As the impact of COVID-19 and the resultant lockdown measures continues to be felt, state and Federal governments in Australia continue to update their stimulus incentives. Here are the latest developments as of early April, following on from the measures introduced in early March and late March.
Employers – new payments to keep employees (JobKeeper)
The new JobKeeper Payment aims to help businesses keep people employed during the crisis and re-start when it is over. It is also be available to the self-employed.
- It provides $1,500 per fortnight per eligible employee for up to 6 months (for employees in an employment relationship at 1 March 2020).
- The payment will be available from 30 March 2020 until 27 September 2020.
- Employers register with the ATO to participate in the scheme which will be administered through STP.
- The first payments will be made by the ATO in first week of May 2020 and will be paid monthly in arrears.
- Business with Turnover under $1 billion: estimate their turnover has or will likely fall by 30% or more.
- Businesses with turnover over $1 billion (or part of $1B consolidated group): estimate their turnover has or will likely fall by 50% or more, and their business is not subject to the Major Bank Levy.
- Self-employed individuals: the above criteria apply.
- Charities registered with the Australian Charities and Not-For-Profit Commission (ACNC): estimate their turnover has or will likely fall by 15% or more relative to a comparable period.
- Non-government schools and private vocational education providers are eligible.
- The Australian government and its agencies, State and Territory governments and their agencies, foreign governments and their agencies, local governments and wholly-owned corporations of these bodies are not eligible for the JobKeeper payment.
- The payment cannot be paid to businesses that are in liquidation or partnerships, trusts, or sole traders in bankruptcy.
- The Tax Commissioner will also have discretion to set out alternative tests that would establish eligibility in specific circumstances (e.g. eligibility may be established as soon as a business has ceased or significantly curtails its operations).
The payment can be made for employees who are
- currently employed by eligible employer (including those stood down or re-hired).
- employed by the employer at 1 March 2020.
- full-time or part-time employees, or a casuals employed on a regular and systematic basis for longer than 12 months as at 1 March 2020.
- aged 16 years or older at 1 March 2020.
- Australian citizens, holders of a permanent visa, or Special Category (Subclass 444) Visa Holders at 1 March 2020.
- residents for Australian tax purposes on 1 March 2020.
- not in receipt of a JobKeeper Payment from another employer.
You must ensure that each eligible employee receives at least $1,500 per fortnight (before tax). Employees who receive $1,500 per fortnight or more from their employer will continue to receive their regular income according to their prevailing workplace arrangements. For employees that have been receiving less than this amount, the employer will now need to pay them, at a minimum, $1,500 per fortnight before tax.
These payments should be made using your payroll system and reported to the ATO via Single Touch Payroll. This will support the online claim process when it is available.
- Apply at ato.gov.au and assess your required turnover decline. Provide information to the ATO on all eligible employees.
- For most businesses or not-for-profits, the ATO will use Single Touch Payroll data to pre-populate the employee details for the business or not-for-profit.
- Notify all eligible employees that they are receiving the JobKeeper Payment.
- Continue to provide information to the ATO on a monthly basis, including the number of eligible employees employed by the business.
- Continue to meet PAYGW and superannuation guarantee obligations for employees.
- The first fortnightly pay period is 30/03/2020 to 12/04/2020. The final fortnightly pay period is 14/09/2020 to 27/09/2020.
Examples of how JobKeeper can benefit employers
An Employer with employees on different wages
Adam owns a real estate business with two employees. The business is still operating but Adam expects that turnover will decline by more than 30 per cent in coming months.
The employees are:
- Anne, who is a permanent full-time employee on a salary of $3,000 per fortnight before tax and who continues working for the business; and
- Nick, who is a permanent part-time employee on a salary of $1,000 per fortnight before tax and who continues working for the business.
Adam is eligible to receive the JobKeeper Payment for each employee, which would have the following benefits for the business and its employees:
- The business continues to pay Anne her full-time salary of $3,000 per fortnight before tax, and the business will receive $1,500 per fortnight from the JobKeeper Payment to subsidise the cost of Anne’s salary and will continue paying the superannuation guarantee on Anne’s income (i.e. on $3,000 per fortnight);
- The business continues to pay Nick his part-time salary of $1,000 per fortnight before tax and an additional $500 per fortnight before tax, totaling $1,500 per fortnight before tax. The business receives $1,500 per fortnight from the JobKeeper Payment which will subsidise the full cost of Nick’s salary.
The business must continue to pay the superannuation guarantee on the $1,000 per fortnight that Nick is earning. The business has the option of choosing to pay the superannuation guarantee on the additional $500 (before tax) paid to Nick under the JobKeeper Payment.
Adam can register his initial interest in the scheme from 30 March 2020, followed subsequently by an application to ATO with details about his eligible employees. In addition, Adam is required to advise his employees that he has nominated them as eligible employees to receive the payment. Adam will provide information to the ATO on a monthly basis and receive the payment monthly in arrears.
An Employer with employees who have been stood down without pay
Zahrah runs a beauty salon in Melbourne. Ordinarily, she employs three permanent part-time employees, but due to COVID-19 she has temporarily closed her doors as a business and has stood down her three employees without pay.
Zahrah’s turnover will decline by more than 30%, so she is eligible to apply for the JobKeeper Payment for each employee. She will receive $1,500 per fortnight for each of her three employees for up to six months and she is required to have passed on those payments to her employees.
Zahrah will maintain the connection to her employees, and be in a position to quickly resume her operations. Zahrah is required to advise her employees that she has nominated them as eligible employees to receive the payment.
It is up to Zahrah whether she wants to pay superannuation on the additional income paid because of the JobKeeper Payment. If Zahrah’s employees have already started receiving income support payments like the JobSeeker Payment, when they receive the JobKeeper Payment they must advise Services Australia of their change in circumstances.
A Self-employed individual
Melissa is a sole trader running a florist. She does not have employees. Melissa’s business has been in operation for several years.
COVID-19 has adversely affected Melissa’s business, and she expects that her business turnover will fall by more than 30% compared to a typical month in 2019. Melissa will be able to apply for the JobKeeper Payment and is able to receive $1,500 per fortnight before tax, paid on a monthly basis.
Businesses facing closure – new credit and personal liability relief
New temporary increases in thresholds, time periods, and deadlines aim to provide relief to businesses facing stress during this period, with the aim of seeing businesses continue.
- A temporary increase in the threshold at which creditors can issue a statutory demand on a company. The current minimum threshold of $2,000 will be increased to $20,000.
- A temporary increase to the time companies have to respond to statutory demands. The response time will be increased from 21 days to six months. The measures will apply for six months.
- A temporary increase in the threshold for a creditor to initiate bankruptcy proceedings.
- A temporary increase in the time period for debtors to respond to a bankruptcy notice.
- The time to respond to a bankruptcy notice will increase from 21 days to six months.
- An extension of the period of protection a debtor receives after making a declaration of intention to present a debtor’s petition.
- Temporary relief for directors from any personal liability for trading while insolvent, to apply for six months.
- Providing temporary flexibility in the Corporations Act 2001 to provide targeted relief for companies to deal with unforeseen events that arise as a result of the COVID-19 health crisis.
- For owners or directors of a business that are currently struggling due to COVID-19, the ATO will tailor solutions for their circumstances, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.
NSW small businesses – new grant payments
The NSW Government will put $750 million into the Small Business Support Fund as part of a third wave of support measures to keep small businesses up and running. This support brings the state government’s total package announced in the past fortnight to $7.61 billion.
- Thousands of small businesses across NSW struggling to cope with the COVID-19 shutdown will have access to a new assistance scheme (announced 3rd April 2020).
- This scheme provides grants of up to $10,000.
The grants will target small businesses such as restaurants, venues, gyms and bars that have been forced to shut because of social distancing measures imposed by the Federal Government.
The new fund is mirrored on the successful scheme rolled out during the recent bushfire crisis, wherein the NSW government provided up to $42 million to up to 4200 businesses.
To be eligible, your business must
- have between 1-19 employees and a turnover of more than $75,000.
- have a payroll below the NSW Government 2019-20 payroll tax threshold of $900,000.
- have an Australian Business Number as at 1 March 2020.
- be based in NSW.
- employ staff as at 1 March 2020.
- be highly impacted by the Public Health (COVID-19 Restrictions on Gathering and movement) Order 2020 issued on 30 March 2020.
- use the funding for unavoidable business costs such as utilities, overheads, legal costs and financial advice.
- provide appropriate documentation upon application.
The grant is aimed at businesses who have taken a hit of up to 66% – much higher than the 30% the federal government requires from businesses seeking assistance through the $130 billion JobKeeper policy. However, the application process aims to be streamlined and simple to access for applicants.
Applications for a small business grant of up to $10,000 will be available through Service NSW within a fortnight and remain open until 1 June 2020.
Employees working from home – deductions for work expenses
The number of employees working from home has drastically increased under the current COVID-19 social distancing regulations. This means both employers and employees need to approach work expenses and deductions slightly differently. The Commissioner of Taxation recently released TR 2020/1, which provides some guidelines for employees:
- If you incur an expense while working from home during the course of earning your employment income, then it is deductible.
- You must have paid for the expense yourself or been obliged to do so. It does not apply if the expense has been reimbursed.
- If you spend money on a “capital” asset (such as a laptop) while working from home, this cannot be deducted. You may be able to use depreciation rules to earn a deduction on this asset.
- “Private” or personal items, such as food, drink, or clothing, usually cannot be deducted as a work expense while working from home.
- “Domestic” or household items you purchase may be deducted based on the type of cost. Costs such as rent, insurance, or mortgage payments usually do not apply (even if you have a home office), while you are more likely to be able to deduct expenses such as phone, electricity and internet charges that are accrued while running your business or working from home.
- Written documentation is vital to substantiate an expense.
Exceptions apply, and it’s important to get advice specific to your situation or the situation of your employees.
In addition, the ATO’s “new working from home shortcut” calculation method for taxpayers was released on 07 April 2020. It covers calculation of home-running expenses incurred between 1 March 2020 and 30 June 2020. It enables you to
- record your hours worked from home and claim running expenses at the rate of 80 cents per hour.
- make the above claim without the usual calculation of work expenses and without having a dedicated work area at home.
The above guidelines still apply, but this further simplifies the process of determining expenses and deductions while working from home.
Calibre Business Advisory invests more time than most firms into finding solutions for our clients. Contact our business advisors and tax accountants to discover new options for your business in Australia and beyond.
Important Disclaimer: Readers should not act solely on the basis of the material on this page. Items herein are general comments only and do not constitute or convey advice. Legislation and proposals of legislation are also subject to constant change. We therefore recommend that formal advice be sought before acting in any of the areas. This news article is issued as a guide to the readers. Calibre Business Advisory Pty Ltd and its associated entities disclaims any losses that may be incurred as a result of the reader undertaking any action based on this article.