Business – Fiscal Artisans

by Fiscal Artisans
February 20, 2023
Uncategorized0

2022–23 Working From Home Deductions: What’s Changed?

#image_title

The Australian Taxation Office has just released its revised methods for working-from-home deductions for the 2022–23 tax year. The main change this year is that the ATO is now more focused on making sure people are actually working from home, and not just claiming the deduction without any evidence to back it up. So if you’re planning on making a claim for working from home this year, make sure you follow these new guidelines to avoid being caught out!

From the 2022–23 income year, the methods available to calculate working-from-home deductions are the:

  • revised fixed rate method
  • actual cost method.

While the actual cost method remains unchanged, the revised fixed rate method has been updated to better reflect contemporary working-from-home arrangements, making it easier to calculate expenses and avoid time-consuming apportionment calculations.

The revised fixed rate method:

  • has increased from 52 cents to 67 cents per hour worked from home
  • removes the requirement to have a dedicated home office space
  • works out the claim for
  • electricity and gas
  • phone and internet usage
  • computer consumables
  • stationery
  • allows taxpayers to separately claim the work-related portion of the decline in value of depreciating assets – such as office furniture and technology.

The revised fixed rate method can also be used by businesses that operate some or all of their business from home to claim home-based business expenses.

If you plan to use the revised fixed rate method for your 2022–23 tax return, you need to have:

  • from 1 July 2022 to 28 February 2023 – a record which is representative of the hours you worked from home. (e.g. diary notations or a work record showing start and finish times for at least 1 month of work as a representative period of time for the year)
  • from 1 March 2023 to 30 June 2023 – a record of the total number of hours you worked from home (such as a timesheet, roster or diary) as well as evidence you paid for each of the expenses you incurred that are covered by the fixed rate method (for example, a phone or electricity bill). You will also need records for any equipment you bought to work from home, like technology or furniture (which provides details of the supplier, cost, date acquired).

    So this will mean that, for EVERY HOUR you want to claim work-from-home deductions using this method, you MUST have the time documented. While this may not be needed for your employer, it is necessary in order to be able to make a full and legitimate tax deduction at year-end.Your diary – paper or electronic – will become your best friend this year!

    There are many apps that can be used for this, or even just a consistent notation on your diary of your start and finish times, recorded daily. But recorded it must be!

Working from home is becoming more common, so make sure you know what you can and can’t claim in order to get the best return on your investment. Contact Fiscal Artisans today for expert advice on how to maximise your deductions this financial year!

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by Fiscal Artisans
September 19, 2022
leon-seibert-2m71l9fA6mg-unsplash.jpg?fit=1000%2C667&ssl=1
BusinessCompaniesCompanyDomain namesmall businessWebsite0

Are your Domain name and website under threat?

Australian Domain name changes are about to go live.

 

Australians have until 20 September 2022 to seek priority allocation of an .au direct domain name that matches their existing domain name.

 

Anyone with an Australian presence (including businesses, organisations and individuals) can now register a new domain name category, known as .au direct. These shorter, simpler domain names will end in simply ‘.au’ (e.g. mybusiness.au) and complement existing namespaces such as ‘com.au’, ‘net.au’, ‘org.au’, ‘asn.au’, ‘id.au’, ‘gov.au’ and ‘edu.au’.

Existing domain name licence holders have been provided priority to register the .au direct equivalent of their domain names until 20 September 2022, after which domain names that have not been allocated will become available to the general public.

This new option for domain names creates opportunities for businesses, organisations and individuals. However, it could also provide another opportunity for cybercriminals by facilitating fraudulent activity like business email compromise. For example, by registering yourbusiness.au where you have already registered yourbusiness.com.au to impersonate your business.

The ACSC recommends that all Australian businesses, organisations and individuals consider taking advantage of the priority allocation process to register the .au direct equivalents of their existing domain names. In cases where conflicts occur, such as when different organisations own similar domain names (e.g. mybusiness.com.au and mybusiness.net.au), priority allocation will help determine who can register their .au direct equivalent. Until 20 September 2022, registrants of .au domain names licensed before the launch of .au direct have priority to apply for the matching .au direct domain name.

After this date, it may be possible for ‘cyber-squatters’ to register ‘your’ domain name and seek to impersonate your website or use it for various fraudulent activities, or simply ‘squat’ on your name and potentially look to sell your own site back to you.

Businesses, organisations and individuals who have registered a domain name outside of Australia can also consider registering an .au direct domain name. For example, a business that currently holds mybusiness.com should consider registering mybusiness.au. This will prevent cybercriminals from registering these domain names and using them for attempted financial fraud.

You can reserve your .au direct domain name by visiting an auDA accredited registrar.

If your business or organisation is a victim of business email compromise or other fraudulent activity, please report the incident to the ACSC through ReportCyber or contact 1300 CYBER1 for support. auDA also has a complaints process available you can access through their website.

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by Fiscal Artisans
February 25, 2021
Uncategorized0

2020 Vision – I can see clearly now the year has gone


2020 Vision

I can see clearly now the year has gone. 

(with apologies to Jimmy Cliff)

 Lessons from a year in lockdown

As we move into 2021 and the end of summer, let’s look back at the realisations that came from the year that was 2020.

Yes, the headings are song titles. Let’s have some fun with this. 
(Artists listed at the end. Can you guess them all without peeking?)

 

 1. If you want it, here it is, come and get it…

Twelve months ago, we could see that the virus was going beyond being a ‘small problem somewhere overseas’ and could disrupt us on more than just a personal scale. But we were being told to ‘keep calm and carry on’. What really needed to be said was that we all had to be ready for substantial changes and that everything could and would shift in a moment.

While Federal government support was promised and eventually provided, it was always after the event. It was not provided to help businesses and individuals deal with the coming problems, but rather to try to ‘rectify the problem’ after the event.

JobKeeper, cashboost etc., were all contingent on businesses being ‘prepared’ in advance – if you did not have all of your ‘paperwork’ in order before the assistance was announced, it was too late to step up. You had to pay staff before the funding was provided. And the support was going to be paid a month or more in arrears – and in some cases up to 6 months later.

The State government support was very much the same. The early rounds of support were released with little information and explanation, and no recourse for later follow up. In some cases, payments took six months from application to payment. This was not what was needed – help was needed right away, not ‘on the never never’. If you were not able to cover your needs upfront, you either had to borrow the money or dip into reserves to survive until the cavalry arrived.

It’s easy to say that the support was arranged in a way that favoured larger businesses, but in my experience, that was the case. Cashflow management is crucial in small businesses (and it’s important in all businesses!), and the support of banks was lacking at the small business level but was far more possible with a business ‘of size’. In our experience, larger organisations found the banks were more willing to “extend credit”, but the same arrangements were not there for the “solo operator” or any business with less than $1 million in turnover.  This often meant that business owners were struggling or had to make employment choices that were not beneficial to them or their staff. The ability to rebound was also affected as a result. The catch-up process to recover from this could take years for some people.

In virtually all cases, the government support was contingent on a business (or sole trader) being correctly registered – all tax registrations, Super, WorkCover etc., in place before the problems started. (For many small businesses, these registrations were often considered voluntary and somewhat unnecessary and costly). And accounting and financial systems all need to be in place so that the data needed was on hand at all times. The difference between having this in place and not doing so (and hence qualifying for support) could be measured in the tens of thousands of dollars for most small businesses in Victoria. In some cases, this was the sole factor between survival and bankruptcy, and business income fell by 75 – 100%. As we move out of lockdown and into a post-vaccine economy,  the lessons to be learned from this are to have your business arrangements in order from the start – the proper business structure, accounting, payroll and reporting in place – and understanding what the numbers mean for you and your business. And be in regular contact with your advisors, so you know what you need to do, then take action quickly, as the opportunity to rebuild stronger and better in 2021 and beyond become more evident.

The lesson from this – be prepared. Structure your business as if it is ten times the size it is today. And get some help in doing this!

 2.   I get by with a little help from my friends

For many in business, the only way through the tangle of support was hand-in-hand with their advisers – accountants, lawyers, planners and mentors. Over the last 12 months, the reality that all our businesses do not ‘operate alone’ – even when you think you ARE in a one-person business – has never been more true.

There is an old saying is that it takes a village to raise a child. In the same way, I believe that you need a ‘village’ to help grow your business. Legal, financial, corporate, tax advice is usually turned to at various times, but you also need to look at assistance in the way that you manage the business, balance your personal and business time and life, and how you keep the focus on the important things. How do you market and promote? Having gone back into a coaching process with a trusted business coach and taken some time to review and refocus on the important elements of health, family, as well as business values and goals, I can only highly recommend to you that, as you plan to grow your business, don’t think you have to try to do it ‘all on your own’. (And I can highly recommend my coach to you!)

One focus I have this year is to provide you with a team of people that can help in key areas – of course in accounting and financial (bank and finance) aspects, but also with financial planning, legal, and business development sides. These are people that I trust with what I do, and I am sure that they can help you in the same way.

Why have ‘just’ one superhero on your side, when you can have the whole Marvel Universe?

 

3. I am, you are, we are… dependant on each other

Its always interesting – and a bit of fun – to debate the role of Government and taxation in modern society. How as a population, we are overtaxed, or undertaxed, should all fend for ourselves, should look (or not look) to the Government to provide basic essentials to us, etc.

And just what is ‘essential’ these days? Besides air, that is – as everything else has a ‘price’ on it now and can be obtained from ‘non-government sources’. But is that the way it should be? Does this provide an opportunity for ‘everyone’ to achieve their fullest potential or only the fortunate few?

At a minimum, health and education services should be a high priority for all of us, just like roads and communication (Internet / NBN access). None of these should be left purely ‘to the market’ as the market will always favour some over others,and value profit over service or access. And in a society that promotes equality and opportunity, that is unfair.

Post-Covid, what do we see as being important now – wealth or health? Individual success or collective achievement?

With Covid, the people we have come to depend upon the most are the front-line people: Medical services to test and treat us; security, cleaning and protective staff to keep things managed in such a way as to protect the affected and minimise the impact on everyone else in society.

And the demands on retail staff, hospitality staff, drivers, delivery people etc. has never been greater. We need them to feed us, clothe us, bring things to us and protect us. And yet, these people have often been maligned, underpaid, and put into temporary positions with little or no security, training or respect. This needs to change on many levels.

I have always suggested to clients that tax is an expense of business – not something to be avoided, rather, to be minimised but accepted as being a cost of business and a societal cost of living. It is a cost of business operations that is necessary to provide services that would otherwise have to be paid for anyway – and may otherwise be completely unaffordable.

For me, the Government’s role has always been to provide the base on which our society can survive, grow and prosper (you cannot have an economy without a society unless that is an economy of machines). No matter who you are, what family you were born into, what abilities you have in your head, hands, face, voice, body or feet, your success is as a result of not just what you have done individually, but also the support you have got from the society and the government-funded or supported schools, health services, roads, police and all the rest that is provided by the taxes that we all pay. Paying tax is not a ‘burden’. It’s a contribution towards providing all of that to you and everyone else around you.

How the Government uses that money to support us – now that is another topic altogether!

 

4. Ch-Ch-Changes

When action needs to be taken, do you do nothing and hope it goes away, or do you make a change quickly?

Over the year, there has been plenty of debate about how soon action needs to be taken, how much action, and for how long.  We saw this ‘post-GFC’ as well as with Covid.

Looking back over the last 12 months, I believe that this is what should have happened:

a)     Lockdown of the economy should have happened earlier, minimising the risk of spread, and continued until a full eradication happened. This could have been done in the same timeline as New Zealand did.

b)     Government financial support needed to start in February, not announced to start in April and paid in May. Yes, people should have been paid to ‘stay at home’ on a substantial percentage of their salaries, not just a basic ‘supplement’ to help businesses maintain employment. And this should have been done in a way that was equitable and supported small businesses, sole traders and creatives, especially those in itinerant roles and positions.

c)      Front line staff needed to be employed directly and paid and trained properly. Covid and quarantine should have been treated as a medical problem, not a security one.

d)   There is an opportunity in every crisis. Facilities should have been built (and should be now) to house those at risk or needed quarantining or return to Australia, manage them safely and protect them and everyone around them. These facilities could then be used for other ‘relief matters’ – be it post a natural disaster, support for displaced people, or for cross border quarantining of itinerant workers for the agriculture and mining industries. The construction of these facilities would employ many trades during construction and operation and redeployment of the facilities on an ongoing basis. 

     The current use of ‘hotel quarantine’ should be stopped, and as the lockdowns ease, hotels can return to their normal corporate and tourism-based activities. Use these facilities for the role where they are ‘fit for purpose.’

There has been a great reluctance to make ‘large changes’ to how things have been done, and planning always seems to have been an afterthought instead of a forward-looking, confident process. There was little leadership shown in taking the country forward together with a cohesive process to overcome the problems. It was more a reaction than taking action.

In the same way, in our businesses and our personal lives, we need to look at what we are doing and identify what changes we need to make – and make them now!

a)   How important is it for us to be ‘in the office’? Can we operate from anywhere else to do our work? This won’t apply to everyone, but what changes can or must be made to simplify the processes for all?

b)  Is your business set up in the right way? Is it able to grow or change as needed in the future?

c)  Is your information (accounting, financial, data services, ideas, materials etc.) up to date, accurate and relevant to what you are doing?

d)  How do you promote what you do? How well do you use the Digital environment to tell the world what you do? It’s not just ‘social media’ – It’s a new way of promoting and doing business.

Let’s talk about what you need to do and set up a plan for your future.

5. Are ‘Friends’ Electric?

The way that we ‘connect’ with friends, family, and business changed for many of us in 2020. The ongoing lockdowns of last year and the ‘snap’ actions seen a few times already in 2021 point to the fact that much will change in the future.

How will this affect what you do – and how you do it?

For many years, we have been told that the internet will be the backbone for almost everything in our lives – communication, entertainment, information, etc. I think that what 2020 has done more than anything else is accelerate that realisation (and implementation) for many of us.

From home-based primary, secondary and tertiary education, to on-line music, art or language lessons, telehealth appointments, endless Zoom meetings, Houseparty dinner gatherings and drinks with friends and family around the country and the world, our world has expanded while it has been consigned to a 24 inch (or phone sized) screen. We truly do have the world in our pockets, so why are we limiting our opportunities to our local suburb, region, state or country?

 Office spaces are coming home – or out of the CBD sprawl, and the need to commute has diminished. How does that affect what you do and how you do it? What opportunities does it open up for you, and what you can do?  Are there benefits from establishing ‘community hubs’ with flexible workspaces for people to go in and out of (with appropriate social spacing and health requirements) that facilitate both ‘office /creative work’ and remote work options? Would larger employers use these facilities instead of towers full of employees in the future?

 And what does this ‘new world’ mean for infrastructure – do we need a new model for ‘home development’? e.g. apartment or residential developments with dedicated ‘workspaces’ available for periodic use? How does retail change – and will there be more “Uber deliveries” instead of bricks and mortar retail. What does that do to the shopping centre environment? The Amazon experience could grow, reducing the need for ‘the Chadstone experience’, replaced by a flotilla of flying delivery drones (or a fleet of star track vans) instead.

 

For many, 2020 is the year that the world has changed, and the need to adapt to a “Brave New World” has become significantly clearer.  Is work our main focus?

 

 6.  Crushed by the Wheels of Industry

Is work our sole focus and the most important thing in our lives? 

Really, is that it?

Just how much do we need, how fast do things need to be?

For many, the ‘extra’ time at home and with the family has been a good opportunity to review what the priorities in life truly are.  To walk the streets in our limited exercise hours, read those books, watch those movies, and talk with friends and family and reconnect. And to reflect and think.

The pause may have allowed you to revisit your priorities and perhaps let go of what was once ‘so important’ to you and focus instead on what is ‘truly’ important.

2021 can (and perhaps should) be the year to look at what your priorities are – business and personal – and perhaps work on the truly important things, not just the things that ‘need to be done’. Find the “Why” you do “what” you do.

No-one gets this all ‘100% right’. Over the life of my business, I know I have not done so! But the process of doing something, getting the results, seeing the errors, correcting and doing again is all part of the process.

And the more we understand the “why”, and the more we do it, the better we get at it (hopefully!).

No one really gets it right without effort, and practice, and repeated action.

We do it, stumble, dust ourselves off (or have our team help us dust ourselves off)  and ‘get back in the fight’.

So, let’s talk about your ‘fight’ for 2021 and beyond – and let’s get on achieving your goals!

Comment here, or email or call and lets talk about what the year looks liek for you, and how we can take action.

 

Stuart Smith

Director

Fiscal Artisans

 

 

And the arists are:

1.       1. Badfinger

2.       2. The Beatles

3.       3. The Seekers

4.       4. David Bowie

5.       5. Gary Numan & Tubeway Army

   6. Heaven 17

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by Fiscal Artisans
October 7, 2020
Uncategorized0

The 2020 Federal Budget. Big Budget Spending for a Post-Covid World.

 

 “We’re back in black, oh yeah we’re BACK in BLACK.


Its May, 2019. And Josh Frydenberg grins and tells us that he has ‘brought the budget back into surplus in the coming year”

Not in the year that he was reporting on (2018/19), but in the year ahead – 2019/20.

Looking back now, it now reminds me of watching The Western Bulldogs play Essendon just a few months after this statement was made – in August 2019.

Essendon started brilliantly, kicking the first goal after just 20 seconds*

The Cheer squad was singing – They are Back in Black Baby! Break out the limited-edition coffee mugs and toast their success! (Or Break out a cigar perhaps?)

Well, we all know that you don’t determine the result of an AFL game after one minute. Nor do you proclaim the success of your financial forecasts in the moments after you announce them. But the treasurer was certainly not backwards in announcing just how successful they were going to be in the future.

And by the end of the financial year?

A year filled with economic downturns (The Myefo update in December 2019 had already shown a reduction in the ‘expected surplus’) then catastrophic bushfires before we faced a Global Pandemic that shut the economy down, meant that All the forecasts were not worth the paper they were printed on.

And like Essendon – not firing a shot until the game was well and truly over, the economic results sunk further and further into the abyss.

Like Essendon, they were well behind even before the Quarter time siren had sounded. But now, they blame the result on the last quarter’s performance, telling us they were ‘in the game’ right up until then.

So, the 19/20 financial year went from an estimated 10 billion surplus to a $150 billion plus deficit. Like Essendon losing by 104 points after being 6 points up!

As we all know, from far too many AFL disappointments, you never assume the result before the game even begins. Plan, and proceed optimistically, but never ever assume you know beforehand exactly how things are going to pan out. It’s why the bookmakers make far more than they pay out!

So, what do we have this year? In looking over the announced elements of this budget, I am looking at things from two viewpoints – what will the budget do to assist tax payers and businesses now or this year in improving their overall position, and what impact will it have on them later – beyond the next 12 months?

So much of the forecasting on this budget is predicated on a Vaccine-inspired, Post-Covid recovery. It is expecting that all state borders other than WA will open up by the end of the year (Xmas on the Gold Coast anyone?), and that Covid flareups like we have had in Victoria will be ‘largely contained’.

The biggest assumption of all is that a Covid 19 vaccination program will be fully in place by the end of 2021. That means not just that a vaccination is approved, but produced and a full immunisation program agreed and put in place by the end of the year. I admire optimism, but there are so many moving parts, and vested interests in play that I have my doubts that this will be in place by then. The budget assumes Australia’s economy will look fairly v-shaped next year. The budget papers expect Australia’s real GDP to fall 3.75% this calendar year, but to grow at 4.25% in 2021 — double what it was before the pandemic.

It’s a big call which underpins a lot of the government’s fiscal thinking, including in assistance to the unemployed and other areas of social security and welfare, where spending will fall to below 2019 levels from next year, “reflecting the impact of and recovery from the COVID-19 pandemic”.

The government says recovery will be driven by easing virus containment measures, and improving business and consumer confidence.

 So really, it all depends on if Australians (especially the rich) will spend.

 

For the recovery to look as v-shaped as Frydenberg wants, middle- and high-income earners will have to spend their tax cuts. Businesses will respond to asset write-offs and tax offsets by investing in stuff. A wage subsidy of $200 a week lasting just 12 months will be enough to get them hiring young Australians, who in turn will spend and keep the economy humming along.


All in all, it’s a whole lot of ifs. 

 

Another assumption is that the population slowly rises again.


The budget papers assume a gradual return of international students and permanent migrants, and a gradual increase in international travel through to the end of next year.


At the same time, net overseas migration is expected to go into the negative (-72,000) next year for the first time since 1946, before finally returning to above 200,000 in 2023-24. 


That longer-term return to normal, assumes people keep coming to Australia. And even the short-term forecasts could be tinged with optimism — as the ABC reported this week, international student numbers have fallen right off a cliff. And cutting university funding while increasing the cost of various courses – some by up to 115% – won’t make it easier for students to come back to study from any location

1.  The Budget at a Glance:


Year Ending

Budget Deficit  

Billion
Spend   Billion
% of GDP

Tax 

Billion
% of GDP

Net Debt  

Billion
% of GDP
2021
213.7
 670.3
34.40
424.6
21.80
703.2
36.10
2022
112.0
 567.5
28.20
413.8
20.60
812.1
40.40
2023
  87.9
 574.9
27.40
442.9
21.10
940.4
42.80
2024
  66.9
 596.6
27.10
487.6
22.10
966.2
43.80

 Note that the estimates for 2020-21 are all considerably higher than the July update from the Treasurer for the same period. This may reflect the additional items in the budget that had not been allowed for at the time, as well as a ‘look’ at the scoreboard midway through the first quarter!)


Economic forecasts

GDP: -1.5% (up from -0.2% in July update); 4.75% in 2021-22
Unemployment: 7.25% (up from 7.0% in July update)
CPI: 1.75% in 2020-21
Nominal GDP: -1.75%
Terms of trade: -1.5%
Household consumption: -1.5%
Dwelling investment -11%
Wage price index: 1.25%
Business investment: -9.5%
Population: 1.58 fertility rate (down from 1.69 in July update)

2.   Personal income tax

2.1  Changes to personal income tax rates

The Government has announced that it will bring forwardchanges to the personal incometax rates that were due to apply from 1 July 2022, so that these changes now apply from 1 July 2020 (i.e., from the 2021 income year). These changes involve:

  • increasing the upper thresholdof the 19% personal income tax bracketfrom $37,000 to $45,000; and
  • increasing the upper threshold of the 32.5% personal income tax bracket from $90,000 to $120,000.

These changes are illustrated in the following table (which excludes the Medicare Levy).

Rate                           Current (2019 to 2022)                     Proposed (2021 – 2024)

0%    

                   0 – $18,200   

0 – $18,200   

19%    

        $18,201 – $37,000   

      $18,201 – $45,000   

32.5%    

        $37,001 – $90,000   

    $45,001 – $120,000   

37%    

       $90,001 – $180,000   

  $120,001 – $180,000   

45%    

       $180,001+   

   $180,001+   
The Government advised that the personal income tax rate changes that have already been legislated, effective from 1 July 2024 (i.e., from the 2025 income year),remain unchanged. These involve abolishing the 37% personal incometax bracket, reducingthe 32.5% personalincome tax bracketto 30%, and increasing the upper threshold of the reduced 30% tax bracket from $120,000 to $200,000.


2.2     Changes to the Low Income Tax Offset (‘LITO’)

The Government announced that it will also bring forward the changes that were proposed to the LITO from 1 July 2022, so that they will now apply from 1 July 2020 (i.e., from the 2021 income year), as follows:

  • The maximum LITO will be increased from $445 to $700.
  • The increased (maximum) LITO will be reduced at a rate of 5 cents per dollar, for taxable incomes between $37,500 and $45,000.
  • The LITO will be reduced at a rate of 1.5 cents per dollar, for taxable incomes between $45,000 and $66,667.

 

 Current LITO (2021 to 2022)                                Proposed LITO (2021 to 2022)

$0 – $37,000

Up to $445

$0 – $37,500

Up to $700

$37,001 – $66,666

$445 – 1.5% of excess over $37,000

$37,501 – $45,000

$700 – 5% of excess over $37,500

$66,667 +

Nil

$45,001 to $66,666

$325 – 1.5% of

excess over $45,000

 

 

$66,667 +

Nil

 

Note that, the Government also announced that the current Low and Middle Income Tax Offset (‘LAMITO’) would continue to apply for the 2021 income year (which is available in addition to the LITO for eligible taxpayers). For example, the maximum LAMITO of $1,080 will be available to taxpayers with taxable incomes of between $48,000 and $90,000 in the 2021 income year.


However – currently, this rebate is set to be removed on June 30, 2021. This will mean an effective INCREASE in the net tax payable on taxable incomes up to $100,000 in the 2021/22 year. 

The net effect of these changes on various income levels are shown here:

 

 

Net tax payable

 

 

 

 

 

 

 

Allowing for tax rates and offset changes

Effective tax rate %

Taxable income

2020

2021

2022

Diff
2020 – 2021 

$       

Diff
2020 – 2021 

%

Diff
2021 – 2022 

%

2020

2021

2022

30,000

$2,142

1,887

2,142

$255

12%

-12%

7.14

6.29

7.14

40,000

$4,467

3,800

4,279

$668

15%

-11%

11.17

9.50

10.70

50,000

$7,467

6,387

7,467

$1,080

14%

-14%

14.93

12.77

14.93

60,000

11,067

9,987

11,067

$1,080

10%

-10%

18.45

16.65

18.45

70,000

14,617

13,537

14,617

$1,080

7%

-7%

20.88

19.34

20.88

80,000

18,067

16,987

18,067

$1,080

6%

-6%

22.58

21.23

22.58

90,000

21,517

20,437

21,517

$1,080

5%

-5%

23.91

22.71

23.91

100,000

25,717

24,187

24,967

$1,530

6%

-3%

25.72

24.19

24.97

150,000

45,997

43,567

43,567

$2,430

5%

0%

30.66

29.04

29.04

180,000

57,697

55,267

55,267

$2,430

4%

0%

32.05

30.70

30.70

200,000

67,097

64,667

64,667

$2,430

4%

0%

33.55

32.33

32.33

250,000

90,597

88,167

88,167

$2,430

3%

0%

36.24

35.27

35.27

400,000

161,097

158,667

158,667

$2,430

2%

0%

40.27

39.67

39.67

I expect that there will be ‘new announcements’ on this over the coming year. Probably leading up to an early election in late 2021. It’s pointless claiming that the government is trying to stimulate the economy with tax cuts if they only last for 12 months for a significant proportion of the population that are struggling the most.
There has been press saying that the backdating of the tax cut will occur by adjusting the tax to be deducted in the rest of the year – resulting in 12 months of tax cuts being provided over a 9 (or fewer months) period. I cannot see this myself, as it will require the legislation to be rushed through, made official and then the ATO needs to inform employers and payroll software providers on how this is to be implemented. Instead, I see the likelihood that there will be a ‘set date’ for payroll changes, after which a reduced tax amount is deducted from pays, with the balance of the tax benefit provided when tax returns for 2021 are lodged after July 1, 2021. (EDIT) As I prepare this, it as confirmed that the tax saving from July 1 until the tax cuts are processed will only be received once people lodge their 2021 tax returns after June 30 next year.

3    Changes affecting business taxpayers

3.1   Expanding access to Small Business Tax Concessions

The Government has announced that it will expand the concessions available to Medium Sized Entities to provide access to up to ten Small Business Concessions.
For this purpose, a Medium Sized Entity is an entity with an aggregated annual turnover of at least $10 million and (less than) $50 million

The expanded concessions will apply in three phases, as follows:

1.     From 1 July 2020, eligible businesses will be able to immediately deduct certain start-up expenses and certain prepaid expenditure.

2.     From 1 April 2021, eligible businesses will be exempt from FBT on car parking and multiple work-related portable electronic devices, such as phones or laptops, provided to employees.

            3.     From 1 July 2021:

  • Eligible businesses will be able to access the simplified trading stock rules, remit pay as you go (PAYG) instalments based on GDP adjusted notional tax and settle excise duty and excise-equivalent customs duty monthly on eligible goods.
  • Eligible businesses will generally have a two-year amendment period apply income tax assessments for income years starting from 1 July 2021.
  • The Commissioner of Taxation’s power to create a simplified accounting method determination for GST purposes will be expanded to apply to businesses below the $50 million aggregated annual turnover threshold.

3.2   JobMaker Hiring Credit

The Government will introduce a JobMaker Hiring Credit to incentivise businesses to take on additional young job seekers.

From 7 October 2020, eligible employers will be able to claim $200 a week for each additional eligible employee they hire aged 16 to 29 years old and $100 a week for each additional eligible employee aged 30 to 35 years old. New jobs created until 6 October 2021 will attract the credit for up to 12 months from the date the new position is created.

The JobMaker Hiring Credit will be claimed quarterly in arrears by the employer from the ATO from 1 February 2021. Employers will need to report quarterly that they meet the eligibility criteria.

The amount of the credit is capped at $10,400 for each additional new position created. Furthermore, the total credit claimed by an employer cannot exceed the amount of the increase in payroll for the reporting period in question (see employer eligibility requirements below). So,, a business cannot qualify for this support by simply replacing an existing employee with a new ‘qualifying employee’. Nor can they sack and re-hire their existing employees.

Who is an eligible employee?

Employees may be employed on a permanent, casual or fixed term basis.

To be an ‘eligible employee’, the employee must:

·       be aged (i.e., at the time their employment started) either:

–       16 to 29 years old, to attract the payment of $200 per week; or

–       30 to 35 years old to attract the payment of $100 per week;

·       have worked at least 20 paid hours per week on averagefor the full weeks they were employed over the reporting period;

·       have commenced their employment during the period from 7 October 2020 to 6 October 2021;

·       have received the JobSeeker Payment, Youth Allowance (Other), or Parenting Payment for at least one month within the past three months before they were hired; and

·       be in their first year of employment with this employerand must be employed for the periodthat the employer is claiming for them.

Certain exclusions apply, including employees for whom the employer is also receiving a wage subsidy under another Commonwealth program.

Who is an eligible employer?

An employer is able to access the JobMaker Hiring Credit if the employer:

·       has an ABN;

·       is up to date with tax lodgementobligations;

·       is registered for Pay As You Go withholding;

·       is reporting through Single Touch Payroll;

·       is claiming in respect of an ‘eligible employee’;

·       has kept adequate records of the paid hours worked by the employee they are claiming the hiring credit in respect of; and

·       is able to demonstrate that the credit is claimed in respect of an additional job that has been created.

 

Employers do not need to satisfy a fall in turnover test to access the JobMaker Hiring Credit. Certain employers are excluded, including those who are claiming the JobKeeper payment.
So if your business is receiving JobKeeper for the October to December 2020 or January to March 2021 period you are NOT eligible for the JobMaker support payment.

New employers created after 30 September 2020 are not eligible for the first employee hired but are (potentially) eligible for the second and subsequent eligible hires. 

·      Apprentice wage subsidy scheme – businesses that hire new apprentices will be eligible for a 50% wage subsidy. The $1.2 billion scheme will support 100,000 apprentices and be available to businesses of all sizes. Given that over 140,000 apprenticeship positions have ben lost in the recent past, this is a much needed, but still lacking, initiative.

 

3.3  Tax-free business support grants

The Government has announced that the Victorian Government’s Business Support Grants for small and medium businesses, as announced on 13 September 2020, are non-assessable, non- exempt income for tax purposes. The Government may extend this arrangement to similar future grants from all States and Territories on an application basis. Eligibility for this treatment will be limited to grants announced on or after 13 September 2020 and for payments made between 13 September 2020 and 30 June 2021.

Essentially, this means that with the Three rounds of support grants announced so far by the Victorian Government, Rounds 1 and 2 are ASSESSABLE for income tax, but round 3 is NOT assessable. At least we have some certainty (In Victoria, not sure what they will do about other states yet) for grants announced after September 13, including the Third round of grants, the Sole trader support and the hospitality support packaged. But the difference in the treatment of the various rounds of grants is difficult to understand.

 

 

3.4  Uncapped immediate write-off for depreciable assets

The Government has announced it will introduce the following changes to the Capital Allowance provisions:

(a)      Businesses with an aggregated annual turnover of less than $5 billion will be able to claim an immediatededuction (what the Budget terms as ‘full expensing’) forthe full (uncapped) cost of an eligible depreciable asset, in the year the asset is first used or is installed ready for use, where the following requirements are satisfied:

  • The asset was acquired from 7:30pm AEDT on 6 October 2020 (i.e., Budget night).
  • The asset was first used or installed ready for use by 30 June 2022.
  •  The asset is a new depreciable asset or is the cost of an improvement to an existing eligible asset, unless the taxpayer qualifies as a small or medium sized business (i.e., for these purposes, a business with an aggregated annual turnover of less than $50 million), in which case the asset can be second-hand.

(b)      As is currently legislated, businesses with aggregated annual turnover between $50 million and $500 million can still deductthe cost of eligible second-hand assets costing less than

$150,000 that are purchased from 2 April2019 and firstused or installed ready for use between 12 March 2020 and 31 December 2020 under the enhanced instant asset write-off.

The Government has announced that it will extend the period in which such assets must first be used or installed ready for use by 6 months, until 30 June 2021.

(c)       Small businesses (i.e., with aggregated annual turnover of less than $10 million) can deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies (i.e., up to 30 June 2022).

Furthermore, the provisions which prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended.

So, as of October 7 effectively, all businesses with a turnover of less than $5 BILLION (i.e. most businesses in Australia) can claim a 100% tax deduction on ALL eligible equipment items purchased and installed for use by June 30, 2022.

Sorry, that does not mean you can claim your new Porsche (or plane or yacht!)  as a full tax deduction this year! (the key word is eligible) As there was already – for small business (less than $10 million turnover) a $150,000 threshold for equipment purchases. For vehicles, the luxury car limit would still apply (Unless specifically removed by the ATO) So for most business, this change actually provides no additional benefit – it extends the existing accelerated depreciation rules, but it does not add significantly to the tax or cashflow benefits. For larger businesses (i.e. turnover above $50 million to $5 Billion) yes, it provides some short-term tax benefit, but you have to wonder who this will benefit the most. And if a listed corporate pays less tax, and does not fully ‘frank’ their dividends as a result – it is the small investor and the superannuation funds that will end up paying more tax! (But it certainly favors the offshore investor for the same reason) 

The ‘instant write off’ of small business asset pools is again already in place for asset pools worth less then $150,000. But this additional benefit won’t be seen until the 2021 tax returns are lodged, so there is no immediate benefit to businesses, or to cashflow from this change. 

Businesses would still need to find funds from cashflow, cash reserves, or bank funding to pay for new equipment. All of these have been hard to find, and bank and lease finance has become as rare as an Adelaide Crows win.  It is hoped that the banks will start working with businesses as we go forward but they have been very ‘Covid wary’ and probably will be until there is a clear path out of lockdown and an improved economic outlook. Catch 22. No cash, no loans, no equipment, no tax benefit, no economic boost.

 

4.     Changes affecting companies

Temporary loss carry back for eligible companies

The Government has announced that it will introduce measuresto allow companieswith a turnover of less than $5 billion to carry back losses from the 2020, 2021 or 2022 income years to offset previously taxed profits made in or after the 2019 income year.

This will allow such companiesto generate a refundabletax offset in the year in which the loss is made. The tax refund is limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry back does not generate a franking account deficit. (So if Franked Dividends have already been paid to shareholders, the loss claim will be limited)

The tax refundwill be available on electionby eligible companieswhen they lodgetheir tax returns for the 2021 and 2022 income years. Note that, companies that do not elect to carry back losses under this measure can still carry losses forward as normal.

 

So, in looking at the 2019/20 tax returns – for the year just passed, we have the possibility of offsetting loses in that year against profits in the 2019 year. That ‘could’ mean getting some tax back that had been paid by business entities in the 2019 year.

But! At this stage, it appears that we will have to wait till after the end of the  2021 tax year – so the first ‘refunds’ would not happen before July or August 2021. So this provides NO additional cashflow in the remainder of this financial year.

 

5.    FBT exemption and deductions for retraining

Employer-provided retraining and reskilling for redundant, or soon to be redundant, employees will be exempt from fringe benefits tax.
Currently, employers providing training that is not sufficiently connected to an employee’s current employment may be subject to fringe benefits tax. The exemption will apply for retraining towards a position within or outside of the employer’s business. Retraining provided through a salary packaging arrangement or commonwealth supported places at universities will not be eligible for the exemption.
When enacted, the exemption will apply from 2 October 2020.
Changes to tax deduction rules for self-education expenses unrelated to current employment will also be considered by the government in consultations.

6.  Superannuation

Super will be paid to a new employee’s existing account

An existing superannuation account will be “stapled” to a member to avoid the creation of a new account when that person changes their employment.

By July 2021 if an employee does not nominate an account at the time they start a new job, employers will pay their superannuation contributions to their existingfund. Employers will obtain information about the employee’s existing superannuation fund from the ATO.

This is a significant and long overdue change – as previously the ATO were not making this information readily available to employers, leaving it to employees to identify their superannuation funds to their new employers. But this will also put the obligation onto employers to ‘know their employee’.

If an employee does not have an existing superannuation account and does not elect a fund, the employer will pay the employee’s superannuation into the employers nominated default superannuation fund.

7. Social security

COVID-19 response package — further economic support and pandemic leave payments

Further economic support payments

Two separate $250 economic support payments will be provided to eligible recipients. The first payment will be made from November 2020 and the second from early 2021.

Payments will be made to eligible recipients of the following benefits and health care card holders:

  • Age Pension
  • Disability Support Pension
  • Carer Payment
  • Family Tax Benefit, including Double Orphan Pension (not in receipt of a primary income support payment)
  • Carer Allowance (not in receipt of a primary income support payment)
  • Pensioner Concession Card holders (not in receipt of a primary income support payment)
  • Commonwealth Seniors Health Card holders
  • ·eligible Veterans’ Affairs payment recipients and concession card holders.
The payments will be exempt from tax and will not count as income support for the purposes of any income support payment.

Looks similar to the Rudd /Swan Cash payments in the time of GFC. Derided then as the “Harvey Norman / Plasma grants”, but rehashed, reduce, and reused in 2020/21. This time limited to benefit holders , as ‘you don’t need support if you have a job’ appears to be the mantra.

JobSeeker payments have been reduced from the peak ‘doubling’ that occurred in March 2020., and there is no announcement on a ‘permanent’ change to the base rate, so at this stage, JobSeeker will revert back to a $40 per day payment at the end of December. JobSeekers can only hope that Josh and Scomo have some goodies lined up for Christmas.

8. R&D tax incentive changes

For small companies (annual turnover of less than $20 million) the refundable R&D tax offset will be set at 18.5 percentage points above the claimant’s company tax rate and there will be no cap on annual cash refunds.
With a current income tax rate of 26% in 2020/21(Reducing to 25% in  2021/22) this means that the R&D tax rebate will be 44.5% for the 2021 year, and 43.5% in 21/22

There is a lot more to breakdown and review in the budget – like the comparison in the subsidy given to Gas investments ($50 million) compared to Electric Vehicle development ($5 million) or Carbon Capture & Storage (Also $50 million) and $70 million for a regional hydrogen export hub. And more money for School Chaplains than there is for Mental Health support for teenagers – sounds like a big “Hail Mary’ to me.
But these are the key items currently in play, and I am sure there will be a need to refine and review much of what has bene suggested. The tax changes won’t be stopped in Parliament, but there will be a big push to increase the Social Security support and provide further support for targeted sectors of the economy. Everyone loves a winner, and we all choose different sides, but right now we need all of the ‘little guys’ to be winning, not just the big boys.

Feel free to contact us and discuss your situation and look at how we set up your business, investment or financial strategy in the best way possible. Or to just talk and lament another year of football games gone wrong!

Happy to see your comments on the blog as well.


Cheers


Stuart



 

 

*https://www.afl.com.au/news/39741/match-report-essendon-v-western-bulldogs

ESSENDON                     1.1         1.3       1.7         4.9 (33)
WESTERN BULLDOGS  6.3       10.3     16.6     21.11 (137)

By midway through the first quarter, Essendon was 3 goals down. They scored their second goal with less than ten minutes remaining in the game after the Bulldogs scored 21 straight.

It would be like going without income for 50 weeks after receiving a payment on the first day of the year – and not realizing that was going to be almost a fifth of your entire salary for the year. And claiming how much money you had made for the year on July 1. 

Never assume the result of your actions from the first few minutes, days or weeks of activity. The game is not over till it ends. Whatever your game is.

 

Information in this blog sourced from:

NTAA Federal Budget handout

Wolters Kluwer Overview

Crikey

The Guardian

The Age

Xero



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