JobKeeper from 28 September 2020

We have summarised the key details in this update please download here. 

The first tranche of JobKeeper ends on 27 September 2020. Those needing further support will need to have their eligibility reassessed and prove an actual decline in turnover.

To receive JobKeeper from 28 September 2020, eligible employers need to assess their decline in turnover with reference to actual GST turnover for the September 2020 quarter (for JobKeeper payments between 28 September to 3 January 2021), and again for the December 2020 quarter (for payments between 4 January 2021 to 28 March 2021).

From 28 September 2020, the JobKeeper payment rate will reduce and split into a higher and lower rate based on the number of hours the employee worked in a specific 28 day period prior to 1 March 2020 or 1 July 2020.

To access JobKeeper payments from 28 September 2020, there are three questions that need to be assessed:

1.      Is my business eligible?

2.      Am I and/or my employees eligible? and

3.      What JobKeeper rate applies?

Please contact our office if you would like assistance with this 02 8848 3000.

What to do when reopening your business

As many business owners look to life after COVID-19, an important question comes up: how do we plan to reopen our business? For most businesses, the easing of restrictions doesn't mean a return to business as usual. 

There are rules and regulations in place about how companies can operate, including how many people can be on their premises at one time and how employees must be protected. Customers may not come back quickly and supply chains may still be disrupted.

Your main goal is to keep your business going after COVID-19, but reopening requires careful planning.

Here are some tips for restarting your business. 

1. Examine your business model 

Many small business owners have expertise that could go into consulting. If you own a restaurant, you could consult with new restaurant owners on setting their menu or hiring staff. You could also create passive income by writing eBooks or running courses related to your specialty.  

2. Have a safety plan and procedures in place

3. Access funding and financial programs

Even with restrictions easing, customers may not be eager to return to your business, for a variety of reasons. Many people now have limited incomes and are concerned about safety measures. It could take a while for your income to balance out.

Local, regional and federal governments have programs available for small businesses. Additionally, financial institutions and local businesses that represent business interests may also have financial programs you can access to help you through the turmoil caused by COVID-19. 

Final thoughts

What's next for you and your business? If you'd like to chat about future-proofing your business, please get in touch with us today on 02 8848 3000.

Extension of the $150,000 threshold for the instant asset write-off rules

As announced earlier last week, the Government is planning to extend the $150,000 instant asset write-off threshold for a further 6 months until 31 December 2020. This means that the higher threshold can apply to assets that are first used or installed ready for use for a taxable purpose on or after 12 March 2020 and by 31 December 2020 (assuming all other basic conditions are satisfied).

The Bill also extends the temporary suspension of the 5 year lock-out rules that can apply when an SBE chooses not to use the simplified depreciation rules. The suspension of these rules will be extended to 30 June 2021.

Modifications will also be made to the rules for entities that have a substituted accounting period to improve access to the higher instant asset write-off thresholds. The way these rules are currently drafted has meant that entities with a year-end other than 30 June have not had the same level of access to the rules as entities using a standard 30 June year-end date.

The HomeBuilder scheme targets the residential construction market by providing tax-free grants of $25,000 to eligible owner-occupiers, including first home buyers, to build a new home or substantially renovate their existing home.

The grants will be distributed by the revenue office of the State or Territory where you live or plan to live.

There are a few complexities to this grant that both home builders/renovators and the building industry need to be across before jumping in and signing a new contract on the expectation that the grant will apply.

Eligibility

Eligibility criteria apply to the individuals applying for the grant and the building project:

Individual eligibility

The HomeBuilder scheme is available to owner occupiers including first home buyers. It is not accessible to owner builders, developers or investors.

To be eligible you need to be:

• An individual (not a company or trust); and
• 18 years of age or older; and
• An Australian citizen.

And, you need to meet the income test. To be eligible, you cannot earn more than:

• Individuals - $125,000 based on your 2018-19 or later tax return
• Couples - $200,000 based on both of your 2018-19 or later tax returns

The building project eligibility

The building contract must be signed between 4 June 2020 and 31 December 2020. And, the construction or renovation must commence within three months of the contract date.

The grants are available if you build a new home or renovate a home to live in (your principal place of residence) where:

* house, apartment, house and land package, off-the-plan, etc.

** renovation works must be to improve the accessibility, safety and liveability of the dwelling. It cannot be for additions to the property (such as swimming pools, tennis courts, outdoor spas and saunas, sheds or garages (unconnected to the property)).

If you own or have purchased land but have not signed a contract to build your home, you may meet the eligibility criteria if you:

• Own a property (house and land), and knock down the house to rebuild – this will be counted as a substantial renovation, and therefore subject to the renovation price range of $150,000 to $750,000 provided the total value (house and land) of the property does not exceed $1.5 million pre-renovation;
• Own vacant land before 4 June 2020, and then build, the total value of the land and new build cannot exceed $750,000; or
• Buy the land after 4 June 2020, and then build, the total value of the land and build cannot exceed $750,000.

Integrity measures and pricing

Building contracts must be at arms-length, that is, the parties cannot be related or connected.

Renovations or building work must be undertaken by a registered or licenced building service 'contractor' (depending on the state or territory you live in) and named as a builder on the building licence or permit.

When it comes to price, the terms should be commercially reasonable, and the contract price should not be inflated compared to the fair market price. The rules enable the purchaser to request that the builder demonstrate that the contract price for the new build or substantial renovation is no more than a comparable product (measured by quality, location and size) as at 1 July 2019.

Interaction with first home owner grant schemes

The HomeBuilder grant does not exclude first home buyers from accessing other grants and concessions such as the First Home Owner Grant, stamp duty concessions, the First Home Loan Deposit Scheme, and First Home Super Saver Scheme.

Problem areas

As the building contract is entered into before the grant is approved, it will be important that the grant is not essential to finance the building project, just in case the grant is not approved.

In addition, as the builder needs to commence work within three months of the contract date, it will be important to ensure that the contract recognises the commencement dates.

Code of conduct for commercial tenancies

The Prime Minster has announced that the states and territories will legislate a mandatory code of conduct for commercial tenancies – see National Cabinet Mandatory Code of Conduct.

The code applies where:

• The landlord or tenant is eligible for the JobKeeper program, and
• They have a turnover of $50 million or less.

The code brings together a set of good-faith leasing principles. Landlords must not terminate the lease or draw on a tenant's security and tenants must honour the lease.

Landlords will be required to reduce rent proportionate to the trading reduction in the tenant's business, through a combination of waivers of rent and deferrals of rent over the "pandemic period." Waivers of rent must account for at least 50% of the reduction in the rental provided to the tenant during that period and deferrals must be covered over the balance of the lease term and in no less period than 24 months.

The arrangements are overseen through a binding mediation process at state and territory level.

Residential landlords and tenants

Most states and territories have introduced rules to ensure that tenants facing COVID related financial distress are not evicted for rental arrears.

Rent remains due, however landlords are encouraged to negotiate either a rent reduction to some degree or waiver where possible – for example, the landlord has a mortgage and has received a freeze on mortgage payments.

Most state and territory governments have free mediation services in place to manage disputes.

New South Wales

The NSW Government is introducing an interim 60-day stop on landlords seeking to evict tenants due to rental arrears as a result of COVID-19, together with longer six month restrictions on rental arrears evictions for those financially disadvantaged by COVID-19.

A household is COVID-19 impacted if:

·        One or more rent-paying members of a household have lost employment or income (or had a reduction in employment or income) due to COVID-19 business closures or stand-downs, or

·        One or more rent-paying members of a household have had to stop working or reduce work hours due to illness with COVID-19 or due to COVID-19 carer responsibilities for household or family members, and

·        The above factors result in a household income (inclusive of any government assistance) that is reduced by 25% or more.

Notice periods for certain other lease termination reasons will be extended to 90 days.

All other tenants not impacted by COVID 19 are expected to honour their existing tenancy agreements.

See Six month moratorium on residential tenancy evictions during COVID-19.

ATO releases JobKeeper alternative test

The alternative tests will only kick in if an entity cannot satisfy the basic decline in turnover test.

These include where an entity commenced business after the relevant comparison period in 2019 or the business did not exist in the relevant comparison period and as a result there was no relevant comparison period in 2019.

It will also cover a circumstance where an entity acquired or disposed of part of their business after the relevant comparison period in 2019, and where an entity has restructured part or all of their business after the relevant comparison period in 2019.

Entities who had an increase in turnover by 50 per cent or more in the 12 months immediately before the applicable turnover test period, or 25 per cent or more in the six months immediately before the applicable turnover test period, or 12.5 per cent or more in the three months immediately before the applicable turnover test period, will also be covered.

The alternative test will also cover entities affected by a drought or other natural disaster in the relevant comparison period in 2019, and entities who have an irregular turnover that is not cyclical, such as what can occur in the building and construction sector.

A sole trader or a small partnership where the sole trader or one of the partners did not work for all or part of the relevant comparison period because they were sick, injured or on leave during the relevant comparison period, and those circumstances affects the turnover of the sole trader or partnership, will also be covered.

Each of the seven circumstances has its own alternative test that is detailed in the legislative instrument.

Update from Accountants Daily

Automatic ATO lodgement and payment deferrals 

The Tax Office will now apply automatic lodgement and payment deferrals for company 2018–19 income tax returns to a new due date of 5 June 2020.

Further, SMSF 2018–19 annual returns will now be due on 30 June 2020.

2019–20 fringe benefits tax (FBT) annual returns have also been automatically deferred to 25 June 2020.

2018–19 income tax returns for individuals, partnerships and trusts can be lodged by the 5 June concessional due date, provided clients pay any liability by this date.

What is an Instant Asset Write-off?

The instant asset write-off allows small to medium-sized businesses to claim immediate deductions for plant and equipment asset purchases (both new and second-hand). Equipment includes vehicles, tools, machinery and office equipment. The asset must be installed and/or used in the income year you're claiming for.

How much can I write-off?

Originally the maximum threshold was $30,000 but now this has been increased to $150,000 for businesses with aggregated annual turnover between $50m-$500m. The write-off threshold is dependent on your annual turnover. This applies from 12 March 2020 until 30 June 2020, for new or second-hand assets first used or installed ready for use in this timeframe.

The higher Instant Asset Write-Off (IAWO) threshold provides cash flow benefits for businesses that will be able to immediately deduct purchases of eligible assets each costing less than $150,000. The threshold applies on a per asset basis, so eligible businesses can immediately write-off multiple assets.

Eligibility to use instant asset write-off depends on:

• Aggregated turnover (the total ordinary income of your business and that of any associated businesses)

• Date the asset was purchased and when it was installed or first used

• Cost of each asset being less than the threshold.

From 1 July 2020 the instant asset write-off will only be available for small businesses with a turnover of less than $10 million and the threshold will be $1,000.

Businesses with a turnover of $500 million or more are not eligible to use instant asset write-off.

Find more information and apply here: https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/Simpler-depreciation-for-small-business/Instant-asset-write-off/

Six-month moratorium on residential tenancy evictions

The NSW Government is introducing measures to help landlords and tenants work together. The support package includes a six-month moratorium on landlords making applications for evictions due to rental arrears:

• for tenants who are financially disadvantaged by COVID-19, and 
• where landlords and tenants try to negotiate rental reductions in good-faith and
• it would not be fair and reasonable in the circumstances to terminate the tenancy.

As well the moratorium on applications for forced evictions due to rental arrears, the package will also immediately:

• put a 60 day stop on new termination notices and termination applications to the NSW Civil and Administrative Tribunal where these are for terminations due to rental arrears as result of a household being unable to pay their rent due to the COVID-19 emergency
• extend notice periods for certain other lease termination reasons to 90 days.

The support package is available to tenants who can prove they have been impacted by COVID-19. The tenant is considered to be impacted by COVID-19 when one or more rent-paying members of the household:

• have lost their employment, income or work hours due to COVID-19 business closures or stand-downs, or
• have had to stop working or substantially reduce work hours due to illness with COVID-19 or to care for a household or family member with COVID-19, and
• this resulted in a reduction in the weekly household income (including government assistance) of at least 25%.

National Cabinet Mandatory Code of Conduct

SME Commercial leasing principles during COVID-19

The National Cabinet has agreed that states and territories will implement a mandatory code of conduct for commercial tenancies. More information here