Businesses nervous about the state of the economy in the wake of a potential second wave can breathe a sigh of relief; the government has confirmed its intention extend the JobKeeper beyond the current legislated end date of 27 September with a few tweaks to eligibility and payment rates.

While the government has extended the JobKeeper from 28 September 2020 to 28 March 2021, not everyone currently on the JobKeeper will be treated the same. Part of the changes include the introduction of a part-time rate to “better align the payment with the incomes of employees before the onset of the COVID-19 pandemic”.

The rates per fortnight for the following periods are:

• 28 September 2020 to 3 January 2021: full rate – $1,200; less than 20hrs worked (part-time rate) – $750.
• 4 January 2021 to 28 March 2021: full rate – $1,000; less than 20hrs worked (part-time rate) – $650.

Employees who were employed for less than 20 hours a week on average in the four weekly pay periods ending before 1 March 2020 will receive the part-time rate from 28 September 2020. Businesses will therefore be required to nominate which payment rate they are claiming for each of their eligible employees. Payment by the ATO will continue to be made in arrears, and alternative tests are available where the employees’ hours were not usual during the February 2020 reference period.

In addition to the change in payment rates, businesses that want to continue claiming the JobKeeper payment beyond 27 September 2020 will be required to reassess their eligibility with reference to their actual turnover in the June and September quarters as well as satisfying existing eligibility requirements.

To be eligible for the JobKeeper for the period 28 September 2020 to 3 January 2021, businesses will be need to demonstrate that their actual GST turnover has significantly fallen in both the June quarter 2020 (April, May and June) and the September quarter 2020 (July, August, September) relative to comparable periods (generally the corresponding quarters in 2019).

Similarly, to be eligible for the second JobKeeper extension from 4 January to 28 March 2021, businesses will again need to demonstrate that their actual GST turnover has significantly fallen in each of the June, September and December 2020 quarters relative to comparable periods (generally the corresponding quarters in 2019). A 30% decline is considered significant (in line with existing eligibility requirements) for most businesses not including not-for-profits. 

As the deadline to lodge a BAS for the September quarter or month is in late October, and the December quarter (or month) BAS deadline is in late January for monthly lodgers or late February for quarterly lodgers, businesses will need to assess their eligibility for JobKeeper in advance of the BAS deadline in order to meet the wage condition (which requires them to pay their eligible employees in advance of receiving the JobKeeper payment in arrears from the ATO).

With most of Victoria officially in lockdown in an attempt to stop the second wave of COVID-19, the impact on many businesses based across metropolitan Melbourne and the Mitchell Shire will be significant over the next 6 weeks and beyond. As a way to soften the blow for the businesses that have only recently started to reopen, the Victorian government is providing a large financial support package.

It is estimated that over 80,000 businesses will be eligible for a new one-off grant of $5,000. For a business to be eligible, it must be located in a lockdown affected area; a participant in the JobKeeper scheme; registered with Worksafe on 30 June 2020; have an annual payroll of less than $3m in 2019-20 on an ungrouped basis; and be registered for GST.

Many businesses will also benefit from an extended and expanded payroll tax deferral. Eligible businesses with payrolls of up to $10m can defer their liabilities for the first half of the 2020-21 financial year. Whilst no further details have been provided, this payroll tax deferral is likely to be different to the payroll tax waiver implemented by the government during the 2019-21 financial year. This means that businesses that choose this option will merely be deferring their liabilities until a later date.

In addition to the above, the government has also launched a $30m dedicated fund for the state’s night-time economy to support the hardest hit businesses in hospitality. As well as a $20m CBD Business Support Fund especially for small businesses in the Melbourne CBD that are faced with a large and sustained shock to their trading environment. Both of these funds appear to be ongoing programs to help businesses over the longer term rather than the immediate shock from lockdown.

Of course, the lockdown doesn’t just affect businesses in the metropolitan areas, regional tourism businesses is also expected to be heavily affected by the closing of borders and Victorians unable to travel locally. Hence, the financial support package also includes $40m for regional tourism businesses to cover the cost of refunds, as well as marketing campaigns to boost region to region visitation. Eligible businesses will be able to claim up to $225 per night for up to 5 nights for each and every room cancelled due to the lockdown, provided they refund the bookings in full.

To be eligible, accommodation providers must have an ABN and be in one of the 11 Victorian Regional Tourism Regions (48 regional and rural councils plus a number of interface councils in the Yarra Valley and Mornington Peninsula; Victoria’s six ski resorts; Gabo, French, Lady Julia Percy Islands). Providers will also have to be “bookable” to the general public and advertised via an online booking platform, accommodation agencies, a registered real estate agent or a publicly available location subject to certain conditions.  

With many Australian businesses taking part in the government’s COVID-19 stimulus package including the JobKeeper and the cash flow boost, the ATO has now commenced a compliance program to weed out those that are exploiting the stimulus; in order to level the playing field for the majority of businesses that are doing the right thing.

The ATO has noted that it will not tolerate illegal behaviour or development of schemes that are designed to deliberately exploit COVID-19 stimulus measures or seek to avoid tax. It says it has already seen some examples of fraud and fraudulent attempts or people developing schemes to try and “steal money from the community”.

Specifically, in relation to the JobKeeper, the ATO said it will be focusing its compliance efforts on the following:

• Business income eligibility requirements;
• Eligibility of employees;
• Ensuring eligible businesses are correctly making claims; and
• Ensuring entities are not manipulating their turnover in order to satisfy the decline in turnover test.

To recap, to be eligible for the JobKeeper, generally the business (with an aggregated turnover of $1bn or less) would have needed to experience a 30% fall in turnover and had at least one eligible employee on 1 March 2020 who was currently employed by the business. Eligible employees usually have to be either Australian residents or holders of a Subclass 444 (Special Category) visa, and be employed either full time, part time or a long-term casual employee at 1 March 2020.

For the cash flow boost, the ATO is on the lookout for employers who have entered into a scheme which is designed to:

• Artificially restructure the business to gain access to the cash flow boost;
• Artificially changing the character of payments to salary or wages to maximise the cash flow boost;
• Inflating reported withholding amounts to maximise the cash flow boost;
• Resurrecting dormant entities or phoenixing.

Again, to recap, the cash flow boost was available to small or medium businesses, including sole traders, companies, partnerships or trusts (aggregated annual turnover of less than $50m) which held an ABN on 12 March 2020. In addition, the business must have made payments to employees subject to withholding (even if the amount required to withhold was zero), and the business lodged at least one tax return or activity statement/GST return for a specific period.

ATO warns that severe penalties can be applied to tax avoidance schemes or those found to be breaking the law, penalties for fraud can also include financial penalties, prosecution, and imprisonment for the most serious of cases.  

As the country starts on its road to recovery from COVID-19, with most states gradually lifting restrictions on gatherings and business trading, many businesses are starting to reopen and trade again. If you run a small business in NSW that has experienced a decline in turnover as a result of COVID-19, you may be eligible for a small business recovery grant of between $500 and $3,000.

The grant is designed to help small businesses to meet the costs of safely reopening or upscaling operations. However, the grant can only be used for purchases of eligible expenses made from 1 July 2020, and only in instances where no other government support is available. These expenses can include the following:

• Fit-out changes and temporary physical changes (eg plastic barriers);
• Staff training and counselling;
• Business advice and continuity planning;
• Cleaning products and additional cleaning services (eg hand sanitising stations);
• Additional equipment necessary to comply with social distancing or other public health measures (eg signage);
• Marketing, communications and advertising;
• Digital solutions (eg e-commerce or business websites).

To be eligible for the grant, your business must be a small business based in NSW as at 1 March 2020. Other criteria include:

• An ABN registered in NSW;
• An annual turnover of more than $75,000 (a BAS must be provided as evidence). Businesses that have not submitted BASs to the ATO but meets all other criteria may be able to provide an income tax declaration as evidence of annual turnover at the discretion of Service NSW;
• Employ less than 20 full-time equivalent staff;
• Be able to report a payroll below the NSW 2019-20 payroll tax threshold of $900,000;
• Be in a highly impacted industry by the Public Health Order (eg accommodation and food services, arts and recreation services, information media and telecommunications, alcoholic beverages manufacturing, real estate services, retailing, etc).
• Have experienced at least 30% decline in turnover from March to July 2020 compared to the equivalent period (of at least 2 weeks) in 2019;
• Have costs associated with safely reopening or upscaling your business from 1 July 2020.

Remember even if your business has previously applied for and received the COVID-19 small business support grant from the NSW government of $10,000, you may still be eligible to apply for this small business recovery grant.

Beware however, Service NSW has indicated that successful grant recipients may be audited in the future to determine their eligibility. Supporting documents in the event of an audit may include prior BAS statements, income tax declaration, profit and loss statements, extractions from accounting software, and receipts and invoices from purchases.

According to Service NSW, evidence (including official receipts) must also demonstrate that the business has used funds in accordance with the terms and conditions of the grant. Those that deliberately provide false or misleading information may be subject to criminal prosecution and recovery action by Revenue NSW.  

If your business is one of many that received the initial cash flow boosts as a part of the government’s COVID-19 economic stimulus measures, prepare for more help coming your way. When you lodge your monthly or quarterly activity statements for June to September 2020, your business will receive additional cash flow boosts.

The additional amount you receive will be equal to the total amount of initial cash flow boosts that you previously received and will be split evenly between your lodged activity statements. Therefore, quarterly payers will generally receive 50% of their total initial cash flow boost for each activity statement, while monthly payers will generally receive 25% of their total initial cash flow boost for each activity statement.

For example, if your business lodges activity statements quarterly and you received an initial cash flow boost of $10,000, when you lodge your June to September 2020 quarterly activity statements your business will receive $5,000 for the quarter ended June 2020 and $5,000 for the quarter ended September 2020. Although, if your business lodges monthly activity statements, you will receive $2,500 for each month of June, July, August and September 2020.

Beware however if your business has revised activity statements after lodgement, it may affect the amount of cash flow boost you may receive. You can check your statement of account through ATO online services for details on how your account may have been adjusted to work out how it will affect your cash flow boost payment.

Remember, if you have not made payments to employees subject to withholding, you need to report zero for PAYG withholding when lodging your activity statements to ensure that you receive the additional cash flow boost payments for June to September 2020. It is important that you do not cancel PAYG withholding registration until you have received the additional cash flow boosts.

To take advantage of the additional cash flow boost payments, make sure you lodge your activity statements by the due dates below:

• For quarterly lodgers, the due dates are:
  • 28 July 2020 for the April-June 2020 quarter; and
  • 28 October 2020 for the July-September 2020 quarter.
• For monthly lodgers, the due dates are:
  • 21 July 2020 for June 2020;
  • 21 August 2020 for July 2020;
  • 21 September 2020 for August 2020; and
  • 21 October 2020 for September 2020.

Renting out your idle resources helps you generate some extra passive income and adds to your worth. You can rent out entire or parts of your house that are vacant and not being used by you. Not just house property but you can also lease out other belongings such as furniture pieces, a washing machine, vehicles, and so on. 

In this article, we are going to discuss the tax implications of sharing the assets being house property and other assets through any digital platform such as Airbnb, home away, etc.  

Tax Implications on Sharing House Property 

Income and Deductions 

You can rent out your property for residential as well as commercial purposes. In either case, the rent amounts that you receive are assessed as income. You have to offer the same as income in your tax return and you can claim a deduction for expenses associated with the rented property.  

Expenses are to be proportioned for the time for which property is rented and part of the property which is rented. When only a part of property is rented out then the expenses can be apportioned based on floor-area and the apportioned expenses can be claimed. Also, if the property is not rented out for the entire year then expenses have to be claimed only for such periods for which the property is rented. 

Further, you must keep a record of the statements that are generated by platforms through which you rent your property and the receipts of the expenses that you incur on renting the property. 

GST on Rental Income 

GST liability doesn’t arise on residential rent. This means that when you rent out a residential property for residential purposes then GST doesn’t apply on the rent. Also, you are not allowed to claim GST credit for associated expenses. However, you will be liable to pay GST if you provide commercial premises for residential accommodation such as a hotel room or if you rent out commercial spaces such as offices. 

Tax Implications on Sharing Other Assets 

Income and Deductions 

The income that you generate by sharing your assets shall form part of your income and has to be declared in your tax return as other income. You can claim a deduction for the expenses that you incur in relating to the sharing of the assets as other deductions. You shall maintain records for the income statement generated by the platform and the receipts of expenses that you incur.  

If you co-own an asset and share it then both the incomes and expenses have to be reported to the extent of your share in the asset. 

GST on Asset Sharing Income 

If you are registered for GST owing to your leasing business carried out through your enterprise then you need to pay GST on the sharing income. Also, you can claim GST credit for expenses related to your leasing business. 

Large private companies will soon have to deal with an added compliance burden, the Reportable Tax Position (RTP) schedule is set to apply to all large companies from 1 July 2020 (ie the 2020-21 income tax year). The reportable tax position (RTP) schedule is a schedule to the company income tax return and requires large businesses to disclose their most contestable and material tax positions.

It is used by the ATO for a range of purposes including tailoring engagement to specific businesses on complex or high-risk arrangements and dentify areas where it needs to provide further clarification or certainty on the correct treatment of transactions and complex high-risk tax arrangements.

Previously, the RTP only applied to public companies or foreign-owned companies that has a total business income of either $250m or more in the current year, or $25m or more in the current year and is part of a public or foreign-owned economic group with total business income of $250m or more in the current year or the immediate prior year. 

The expansion is seen by the ATO as a way to level the playing field in the large market. The same turnover thresholds and economic group definition will be used for public, foreign-owned and private companies. Due to 2020-21 income tax year being the very first year that the RTP will apply to private companies, the ATO will take a go-slow approach. It will notify selected large private companies by the end of July 2020, if not earlier, that they will be required to lodge the RTP schedule.

Those private companies that have not been notified will not have an obligation to lodge the schedule for the 2020-21 income tax year. However, for subsequent income tax years, it is the ATO’s intention that all large private companies will self-assess their lodgement requirement for the RTP, which aligns with the current public and foreign owned companies’ RTP schedule instructions.

As a part of the expansion, the ATO consulting on the addition of 4 new questions to Category C section of the schedule. The additional questions relate to the following:

• Head company of a consolidated group: loans to shareholders or associates which were not repaid before the lodgement date;
• Trust arrangements involving debt and/or rollover relief (ie arrangements that are in a similar vein to Taxpayer Alert TA 2019/2);
• More than 10% of issued shares owned by a single shareholder acting as a trustee of a trust; and
• Claims for foreign income tax paid where less than 100% of the related foreign income (including capital gains) is included in Australian assessable income.

These questions are the ATO’s attempt at working out whether certain private companies have issues with distributable surplus or avoiding CGT by exploiting restructure rollovers for example.

Leasing out cars on ridesharing apps is a great business avenue these days. There are various such platforms where you can make money through ride sharing. In this article, we are going to understand the taxation aspect of sharing cars through a ridesharing app. 

Tax for Ride Sharing 

If you are also indulged in the activity of renting out your car on any ridesharing app, then there are some basic things that you must follow: 

• Declare the income that you generate from the sharing of your car as other income in your tax return. 

• Claim a deduction as other deductions for expenses incurred by you that are associated directly with car sharing. 
• Maintain records for income earned and expenses incurred by you. 

Deductions for Ride Share

Expenses that you incur in connection with car-sharing can be claimed as a deduction provided that the expenses have a direct nexus with car-sharing activity and you have proper receipts to substantiate expense claims. Here are some of the most common expenses that can be claimed against car-sharing income. 

Car Expenses 

There are two methods that can be used for arriving at the car expenses to be claimed if you are an individual: 

• Cents Per Kilometer Method
  • This method provides that an individual can claim expenses subject to a maximum 5,000 income-producing kilometers per car. Thus, you need to keep a count of kilometers used in car-sharing as income-producing kilometers. The claim for expenses is to be made based on a per kilometer rate that is to be calculated by considering all vehicle running expenses. Expenses that are non-running in nature such as interest on a car loan, depreciation, etc. are not considered.  

 

• Logbook Method 
  • The logbook method allows a person to claim a deduction for expenses based on income-producing use percentage of the car. The information regarding the income-producing use can be derived from the travel details contained in the logbook. The amount can be arrived as follows: 

1. 1. Identify the total expenses incurred on the car for the entire year. 
   2. Calculate a percentage by dividing the distance traveled for income-producing use by the total distance traveled and multiplying the result by 100. 
   3. Multiply the total expenses arrived at step 1 by the percentage arrived at step 2. 

This will give you the amount of deduction that can be claimed as an expense. 

Membership Fees 

A ridesharing app may collect membership fees from the owners who have their cars registered with the app for the services and the platform that the app provides. You can claim a deduction for the membership fees you pay to the app company. 

Car Availability Fees 

Sometimes, ridesharing apps place a condition that the car provider makes available his car for a minimum period failing which a fee is levied by the name of car availability fees. The fee that you pay can be claimed as a deduction. 

You must maintain proper records so that you are able to substantiate the claim that you make for expenses in your tax return. 

With businesses all around the country starting back up after the COVID-19 pandemic, many, including the federal government are hoping to trade their way out of a potentially prolonged recession. Businesses that are in relatively good shape can help the economy and themselves at the same time by purchasing any needed capital assets and taking advantage of the instant asset write-off now.

From 12 March 2020 until 30 June 2020, the instant asset write-off threshold amount for each asset has been increased from $30,000 to $150,000. Which means that businesses are able to purchase an asset up to the value of $150,000 and claim the entire amount (or the business-use portion) as a tax deduction provided it is first used or installed ready for use between those dates. Any businesses with an aggregated turnover of less than $500m is eligible.

You’d better be quick though, on 1 July 2020, the instant asset write-off threshold will revert back down to $1,000 and only small businesses with an aggregated turnover of less than $10m will be eligible. This means that the difference in timing could cost your business a large deduction in the current financial year. However, not all assets are included in the instant asset write-off, a small number of assets are excluded and there are special rules for the purchase of a car.

For example, if your business purchases a luxury passenger car costing $100,000 on 5 June 2020, while the instant asset write-off threshold is $150,000, you are not able to deduct the entire cost of the car. The cost of car for depreciation is limited to the car limit for the year. For the year ending 30 June 2020, the car cost limit for depreciation is $57,581, therefore, you will only be able to deduct $57,581 under instant asset write-off and cannot claim the excess cost under any other depreciation rules.

If, in the above example, your business instead purchases a work ute which isn’t designed to carry passengers and has been set up with all the trade tools in the tray for use in your business, the car cost limit for depreciation would not apply. So, if the ute was purchased for $70,000 on 5 June 2020, your business is able to claim the full deduction of $70,000.

It is also important to note that your business can claim the instant asset write-off on multiple assets, as long as the cost of each asset is less than the threshold. Whether or not GST is included or excluded from the threshold largely depends on if your business is registered for the GST. For any assets that cost the same or more than the relevant instant asset write-off threshold, it will usually need to be depreciated according to either simplified depreciation rules or general depreciation rules, depending on which one the business uses and the type of asset.

With the Federal government planning to ramp up infrastructure spending to get the economy going with “nation building” projects, the opportunity is ripe for businesses to take full advantage and tender for these contracts. Before you dive into writing your tender, you should be aware that any contracts over $4m (including GST) will require your business to obtain a statement of tax record (STR) from the ATO.

It should be noted that any first-tier subcontractors undertaking work individually valued at over $4m (including GST) for the primary business will also need to obtain an STR. There may also be different rules depending on the structure of the business (ie partnerships, trusts, joint ventures, subsidiary of a tax consolidated group or a multiple entry consolidated group). 

A STR basically shows whether a business has satisfactory engagement with the tax system and is derived from the details contained in ATO systems. To obtain a satisfactory STR, a business must have the following:

• Up to date registration requirements (registered for ABN, GST and having a TFN);
• Lodged at least 90% of obligations under each lodgement type that were due in the last 4 years of operation (from the date of request for an STR) including income tax returns, BASs and FBT returns; and
• Paid any undisputed debt of $10,000 or greater by the due date or have a payment plan in place (does not include disputed debts subject to formal objections, review or appeal).

Businesses that have been in existence less than 4 years will need to meet additional conditions to obtain a satisfactory STR including making statements relating to having a tax record of less than 4 years in Australia, compliance and payment of Australian tax obligations, and having no tax-related convictions in the last 4 years.

If your business receives an unsatisfactory STR, don’t panic, the report will have outlined details of criteria you met or did not meet, or both. From that information you can take corrective action to bring your tax obligations up to date. Once that’s completed, your business can apply for the STR again.

As extra support for businesses that have been affected by COVID-19, if an unsatisfactory STR is issued, the ATO will contact the business to discuss options and help with any corrective action. It notes that where possible, it will assist businesses to obtain lodgement deferrals or put payment plans in place.

Those businesses that have previously applied for an STR should check to see it is still valid prior to tendering for any government contracts as a STR is only valid for 6 or 12 months depending on whether you have an Australian tax record of less or more than 4 years.