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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.
What happened?
In a shock result, Scott Morrison and the Coalition have retained power and are likely to achieve a majority in the lower house, with five seats yet to be finalised. The Coalition achieved a 41% primary vote in an election that everyone had them losing, with Labor only achieving 33% primary vote. Queensland turned blue which caught many by surprise in light of the highly favoured state Labor government, whilst Victoria didn’t turn red enough to secure Labor victory.
How did it happen?
The analysis is ongoing, but we can point to a few pretty logical conclusions:
- Too much too soon – only a government already in power would campaign on bold and new policies, and only someone ill-advised would campaign on more than one or two major messages, but Bill Shorten and the Labor party managed to do both. We can see why these occurred given the expectation they would win big and perception that voters wanted change. However, the messaging ultimately confused voters and the big/bold new policies scared voters away. In stark contrast, Scott Morrison and the Coalition campaigned on one message (ie. “a fair go for those that have a go”) with one new policy (tax cuts for all). Simplicity clearly resonated.
- Alienation and division – too many of Labor’s policies alienated and divided larges sections of the voter base. Franking credits (retirees), negative gearing (anyone with an investment property, construction workers), climate change (higher energy prices in the near term, mining job losses), and higher wages / no corporate tax reform (less jobs). When you add all those together, it goes close to explaining the 66% of people who didn’t vote Labor. We’re not saying some of those policies don’t have long term merits or could be better represented with some adjustments, but the quantum scared plenty of voters away.
- Preference votes – this largely explains why Queensland turned blue (so close to State of Origin), with United Australia Party and Katter Party preferences going the way of the Coalition. When we look at the voter base, many Queenslanders rely on the mining sector for work and plenty of self-funded retirees south of the border move to Queensland for retirement. Labor’s climate change agenda directly impacted the Adani coal mine in northern Queensland which turned voters against them.
- Scott Morrison’s US style campaign – although many Australian’s fail to understand that our political system puts the party first not the individual (unlike US presidential campaigns), Scott Morrison very cleverly campaigned by himself and didn’t allow any of his front benchers to speak for the party during the campaign. This meant voters could get closer to him and that the messaging was very clear. When too many people at the top speak, the messaging almost always gets mixed.
- Economic backdrop – the Australian economy continues to weaken with inflation remaining weak and unemployment now starting to increase. Consumption is too low, as is wages growth, and the household budget is stretched under mortgage stress and higher household expenses (energy, private health insurance, school fees). In addition, the housing market continues to weaken affecting sentiment and the labour market. With that backdrop in mind, you have an incumbent government which earlier in the year announced a budget surplus much sooner than expected, and one campaigning on tax cuts for all, versus a challenger campaigning on plenty of change which in the short term may have led to job losses, higher energy prices, less investment in residential property, and lower ownership of franked Australian shares. We’re not saying these would’ve happened, but that’s what the electorate believed.
What does it mean?
There’s three main takeouts from the result of the weekend’s election:
- The lower house – the Coalition will lead the lower house with majority, and may even end up with a clear majority, which would allow them to appoint their own speaker whilst retaining the numbers on the floor of the house. This would give them clear passage in the lower house without having to rely on deals with the smaller parties. Some might argue that’s too much power, but it means a government can finally be decisive and not have to cut ridiculous deals that largely only advantage a tiny part of the population at the expense of the rest. The Senate is likely to remain messy, so the balancing of power remains.
- The Labor party – with Bill Shorten having stepped down as the leader of the Labor party, the party will need to appoint someone to fill the big hole left considering Labor was very united in Shorten as their leader. Whilst there are plenty of willing and qualified people to fill the role, that person’s job is made all the harder by virtue of the fact that voters made it very clear that the Labor policy agenda was wrong. The change required on the policy front is enormous, in addition to electing a leader who appeases both the right and left factions of the party.
- The RBA – their job has possibly been made somewhat easier in that they would prefer to not have to cut rates any further. It remains to be seen how supportive the Coalition’s policies will be on the economic front, but both the housing market and the share market will get a free kick out of the Coalition win, helping lift sentiment, whilst the Coalition’s majority in the lower house should also provide a much needed lift in business confidence and sentiment, which may result in greater private sector investment and less pressure on the labour market. Time will tell, however, the recent uptick in unemployment means that the RBA has seen all the pre-conditions achieved for a rate cut (low inflation, weak labour), which the market now expects in June and another one in the 2nd half of the year.
Do I need to re-think my portfolio?
The answer is broadly no, given no changes to franking credits or negative gearing. However, we’re not ones to encourage complacency, and we remain as active as ever in assessing and interpreting changes to information, whether they are Australian recession, Brexit, trade wars, etc. The main tenets remain:
- Diversification – the only free lunch
- Don’t over stretch for income or for growth – over-stretching ensures pain
- Rebalance and reassess – be willing to take advantage of opportunities, flexibility is important
Last night the Treasurer, Josh Frydenberg, handed down the Federal Budget 2019-20. Whilst some would suggest that this a typical pre-election budget, there are some significant benefits for the majority of our clients.
Forecast Surplus
The most significant announcement was that the budget is “back in the black” with a forecast surplus in the 2019/20 year of $7.1b. This is significant as it has been a long time coming and amounts to a significant interest bill reduction to be able to fund essential services, infrastructure projects and help expand the overall economy to the benefit of all.
Other significant changes in the Federal Budget
Other significant changes that will impact people, are lower tax rates, an increase in the Medicare low income threshold, and the expansion of the instant asset write off for most businesses. All of which should have a positive impact on a slowing economy and allow Australia to maintain a competitive tax position in a Global economy where countries are increasingly competing for our most talented individuals and businesses.
Professionals Tax Cuts
Australians are able to earn more and keep more of what they earn, and even professionals on higher incomes can make the most of this.
The highest tax band has been expanded to incomes over $200,000, up from those over $180,000. This means that all taxpayers on salaries between $45,0001 and $200,000 would be taxed at the lower rate of 30 per cent.
Good news for Businesses and Business Owners
The good news for businesses is that more will be eligible for an instant asset write-off on purchases valued at up to $30,000, which will also see substantial tax cuts introduced.
- Originally introduced as a temporary measure for purchases under $25,000 in value, then increased to $25,000, it has now been increased again to $30,000
- These eligibility requirements have been updated to businesses with an annual turnover of up to $50 million which enables 220,000 in addition to access the write-off
- The government also noted that it has “legislated to bring forward the increases to the unincorporated small business tax discount rate, rising from 8 per cent currently to 13 per cent in 2020–21 and to 16 per cent from 2021–22 (up to the existing cap of $1,000)
- The government said it would direct $525 million to ‘upgrade and modernise’ Vocational Education and Training (VET)
- Further resource was allocated to establishing Training Hubs to facilitate better connections between employers and school students, targeting skills shortage
Additional business incentives
In addition to the asset write-off for businesses, other incentives that are of benefit to your business include:
- The roll out of e-invoicing with the aim of reducing transaction costs by $28 billion over the next decade
- Reducing the number of BAS GST questions by education to streamline GST reporting for small businesses
- $60 million in funding for export development grants
- Reaffirmed commitment to the establishment of a $2 billion Australian Business Securitisation Fund which will focus on enhancing small businesses’ access to finance
Superannuation
Unlike many previous budgets there were fortunately not many changes to superannuation. I say fortunately as on most previous occasions there has usually been a sting in the tail. However, this time there appears to be only positive news for those 65 or 66 years of age who will no longer have to meet a work test to be able to contribute to super. Also, the spouse contribution rules will be extended to those between ages 70 to 74.
Positive news for South East Queensland
Finally, for those of us who live in the SE corner there was some very positive news on the infrastructure front. Additional funding for the M1 corridor, light rail expansion on the Gold Coast and fast rail business case for Brisbane to Gold and Sunshine Coasts.
Keep up to date
It will be interesting to see how Labour responds in coming days as it is going to be difficult to explain away the negative effects of their proposed franking credit changes, capital gains tax and negative gearing proposed changes. With an election just around the corner we will update you in coming months on how and when these changes will likely impact you should there be a change in government which the poles are currently predicting.
Quill is a team of financial specialists, working with professionals and entrepreneurs to take their financial and business growth to the next level. Get in touch with the Quill team today.
When to lodge your Business Activity Statement
When is BAS due? Knowing the key dates for lodgement is important to make sure you pay on time and avoid late lodgement penalties or general interest charges for overdue amounts. To avoid penalties, find out when BAS is due, and refer to the information found on ‘Failure to lodge on time penalty’ by the Australian Taxation Office for more. In addition to this, you can also read more about what to do if you’re lodging your BAS statement late.
There are 2 types of Activity Statements – an Instalment Activity Statement (IAS) and a Business Activity Statement (BAS).
Instalment Activity Statement (IAS)
Monthly activity statements are due for lodgement and payment on the 21st of the following month.
Business Activity Statement (BAS)
The Business Activity Statement is required to be lodged either monthly or quarterly.
Monthly reporting
The due date for your monthly BAS is the 21st day of the month following the end of the taxable period. For example, Monthly BAS’s have a due date of the 21st day following the BAS period. Please refer to the below table.
Quarterly reporting
The due date for your quarterly BAS is the 28th day following the respective BAS period. If you are using the services of a BAS or Tax Agent then you will be entitled to an extension due date of the 25th day two months following the respective BAS period.
Please refer to the tables below for more of a guideline:
Alternatively please go to the ATO website for more information on due dates for bas and bas lodgement.
We know that most employers want to do the right thing. To help you meet your obligations, we have put together this list of areas to watch out for when calculating payroll tax.
Taxable wages
Make sure you include and correctly declare your taxable wages, including:
• allowances
• remuneration
• bonuses
• salary
• commissions
• superannuation
• contractor payments
• wages (cash and non-cash)
• fringe benefits
Superannuation contributions
All superannuation contributions are taxable, including payments to non-employee directors. Make sure you include any superannuation payments paid outside your payroll system (e.g. top-up payments to a director’s superannuation fund).
Directors remuneration
Directors remuneration is taxable and may include payments to a director’s trust or incorporated entity.
Fringe benefits
Fringe benefits are taxable, calculated on the Type 1 and Type 2 aggregate amounts grossed up by the Type 2 gross-up factor.
Fringe benefits that have a nil taxable value under the Fringe Benefits Tax Assessment Act 1986 will also have a nil taxable value for payroll tax purposes.
Read the public ruling on fringe benefits {PTA003} for more information on this topic and how to apportion the Queensland component of your fringe benefits.
Contractor payments
Any payments you make to contractors, subcontractors and consultants are taxable unless they meet one of the 9 contractor exemptions. You should also consider if your contractor is a common law employee.
Use our contractor provisions interactive help to determine if your contractor payments are taxable.
Apprentices and trainees
Payments to apprentices employed under the Further Education and Training Act 2014 (FET Act) are exempt.
Payments to trainees registered under the FET Act are exempt; unless before commencing the traineeship, the trainees worked for you for 3 months or more full time or for 12 months or more part time or casually.
The exemption applies for any certificate registered under the FET Act, including certificate IV. Other rules apply for certificates II and III.
You may also be entitled to a payroll tax rebate.
Group relationships
Related businesses are treated as a group for payroll tax purposes. One business, the designated group employer (DGE), claims any deduction entitlement on behalf of the whole group. The deduction is based on the total Australian wages of all group members. All other group members pay 4.75% of all taxable wages. The DGE and all group members must lodge separate returns.
Interstate employees
Use our taxable wages interactive help to determine if you should declare your wages in Queensland or another state or territory.
See also the public ruling on payroll tax nexus provisions {PTA049}.
Allowances
Accommodation and motor vehicle allowances have an exempt rate. If an allowance paid to an employee exceeds the exempt rate, the excess amount is taxable.
To claim a motor vehicle allowance exemption, records must be kept to prove business kilometres.
Talk to Quill Group Today
Get in touch with us today to find out how we can assist you in navigating your payroll taxation for your business. We’re a team of over 60 specialists, here and ready to help you with your specific business needs.
The responsibilities associated with successfully running a business have never been more extensive or stringent than today. One area which is often put to the ‘back of the pack’ for most is their Business Activity Statement (BAS) and Taxation obligations. However, the ATO do not subscribe to this notion and have prioritised increasing their effectiveness at regulating these lodgements. They have frequently enhanced their penalty system under the Crimes Amendment (Penalty Unit) Bill and from December 2012 these units have increased astronomically by 91%. Therefore, it is more important than ever to make sure you have all your BAS reporting and Tax affairs in order. However, if you have submitted a late BAS statement, here’s what to do.
ATO DUE DATES
Income Tax Returns
Tax return for all individuals and trusts where one or more prior year tax returns were outstanding as at 30 June 2019. Tax return for clients prosecuted for non-lodgment of prior year tax returns and advised of a lodgment due date of 31 October 2019.
Click here to see further information about individuals and trust return due dates in 2019 and 2020.
Business Activity Statements (BAS’s)
Click here for our latest information regarding Business Activity Statements.
Quarterly BAS’s are due for lodgement the 28th day following the respective BAS period (e.g. March 2018 Quarter BAS’s are due 28 April 2018). However, if lodged through a BAS agent you will be granted an extended due date of the 25th day two months following the respective BAS period (e.g. March 2018 Quarter BAS’s are due 26 May 2018). Businesses lodging Monthly BAS’s have a due date of 21st day following the BAS period and do not receive the extended due date concessions afforded to Quarterly lodgers. If you are currently lodging BAS’s on a monthly-basis and wish to change to quarterly reporting for the convenience and extended lodgement periods, you must have sales turnover less than 20 million and contact the ATO to make the switch as long as they haven’t previously determined you must lodge monthly for other reasons.
PENALTIES AND GENERAL INTEREST CHARGES
If any of the above mentioned due dates are breached, you may be subject to the ATO’s penalty system for which they issue Penalty Units (currently $210 per unit) depending on the infraction and period outstanding. ‘Failure to lodge’ penalties are calculated based on the size of the entity and each 28-day period the tax return or BAS statement is overdue. ‘Small Entities’ which have a turnover of less than 1 million are issued one penalty unit per period overdue which is capped at a maximum of five penalty units being $1,050. ‘Medium Entities’ which have a turnover of 1 million and below $20 million or have PAYG withheld amounts totalling between $25,001 and 1 million in a previous year (medium withholders) are issued two penalty units per periods overdue. ‘Large Entities’ with a turnover of 20 million and above or PAYG withheld amounts totalling 1 million in a previous year (large withholders) are issued five penalty units per periods overdue. In addition to this the ATO applies a general interest charge (GIC) for any unpaid tax liability or BAS statements from the date it was due to be paid until which time the amount in question is settled (including the associated penalties and interest charges).
YOU’RE LATE – WHAT TO DO NOW?
The ATO generally does not apply penalties in isolated cases of late lodgement where an entity has maintained a good lodgement history. Also, if you were subject to extenuating circumstances impacting your ability to lodge (i.e. natural disaster or serious illness) you can apply to have the penalty and interest charges remitted. If neither of the above applies then you will need to lodge and pay your Income Tax Return or BAS Statement (including any penalty and interest) as quickly as possible. If you are unable to make immediate payment then it is in your best interests to enter into a payment arrangement with the ATO which can avoid or reduce your penalty consequences, however general interest charges will still be applied.
If you’d like to make an appointment to speak to one of our accountants, get in touch.
Have you ever run into a speed bump when tackling a tough task that at first seems impossible to solve but after dropping and revisiting it with ‘fresh eyes’, realise the answer is simple and right in front of you? Fundamentally this is what an Advisory Board can offer in the modern-day business world, a ‘fresh-eyed approach’ to your business operations. A well-structured advisory board can not only bring a much needed outside perspective, but also critical advice and networking opportunities to complement your existing skills and assist in achieving business goals.
What is an advisory board?
An advisory board is essentially a group of people carefully selected by an entrepreneur with the sole intent of providing non-binding strategic advice and support to the businesses’ many stakeholders (owners, shareholders or directors etc). When compared to the traditional ‘Board of Directors’ arrangement, it provides entrepreneurs with a safe haven to express their thoughts as it is structured to be informal and flexible. While they may not make decisions for the business, they are still legally required to fulfil their obligations with care and due diligence.
What services can an advisory board provide?
Every business’s journey is unique, this means their expectations in respect to an advisory board must be handled differently and be specifically tailored to the business needs. A few general examples of where an advisory board can assist a business include:
- Requiring additional funds to be raised
- Where rapid growth has occurred
- Wanting to access a larger network or establish strategic partnerships
- Major changes in mission statement, core values or strategic direction
- Smoothing the transition between different business cycles
- Manoeuvring through complex succession issues
- Enhancing market reputation and creditability
- Implementing a better business culture
- Generating new business ideas or identification of overlooked issues
What is the selection process of an advisory board?
The selection process of your advisory board must be handled with great care. A business should evaluate itself honestly and identify what areas of the business are strengths and weaknesses and determine how best utilisation of external support can supplement or complement existing skills. Common areas for business skill gaps include strategy, legal, taxation, finance, technology, marketing and human resources. Advisory board members are usually compensated with a daily fee for each meeting, however if more is required than these occasional meetings a periodic retainer can be negotiated. In high profile arrangements company equity is also another option, usually being 0.25% (but can vary 0.10% to 2%) depending on the value of the advisor, time commitment to the role and length of the contract.
In today’s global economy and rapid progressing technology front, advisory boards are being mass adopted for their unparalleled flexibility and wide-spread application to all business’s regardless of size, industry or lifecycle stage.
How can we help?
Quill is the largest multi-disciplined financial services practice on the Gold Coast, with an extension office in Brisbane. We provide a high touch personalised service delivered with competence, confidence and amazing results.
At Quill we are passionate advocates for our clients, and our team focus is always to provide an amazing experience, not just great service.
To ensure your business is receiving the service it requires, talk to Quill today to find out what we can do for you. Get in touch with us here.
“We now hold our Board meetings at their office and they have become an integral part of those meetings. All reports for the Board are prepared and distributed in a timely manner. We have no hesitation in recommending the Quill Group to anyone looking for professional accounting services at a fair and reasonable rate.”
– Ian Overett
The Government introduced Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 into Parliament on 28 March 2018 which affects employer superannuation contributions. This Bill introduces very serious consequences for employers who break the law by short changing their employees. The ATO will have access to new enforcement and collection provisions, including strengthened arrangements for director penalty notices. Some of the proposed amendments are to:
- enable the Commissioner of Taxation to issue directions to employers to pay unpaid superannuation guarantee
- undertake superannuation guarantee education courses
- to disclose more information about superannuation guarantee non-compliance to affected employees;
- extend Single Touch Payroll reporting to all employers;
- require more regular reporting by superannuation funds
- strengthen the commissioner’s ability to collect superannuation guarantee charge and pay as you go withholding liabilities
As an employer, specifically as a Director of a company where employer superannuation contributions and obligations have not been met, you may find yourself personally liable for unpaid superannuation. This is because Director penalties can apply to Directors of companies where the company does not meet its Superannuation Guarantee Charge (SGC) obligations.
Proposed Superannuation Guarantee Amnesty
The Government introduced Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2018. The Bill makes numerous amendments to superannuation and related tax laws, including to encourage the recovery of unpaid Superannuation Guarantee (SG) by introducing a temporary amnesty from late payment penalties for employers who disclose that they have underpaid SG in the past.
It is estimated that in 2014-15, around 2.85 billion in SG payments went unpaid. Of particular concern is that this estimate only relates to one income year!
The Bill complements measures proposed in Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 into Parliament on 28 March that seeks to strengthen the penalty regime for SG non-compliance.
The Amnesty is proposed to last for 12 months, commencing on Thursday 24 May 2018 and ending on Thursday 23 May 2019.
The Amnesty applies only to disclosures of previously undeclared SG shortfall amounts that are made during the 12-month amnesty period and the disclosures relate to the quarters starting when the SG regime commenced and all subsequent quarters until and including the quarter starting on 1 January 2018 — that is, the period from 1 July 1992 to 31 March 2018. This is an astonishing 26 years.
The benefits of the Amnesty will not be available for SG non-compliance that occurs on or after 1 April 2018.
When is an employer eligible for the Amnesty?
To be eligible for the Amnesty, an employer must:
- voluntarily disclose SG shortfall amounts, relating to any period from 1 July 1992 to 31 March 2018, within the Amnesty period (24 May 2018 to 23 May 2019);
- disclose SG shortfall amounts that have not previously been disclosed;
- make the payment of the SG shortfall amount during the 12-month Amnesty period; and
- not have been previously informed that the ATO is examining (or that it intends to examine) the employer’s SG compliance for the relevant quarter.
An employer may still qualify for the Amnesty if it has previously made disclosures about an SG shortfall for a quarter but comes forward with information about additional amounts of SG shortfall for that quarter.
The benefits for employers who take part in the amnesty are:
- Administration component for SG shortfalls will be waived (currently $20 per SG statement lodged)
- the Part 7 penalty for failing to lodge an SG statement, equal to double the amount of the SGC, i.e. 200 per cent of the SGC payable will not apply
- Catch-up SG payments made between 24 May 2018 and 23 May 2019 will be tax deductible (generally, late payments of SG are not deductible for tax purposes)
The measures are aimed to incentivise employers to get up to date with their obligations and assist the Government in tackling the SG gap problem.
We are your business accounting specialists.
Get in touch with us or give our office a call on 07 5528 2000 to discuss registration in more detail. At Quill, we are passionate advocates for all of our clients and our team is focussed on providing an experience, not just great service. As the largest multi-disciplined financial services practice on the Gold Coast, we provide a high touch personalised service delivered with competence, confidence and amazing results.
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