business

The JobKeeper scheme was organised so quickly so there was always going to be tricky questions of how it was going to operate and who it will apply to.

When they first announced the Scheme, the Government did not have all the details worked out. So, when businesses and Tax Agents like us, started to ask a lot of questions there was nothing provided except ‘wait and see what we give you when we have worked it out ourselves, and oh, don’t forgot to register for updates so it looks like we are doing something.’

In the last few weeks many people have been working overtime to keep their businesses afloat and trying to get their head around our new world. The Accountants, Lawyers, HR Consultants, IT specialists. The list goes on.

There is one main point in the JobKeeper Scheme that is going to hurt many businesses. The ATO are insisting that $1,500 is paid to all employees before they (The ATO) will pay businesses the “wage subsidy”. If you are still operating at a decent level, then it might be achievable.

But I have a client in the Medical Profession that has completely shut down with 2 staff plus themself. That means the business needs to pay $4,500 this week and another $4,500 in the final week of April (every fortnight). Then in May the ATO will pay him $9,000.

It’s a short term cashflow issue but if you do not have the cash what do you do?

What period will JobKeeper scheme cover?

The JobKeeper scheme will be available for the period 30 March 2020 until 27 September 2020.

Turnover

The ATO have confirmed that it is based on estimated GST turnover. This means the ATO will be looking at your Business Activity Statement and if it is estimated to have fallen or will fall by 30 per cent or more relative to a comparable period.

What does this mean exactly?

Well it means income which is declared on your BAS quarter or BAS income for a month which must be compared to the same period last year.

The test compares the GST turnover of any of the months from March 2020 to September 2020 or the quarters that starts on 1 April 2020 or 1 July 2020 with the corresponding period in 2019, with a business satisfying the test where there is a shortfall of 30 per cent or more.

E.g. a business can make the comparison by comparing the whole of the month of March 2020 with March 2019, or by comparing the quarter beginning on 1 April 2020 with the quarter beginning on 1 April 2019.

Once an entity satisfies the decline in turnover test, it does not need to retest its turnover in later months but you will need to notify the ATO of its current GST turnover for the reporting month and its projected GST turnover for the following month on a monthly basis. This is for their information only.

Which employees are eligible?

Employees can only claim once with one employer. Business owners are confused how to claim for themselves. If you are paid a salary or a wage by your business, you claim as an employee. If you do not get paid a salary or a wage you can claim as a business owner. But you cannot claim both.

In order to claim you should register and pay wages via Single Touch Payroll. Payroll payments should be made using your payroll system and reported to the ATO.

If you do not report through Single Touch Payroll, you can still claim the JobKeeper scheme however, there will be a manual claim process but we have not been given details.

Once you decide to participate in the JobKeeper scheme, all eligible employees must be covered by the scheme and you will have to tell your employees whether you have nominated them as an eligible employee.

How often will the ATO pay me?

The payments will be made by the ATO monthly in arrears. This means you have to pay your employee and then collect from the ATO later. You will have to ensure your cashflow allows this. You could be out of pocket for a number of weeks.

The ATO is aware that this will present cash flow difficulties but has stated that they expect payments to be made to employees before the ATO will make payment to the business. If businesses do not have the cash to make payment they have advised that businesses should talk to their bank to discuss ‘their options’.

The banks have said businesses may be able to use the upcoming JobKeeper scheme as a basis to seek credit in order to pay their employees until the scheme is making its first payments.

We do not believe this is a viable option.

Trying to get a bank to organise finance in the next few days may be almost impossible and at the moment the banks are not picking up the phone as they are so busy working on deferrals and payment holidays.

Employers will need to ‘satisfy payment requirements for their eligible employees in respect of each 14 day period covered by the scheme.

Basically this means the ATO can confirm you have made the payment before paying you which will delay payment even more.

The first period starts on Monday 30 March 2020 and ends on Sunday 12 April 2020. That was three days ago so you need to organise payment in the next week or so.

The final period will start on Monday 14 September 2020 and end on Sunday 27 September 2020.

If I have stood down employees with the intention of keeping them when things get back to normal do I pay them?

Yes, you need to pay them as long as they are not claiming Jobseekers Allowance.

You can claim the JobKeeper scheme for employees that were stood down after 1 March 2020. To be eligible in relation to these employees, you will need to pay them a minimum of $1,500 per fortnight (before tax).

My business was not in existence 12 months ago or my monthly income is not consistent. What happens now?

The Tax Commissioner will have discretion to consider additional information that the business can provide to establish that they have been adversely affected by the impacts of the Coronavirus.

The ATO realise that there will be some businesses that do not have all the information available but will still claim. The ATO has said there will be ‘some tolerance’ where employers, in good faith, estimate a 30 per cent but actually experience a slightly smaller fall.

My Turnover has not gone down 30% yet but I think it will happen later. Can I still claim?

Yes, but you can only apply when you reasonably expect that your GST turnover will fall by 30 per cent. The ATO will provide guidance about self-assessment of actual and anticipated falls in turnover at a later date so we do not know how this will operate at the moment.

If you claim JobKeeper scheme at a later date it will not be backdated to 30 March 2020.

I operate a business but do not pay a salary or wage to myself. Can I claim?

Yes. People who are self-employed will be eligible for the payment provided:

  • they were actively engaged in the business;
  • are not entitled to another JobKeeper scheme
  • are not a permanent employee of any other employer;


What about partnerships?

You can claim but only one partner can be nominated to receive a JobKeeper scheme along with any eligible employees provided.

  • they were actively engaged in the business;
  • are not entitled to another JobKeeper scheme
  • are not a permanent employee of any other employer;


What about Trusts?

Trusts can receive the JobKeeper schemes for any eligible employees.

If you receive a distribution and not a salary one individual beneficiary can be nominated to receive the JobKeeper scheme provided:

  • they were actively engaged in the business;
  • are not entitled to another JobKeeper scheme
  • are not a permanent employee of any other employer;


Technically, a trust that is loss making cannot pay distributions which means a loss making trust cannot claim.


What about company directors?


An eligible business can nominate only one director to receive the payment, as well as any eligible employees provided:

  • they were actively engaged in the business;
  • are not entitled to another JobKeeper scheme
  • are not a permanent employee of any other employer;


I have and Apprentice. Do I get the JobKeepers and the Training Subsidy?


No.


Eligible small businesses can receive the 50 per cent wage subsidy for apprentices and trainees in the Supporting Apprentices and Trainees measure from 1 January to 31 March 2020, and the JobKeeper scheme.


Where small businesses receive the JobKeeper scheme, they are not eligible to receive the apprentice and trainee wage subsidy from 1 April 2020 onwards.

 

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We pride ourselves in supporting small businesses during the current COVID-19 crisis.

Helping navigate the various stimulus packages to maximise the entitled benefits businesses may receive, whilst also, at times, protecting people from themselves. Sometimes that means we will need to say no.

The Tax Practitioners Board (TPB) in partnership with the ATO yesterday released a joint statement titled Working together in response to the impacts of COVID-19. It serves as a reminder to accountants and bookkeepers of our responsibilities in the profession during this troublesome time.

Working together in response to the impacts of COVID-19

As the Australian community confronts the unprecedented COVID-19 crisis, you will have seen impacts to your clients and your own business. We know you are working hard to support your clients while dealing with the impacts to your own business.

These are trying times, and we at the Tax Practitioners Board (TPB), Australian Taxation Office (ATO) and your professional associations are committed to supporting you through this difficult period.

The Commissioner has highlighted that tax professionals have always been a vital part of Australia’s tax and super systems. Now, as we work together in response to the impacts of COVID-19, our partnership is more important than ever. We all play an essential role in helping the community respond to this crisis and supporting our clients.

As you know, the intent of the Government’s relief measures is to help the economy withstand and recover from the economic impact of COVID-19 by supporting businesses to manage cash flow challenges and retain employees.

Some advisors may be grappling with the tax consequences associated with the stimulus payments, and wondering what will attract our attention. We also know that some businesses are already making changes to their business structures and employment arrangements following the stimulus announcements.

We ask that tax agents and businesses be mindful that it is not acceptable to backdate or artificially change a business structure or employment arrangements, including changing the characterisation of payments, in order to obtain a benefit or payment that would not otherwise have been paid. The TPB and ATO will take firm and swift action should this be the case.

We understand these situations can be difficult to navigate and we encourage anyone who needs advice to seek assistance from us. If you become aware of someone doing the wrong thing, report them to the TPB or the ATO or call 1300 362 829. All reports will be treated in the strictest confidence.

As trusted guardians of the tax and super systems, we all have an important role to play in helping Australia overcome these challenges. The best way forward is for all of us to work together to ensure the Government measures are applied in accordance with their intent. We are committed to supporting you during this difficult time, and ask that you support all Australians in the conduct of your practices.

What does this all mean?

The main message here is that the ATO will not take too kindly of businesses looking to become eligible for, or to maximise benefits that they would not ordinarily be entitled to. It echos the information released as part of the Cashflow Boost for Employers

… if you have been paid more cash flow boosts than you are entitled to, you will be required to repay the excess

Schemes

You will not be eligible for cash flow boosts if you (or a representative) have entered into or carried out a scheme for the purpose of:

  • becoming entitled to cash flow boosts when you would otherwise not be entitled, or
  • increasing the amount of the cash flow boosts

This may include restructuring your business or the way you usually pay your workers to fall within the eligibility criteria, as well as increasing wages paid in a particular month to maximise the cash flow boost amount.

Any sudden changes to the characterisation of payments made may cause us to investigate whether the payments are in fact wages. If the payments are wages, we may consider the characterisation of past payments, including whether they should have been subject to PAYGW and whether super guarantee contributions should have been made. You may also have FBT obligations that have not yet been met.

Our position on all of this is not to make changes that might bring about scrutiny from the ATO. Don’t do things you would not have ordinarily.


And from the JobKeeper Fact Sheet from Treasury, prior to it being legislated –

The Government will include appropriate integrity rules to prevent employers from entering into artificial schemes in order to get inappropriate access to payments.There are serious consequences, including large penalties and possible imprisonment, for those trying to illegally get benefits under the scheme.

How does this change our approach with businesses?

It is clear that the Tax Office wants you to keep doing things the way it has always been done. No sudden changes. And for us, that’s our starting point recommendation as well. Remember, the ATO has massive amounts of information from your activity statements, and Single Touch Payroll reporting, to build a picture of what your business usually looks like.

The difficulty arises when is a genuine reason for a change to the characterisation of payments, that is not an attempt to scheme but is a legitimate case for the business. This could be, for example, a tax planning decision. Intention means everything.

Our position as professional accountants and business advisors is simple. 

We are here to support you doing the right thing by everyone involved, and maximising the benefits you are entitled to while we navigate the intricacies of the stimulus measures put forward to us. 

Our primary focus is always on supporting and protecting your best interests and your business. 

Not just during these rough times but also into the future.

 

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COVID-19 poses a considerable threat not only to our health but also to our businesses.

For many businesses, the steps the governments have imposed to contain the virus have resulted in a sudden and dramatic fall in demand for products and services, labour shortages and supply disruptions.

There are a number of actions you should consider to help manage your business through these uncertain times.

These actions should assist your business to survive and place it in the best possible position for revival.

Below is a list of actions you can undertake to help your business manage this difficult time.

We encourage you to speak with your accountant or other professional advisers to help you manage through this crisis:

1. Keep your financials up-to-date

To be able to make the best possible decisions, you need access to the most up-to-date information on the financial position of your business.

2. Act now to improve your cash flow

Improving cash flow, whether it be by getting more cash into the business or reducing cash leaving the business, or both, is essential to business survival. It should also put your business in a good position to take advantage of the recovery. You need to establish a Cash War Chest.

3. Increase online sales and keep in contact with your key customers

With customers staying at home, look to reach them through online sales platforms. At a minimum have an Ebay store and look at an Amazon store front. Then consider whether a Shopify website will work.

4. Develop a contingency plan.

If possible, put in place a plan to help your business continue operations if the government imposes tighter restrictions, such as staff working from home. Also consider is there an opportunity for your business to change direction with new service offerings.

5. Keep regular contact with staff

Remain positive but also be upfront with staff on the state of your business. 

6. Keep in contact with your key suppliers

Talk to your key suppliers about their ability to deliver reliably to you during the crisis. Consider alternative suppliers.

7. Do a regular financial health check on your business

Knowing the financial health of your business is essential to assisting you in deciding what you can and should do to manage through the crisis.

8. Take time to do a reality check

Ask yourself some questions about the performance of your business before the crisis to help you determine what you want your business to look like post-crisis.

9. If you are in financial difficulty, seek professional advice asap.

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The Federal Government has so far announced two separate stimulus packages to the sum of $189 billion.

The packages include both cash and tax incentive measures.

Below they are summarised, based on what we know as of today.

1) 100% Cashback on PAYG Withholding, up to $100,000 in total
Eligible small and medium-sized employers will be provided a 100% tax-free ‘cash back’ of up to $50,000 (and a minimum of $10,000) on your PAYG Withholding on wages between 1 January 2020 and 30 June 2020.

A second tranche of tax-free, cash back payments of up to $50,000 (and a minimum of $10,000) on your PAYG Withholding on wages will also be paid for the period 30 June 2020 – September 2020.

This second payment is calculated as the total cash back credit calculate in the first payment, split evenly over the June-2020 to September 2020 BAS/IAS lodgement period.

So to summarise – the cash back is now calculated on 100% of PAYGW of your wages, paid in 2 separate calculation periods.

So, breaking this down:

Payment 1

If you have spent more than $50k in PAYGW for the 6 month period between 1 January and 30 June 2020, you will receive $50,000 in cash from the Government for this period.

If you have spent $30k in PAYGW for the same period, you will get $30,000

Regarding the Additional Payment (Payment 2):
The same total benefit per Payment 1 is paid equally over your BAS/IAS lodgement period between 30 June 2020 and 30 September 2020

A couple of other points on this:

If you take your ‘salary’ as a dividend or directors drawing and want to maximise your ‘cash back’, you could explore changing the treatment of your remuneration from drawings to salary.

If you have an existing debt with the ATO this benefit will offset your existing liability.

💡 How to apply?

This credit will automatically be processed upon lodgement for your BAS and IAS. We and/or your bookkeeper will process it for you.

2) 50% subsidy on apprentice wages, up to $21,000

Eligible employers can apply for a wage subsidy of 50% of apprentice or trainee wages for up to 9 months from 1 January 2020 to 30 September 2020 (up to a maximum of $21,000 per eligible apprentice or trainee).

If a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.

Tax incentives for Small Business Owners

The immediate tax deduction threshold has been increased from $30,000 to $150,000 for assets purchased between 12 March 2020 and 30 June 2020

Assets over $150,000 will attract an additional 50 percent depreciation rate of the asset cost in the year of purchase for assets purchased between 12 March 2020 and 30 June 2021

A couple of other points on this:

It’s important to note that these are tax incentives, not cash back incentives. In other words, you need to spend the money, and pay income tax in order to get the tax benefit.

The tax benefits will be applicable for your FY20 and FY21 tax returns, which means you won’t see any benefit until you’ve lodged your 2020 and 2021 returns.

💡 How to apply?

This credit will be processed upon preparation and lodgement for your 2020 and 2021 income tax returns.

Tax Payment Deferrals

The ATO is providing SMEs payment deferral concessions for businesses directly impacted by COVD-19.

They are outlined as followed:

Deferring by up to 4 months the payment date of amounts due through the business activity statement (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise.

Allow businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get faster access to GST refunds they may be entitled to.

Allowing businesses to vary Pay As You Go (PAYG) instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.

Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities.

Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low interest payment plans.

A couple of very important things to note:

You will still need to pay Superannuation

These relief provisions are not automatically applied. You will or we can contact the ATO to make any of the above requests for assistance.


💡 How to apply?

Businesses can call the ATO’s Emergency Support Infoline on 1800 806 218 to discuss relief options based on their needs and circumstances.

Government underwritten, Cash flow loans for SMEs
The Government will provide a guarantee of 50% of new loans written by banks and SME lenders to support new short-term unsecured loans to SMEs.

Important clarification – this does not mean the Federal Government is issuing loans directly.

It means that the Government is providing a guarantee to banks and SME lenders to reduce their risk to provide unsecured loans to SMEs that need the cash for working capital.

So what does this mean for me?

Expect a new type of loan product issued by the banks and lenders, tailored for SMEs that have been directly disrupted by COVID-19


💡 How to apply?

Contact your bank/lending institution about this package.

Refer to the ‘Coronavirus SME Guarantee Scheme’ and ask what new loan products are available to assist.


There is a lot more information out there and we will endeavour to sort through it all and pass on all that is important and relevant.


These are stressful times, and we are here to help you in anyway we can.


Please contact us if you any questions or need help with anything. Together we can work through this.
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Managing your business in a crisis

Practical strategies you can deploy straight away.

We are experiencing extraordinary events, first the bushfires, then the rain and now the impact of the coronavirus.

The impact of these are likely to see Australia enter into recession for the first time in almost 30 years.


For businesses to prepare and combat the effect of a recession, business owners must urgently review their business and prepare for such an event. To assist business owners (or your clients) through these troublesome times, below are some simple and practical ideas that business owners can implement during such a crisis. We can also assist business owners with this assessment.

Here is our 5-step process to crisis proof your business.
  1. Review
  2. Identify and build
  3. Execute and act
  4. Monitor
  5. Speak to us
1. Review

This is for you to focus on what is within your control and what your business key drivers are.

• Is your work environment for staff and customers safe?

• What expenses are key to the business operating and which are not?

• Are there any expenses that can be reduced without impacting the business’s long term viability?

• Which revenue streams have been or will be impacted?

• What actions can be undertaken to protect and maintain revenue?

• What obligations do you have to financial institutions, such as loans?

• What statutory obligations to you have in the short and medium term?

2. Identify and Build

Once you have determined the key drivers of your business then you MUST develop a plan.

Documenting the plan, allocating responsibilities, and setting agreed timelines is essential.
 
Ensure your staff and key stakeholders are supportive of the plan. Communication is key.

• Prepare a plan to ensure a safe environment for your staff and customers. How are you communicating that you have a safe environment to your staff and customers? How often are you communicating?

• Optimise revenue—what revenue initiatives can be undertaken to maintain a sustainable level of income—consider collection of debtors, sale campaign, alternative delivery methods (online). Are there new revenue lines that can be undertaken as a result of changing market conditions? But also be honest with the stock levels you have to your customers.

• Supplies – ask your suppliers if they can recommend alternatives if they’re affected by imports. If they can’t, explore finding alternative for your stock.

• Reduce expenses—a detailed review of business expenses should be undertaken to identify any expenses that can be reduced or even eliminated altogether. This could be a reduction in staffing hours, termination of unnecessary or non-essential services or even sale of surplus assets that are subject to finance.

• Deferral of expenses—are there any other expenses that can be delayed? Are there any creditors that are willing and able to provide support through relaxed payment terms? The Australian Taxation Office (ATO) can provide relief through the following initiatives:

 – Deferring (by up to four months) the payment date of amounts due through the business activity statement—including pay as you go (PAYG) instalments)—income tax assessments, fringe benefits tax assessments and excise tax.

 – Allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting to get quicker access to GST refunds they may be entitled to.

 – Allowing businesses to vary PAYG instalment amounts to zero for the March 2020 quarter. Those businesses can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.

 – Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities.

 – Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low-interest payment plans.

 – Financier support—contact your financier to discuss what financial support is available (usually by way of deferred payment terms under the loan facility).

 – Consider government assistance—find out which government support applies to your circumstances.

3. Execute and Act

Urgently responding to these situations could include the following approach.

• Increase your sales through new sales approaches and new revenue lines.

• Increase exposure through other platforms to sell and market your business. Could platforms previously thought to not work for your business now be relevant? Consider ecommerce and social media to increase your businesses visibility and exposure to current and new markets.

• Communication must be open and transparent with employees, financial institutions, landlords, suppliers, the ATO, customers and local business networks. It should be regular and honest. 

• Implement relaxed payment terms. Make it easier for other businesses to do business with you. But  make sure you understand the financial impact this may have on your business.

• Enable staff to work from home if possible. Staff safety is paramount and non-negotiable.However, knowing what they need to be effective while away from an office environment will help speed up this process and streamline job functions/tasks during this period. Also ensure cyber security measures are in place.

4. Monitor

Regularly check on the financial position.

This means:
• Monitor on a regular basis.
• Adapt and change your plan, if necessary.

5. Speak to us

The current environment can be very daunting and we are available at any time to assist business owners that find themselves in a distressed position. We are experts in
providing advice and can provide the guidance that may be needed in these difficult times.
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The Australian Government has announced a cash stimulus package for small business in wake of the Coronavirus and the downturn in economic conditions.

But what does this actually mean.  People are asking “when do I get my $25,000 deposited into my bank account”.

Now before you start planning to spend this money, let’s look at the government jargon, the accounting terminology and put it all into perspective.

  1. You will not receive an automatic payment of $25,000 in your bank account. Plain and simple.  Sorry.
  2. The $25,000 rebate is a rebate based on the level of tax on wages reported on your activity statements for March 2020 and June 2020 (or monthly activity statements for March 2020 – June 2020).
  3. The rebate you are entitled to is 50% of the reported tax on wages
  4. Over the course of the eligibility period, you can receive up to a maximum of $25,000
  5. If you don’t employ anyone (so a sole trader, perhaps with contractors only), you may not be eligible for any part of this particular rebate
  6. The rebate will be applied as part of the BAS and reduce the overall amount owing.
  7. If the rebate puts you into a refund position, the ATO can take up to 14 days (however I would suggest it could take longer) to refund any amount to you.
  8. There is a minimum amount of $2000 for the first activity statement for those eligible business owners with employees who don’t reach the tax threshold to report tax on wages.
  9. Link to the Government article regarding the stimulus (plus other announcements) can be found here

So how do you know if you are an eligible business:

  1. Your turnover must be under $50 million
  2. You must have employees

So why wont everyone get this?

The government wants to make sure that the most amount of people can retain their jobs based on this current economic downturn due to Coronavirus.  By giving a rebate to those who are employing staff, those business owners are more likely to keep those staff on, and continue to be able pay their wages.  In a cash flow crisis, the last thing people want to worry about each day when they go to work is whether or not they will leave at the end of the day unemployed.

I think it is the government’s intention for business owners who are eligible for this particular rebate, to hopefully then spend that money back into the economy, back into other small business operations, supporting other freelancers and contractors, and in effect, boosting other peoples income. So hopefully, we will all benefit.

Time will tell what, if any, impact this Small Business rebate will have on our economy.

There were other government initiatives announced as well, like the extension of the Instant Assets Write Off.

But, do your research and speak to your accountant before rushing out and making any rash and expensive business decisions.

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