trustee company.
Fees for commonly lodged documents – ASIC fee increases 2020
For a full list of ASIC fees applicable from 1 July 2020, visit the ASIC website: Fees for commonly lodged documents
How Quill Group can assist with ASIC fees
Quill Group are ASIC Registered Agents and acts as intermediaries between officeholders of companies (director / business owners) and ASIC to help companies meet their lodgement obligations more efficiently.
Officeholders of an Australian company are ultimately responsible for the companies compliance the benefits of Quill Group as the Registered Agent is we handle a large volume of companies and are very familiar with the requirements companies need to meet under the Corporations Act 2001 (the Act).
Specifically, Quill provides the following as part of our Registered Agent service:
- Electronic receipt and download of Annual Company Statement from ASIC and reviewing and liaising with company director to ensure all details are accurate and fees are paid on time to avoid ASIC late fines and penalties;
- Ensure ASIC requirements are met in terms of reporting time frames;
- Lodgement of ASIC forms online;
- Protection against unauthorised and fraudulent changes to your company details;
- Option for Quill Group to act as the Company Registered Office of the company and physically hold the company register;
You can read more about our registered agent service here: ASIC Registered Agent and Registered Office
Quill Group is extremely proud to announce that Rachel Hunter has been has been named as a finalist in the 2020 Australian Accounting Awards in the Public Accountant category.
The Australian Accounting Awards showcase the industry’s most prestigious accolades recognising excellence across the entire accounting industry. The awards pinpoint professional development and innovation, showcasing both the individuals and firms which are leading the way in the industry.
Award recipients represent a true cross section of the accounting industry, recognising the contributions of the profession’s most senior ranks through to its rising stars.
According to Accountants Daily, this year’s finalists for the Public Accountant of the Year have demonstrated an outstanding approach to tax and compliance, while working towards the financial and lifestyle goals of their clients. These finalists were commended for their ongoing education and training to deliver the best services for their client base.
For those of you fortunate to have worked with Rachel Hunter, this nomination will come as no surprise. Rachel goes above and beyond for her clients every day and has received an average feedback score of 9.5/10 with feedback like the following coming through regularly:
“I must say the service and communication by Rachel Hunter has been exceptional. We have only been a customer for a little over 12 months but advice Rachel has provided has been treated with the utmost urgency. I feel our business relationship has been very personal in this short time period which I am appreciative of. I would highly recommend Rachel and Quill Group to anyone seeking not only great professional advice but someone who takes a vested interest in your business and it’s success. I truly wish we would have met Rachel years ago.
Thank you Rachel.”
– Chris G. (Business Owner Gold Coast)
More About Rachel Hunter
- Position: Relationship Manager / Associate Director
- Current Practice Areas: Tax, Business Consulting
- Qualifications: Bachelor of Business (Accounting) – Griffith University Gold Coast
- Post-Graduate Qualifications: CPA Australia
- Year Entered Industry: 1998
- Personal Mantra: Aim for the stars and if you hit the clouds, you have still reached the sky.
- LinkedIn: linkedin.com/in/rachhunter/
The winners of the awards will be announced via a live broadcast on Friday the 19th of June. We wish Rachel all the best!
To speak to Rachel Hunter and learn more about how she and the Quill Group team can assist you and your business, please get in touch.
The laws setting out the Federal Government’s response to Coronavirus were introduced into Parliament on 23 March 2020, the bill has now been passed by both just awaiting royal assent, with one measure being the cash flow boost for eligible employers who may receive up to $100,000 tax-free.
Am I eligible for the cash flow boost?
A business (including a charity or not-for-profit) will be eligible for the cash flow boost if it meets the following conditions.
- The business must make a payment that is subject to the withholding tax provisions – the most common example will be payments of salary or wages.
- The business must be one of the following:
(a) a small business entity – which generally means carrying on business in the relevant income year and with an aggregated turnover of less than $10 million
(b) a medium business entity – which generally means carrying on business in the relevant income year and with aggregated turnover of less than $50 million
(c) a charity or other not-for-profit entity of an equivalent size. The legislation tests turnover for the most recent income year that the business has received an income tax notice of assessment.
If this is not possible, which may be relevant for charities and other entities that are exempt from income tax, the alternative is for the Commissioner to be satisfied that there is a reasonable possibility the business will meet the criteria for the relevant income year (either the 2020 income year or the 2021 income year). - The business must have notified the Commissioner of the payment that was subject to withholding tax in the approved form. This will usually be done by lodging the relevant Business Activity Statement (BAS).
- The payment must relate to either:
(a) for monthly withholders – the months of March 2020, April 2020, May 2020 or June 2020
(b) for quarterly withholders – the quarters ending March 2020 or June 2020. - The business must have held an ABN on 12 March 2020. This is not relevant for charities.
- The business must have either:
(a) derived assessable income from carrying on a business in the 2019 income year
(b) made supplies in the course of carrying on its enterprise within Australia after 1 July 2018 and before 12 March 2020.
What if the business has not historically paid salary or wages?
We have received good questions about helping clients access the boosts – in some cases where the client has not made payments subject to withholding. This may be because the owners have historically taken dividends or drawings.
The legislation contains integrity rules that prevent businesses from trying to manoeuvre into the eligibility conditions.
One condition for getting the boosts is that the client (and their agents and associates) did not enter into an arrangement for the sole or dominant purpose of getting the boosts, or getting increased boosts.
We will update this article if we receive any guidance as to whether switching from drawings/ dividends to salary, for example, when all of the other conditions are satisfied, will trigger the anti-avoidance provisions.
What do I have to do to get the cash flow boost?
Businesses will need to lodge their BASs showing the payments that are subject to withholding.
If the business is a charity or not-for-profit with no income tax notices of assessment, it will need to notify the Commissioner that it should satisfy the small to medium business entity requirement.
How much are the cash flow boosts?
There are two cash flow boosts. The minimum amount for each cash flow boost is $10,000 – so $20,000 in total. The maximum cap for each cash flow boost is $50,000 – so $100,000 in total.
Subject to the minimum amount and maximum cap, the cash flow boost is 100% of the amount that has been withheld for the period.
However, if the payment is for the month (not quarter) of March 2020, the cash flow boost is 300% of the amount that has been withheld. This means there is no difference between monthly and quarterly reporting.
How do I get the first cash flow boost?
The tax-free payment will broadly be calculated and paid by the ATO as an automatic credit to an employer, upon the lodgment of activity statements from 28 April 2020, with any resulting refund being paid to the employer. This means that:
- – quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020; and
- – monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgments. However, the payment for the March 2020 activity statement will be calculated as being three times the actual amount withheld.
Note that, the minimum payment of $10,000 will be applied to an entity’s first activity statement lodgment (whether for the month of March or the March quarter) from 28 April 2020.
How do I get the second cash flow boost?
The second cash flow boost is the same amount as the first cash flow boost. There are further eligibility conditions, but most will be satisfied if the business remains in business.
For employers that continue to be active, an additional (tax-free) payment will be available in respect of the June to October 2020 period, basically as follows:
- – Quarterly lodgers will be eligible to receive the additional payment for the quarters ending June 2020 and September 2020, with each payment being equal to 50% of their total initial (or Stage 1) payment (up to a maximum of $50,000).
- – Monthly lodgers will be eligible to receive the additional payment for the June 2020, July 2020, August 2020 and September 2020 activity statement lodgements, with each additional payment being equal to a 25% of their total initial (or Stage 1) payment (up to a maximum of $50,000).
The ATO will automatically calculate and pay the additional (tax-free) payment as a credit to an employer upon the lodgement of their activity statements from July 2020, with any resulting refund being paid to the employer.
If you have any questions, please contact a member of our team to discuss.
See more on the ATO Website here regarding boosting cash flow for businesses.
See the latest updates on COVID-19 and how it may affect you here.
The Government yesterday released a second, far reaching $66.1 bn stimulus package that boosts income support payments, introduces targeted changes to the superannuation rules, provides cash flow support of up to $100,000 for small business employers, and relaxes corporate insolvency laws.
The Prime Minister has warned that there are no “quick solutions” and that business should prepare for 6 months of disruption.
In Summary
Business
- – Tax-free payments up to $100,000 for small business and not-for-profit employers. An increase in the previously announced initial tax-free payments for employers to a maximum of $50,000. In addition to this, a second round of payments will be made up to a maximum of $50,000, accessible from July 2020.
- – Solvency safety net – temporary 6 month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000, and an increase in the time companies have to respond from 21 days to 6 months. Directors also are provided with temporary relief from personal liability for trading while insolvent for 6 months.
- – Access to working capital – Introduction of a Coronavirus SME guarantee scheme protecting financial institutions by guaranteeing 50% of new loans to SMEs.
- – Sole traders and self-employed eligible for Jobseeker payment – the eligibility criteria to access income support relaxed for the self-employed and sole traders.
- – Temporary relief from some Corporations Act requirements
Individuals
- – Early release of superannuation – individuals in financial distress able to access up to $10,000 of their superannuation in 2019-20, and a further $10,000 in 2020-21. The withdrawals will be tax-free and will not affect Centrelink or Veterans’ Affairs payments.
- – Temporary reduction in minimum superannuation draw down rates – superannuation minimum drawdown requirements for account based pensions and similar products reduced by 50% in 2019-20 and 2020-21.
- – Deeming rates reduced – from 1 May, superannuation deeming rates reduced further to a lower rate of 0.25% and upper rate of 2.25%.
- – Supplements increased, access extended and eased – for 6 months from 27 April 2020:
- – A temporary coronavirus supplement of $550 will be paid to existing income support recipients (people will receive their normal payment plus $550 each fortnight for 6 months).
- – A second one-off stimulus payment of $750 will be paid automatically from 13 June 2020 to certain income support recipients (in addition to the payment made from 31 March 2020).
- – Eligibility for access to income support eased to include sole traders and the self-employed, and to those caring for someone infected or in isolation.
- – Waiting periods and assets tests temporarily waived.
- – Bankruptcy safety net – temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor from $5,000 to $20,000.
The Government has flagged that additional stimulus packages will be required.
In detail
Support for business
Tax-free payments up to $100,000 for employers
- – From: 28 April 2020
- – Eligibility: Small and medium business entity employers and not-for-profit entities, with an aggregated annual turnover under $50 million.
The Government has increased the previously announced measures to provide cash flow support to business.
Now, eligible businesses with a turnover of less than $50 million will initially be able to access tax-free cash flow support, with the minimum amount being increased to $10,000 and the maximum amount increased to $50,000 (previously $2,000 to $25,000). However, additional support will be provided in the July – October 2020 period so that eligible entities will receive total minimum support of $20,000 and up to $100,000.
In order for a business to qualify for this support it must have been established prior to 12 March 2020. The rules are more flexible for charities because the Government recognises that new charities might be established in response to the pandemic.
The cash flow support measures will be provided in the form of a credit in the activity statement system. The support will be provided in two phases.
- – The first phase ensures that eligible employers receive a credit equal to 100% of the PAYG amounts withheld from salary and wages paid to employees during the relevant period, up to the maximum amount of $50,000.
- – The second phase ensures that eligible employers receive another series of credits, equal to the credits that were received under the first phase. For example, if a business received $40,000 of credits in the first phase it will receive a further $40,000 of credits in the second phase. These additional credits will be spread over two or four activity statement periods, depending on whether the employer lodges on a quarterly or monthly basis.
If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $10,000 will be made in the first phase and a further payment of $10,000 will be made in the second phase.
The credits are automatically calculated by the ATO and employers will need to lodge an activity statement to trigger the entitlement. If the credit puts the business in a refund position the excess amount will be refunded by the ATO within 14 days.
Businesses that lodge activity statements on a quarterly basis will be eligible to receive credits in the first phase for the quarters ending March 2020 and June 2020. Credits in the second phase will be available for the quarters ending June 2020 and September 2020. The minimum $10,000 payment will be applied to the first lodgement.
Business that lodge on a monthly basis will be eligible for the credits in the first phase for the March 2020, April 2020, May 2020 and June 2020 lodgements. Credits in the second phase will be available for the June 2020, July 2020, August 2020 and September lodgements. The minimum $10,000 payment will be applied to the first lodgement.
Eligibility for the measure will be based on prior year turnover. We will have to wait for the legislation for the finer details.
Not-for-profit employers, including charities, with an aggregated turnover under $50 million will also be able to access the cash flow support.
Solvency safety net
A safety net has been put in place to protect businesses in temporary financial distress as a result of the pandemic by lessening the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business. These include:
- – A temporary 6 month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000.
- – The time a company has to respond to statutory demands will increase from 21 days to 6 months.
- – For 6 months, directors will be provided with temporary relief from personal liability for trading while insolvent.
- – See also bankruptcy safety net below
It will be more important than ever for business to stay on top of their debtors.
Debts incurred will still be payable by the business. Only those debts incurred in the ordinary course of the business will be subject to the safety net measures.
Access to working capital for SMEs – supporting lenders
The Government has announced a Coronavirus SME guarantee scheme that will guarantee 50% of new loans to SMEs up to $20 billion. These loans are new short-term unsecured loans to SMEs.
SMEs with a turnover of up to $50 million will be eligible to receive these loans.
The Government will provide eligible lenders with a guarantee for loans with the following terms:
- – Maximum total size of loans of $250,000 per borrower.
- – The loans will be up to three years, with an initial six month repayment holiday.
- – The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.
Loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look through the cycle to sensibly take into account the uncertainty of the current economic conditions.
This latest measure builds on the previous initiatives to ensure small business can access capital, including:
- – An exemption to the responsible lending obligations to enable financial institutions to provide new credit, credit limit increases, and credit variations and restructures,
- – $15bn to the Australian Office of Financial Management to invest in wholesale funding markets used by small banks and non-banks to enable these lenders to support SMEs, and
- – Australian Banking Association members will defer loan repayments for 6 months for small businesses (affected small businesses will need to apply for relief).
Sole traders and self-employed eligible for Jobseeker payment
The eligibility criteria to access income support payments will be relaxed to enable the self-employed and sole traders whose income has been reduced, to access support.
More:
Temporary relief from Corporations Act requirements
The Treasurer has been given a temporary instrument-making power to amend the Corporations Act to provide relief or modifications to specific compliance obligations.
ASIC has announced measures for those companies with a 31 December financial year that need to hold their AGMs by 31 May 2020, providing a two month no action period and enabling hybrid virtual AGMs.
Individuals
Early release of superannuation
From mid-April, individuals in financial distress will be able to access up to $10,000 of their superannuation in 2019-20, and a further $10,000 in 2020-21. The withdrawals will be tax free and will not affect Centrelink or Veterans’ Affairs payments.
To be eligible to access your superannuation you need to meet the following requirements:
- – you are unemployed; or
- – you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
- – on or after 1 January 2020:
- – you were made redundant; or
- – your working hours were reduced by 20% or more; or
- – if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20% or more.
For those eligible to access their superannuation, you can apply directly to the ATO through the myGov website from mid-April.
More:
Temporary reduction in minimum superannuation draw down rates
Superannuation minimum drawdown requirements for account-based pensions and similar products will be reduced by 50% in 2019-20 and 2020-21.
| Age | Default minimum drawdown rates (%) | Reduced rates by 50 per cent for the 2019-20 and 2020-21 income years (%) |
| Under 65 | 4 | 2 |
| 65-74 | 5 | 2.5 |
| 75-79 | 6 | 3 |
| 80-84 | 7 | 3.5 |
| 85-89 | 9 | 4.5 |
| 90-94 | 11 | 5.5 |
| 95 or more | 14 | 7 |
The upper and lower social security deeming rates will be reduced further. As of 1 May 2020, the upper deeming rate will be 2.25% and the lower deeming rate 0.25%.
More: Providing support for retirees
Time limited fortnightly $550 ‘coronavirus supplement’
For the next 6 months, the Government is introducing a new Coronavirus supplement to be paid at a rate of $550 per fortnight. This supplement will be paid to both existing and new recipients in the eligible payment categories.
The payment will be made to those receiving:
- – Jobseeker payment (and those transitioning to the jobseeker payment)
- – Youth allowance jobseeker
- – Parenting payment
- – Farm household allowance
- – Special benefits recipients
In addition, eligibility to income support payments will be expanded to:
- – Permanent employees who are stood down or lose their job
- – Casual workers
- – Sole traders
- – The self-employed
- – Contract workers who meet the income test
The Government notes that these criteria could include those required to care for someone affected by the Coronavirus.
Asset testing has also been reduced and will be waived for 6 months. Income testing will still apply.
The payment is not available if you have access to any employer entitlements such as annual or sick leave or income protection insurance.
More:
Second $750 payment to households
The Government is now providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders residing in Australia (see the full list here). The payment will be exempt from taxation and will not count as income for the purposes of Social Security, Farm Household Allowance and Veteran payments.
- – Payment 1 from 31 March 2020 (previously announced on 12 March): Available to people who are eligible payment recipients and concession card holders at any time between 12 March 2020 to 13 April 2020;
- – Payment 2 from 13 July 2020: Available to people who are eligible payment recipients and concession card holders on 10 July 2020.
The payments will be made automatically to those that meet the criteria.
More:
Payments to support households
Bankruptcy safety net
A temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will increase from $5,000 to $20,000. In addition, the time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.
Where someone declares their intention to enter voluntary bankruptcy, the period of protection from unsecured creditors will be extended from 21 days to 6 months.
More:
More information:
A relief package is now available for all Queensland businesses, which means you don’t need to lodge or pay QLD payroll tax returns before 31 July 2020.
UPDATE SEPTEMBER 2020: An updated deferral schedule for the payment of payroll tax is now in place (the table below has been updated to reflect the new deferral dates).
In addition, there are Queensland payroll tax refunds available for eligible businesses for the months of July and August 2020. More information is available here: Queensland payroll tax refunds.
| Return period 2020 | Lodgement due date | Deferred payment due date |
|---|---|---|
| 2019-20 annual | 21 July 2020 | 7 October 2021 |
| July | 7 August 2020 | 14 January 2021 |
| August | 7 September 2020 | 14 January 2021 |
| September | 7 October 2020 | 7 October 2021 |
| July-September quarter | 7 October 2020 | 7 October 2021 |
| October | 9 November 2020 | 14 January 2022 |
| November | 7 December 2020 | 14 January 2022 |
| December | 14 January 2021 | 14 January 2022 |
| October-December quarter | 14 January 2021 | 14 January 2022 |
| July-December half-year | 14 January 2021 | 14 January 2022 |
During this time, you can:
- lodge returns in OSRconnect, without paying them; this may help you to keep track of your liabilities, so that you know what you need to pay by 3 August
or - continue to lodge and pay returns as usual.
If you choose to defer lodging returns, you can resume at any stage during this time.
Please click the link below to apply for QLD Payroll Tax Deferral.
NSW Payroll Tax waived until the end of the financial year
For businesses with payrolls of up to $10 million the NSW government will waive payroll tax until the end of the financial year.
We will provide more information regarding state related support packages as they come to light.
Employer obligations | Fair work
As an employer, it’s important to keep up to date with your workplace entitlements and obligations if you’re affected by the outbreak of coronavirus. There are a number of different scenarios regarding leave obligations if a team member is sick with coronavirus, required to self-isolate, working from home, school closures etc that you should be aware of. Please refer to the below link on the fair work website.
Additional Resources
- Find out about coronavirus small business support.
- Read the media release about support for businesses.
The Government has announced a $17.6 billion investment package to support the economy as we brace for the impact of the coronavirus.
The yet to be legislated four part package focuses on business investment, sustaining employers and driving cash into the economy.
For business
- Business investment
- Increase and extension of the instant asset write-off
- Accelerated depreciation deductions
- Cash flow assistance for small and medium sized business
- Tax-free payments up to $25,000 for employers
- Wage subsidy of up to 50% of an apprentice or trainee wage
- Targeted support for severely affected sectors, regions and communities
For individuals
- Household stimulus payments to drive cash into the economy
- Tax-free $750 payment to social welfare recipients
Parliament sits on 23 March. The Prime Minister has stated, “we have no plans to change the parliamentary sitting schedule.” Here’s what we know so far:
Business investment
Increase and extension of the instant asset write-off
From 12 March 2020, the instant asset write-off threshold will increase from $30,000 to $150,000, and access to the write-off will be expanded to include businesses with aggregated annual turnover of less than $500 million until 30 June 2020.
The instant asset write-off is a tax deduction that reduces the tax liability of your business. It enables your business to claim an upfront deduction for depreciating assets in the year the asset was purchased and used (or installed ready to use). For example, if your business is a base rate entity (turnover under $25m) in a company structure you will get back 27.5% in your 2019-20 company return if the company acquires an asset that is used by 30 June 2020. If your business is likely to make a tax loss for the year, then the instant asset write-off is unlikely to provide a short-term benefit to you.
This is the fourth increase or extension to the instant asset write-off and businesses will need to be wary of what they are claiming and when:
| Instant asset write-off thresholds | Small Business* | Medium business** | Large business*** |
| 1 July 2018 – 28 January 2019 | $20,000 | – | – |
| 29 January – 2 April | $25,000 | – | – |
| 2 April – 12 March 2020 | $30,000 | $30,000 | – |
| 12 March – 30 June 2020 | $150,000 | $150,000 | $150,000 |
*aggregated turnover under $10 million
**aggregated turnover under $50 million
***aggregated turnover under $500 million
Assets will need to be used or installed ready for use from when the changes were announced on 12 March 2020 until by 30 June 2020 to qualify for the higher threshold. Anything previously purchased does not qualify for the higher rate but may qualify for one of the other thresholds. Similarly, anything purchased but not installed ready for use by 30 June 2020 will not qualify.
The instant asset write-off only applies to certain depreciable assets such as a concrete tank for a builder, a tractor for a farming business, and a truck for a delivery business. You will also need ensure that there is a relationship between the asset purchased by the business and how the business generates income. You can’t for example just go and purchase multiple television sets if they have no relevance to your business.
There are some assets that don’t qualify such as horticultural plants, capital works (building construction costs etc.), assets leased to another party on a depreciating asset lease, etc.
What businesses can access the instant asset write-off
To access the instant asset write-off, your business needs to be a trading business (the entity buying the assets needs to carry on a business in its own right). It also needs to have an aggregated turnover under $500 million. Aggregated turnover is the annual turnover of the business plus the annual turnover of any “affiliates” or “connected entities”. The aggregation rules are there to prevent businesses splitting their activities to access the concessions. Another entity is connected with you if:
- You control or are controlled by that entity; or
- Both you and that entity are controlled by the same third entity.
Accelerated depreciation deductions
In addition to the increased instant asset write-off rules, accelerated depreciation deductions will apply from 12 March 2020 until 30 June 2021. This will bring forward deductions that would otherwise be claimed in later years.
Businesses with a turnover of less than $500 million will be able to deduct 50% of the cost of the asset in the year of purchase. They can also claim a further deduction in that year by applying the normal depreciation rules to the balance of the asset’s cost. This will presumably only be relevant if the business cannot already claim an immediate deduction for the full cost of the asset.
For example, let’s assume that a business purchases a new truck for $250,000 (exclusive of GST) in July 2020. In the 2021 tax return the business would claim an upfront deduction of $125,000. The business would also claim a further deduction for the depreciation that would have arisen on the balance of the cost. If the business is a small business entity and using the simplified depreciation rules, this would mean an additional deduction of $18,750 (i.e., 15% x $125,000). The total deduction in the 2021 tax return would be $143,750. Without the introduction of this investment incentive the business would have claimed a deduction of $37,500 (i.e., 15% x $250,000).
This incentive will only be available in relation to new assets that are acquired after 12 March 2020 and are first used or installed ready for use by 30 June 2021. It will not apply to second-hand assets or buildings and other capital works expenditure.
Cash flow assistance for small and medium sized business
Tax-free payments up to $25,000 for employers
Tax-free cash flow support between $2,000 and $25,000 will be available to eligible businesses with a turnover of less than $50 million that employ staff between 1 January 2020 and 30 June 2020.
This is not a direct cash payment but a credit equal to 50% of the PAYG amounts withheld from salary and wages paid to employees. The employer will need to lodge an activity statement to trigger the entitlement. If the credit puts the business in a refund position the excess amount will be refunded by the ATO within 14 days.
If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $2,000 will still be made.
Businesses that lodge activity statements on a quarterly basis will be eligible to receive the credit for the quarters ending March 2020 and June 2020. Business that lodge on a monthly basis will be eligible for the credit for the March 2020, April 2020, May 2020 and June 2020 lodgments. The minimum $2,000 payment will be applied to the first lodgement.
Eligibility for the measure will be based on prior year turnover. We will have to wait for the legislation for the finer details.
Wage subsidy of up to 50% of an apprentice or trainee wage
Eligible employers can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020. The payments are accessible to businesses with less than 20 employees. Employers will receive up to $21,000 per apprentice ($7,000 per quarter).
Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.
In order to qualify for this payment the apprentice or trainee must have been in training with the business as at 1 March 2020. Employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will also be eligible for the subsidy.
It is expected that employers will be able to register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020.
Targeted support for severely affected sectors, regions and communities
$1 billion has been committed to support sectors, regions and communities disproportionately affected by the economic impact of the coronavirus. Tourism, agriculture and education are specifically mentioned.
Initial measures include:
- Waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and Commonwealth National Parks
- Additional assistance to help businesses identify alternative export markets or supply chains
- Measures to promote domestic tourism
Further plans and measures will be developed with the affected industries and communities.
Administrative relief for certain tax obligations will also be provided, including deferred tax payments up to four months. The ATO will establish a temporary shop front in Cairns within the next few weeks to support the region’s small businesses. Other initiatives to bring support to the communities are being considered.
Household stimulus payments to drive cash into the economy
Tax-free $750 payment to social welfare recipients
A one-off, $750 cash payment will be made to pensioners, social security, veteran and other income support recipients and eligible concession card holders. Payments will be from 31 March 2020 on a progressive basis, 90% are expected to be made by mid-April.
The payment will be tax-free and will not count as income for Social Security, Farm Household Allowance and Veteran payments.
There will be one payment per eligible recipient even if they qualify in multiple ways.
Casual employees able to access the Newstart ‘sickness payment’
While not part of the stimulus package, the Prime Minister has stated that casual employees required to self-isolate or who contract the coronavirus will be eligible for a sickness payment (jobseeker payment) through Newstart. The normal waiting period for this payment will be waived.
We’ll bring you more details as soon as they become available.
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