Government proposal to modernise business communications
The Government has committed to modernising certain laws so that they are 'technology neutral', to enable easier communication between businesses, individuals and regulators.
The first phase of legislative reform will focus on key areas raised by stakeholders which are implementation-ready (ideally by the end of 2021),
including:
 expanding the range of documents that can be validly signed electronically;
 increasing the range of documents that can be sent electronically to shareholders and amending requirements to contact lost shareholders;
 improving flexibility for customers when changing address and consenting to electronic communication with credit providers;
 removing prescriptive requirements for notices to be published in newspapers, where suitable alternatives have been identified; and
 addressing provisions in Treasury legislation where only non-electronic payment options are in place.

Subsequent phases will consider reforms in additional areas that could benefit from greater technology neutrality, including communication with regulators, and product disclosure and recordkeeping requirements.

ATO "keeping JobKeeper payment fair"
The ATO is using its compliance resources to maintain the integrity of the JobKeeper measure.
While most businesses and employees have done the right thing, the ATO has identified concerning and fraudulent behaviour as well as claims by a small number of organisations and employees, and will actively pursue these claims.
Some of the concerning behaviours the ATO is currently examining include:
 businesses that have:
   – made claims for employees without a nomination notice, or have not paid
their employees the correct JobKeeper mount (before tax);
   – made claims for employees where there is no history of an employment
relationship;
   – amended their prior business activity statements to increase sales in order to meet the turnover test; or
   – recorded an unexplained decline in turnover, followed by a significant
increase; and
 individuals who have knowingly:
   – made multiple claims for themselves as employees or as 'eligible business
participants'; or
   – made claims both as an employee and an 'eligible business participant'.

The ATO encourages all JobKeeper applicants to review their applications and contact the ATO if they have made mistakes (and the ATO may not pursue repayment of an overpayment in certain circumstances, such as for honest mistakes).
If anyone is concerned that someone is doing the wrong thing in relation to the JobKeeper payment, they are encouraged to tell the ATO about it. The ATO will be examining JobKeeper Tip-Offs and contacting businesses where it has concerns and needs more information.

Independent review service for small businesses made permanent
Following a successful multi-year pilot, the ATO’s small business independent review service will be offered permanently as a dispute resolution option for eligible small businesses.
ATO Deputy Commissioner Jeremy Geale said the service is all about ensuring small businesses are given the opportunity to achieve an independent, fast, free, and fair resolution when they disagree with the ATO’s audit position:
“Independence is critical when handling a dispute, so we ensure each and every independent review is done by an officer from a different part of the
ATO who was not involved in the original audit”.
The ATO’s small business independent review service is available to eligible small businesses with an annual turnover of less than $10 million in relation to disputes about income tax, GST, excise, luxury car tax, wine equalisation tax, and fuel tax credits, and is in addition to other dispute options.
Disputes about employer obligations like superannuation and FBT are not eligible for the independent review service. 
More information about the ATO’s independent review service, including how to request a review and eligibility criteria, is available on the ATO’s website.

ATO asks businesses to check if they are still using their ABNs
The ATO has advised that, if a business hasn’t used its ABN for a while, the ATO may contact them about cancelling their ABN.
The ATO may also contact them about their ABN if their business situation has changed.
To ensure businesses don’t miss out on Government support, including during unfortunate events, it’s essential that they regularly review their ABN details and keep them up to date (or cancel their ABN if the business is no longer
operating, so that Government agencies can tailor their support to those that need it).
It’s also important to check that the business has listed the physical address of the business, as otherwise it can be difficult for emergency services and Government agencies to make contact.
A business' mailing address and physical location address can be listed separately on its ABN data, and these (and other ABN details) can be checked
and updated online at any time.

Passenger movement data matching program
The ATO will access data from the Department of Home Affairs on passenger movements during the 2016/17 to 2022/23 financial years, and match it with certain sections of ATO data holdings to identify taxpayers that can be provided with tailored information to help them meet their tax and superannuation obligations, or to ensure compliance with taxation and superannuation laws.
Data items include names, dates of birth, arrival and departure dates, passport Information, and status types (visa status, residency, lawful, Australian citizen).
The ATO estimates that records relating to approximately 670,000 individuals will be obtained each financial year.

Super contribution caps will increase from 1 July 2021
The ATO has confirmed that, from 1 July 2021, the superannuation concessional and nonconcessional contribution caps will be indexed.
The new caps for the 2021/22 year will be: 
    Concessional Cap: $27,500
    Non-Concessional cap: $110,000 (or $330,000 over 3 years)
The total superannuation balance limit that determines if an individual has a nonconcessional contributions cap of nil will also increase from $1.6 to $1.7 million, effective from 1 July 2021.

JobKeeper comes to an end
The ATO has advised that the final JobKeeper payment will be processed in April 2021. Enrolled businesses do not have to do anything when the program closes, although they will need to complete their final March monthly business declaration by 14 April 2021.
Also, once a business is no longer claiming JobKeeper Payments, it may start to be eligible to receive the JobMaker Hiring Credit for any additional employees that started employment on or after 7 October 2020.

ATO loses case on JobKeeper and backdated ABNs
On 24 March 2021, the Full Federal Court handed down its decision in a case concerned with the
requirement that an entity claiming JobKeeper must have had an ABN on 12 March 2020, or a
later time allowed by the ATO.
The Registrar of the Australian Business Register had reactivated the relevant entity's previously
cancelled ABN after 12 March 2020, but with a backdated effective date on or before 12 March 2020.
The Court held that backdating an ABN to have an effective date on or before 12 March 2020 did not
satisfy the requirement for the entity to have had an ABN on 12 March 2020.
However, the Court also held that the ATO's decision not to allow the entity a "later time" to have an ABN was a "reviewable decision", and that the Commissioner's discretion should be exercised in these circumstances (i.e., the Court held that the entity should be entitled to JobKeeper).
The Court's decision does not change the need to satisfy all of the other eligibility requirements.
Where the ATO has postponed finalising a decision regarding a taxpayer's eligibility for JobKeeper (and/or the cash flow boost) pending the Court's decision, the ATO will contact the affected taxpayer shortly to provide them with an update.

First criminal conviction for JobKeeper fraud
A person claiming to be a sole trader was convicted of three counts of making a false and misleading statement to the Commissioner of Taxation, in order to receive $6,000 in JobKeeper payments to which he was not entitled, as he was not operating a genuine business and he had already agreed to be nominated by his full-time employer for the allowance.
The ATO has a dedicated integrity strategy that supports the administration of the Government’s
stimulus packages, with robust and efficient compliance systems that make it very easy to identify fraudulent behaviour and stop it.
ATO Deputy Commissioner Will Day said “Since the first payments were made in April, the ATO has monitored every payment, every day, every month, and will continue to do so until the last payment is made."

ATO's taxable payments reporting system update
The ATO has confirmed that more than 60,000 businesses have not yet complied with lodgment
requirements under the taxable payments reporting system ('TPRS') for 2019/20.
The TPRS is a black economy measure designed to assist the ATO to identify contractors who don’t
report or under-report their income.
The ATO estimates that around 280,000 businesses need to lodge a Taxable payments annual report ('TPAR') for the 2020 financial year. Importantly, 2020 was the first year that businesses that pay contractors to provide road freight, information technology, security, investigation, or surveillance services may need to lodge a TPAR with the ATO (in addition to those businesses providing building and construction, cleaning, or courier services).
Businesses who have not yet lodged need to lodge as soon as possible to avoid penalties. ATO Assistant Commissioner Peter Holt added that some businesses may not realise they need to lodge a TPAR, but may be required to, depending on the percentage of payments received for deliveries or courier services.
“Many restaurants, cafés, grocery stores, pharmacies and retailers have started paying contractors to deliver their goods to their customers. These businesses may not have previously needed to lodge a TPAR. However, if the total payments received for these deliveries or courier services are 10% or more of the total
annual business income, you’ll need to lodge,” Mr Holt said.

FBT rates and thresholds for the 2021/22 FBT year
The ATO has updated its webpage containing the fringe benefits tax ('FBT') rates and thresholds for
the 2017/18 to 2021/22 FBT years.
Two amounts that were not previously announced for the 2021/22 FBT year are:
  the FBT record keeping exemption is $8,923 (up from $8,853 for the 2020/21 FBT year);
and
  the statutory or benchmark interest rate is 4.52% (down from 4.80% for the 2020/21 FBT year).

The ATO also separately released two taxation determinations setting out further rates and thresholds for the FBT year commencing on 1 April 2021, being:
  Motor vehicle (other than a car) — cents per kilometre rate; and
  Reasonable food and drink amounts for employees living away from home.

Please contact our office if you need more information about these rates or FBT in general.

Warning regarding new illegal retirement planning scheme
The ATO has recently identified a new scheme where SMSF trustees were informed that they could set up a new SMSF to roll-over the fund balance from the old SMSF and then liquidate their old SMSF, in an attempt to avoid paying potential tax liabilities.
The ATO warns that taking part in this arrangement and others like it can result in civil and criminal actions and could ultimately put the members' retirement savings at risk.
If a trustee of an SMSF believes they have been approached by a promoter of a retirement planning scheme, the ATO recommends they seek a second opinion from a registered tax agent or appropriately qualified financial adviser, and also report the promoter to the ATO.

New succession planning guide for family businesses
The Australian Small Business and Family Enterprise Ombudsman, in conjunction with Family Business Australia, has released a new online guide to succession planning — the “Introductory Guide to Family Business Succession Planning” — which provides a stepby- step guide to passing the family business on to
the next generation.
A recent report revealing that 54% of family businesses have no documented succession plan in place and no retirement plan for the current CEO.
The easy-to-read guide offers tips on how to handle tense conversations that can arise between family members throughout the transition phase.
The guide is free and available on both the Family Business Australia and the ASBFEO’s websites.

Changes to STP reporting
concessions from 1 July 2021 Small employers (19 or fewer employees) are currently exempt from reporting ‘closely held’ payees through Single Touch Payroll ('STP'). Also, a quarterly STP reporting option applies to
micro employers (four or fewer employees). These concessions will end on 30 June 2021.
The STP reporting changes that apply for these employers from 1 July 2021 are outlined below.
Closely held payees (small employers) 
From 1 July 2021, small employers must report payments made to closely held payees through STP using any of the options below. Other employees must continue to be reported by each pay day.
A ‘closely held payee’ is an individual who is directly related to the entity from which they receive payments. For example, this could include family members of a family business, directors or shareholders of a company and beneficiaries of a trust.
Payments to such payees can be reported via STP (from 1 July 2021) using any of the following 
options:

1. Report actual payments on or before the date of payment.
2. Report actual payments quarterly on or before the due date for the employer’s quarterly activity statements.
3. Report a reasonable estimate quarterly on or before the due date for the employer’s quarterly activity statements. Note that consequences may apply for employers that under-estimate amounts reported for closely held payees.

Small employers with only closely held payees have up until the due date of the payee’s tax return
to make a finalisation declaration. Employers will need to speak with these payees about when their
individual income tax return is due.
Micro employers
From 1 July 2021, the quarterly reporting concession will only be considered for eligible micro employers experiencing ‘exceptional circumstances’.
Common examples of when the ATO would generally consider it to be fair and reasonable to grant a deferral due to exceptional or unforeseen circumstances include natural disasters, other disasters or events, serious illness or death.
Additionally, ‘exceptional circumstances’ for access to the STP quarterly reporting concession from 1 July 2021 may include where a micro employer has:

 seasonal or intermittent workers; or
 no or unreliable internet connection.

The ATO says it will consider any other unique circumstances on a case-by-case basis. It should be noted that registered agents must apply for this concession and lodge STP reports, quarterly, on behalf of their eligible micro employer clients.
The STP reports are due the same day as the employer’s quarterly activity statements. If an employer prefers to report monthly, the STP reports must be lodged on or before the 21st day of the following month.
Finalisation declarations will need to be submitted by 14 July each year.
​
Please contact our office if you require more information or assistance with these STP reporting options.

Paper PAYG and GST quarterly instalment notices
The ATO has previously advised that it will no longer issue paper activity statements after electronic lodgment. Instead, electronic activity statements will be available for access online, three to four days after the activity statement is generated.
As part of its digital improvement program, the ATO stopped issuing paper quarterly PAYG and GST instalment notices (forms R, S & T), where taxpayers had a digital preference on ATO systems. The September 2020 notice was the last one issued to these taxpayers. 
However, the ATO has received feedback from tax professionals that issues have arisen for some of their clients as a result of this change. For example, some taxpayers who are self-lodgers rely on the receipt of the paper statements as a reminder that their instalments are due.
As an interim solution, the ATO said it will issue paper PAYG and GST quarterly instalment notices starting with the March 2021 quarterly notices.
For taxpayers impacted by this change, the ATO will work with their registered agents to take their circumstances into account. The ATO has a range of practical support options available, including lodgment deferrals and payment plans that agents can access online, on behalf of their clients.
For self-lodgers, the ATO has issued an email notification reminding them that their December 2020 PAYG and GST instalment notices are due 
for payment soon (by 2 March 2021). The ATO said it will continue to work with the tax profession to develop a digital solution for the PAYG and GST instalment notices that is workable for registered agents and their clients. 
Please contact our office if you require more information about paper PAYG or GST quarterly instalment notices.

Avoiding disqualification from SG amnesty
The superannuation guarantee (‘SG’) amnesty ended on 7 September 2020. Employers who disclosed unpaid SG amounts and qualified for the amnesty are reminded that they must either pay in full any outstanding amounts they owe, or set up a payment plan and meet each ongoing instalment amount so as to avoid being disqualified and losing the benefits of the amnesty.
The ATO will be sending employers reminders to pay disclosed amounts, if they have not previously
engaged with the ATO. Employers will have 21 days to avoid being disqualified from the amnesty.
Registered agents can assist their employer clients who qualified for the SG amnesty avoid
disqualification. In particular, if a client needs to set up a payment plan, agents can do this (online) on their behalf, if the employer:

 has an existing debit amount under $100,000 (total balance or overdue amounts);
 does not already have a payment plan for that debit amount; and  has not defaulted on a payment plan for the relevant account more than twice in the past two years. 

The ATO has advised that employers who are disqualified from the amnesty will:

 be notified in writing of the quarter they are disqualified for;
 be charged an administration component of $20 per employee for each disqualified quarter;
 have their circumstances considered when deciding a Part 7 penalty remission (this is an additional penalty of up to 200% of the unpaid SG amount that may be imposed under the SG laws); and
 be issued with a notice of amended assessment.

Employers who continue to qualify for the SG amnesty are reminded that they can only claim a tax deduction for amounts paid on or before 7 September 2020 (i.e., the amnesty end date).
Please contact our office if you require more information or would like us to set up a payment plan for SG amnesty amounts on your behalf.

New measures applying from 1 January 2021 
The Government has provided an update of a number of new measures which came into effect 
from 1 January 2021, including (among others):
 The most significant changes to Australia’s insolvency framework in 30 years, which are intended to reduce costs, cut red tape and help more small businesses recover from the pandemic. The reforms introduce a new, simplified debt restructuring process. These measures apply to incorporated businesses
with liabilities of less than $1 million — covering around 76% of businesses subject to insolvencies today, 98% of which have less than 20 employees.
 Australians will have more power to choose their own superannuation fund: ‘Your Superannuation, Your Choice’ allows around 800,000 Australians to decide where their retirement savings are invested,
representing around 40% of all employees covered by a current enterprise agreement.
 The Government’s HomeBuilder program has been extended to 31 March 2021. The scheme is expected to support the construction or major rebuild of an additional 15,000 homes.
 Major reforms to Australia’s foreign investment framework take effect, with new requirements for foreign investors.

Shortcut rate for claiming home office expenses extended
The ATO has extended (again) the ability to utilise the "shortcut rate" for claiming home office running expenses to 30 June 2021 (it previously only applied until 31 December 2020).
The ATO's guideline allows certain taxpayers to claim a fixed rate per hour (80 cents per hour) for
most additional running expenses incurred when working from home by keeping a record of the
number of hours they have worked from home, rather than needing to calculate specific running
expenses.
The expenses included in the shortcut rate include lighting, heating, cooling and cleaning costs, the
decline in value and repair of home office items (such as furniture and furnishings in the area used
for work, computers and laptops, etc.), and phone and internet expenses. However, the guideline does not cover "occupancy expenses", such as rent, mortgage interest, property insurance and land taxes.

AAT decision on JobKeeper and backdated ABNs
On 21 December 2020, the AAT handed down its decision in a case relating to a taxpayer's eligibility
for JobKeeper payments, in circumstances where the Registrar of the Australian Business Register
decided to reactivate a previously cancelled ABN after 12 March 2020, with a backdated effective
date on or before 12 March 2020. 
The AAT held that the taxpayer met the JobKeeper requirement to have an ABN on 12 March 2020. 
However, the ATO disagrees with this decision and has lodged an appeal in the Federal Court.
While the appeal outcome is pending, the ATO will postpone finalising decisions regarding an entity’s
eligibility for JobKeeper where the entity has backdated its registration in order to qualify.
The ATO is taking a similar position in regard to eligibility for the Cash Flow Boost. 

Note that the AAT's decision has not changed the need to satisfy all other eligibility conditions.

SMSF related party rental income deferrals due to COVID‑19
The ATO has made a determination to ensure that trustees of SMSFs do not inadvertently breach the
"in-house asset rules" where the fund allows a related party to defer the payment of rent under a lease agreement (on arm’s length terms) because of the financial impact of COVID‑19.
Where the requirements of the determination are met, the deferral of rent will not be treated as a
"loan" or "financial accommodation" to the related party in either or both of the 2019/20 or 2020/21
income years. 
The determination also applies where an SMSF owns interests in a "non-geared" company or unit trust that allows a tenant to defer the payment of rent under a lease (on arm’s length terms)
because of the financial impact of COVID‑19.

ATO data-matching programs
The ATO has announced it will engage in the following data-matching programs:
 it will acquire motor vehicle registry data from state and territory motor vehicle registry authorities for 2019/20 through to 2021/22, with records relating to approximately 1.5 million individuals to be obtained each financial year; and
 it will acquire data on Australian sales made through online selling platforms for the 2018/19 through to 2022/23 financial years, collecting 20,000 to 30,000 account records each financial year (with around half of the matched accounts relating to individuals).
These records will be electronically matched with ATO data holdings to identify non-compliance with
registration, lodgment, reporting and payment obligations under taxation laws.

JobMaker Hiring Credit scheme:
Claims open from 1 February 2021 The JobMaker Hiring Credit is being administered by the ATO and provides a wage subsidy payment directly to employers as an incentive to employ additional job seekers aged 16 to 35 years. Registrations for the JobMaker Hiring Credit scheme opened on 7 December 2020, and claims for the first JobMaker period can be made from 1 February 2021, provided employers are registered and meet all eligibility requirements. Employer eligibility requirements include thatapplicants:
 are up to date with their tax and GST lodgment obligations for the last 2 years;
 have not claimed JobKeeper payments for a fortnight that started during the JobMaker period; and
 are reporting through Single Touch Payroll. The ATO will be writing to employers who have registered for the JobMaker Hiring Credit from 15 January 2021, encouraging them to check that they meet all JobMaker Hiring Credit eligibility criteria before they claim, to ensure that registrants can make a claim from 1 February 2021 and there are no delays in them receiving their payments.

Cash payment limit Bill shelved
It appears that the Government has decided not to proceed with its proposal to limit cash payments
in Australia to $10,000. This measure was originally raised as part of the 2018/19 Budget, and the Government subsequently introduced a Bill to the House of Representatives, proposing to make it an offence for entities to make or accept cash payments of $10,000 or more. That Bill passed the House and was then introduced to the Senate on 11 November 2019, but proceeded no further, and the Government
withdrew the Bill from the Senate on 3 December 2020.

Improvements to be made to full expensing measure 
The government will expand eligibility for the temporary 'full expensing measure', which temporarily allows certain businesses to deduct the full cost of eligible depreciable assets in the year they are first used or installed. 
The government initially announced in the 2020/21 Budget that businesses with a turnover of up to $5 billion would be able to immediately deduct the full cost of eligible depreciable assets as long as they are first used or installed by 30 June 2022.
The government will also allow businesses to opt out of temporary full expensing and the backing business investment incentive on an asset‑by‑asset basis. This change will provide businesses with more flexibility in respect of these measures, removing a potential disincentive for them to take advantage of these incentives
(Editor: For example, where the automatic application of full expensing might cause the entity to make a loss).

JobMaker Hiring Credit passed
The government has passed legislation to establish the JobMaker Hiring Credit, which is part of the government’s economic response to the COVID-19 pandemic. 
​The JobMaker Hiring Credit is specifically
designed to encourage businesses to take on additional young employees and increase employment.
It does this by providing employers with a fixed amount of $200 per week for an eligible employee
aged 16 to 29 years and $100 per week for an eligible employee aged 30 to 35 years, paid quarterly in arrears by the ATO. 
To be eligible, the employee must have been receiving JobSeeker Payment, Youth Allowance
(Other) or Parenting Payment for at least one of the previous three months, assessed on the date of employment. Employees also need to have worked for a minimum of 20 hours per week of paid work to be eligible, averaged over a quarter, and can only be eligible with one employer at a time. 
The hiring credit is not available to an employer who does not increase their headcount and payroll. 
Employers and employees will be prohibited from entering into contrived schemes in order to gain access to or increase the amount payable. 
Existing rights and safeguards for employees under the Fair Work Act will continue to apply, including protection from unfair dismissal and the full range of general protections.

ATO Visa Data Matching Program
The ATO will acquire visa data from the Department of Home Affairs for 2020/21 through to 2022/23, relating to approximately 10 million individuals for each financial year. The data will be used to identify non-compliance with obligations under taxation and superannuation laws, including registration, lodgment, reporting and payment responsibilities.

How to avoid getting dodgy advice
The ATO is warning taxpayers who may be thinking about pausing, changing or closing their business, due to the current economic conditions, to be wary of untrustworthy advisers who may recommend inappropriate or illegal behaviour. This could include illegal phoenix activity, where businesses intentionally remove their assets prior to winding up so that they can be used in a copy of the original business.
Red flags include: 
 people the taxpayer doesn't know cold calling with advice;
 unsolicited letters, emails or phone calls after the taxpayer has been through court action with a creditor;
 advice to transfer assets to a third party without payment;
 refusal to provide advice in writing;
 advice suggesting they have a sympathetic liquidator who will protect the taxpayer's personal interests and assets;
 advice to withhold certain records from the bankruptcy trustee or liquidator, or provide incorrect information to authorities; and
 advice to deal with the liquidator or trustee on the taxpayer's behalf.
The ATO instead recommends anyone thinking of pausing, changing or closing their business to contact a qualified professional, such as an accountant, lawyer, or registered liquidator.

STP data-sharing with Services Australia
Single Touch Payroll ('STP') allows the ATO to share data in real-time with other government agencies, to "help them deliver government services to the Australian community". As part of the ATO's data-matching program, it has a STP data-sharing arrangement with Services Australia to help them administer Australia's welfare system. This means that people who are on an income support payment from Services Australia and need to report their employment income fortnightly to Centrelink will now see their employer details
are pre-filled.

Proposed FBT exemption — retraining and reskilling
The government has announced it will introduce an exemption from FBT for retraining and reskilling benefits provided by employers to redundant, or soon to be redundant, employees where the benefits may not be related to their current employment.
It is proposed that this exemption will not apply to:
 retraining provided under a salary packaging arrangement;
 training provided through Commonwealth supported places at universities; or
 repayments towards Commonwealth student loans.
If enacted, this proposed measure is intended to
apply from the day it was announced (i.e., 2 October 2020).

Getting the margin scheme right
The margin scheme may allow a property owner to pay less GST when they sell the property — paying GST of 1/11th of their margin on the sale, rather than 1/11th of the total sale price. 
If a property owner wants to use the margin scheme when selling property, they must be eligible before the property is offered for sale.
This may be where they're selling new property as part of their business and they're registered for
GST. 
Importantly, among other criteria, there must be a written agreement before settlement between the
supplier and purchaser to use the margin scheme — this could be part of the contract. 
To avoid the common errors suppliers make when selling property using the margin scheme, the ATO is reminding suppliers that they must also:
 calculate the margin correctly; and 
 report the amount of the margin on the sale on their BAS — not the full amount of payment received.
We can help determine your eligibility and also calculate the margin. 
Also remember that, when someone purchases property using the margin scheme, they:
 can't claim GST credits for the sale; and
 don't report it on their activity statement.

Tax cuts pass Parliament

Tax cuts pass Parliament The Government announced various tax measures in the 2020 Budget on 6 October 2020, and it was able to secure passage of legislation containing some of the important measures very shortly afterwards, as summarised below. 

Tax relief for individuals 

The Government brought forward 'Stage two' of their Personal Income Tax Plan by two years, so that, from 1 July 2020:
the low income tax offset increased from $445 to $700;
the top threshold of the 19% tax bracket increased from $37,000 to $45,000; and
the top threshold of the 32.5% tax bracket increased from $90,000 to $120,000. In addition, in 2020/21, low and middle-income earners will receive a one-off additional benefit of up to $1,080 from the low and middle income tax offset. Tax relief for business Businesses with a turnover of up to $5 billion are now able to immediately deduct the full cost of eligible depreciable assets as long as they are first used or installed by 30 June 2022. 

To complement this, the Government will also temporarily allow companies with a turnover of up to $5 billion to offset tax losses against previous profits on which tax has been paid. Also, businesses with an aggregated annual turnover between $10 million and $50 million will, for the first time, be able to access up to ten small business tax concessions. Under the changes passed by the Parliament, the Government will also enhance previously announced reforms to invest an additional $2 billion through the Research and Development Tax Incentive.

Employers need to apply recent tax cuts as soon as possible

The ATO has now updated the tax withholding schedules to reflect the 2020/21 income year personal tax cuts — the updated schedules are available at ato.gov.au/taxtables. The ATO has said that employers now need to make adjustments in their payroll processes and systems in order for the tax cuts to be reflected in employees’ take-home pay. Employers must make sure they are withholding the correct amount from salary or wages paid to employees for any pay runs processed in their system from no later than 16 November onwards. Employees should be aware that any withholding on the old scales will be taken into
account in their tax return.

Deferrals of interest due to COVID-19
​
Many lenders have recently allowed borrowers with investment property loans to defer repayments for a period of time. While repayments are being deferred, interest (and fees) will usually be added to the loan
balance (i.e., the deferred interest will be 'capitalised'). However, it is important to recognise in such situations that, while repayments are not being made during the relevant period, borrowers continue to ‘incur’ the interest during that time. Further, interest will continue to be calculated
and will accrue on both the unpaid principal sum of the loan and the unpaid (i.e., capitalised) interest. The interest that accrues on the unpaid or capitalised interest is referred to as ‘compound interest’. Importantly, the ATO has previously acknowledged that, if the underlying, or ordinary, interest is deductible, then the compound interest will also be deductible. Accordingly, interest expenses (including any compound interest) will generally be deductible to the extent the borrowed monies are used for income producing purposes (such as where the borrowed funds are used to purchase a rental property). However, interest on a loan will not be deductible to the extent to which the borrowed 
funds are used for private purposes (e.g., to purchase a home, a private boat, or to pay for a holiday). Note that, despite the name, "penalty interest" is not always "in the nature of interest" and, in some cases, may not be deductible (e.g., due to the expense being capital in nature).

Simplified home office expense
​
deduction claims due to COVID-19 Given that many Australians continue to work from home due to COVID-19, the ATO has updated its Practical Compliance Guideline which allows taxpayers working from home to claim a rate of 80 cents per hour, by keeping a record of the number of hours they have worked
from home, rather than needing to calculate specific running expenses. The application of the Guideline has been extended so that it now applies from 1 March 2020 until 31 December 2020. This determination is intended to be in effect until (and will be repealed from) 22 March 2021, unless the Government determines otherwise. Note that the Government has also released exposure draft legislation to make these reforms (in respect of virtual meetings and electronic document execution) permanent.

COVID-19 and loss utilisation
​
The ATO understands the way some businesses operate has been impacted as a result of COVID-19. Some of these impacts may have resulted in changes that affect whether they are able to utilise their carried-forward losses in the current or a future income year. For companies to utilise their carried-forward losses in a particular year, they need to satisfy the continuity of ownership test or, if they fail that test, they need to satisfy the business continuity test ('BCT'). Whether a company can utilise carried-forward losses requires a consideration of its facts and circumstances. Generally, a company that has completely closed its business with no intention to resume will fail the BCT. However, a company that has temporarily closed its business may still be able to satisfy the BCT. Importantly, the mere receipt of JobKeeper payments will not cause a company to fail the BCT.

Employees on JobKeeper can satisfy the ‘work test’

The Australian Prudential Regulation Authority ('APRA') has confirmed that, where an employer is receiving the JobKeeper wage subsidy for an individual, superannuation funds should consider the individual to be ‘gainfully employed’ for the purpose of the ‘work test', even if that individual has been fully stood down and is not actually performing work. As such, superannuation funds can assume that all members in receipt of the JobKeeper subsidy satisfy the ‘work test’ when determining whether they can make voluntary superannuation contributions.

We summarise the below key changes announced in the Federal Budget that was delivered on 6 October 2020.  This is for informational purposes and does not take the place of advice suited to your circumstances.   Should you require any further information or explanation please contact your accountant at SH Tait & Co.
INDIVIDUAL TAXPAYERS:

Changes to personal income tax rates

The Government has legislated to bring forward changes to the personal income tax rates that were due to apply from 1 July 2022, so that these changes now apply from 1 July 2020 (i.e., from the 2021 income year). These changes include: 

• increasing the upper threshold of the 19% personal income tax bracket from $37,000 to $45,000; and 
• increasing the upper threshold of the 32.5% personal income tax bracket from $90,000 to $120,000.

 The current and proposed tax brackets are summarised below (excludes the Medicare Levy). 

​Employers are to reduce the tax withheld from 13 October 2020.

Changes to the Low Income Tax Offset ('LITO')

The Government announced that it will also bring forward the changes that were proposed to the LITO from 1 July 2022, so that they will now apply from 1 July 2020 (i.e., from the 2021 income year), as follows:

• The maximum LITO will be increased from $445 to $700.
• The increased (maximum) LITO will be reduced at a rate of 5 cents per dollar, for taxable incomes between $37,500 and $45,000.
• The LITO will be reduced at a rate of 1.5 cents per dollar, for taxable incomes between $45,000 and $66,667.

The current and proposed LITO are summarised below:  

Note that, the Government also announced that the current Low and Middle Income Tax Offset (‘LAMITO’) would continue to apply for the 2021 income year (which is available in addition to the LITO for eligible taxpayers). For example, the maximum LAMITO of $1,080 will be available to taxpayers with taxable incomes of between $48,000 and $90,000 in the 2021 income year.  

BUSINESS TAXPAYERS:
Expanding access to Small Business Tax Concessions
The Government has announced that it will expand the concessions available to Medium Sized Entities to provide access to up to ten Small Business Concessions.   

For this purpose, a Medium Sized Entity is an entity with an aggregated annual turnover of at least $10 million and (less than) $50 million.   

The expanded concessions will apply in three phases, as follows:

1. From 1 July 2020, eligible businesses will be able to immediately deduct certain start-up expenses and certain prepaid expenditure.
2. From 1 April 2021, eligible businesses will be exempt from FBT on car parking and multiple work-related portable electronic devices, such as phones or laptops, provided to employees.
3. From 1 July 2021:
   • Eligible businesses will be able to access the simplified trading stock rules, remit pay as you go (PAYG) instalments based on GDP adjusted notional tax and settle excise duty and excise-equivalent customs duty monthly on eligible goods.
   • Eligible businesses will generally have a two-year amendment period apply to income tax assessments for income years starting from 1 July 2021.
   • The Commissioner of Taxation’s power to create a simplified accounting method determination for GST purposes will be expanded to apply to businesses below the $50 million aggregated annual turnover threshold. 

JobMaker Hiring Credit
The Government will introduce a JobMaker Hiring Credit to incentivise businesses to take on additional young job seekers.   

From 7 October 2020, eligible employers will be able to claim $200 a week for each additional eligible employee they hire aged 16 to 29 years old and $100 a week for each additional eligible employee aged 30 to 35 years old. New jobs created until 6 October 2021 will attract the credit for up to 12 months from the date the new position is created. 

The JobMaker Hiring Credit will be claimed quarterly in arrears by the employer from the ATO from 1 February 2021. Employers will need to report quarterly that they meet the eligibility criteria. 

The amount of the credit is capped at $10,400 for each additional new position created.  Furthermore, the total credit claimed by an employer cannot exceed the amount of the increase in payroll for the reporting period in question (see employer eligibility requirements below). 
Who is an eligible employee?
Employees may be employed on a permanent, casual or fixed term basis.  To be an ‘eligible employee’, the employee must:

• be aged (i.e., at the time their employment started) either:
  • 16 to 29 years old, to attract the payment of $200 per week; or
  • 30 to 35 years old to attract the payment of $100 per week;
• have worked at least 20 paid hours per week on average for the full weeks they were employed over the reporting period;
• have commenced their employment during the period from 7 October 2020 to 6 October 2021;
• have received the JobSeeker Payment, Youth Allowance (Other), or Parenting Payment for at least one month within the past three months before they were hired; and
• be in their first year of employment with this employer and must be employed for the period that the employer is claiming for them. 

Certain exclusions apply, including employees for whom the employer is also receiving a wage subsidy under another Commonwealth program.  
Who is an eligible employer?
An employer is able to access the JobMaker Hiring Credit if the employer: 

• has an ABN
• is up to date with tax lodgment obligations;
• is registered for Pay As You Go withholding;
• is reporting through Single Touch Payroll;
• is claiming in respect of an 'eligible employee'
• has kept adequate records of the paid hours worked by the employee they are claiming the hiring credit in respect of; and
• is able to demonstrate that the credit is claimed in respect of an additional job that has been created. Broadly, there must be an increase in the business’ total employee headcount and also in the payroll of the business for the reporting period (based on a comparison over a specified reference period). 

Employers do not need to satisfy a fall in turnover test to access the JobMaker Hiring Credit. Certain employers are excluded, including those who are claiming the JobKeeper payment.   New employers created after 30 September 2020 are not eligible for the first employee hired but are (potentially) eligible for the second and subsequent eligible hires. 
Uncapped immediate write-off for depreciable assets

The Government has announced it will introduce the following changes to the Capital Allowance provisions:

1. Businesses with an aggregated annual turnover of less than $5 billion will be able to claim an immediate deduction (what the Budget terms as ‘full expensing’) for the full (uncapped) cost of an eligible depreciable asset, in the year the asset is first used or is installed ready for use, where the following requirements are satisfied:
   • The asset was acquired from 7:30pm AEDT on 6 October 2020 (i.e., Budget night).
   • The asset was first used or installed ready for use by 30 June 2022.
   • The asset is a new depreciable asset or is the cost of an improvement to an existing eligible asset, unless the taxpayer qualifies as a small or medium sized business (i.e., for these purposes, a business with an aggregated annual turnover of less than $50 million), in which case the asset can be second-hand.

·  As is currently legislated, businesses with aggregated annual turnover between $50 million and $500 million can still deduct the cost of eligible second-hand assets costing less than $150,000 that are purchased from 2 April 2019 and first used or installed ready for use between 12 March 2020 and 31 December 2020 under the enhanced instant asset write-off. The Government has announced that it will extend the period in which such assets must first be used or installed ready for use by 6 months, until 30 June 2021.

1. Small businesses (i.e., 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 (i.e., up to 30 June 2022). Furthermore, 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.  

 
CORPORATE TAX PAYERS INCLUDING PTY LTD COMPANIES:

Temporary loss carry back for eligible companies

The Government has announced that it will introduce measures to allow companies with a turnover of less than $5 billion to carry back losses from the 2020, 2021 or 2022 income years to offset previously taxed profits made in or after the 2019 income year.
   
This will allow such companies to generate a refundable tax offset in the year in which the loss is made. The tax refund is 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 companies when they lodge their tax returns for the 2021 and 2022 income years. Note that, companies that do not elect to carry back losses under this measure can still carry losses forward as normal. 
The application of these new measures to our corporate business clients will be considered during tax planning work performed in April / May 2021.

OTHER BUDGET ANNOUNCEMENTS:
Supporting apprentices and trainees
The Australian Government is extending and expanding the Supporting Apprentices and Trainees wage subsidy, to include medium-sized business who had an apprentice in place on 1 July 2020.  Eligible employers can apply for a wage subsidy of 50% of an eligible apprentice or trainee’s wages paid until 31 March 2021.
·        Your small business may be eligible if:
·        you employ fewer than 20 people; or
·        you are a small business with fewer than 20 people, using a Group Training Organisation; and
·        the apprentice or trainee was undertaking an Australian Apprenticeship with you on 1 July 2020 for claims after this date. Claims prior to 1 July 2020, will continue to be based on the 1 March 2020 eligibility date.
·        Your medium-sized business may be eligible if:
·        you employ fewer than 200 people; or
·        you are a medium business with fewer than 200 people, using a Group Training Organisation; and
·        the apprentice or trainee was undertaking an Australian Apprenticeship with you on 1 July 2020.
Any employer (including all small, medium or large businesses and Group Training Organisations) who re-engages an apprentice or trainee displaced from an eligible small or medium business may also be eligible for the subsidy. Further information is available at https://www.australianapprenticeships.gov.au/search-aasn
  
Small business COVID-19 Adaption Grant Program
The objective of this program is to support small businesses subject to closure or highly impacted by the coronavirus (COVID-19) shutdown restrictions announced by the Queensland Government, to adapt and sustain their operations, and build resilience.  The first round of funding for this program is 100% subscribed, however round two is currently open specifically to regional businesses, noting that subscription is nearing capacity.  To be a 'regional business', your principal place of business must be in a local government area within Queensland that is not identified as a South East Queensland (SEQ) location.
To be eligible, your business must:

• have been subject to closure or otherwise highly impacted by current shutdown restrictions announced by Queensland's Chief Health Officer on 23 March 2020
• have experienced a minimum 30% decline since 23 March 2020, over a minimum 1-month period due to the onset and management of COVID-19
• employ staff and have fewer than 20 employees at the time of applying for the grant (employees must be on your payroll and does not include the business owner(s))
• have a valid Australian Business Number (ABN) active as at 23 March 2020
• be registered for GST
• have a Queensland headquarters
• have an annual turnover over $75,000 for the 2018–19 or 2019–20 financial year, or you can provide financial records that show this will be met for recently started small businesses
• have a payroll of less than $1.3 million
• not be insolvent or have owners or directors that are an undischarged bankrupt.

The available grant amount is a minimum of $2,000 and up to a maximum of $10,000 per eligible small or micro business.
In recognition of the significant impacts of COVID-19 on small businesses, the funding can be used towards meeting a variety of ongoing costs, including the following:

• financial, legal or other professional advice to support business sustainability and diversification
• continuing to meet business operational costs including utilities, council rates, rent, telecommunication charges, insurance fees, licensing or franchise fees
• strategic planning, financial counselling or business coaching aligned to business development and diversification
• building the business through marketing and communications activities (e.g. content development – web pages, mobile apps, visual and audio media etc.)
• digital/technological strategy development

 
Modern Manufacturing Initiative
This Modern Manufacturing Strategy (the Strategy) is led by industry, for industry, to help our manufacturers to scale-up, become more competitive and build more resilient supply chains. The Australian Government will be a strategic investor in this, in order to drive productivity and create jobs for Australians, both now and for generations to come.  Key initiatives will deliver immediate and long-term economic benefits.

• $1.3 billion Modern Manufacturing Initiative – The MMI will transform manufacturing businesses and help them to scale-up, translate ideas into commercial successes and integrate into local and international value chains.
• $107.2 million Supply Chain Resilience Initiative – The Supply Chain Resilience Initiative will help Australia address identified gaps in critical supply chains.
• $52.8 million Manufacturing Modernisation Fund round two – The Manufacturing Modernisation Fund round two will deliver quick action to unlock business investment on shovel ready projects.

 
The program is targeted at growth opportunities in the following areas:
 

• Resources Technology & Critical Minerals Processing
• Food & Beverage
• Medical Products
• Recycling & Clean Energy
• Defence
• Space  

This funding is targeted at substantially large businesses who are looking to further ‘scale up’ their operations.  More information on the funding available is at https://www.industry.gov.au/news-media/modern-manufacturing-initiative-and-national-manufacturing-priorities-announced
Insolvency reforms to support small business

The Government will implement certain insolvency reforms, effective from 1 January 2021 (subject to the passing of legislation) to support small business, including the following:   

• The introduction of a new streamlined process to enable eligible incorporated small businesses (broadly, those with liabilities of less than $1 million) in financial distress to restructure their debt.
• Simplifying the liquidation process for eligible incorporated small businesses (to allow faster and lower-cost liquidations, increasing returns for creditors and employees).
• Support for the insolvency sector (to ensure it can respond effectively to increased demand and to the needs of small business).  

Currently, the insolvency system faces a number of challenges. These include an increase in the number of businesses in financial distress due to COVID-19, a ‘one-size-fits-all’ system, and high costs and lengthy processes that can prevent distressed small businesses from engaging with the insolvency system early thereby reducing their opportunity to restructure and survive. Temporary insolvency and bankruptcy protections that were introduced in March 2020 to provide relief for businesses impacted by COVID-19 are due to expire on 31 December 2020 (e.g., under these measures, directors are temporarily relieved from personal liability for trading while insolvent). However, the number of companies being put into external administration is expected to increase significantly, putting additional stress on the system. Therefore, the above proposed reforms will help more businesses to successfully get to the other side of the crisis.  If your business is in significant financial distress, please contact our office before 31 December 2020 so that we can discuss these provisions in further detail.

Special COVID-19 Superannuation Condition of Release Extended

Regulations  that  extend  the  time  frame  of  the special  condition  of  release  to  access  
$10,000 from superannuation for individuals experiencing financial difficulties due to COVID-19 
have been formally registered.
The   ability   to   withdraw   up   to   $10,000   from superannuation (if certain conditions are 
met) was initially set to expire on 24 September 2020.
The newly registered Regulations to the SIS Act will now enable an eligible individual to withdraw 
up to $10,000 from superannuation (which is not assessable to the individual) until 31 December 
2020.
To be eligible, a citizen or permanent resident of Australia  (and  New  Zealand)  must  require  
the COVID-19 early release of super to assist them to deal with the adverse economic effects of 
COVID- 19.
In  addition,  one  of  the  following  circumstances must apply:
θ    The individual is unemployed;
θ    The individual is eligible to receive one of the following;
–      JobSeeker payment;
–      Youth Allowance for job seekers (unless they are undertaking full-time study or are a new 
apprentice);
–      Parenting payment (which includes the single and partnered payments);
–      Special Benefit; or
–      Farm Household Allowance;
θ    On or after 1 January 2020 either;
–     they were made redundant;
–     their working hours were reduced by 20% or more (including to zero); or
–     they were a sole trader and their business was suspended or there was a reduction in turnover 
of 20% or more (partners in a partnership are not eligible unless the partner satisfies any other 
eligibility criteria).


Tax treatment of JobKeeper Payments

Broadly,  JobKeeper  Payments  received  by  an employer are assessable income to the employer.
Likewise,      the      payments      an      employer subsequently  makes  to  an  employee  that  
are funded  (in  whole  or  in  part  by  the  JobKeeper Payment)  are  generally  allowable  
deductions  to the employer.
The ATO has recently issued some guidance for employers in receipt of JobKeeper Payments.
For  sole  traders,  they  will  need  to  include  the payments as business income in their 
individual tax return.
For  partnerships or  trusts, JobKeeper  payments should  be  reported  as  business  income  in  
the relevant partnership or trust tax return.
For  a  company,  report  JobKeeper  payments  as income in the company tax return.
For a taxpayer that has repaid (or is in the process of repaying) any of their JobKeeper payments 
to the  ATO,  these  amounts  do  not  need  to  be included in their tax return.

Note  a business would be  refunding JobKeeper payments to the ATO if it had been discovered that 
the business had incorrectly claimed JobKeeper payments,  and  had  either  voluntarily  disclosed 
this   to   the   ATO,   or   the   ATO   made   this determination as a result of audit activity.

The normal rules for deductibility apply in respect of   the   amounts   a   taxpayer   pays   to   
their employees,   even   where   those   amounts   are subsidised by the JobKeeper payment.
That is, if the underlying salary is deductible, then it is still deductible to the employer where 
it has been subsidised by a JobKeeper payment.
For  employees  who  have  received  JobKeeper payments,  these  will  be  included  as  salary and 
wages (or an allowance) in their income statement (or   payment   summary)   as   provided   by   
their employer.
If  you  have  any  queries  about  the  JobKeeper Payment scheme, please contact our office.


Deduction for work-related vehicle expenses disallowed

In   a   decision   of   the   Administrative   Appeals Tribunal,  a  taxpayer,  Mr  Bell,  was  a  
denied  a deduction for $21,565.73 of work-related vehicle expenses for the 2016 income year.
Mr    Bell,    was    a    construction    worker    who predominantly worked on a construction 
site in an eastern    suburb    of    Melbourne    and    lived approximately  100  kilometres  
away  from   that worksite.
Mr  Bell  owned  a  ute  that  had  a  load  carrying capacity of more than one tonne – so it fell 
outside the definition of a 'car' for the purposes of the ITAA 1997.
Mr Bell claimed a total deduction for $24,865.73 for  motor  vehicle  expenses   and  received  an 
allowance    under    his    Enterprise    Bargaining Agreement.
This  allowance  did  not  vary with  the  amount  of travel  undertaken  and  totalled  $15,221  
for  the year.
Mr Bell contended that he was required to use his vehicle  to  transport  heavy/bulky  goods  
(tools) between  his  home  and  his  workplace  and  to collect  supplies  and  equipment  from  
hardware stores while travelling between his workplace and his home.
Ordinarily,  travel  from  home-to-work  (and  back again) is considered non-deductible.  However, 
if an employee is required to carry heavy/bulky
equipment   for   which   there   are   no   secure storage  facilities  at  work,  the  travel  
between home and work  with the heavy/bulky equipment can be considered deductible.
Unfortunately  for  Mr  Bell,  evidence  before  the Tribunal indicated that there were safe and 
secure storage  facilities  for  his  tools  (the  bulky/heavy equipment) at the worksite.
Accordingly, Mr Bell was unable to rely upon the ‘bulky goods’ exception to recharacterise home- 
to-work   travel   as   being   a   deductible   work expense.
Instead, it  retained its ordinary private and non- deductible status.
Mr   Bell   was   unsuccessful   in   advancing   the argument that he was entitled  to a deduction 
in relation to the motor vehicle expenses because he was in receipt of an allowance.
However, Mr Bell was able to convince the ATO that he had undertaken at least some work-related 
travel using his vehicle.  The ATO allowed Mr Bell a   deduction   under   the   'cents   per   
kilometre method'  up  to  the  maximum  dollar  amount  for 5,000  kilometres  for  the  2016  
income  year  of
$3,300.

Editor:   This decision provides a timely reminder that  simply  carrying  bulky  equipment  
between home   and   work   will   not   make   these   trips deductible, where there is a secure 
place for the equipment   to   be   stored   at   the   employee’s worksite.  The decision also 
highlights the fallacy of assuming that being in receipt of an allowance somehow  entitles  the  
taxpayer  to  an  offsetting deduction.
The taxpayer was technically 'lucky' that he was allowed    the    'cents    per    kilometre    
method' deduction  for  work-related  travel,  given  that  his motor vehicle fell outside the 
definition of a 'car'.
This is because the cents per kilometre method only applies to 'cars', so it could be said that the 
ATO  was  generous  to  the  taxpayer  in  these circumstances.

Please contact our office if you have any queries as to the deductibility of work-related travel.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.