Under Victoria’s Business resilience package announced by Prime Minister, some of the grants will be exempted from income tax; still, its legislation is due.
The extension and alternative tests have been confirmed with JobKeeper 2.0 details.
The treasurer has released such guidelines that govern the eligibility for JobKeeper after September 28th, 2020. The tax commissioner also depicted a legislative instrument that outlines the alternative tests to satisfy the decline in the turnover test.
To stand eligible for JobKeeper 2.0, an entity should satisfy the following conditions:
- The entity must have carried business in Australia on March 1st, 2020 (the rules are different for non-profit entities).
- The entity should pass the additional decline in the turnover test.
This original reduction in the turnover test is similar as was mandatory to access JobKeeper initially, and it involves comparing projected GST turnover for a specific month or a quarter in the year 2020 with current GST turnover for the corresponding period in 2019 to analyze if there is a reduction in turnover of the relevant percentage, (15%, 30%, 50%, it depends upon the entity).
Being the part of new rules, the time period for the entities to clear the original reduction in the turnover tests have been expanded.
The tests will be satisfied if the entities may clear the following periods:
- For monthly test: April, May, June, July, August, September, October, November, December.
- For quarterly test: June quarter, September quarter or December quarter.
If the original reduction in the turnover test has been met, it is very crucial to confirm that an additional reduction in the turnover test is met to access JobKeeper for every of the two additional periods that is (September 28th, 2020 to January 3rd, 2021, and January 4th, 2021 to March 27th, 2021).
For the first period that is September 28th, 2020 to January 3rd, 2021, the entity must be enabled to show that the current GST turnover for the September 2020 quarter has dropped by the mandated amount as compared with the GST turnover for September 2019 quarter.
For the second period that is January 4th, 2021 to March 28th, 2021, the entity should be able to show that the current GST turnover for December 2020 quarter reduced by the required amount in comparison to the current GST turnover for December 2019 quarter.
Just as the original JobKeeper rules, the ATO holds the power to set out alternative tests in which it is inappropriate to compare actual turnover for a quarter in 2020 with the corresponding quarter in 2019.
The alternative tests for the additional reduction in the turnover test are in a similarity to the tests available for the original JobKeeper package.
The tests covered the following parts:
- In which the business initiated before March 1st, 2020, but after the initiation of the comparison period.
- A business that makes an acquisition or disposal of the part of its business that changed the entity’s current GST turnover.
- A business that has a substantial increase in turnover.
- A business which is affected by natural disaster or drought.
- The businesses that are with irregular turnover.
- Small partnership or sole traders with the individuals affected by sickness, injury, or leave.
Once it gets confirmed, the entity is eligible for JobKeeper 2.0, the next issue is to analyze the eligible employees or business participant. The employees must be eligible for JobKeeper payments if they were employed by the entity on July 1st, 2020 and can meet all other eligibility needs.
The employees are also required to have provided the employer along with the nomination notice. If the employee already has cleared all the conditions at March 1st, 2020, they are not required to be retested using the July 1st, 2020 test date.
The JobKeeper payment rate will get split into two tiers, from September 28th, 2022. The payment will be based on the number of hours worked by the individual in the business in the reference periods. For the periods September 28th to January 3rd, 2021, the payment rates are as follows:
- $ 1200 each fortnight for each employee or business participant who is qualified for enhanced payment
- $750 each fortnight for each employee or business participant who was not qualified for the higher payment rate.
The payment rates for the period January 4th, 2021 to March 28th, 2021, are:
- $1000 each fortnight per employee or the business participant qualifies for higher payment rate
- $650 each fortnight per employee or the business participant who were not qualified for higher payment rate
COVID-19 Grants for Victoria and tax exemption
The Prime Minister has declared that the agreement relies between the Commonwealth and Victoria to make the specific grants to small and medium business under the Business Resilience Package of Victoria that is exempted from income tax.
On the basis of an application, the commonwealth will extend the arrangement to all the states and territories. The eligibility will get restricted to the future grants program announcements for small and medium businesses that face similar circumstances to the Victorian businesses. The tax exemption will be limited for the grants paid till June 30th, 2021.
JobKeeper Administration requirements after September 28th
The ATO has produced a single page factsheet that outlines the actions that are required to be taken by the entities to stand eligible for JobKeeper for their employees or eligible business participants.
The business which is already enrolled in the JobKeeper, it will be necessary to view that the additional reduction in the turnover test has been met for the September quarter. To meet the wage conditions for eligible employees, the entity will have time till October 31st, 2020.
These entities will in continuation lodge monthly declarations to the ATO and will require selecting the payment rate that is applicable to each employee or the business participant in the forts monthly declaration. The new entities that are eligible will be required to enrol for the JobKeeper with the ATO. These entities will be required to satisfy the additional reduction in the turnover test along with the original reduction in the turnover test.
PAYG INSTALMENT VARIATIONS COVID-19
According to ATO, it will not apply any penalties or interest for 2021 income year for excessive variations of PAYG installments. The ATO may apply the penalties in which the value of varied installments is lower than 85% of the total tax payable.
Under the influence of COVID-19, ATO will not pursue this in 2021. The manner in which the guidance of ATO is mentioned doesn’t provide a complete guarantee that the penalties will not be payable in all the conditions.
The ATO has released the guidance that outlines the circumstances in which the overpayments received by taxpayers are not required to be repaid. According to the indication by ATO, if JobKeeper payment gets identified, the ATO may decide the overpayment is not required to be repaid especially if it’s an honest mistake. The following factors are also considered like:
- If the taxpayer relied in a good faith on the statement made by an employee in the nomination notice
- The taxpayer passed on the benefit of the JobKeeper payment to the desired employee
- The blunder was made in JobKeeper when there was less public guidance
The blunders won’t be considered honest in the situation in which the fraud was perpetrated by the JobKeeper recipient or any other entity. There has been intentional disregard of the law of recklessness in the application, or if the employer deliberately failed to meet specific wage conditions. In this the ATO indicates that the taxpayers are required to repay the overpaid amounts, the taxpayer will be advised in writing:
- The reason that the ATO think for the overpayment
- Amount required to be repaid
- The manner in which the taxpayer may make the repayment
Penalties could also be applicable in such circumstances.
TAX TREATMENT OF JOBKEEPER PAYMENT AND CONCESSIONS THRESHOLDS
In relation to the tax treatment, ATO has given clarification for the JobKeeper payments received by an entity. As, the JobKeeper payments were accessible for the business entities, the further clarification was required that either the payments were ordinary income, if yes then whether they were generated in the ordinary course of pursuing a business, it could mean that those were included in the annual turnover of the entities that is relevant for range of small business concession thresholds.
The confirmation by the ATO states that even though the JobKeeper payments are the ordinary income, they are not generated in the ordinary course of the business, and is excluded in aggregate annual turnover.
It concludes that the number of taxpayers could be eligible for the range of concessions since their turnover has fallen due to COVID-19.
Guidance, Rulings and Determinations
Updated statement on ATO discretion for Cashflow boost and JobKeeper.
This statement the method by which the ATO will approach such situations in which the tax payers have got the discretion of the commissioner to extra time to an entity to whether get an ABN or notify the Commissioner of assessable income or the supplies in order to access the cashflow boost and the JobKeeper payments for the eligible business participants.
There have been updated practice statements that also include some examples that provide further assistance on the types of circumstances in which the commissioner may not exercise the discretion.
- No compliance with the lodgment obligations
- New businesses not registered for GST
- Deferral that are Non-ATO initiated
- Exceptional circumstances
- Influence of conduct of tax agent
Extension in Simplified Home Deductions Method
The ATO has produced a practical compliance guideline that outlines a new shortcut method which could be used by the taxpayers that claim running expenses while working from home.
These relaxed were intended originally to be applicable during the period from March 1st, 2020 till June 30th, 2020. This is with ATO extending the period further to December 31st, 2020.
The ATO indicates that this could again be extended. The shortcut method set in the PCG allows the individuals who are qualifying to claim a reduction using the standard rate of 80 cents each hour that is every hour worked from home at the relevant period.
Whether the land used for storage was an active asset – Reversal of Decision
Eichmann v FC of T  FCAFC 155
The Full Federal court has overturned the decision made by Federal Court, which concludes that the vacant land could be used outside the main business functions and still qualify an active asset to serve the purpose of CGT concessions of small businesses. The decision of federal court stated that there must be a direct relationship between the use to which the asset is putting and the carrying on of the business.
The court considered that there was the distinction that was required to be made between the assets used in carrying on the business. To be the active assets, the assets should lie in the second category.
The Full Federal Court found that the approach followed by the Federal Court in the prior decision was much restrictive and the legislation must be read in a way which is advantageous to the tax payers despite the restrictive manner, to promote the reason of concessions.
As per the Court rulings, the active asset test does not need the use of the relevant asset to take place within the day to day or the normal course of carrying business.
Self-Managed Superannuation Funds
Treasury Laws Amendment Bill 2020.
This bill amends the Superannuation legislation to enhance the maximum number of members who are allowed in SMSF that was 4, now to 6, also to modify the corresponding provisions that are related to needs for the members to be trustees. This could get affected by laws based on the State, concerning the number of trustees of the trust.
The modifications are also applicable to “small APRA funds” that are the funds with less than 5 members but these are not SMSFs. The amendments enhance the number of members that are referred to in the definition of “Self-managed Superannuation fund” in SIS act about the accounts and the statements that the trustees of SMSF assure are prepared for every income year.
Get the assistance related to updates in the JobKeeper payment and COVID-19 grants. Reliable Bookkeeping Services in Australia is dedicated to providing you all the updated information and assistance to grab most of the grants provided by the government. Call now to seek the best advice and services @ 1300 049 534