Government lends a hand
IN these unprecedented times, businesses across the economy are suffering, not the least the travel industry. The Federal Government is hoping to keep many businesses propped up with a range of stimulus measures. The bonus cash is welcome news for many, but unpacking what your business is eligible for and how to apply for the subsidies can be hard to follow. Thankfully, Simla Sooboodoo, Founder and CEO of Hands On Journeys and trained CPA Accountant has done an incredible amount of legwork, listening in to seminars and reading through paperwork to provide this summary of stimulus packages.
This is $1,500 per fortnight, or $750 per week for each employee and paid to employers. Eligibility conditions apply. It’s also not being paid until the start of May, with employers to be reimbursed monthly in arrears. So, there is still no immediate cash relief, with employers expected to self-fund or borrow in the meantime.
1. Small Business
- Small business need a 30% actual or anticipated turnover drop from the same period last year i.e Jan to Mar 2020 BAS compared to Jan to Mar 2019 BAS
- The turnover is your BAS reported revenue, including GST-free, but Australian sales only.
- The ATO will consider further info e.g. if a new business, ceased business, or an unusual prior period.
- A business that does not meet eligibility now may join JobKeeper in future when it does.
- Need to be persons you employed as at 1 March, aged over 16, and includes those since laid off.
- Applies to full- and part-time employees, and casuals employed for over 12 months.
- All must be Australian residents for tax purposes as at 1 March.
- New Zealand visa 444 employees are eligible, but not temporary visas e.g. students or working-holiday.
- Each employee must be notified, they can only have one primary employer and can’t also get JobSeeker payments.
- An employee may continue to earn income from a non-primary employer.
- Sole traders, Partnerships, Trusts & Companies may nominate one person for a non-employee payment.
- This is in addition to JobKeeper subsidies for any eligible employees.
- The non-employee person must have been actively engaged in the business.
- The business must have an ABN and revenue up to 12 March, and estimate this has or will fall by 30%.
- They can not be entitled to another JobKeeper payment, i.e. as employee or business nominee.
- Note a partnership can only nominate one recipient, and a partner cannot be an employee.
4. Decline in Turnover Test
- An entity can assess its decline for either a test month or quarter, regardless of its BAS period.
- Its ‘Projected Turnover’ in the test month/quarter is compared to ‘Actual Turnover’ for the same month/quarter last year.
- Exclude input taxed, non business, and export supplies.
- Your monthly/quarterly prediction may need updating each fortnight, so staff are not overpaid.
- The ATO is required to show some tolerance where estimates fall slightly below 30%.
- Record keeping of the estimate basis is essential to avoid repayments, interest, or penalties.
- A flat $1,500 per fortnight subsidy applies per employee/nominee. Available from 30 March to 27 September.
- The employee must be paid a minimum $1,500 per fortnight (less tax), or their existing wage, whichever is higher.
- Business must have paid this for each fortnight before receiving the JobKeeper subsidy.
- An employee payment may be in cash or as a fringe benefit or super, if mutually agreed.
- The first fortnight was from Monday 30 March to Sunday 12 April. A back payment is possible.
- STP (Single Touch Payroll — Link your payroll system with the ATO) will be used to support the claims process, otherwise a manual claim process will apply.
- Employees who have been stood down can get the $1,500, but cannot also access JobSeeker.
- SGC superannuation continues, but is optional on any excess JobKeeper paid to an employee.
- Payment is made in arrears monthly, e.g. the two fortnights in April are paid from first week of May.
- Monthly reporting of eligible employees to the ATO will be needed.
- It will be taxable income, and in turn that paid to employees will be deductible wages.
- Amounts paid to a self-employed nominee will be personally taxable, i.e. not as an employee.
Registration & Payment dates
- Register on https://www.ato.gov.au/Job-keeper-payment/
- A future application will also be needed with employee details
Example – Mixed Employer
Ted Transport company has suffered a 32% estimated downturn and it employs himself on $1,600 per week, a part-time office-worker on $600 per week, and a casual assistant for the past 4 months on $400 per week. Ted gets same pay (with $750pw subsidy), the part-timer gets a pay increase to $750 (with $750pw subsidy), the casual gets the same pay (with no subsidy as has not worked 12 months). The company will receive $750 $750 $0 = $1,500 x 4 weeks = $6,000 a month in JobKeeper subsidy, of which $150 x 4 = $600 is an extra wage cost.
Jane’s Travel Company has been forced to close, and will be over the 30% decline without having to prove so. Her five permanent employees have been stood down, but Jane will still receive $1,500 JobKeeper subsidy per fortnight for each, after arranging to pay to them same after deducting tax. She chooses not to pay any SGC Super. As a Sole Trader, she also receives a $1,500 Jobkeeper payment personally.
Boosting Cash Flow for Employers $20k-$100k
A maximum $100,000 tax-free for small employer business, with a minimum $20,000. This replaces the initial $25,000 package, and is now based on 100% of Pay As You Go Withholding (PAYGW) lodged, and is receivable over the March, June & September quarters.
Half of the limit, that is $50,000 and $10,000, is based on PAYGW lodged for the combined March and June periods and called the “Initial Boost”. Then an “Additional Boost” equal to the Initial Boost will be received in the June to September periods (regardless of actual PAYGW).
Employers with PAYGW below $10,000 up to June should receive the minimum Initial Boost of $10,000 after March lodgement, then the minimum Additional Boost of $10,000 split between your June to September lodgement periods.
- Must have been an employer established with ABN at 12 March with aggregated turnover under $50m.
- The entity must continue to be active.
- Must have made eligible payments that are subject to PAYGW, even if deduction was nil.
- Includes salaries & wages, director fees, ETP’s & contractor voluntary agreements.
- Must have lodged a 2019 tax return, or a prior BAS, with income by 12 March.
Initial Boost – Calculation Basis
- Available amount = maximum of $50,000 & minimum $10,000 for period to 30 June.
- Quarterly lodgers – based on 100% of PAYGW lodged in March & June quarters.
- Monthly lodgers – based on 300% of March PAYGW, & 100% of monthly PAYGW to June.
- Small lodgers – receive $10,000 if total PAYGW to June is less than #10,000
Additional Boost – Calculation basis
- Additional Boost – the total of amounts you received for the Initial Boost above.
- Quarterly lodgers – half of the Additional Boost on June BAS, half on September.
- Monthly lodgers – a quarter of the Additional Boost each month June to September.
- Small lodgers – receive minimum $10,000 spread over relevant BAS June to September.
- Both the Initial Boost and the Additional Boost may be received on June lodgement.
- Quarterly lodgers – 28 April (March), 28 July (June), 28 October (September)
- Monthly lodgers – 21st of the month following the BAS month
- Lodging BAS earlier will not bring forward payment
- Deferred or late BAS will receive the Boost when BAS lodged, if within 2 years
- An automatic credit issued by the ATO to your ICA (BAS account)
- You may pay the ATO an amount less the Boost credit, or receive a refund
- The ATO will apply a credit balance to other BAS or income tax liabilities
- Any credit balance remaining to be refunded (within 14 days)
Conditions & Integrity Measures
- Schemes for the sole purpose of gaining or increasing the Boosts will be ineligible
- The ATO may check the character of amounts being claimed as wages
Tax & Accounting treatment
- Will not be assessable income nor subject to GST
- Will usually be included in entity as Grant Income, and debited to your PAYG Liability
Centrelink & $550 supplement (Sole traders and Self-employed)
- Easier eligibility for sole traders & self-employed, with an additional $550 per fortnight supplement paid from 27 April.
- Includes JobSeeker, Youth Allowance, Abstudy, Parenting Payment, Farm & Special Benefit recipients.
- The full $550 applies if entitlement to the above is at least $1 after test reductions.
- No Asset Test or Liquid Asset Test Waiting Period, Income Test applies.
- Income Test reduction is at 50% over $104, 60% over $254 or partner earnings over $994.
- Apply direct to Centrelink using myGov online or by phone.
Apprentice & Trainee Subsidy
- Up to $21,000 per apprentice or trainee you employed as at 1 March, or re-engaged.
- Includes JobSeeker, Youth Allowance, ABSTUDY, Parenting Payment, Farm & Special Benefit recipients.
Vary PAYG Instalments
- End company or personal tax instalments by varying your BAS, IAS or Instalment Notice.
- These are based on ATO estimates of your 2020 taxable income, and will have naturally changed.
- In the same process, you may also seek a refund of instalments previously paid for 2020.
- Where a BAS has already been lodged, or an IAS is automatic, a revision may be possible.
$1,500 Support Welfare Recipients
- Applies to all welfare & income support & retirees who hold a Seniors card.
- $750 is paid from 31 March, and $750 from 13 July.
- The second payment may not be received if receiving the new $550 supplement above.
Access Super $20,000
- Individuals may draw $10,000 tax-free by 30 June, and another $10,000 up to September.
- You must prove a 20% drop in hours or income, or unemployment or Centrelink benefits.
- An application to the ATO is needed, which then provides a release to your super fund.
- An SMSF must also follow this strict process BEFORE drawing any cash.
- Note that this measure will realise permanent losses, that might otherwise be recovered.
Commercial Rent Relief
- This may evolve under different State legislation.
- An enforced moratorium for 6 months on all evictions is probable.
- Commercial property owners get bank loan repayment deferments as above.
- The PM’s existing advice is to negotiate with your landlord for a rent holiday or discount.
- Landlords have been told to simply share the pain… although many are also small enterprises.
ATO Lodgement Deferrals
- An application is still needed to the ATO for each deferral.
- A business will usually need to otherwise be up to date and have been impacted by Covid-19.
Small Business Loan Guarantee
- The government will provide a 50% guarantee for new unsecured loans up to $250,000.
- For a period up to 3 years with an initial 6 month repayment holiday
- Normal bank lending criteria and assessments will apply
Asset Write-offs & Depreciation
- The Instant Asset Write-off increased from $30,000 to $150,000, 12 March to 30 June 2020.
- Must be depreciable equipment in place by 30 June 2020.
- A new 50% depreciation rate can apply to June 2021 if above conditions are met.
- In that case 50% applies in the year of installation, and the usual rates thereafter.