Potential property tax deductions:
1. Interest on Your Loan: The most substantial investment property tax deduction available.
2. Property Depreciation: Often overlooked but a significant tax deduction.
3. Advertising Costs and Agent Fees: Deductible expenses incurred when finding and managing tenants.
4. Legal Expenses: Certain legal costs related to challenging tenants can also be claimed.
5. Council Rates and Utilities: Crucial deductible expenses for property upkeep.
6. Insurance: Safeguarding their property and deducting the insurance costs.
7. Repairs & Maintenance: Understanding the difference between repairs and improvements.
8. Pest Control: Expenses for professional pest control are claimable.
9. Land Tax: Specific regulations vary by state or territory; professional guidance is essential.
10. Tax Agent Fees: If they have an accountant or tax agent, their fees are deductible.

Claim your expenses

Work-related deductions

Claiming all your work-related deductions may considerably reduce your tax bill.

Typical work-related expenses include:

• uniforms and protective items
• employment-related mobile phone and internet costs
• subscriptions and union fees
• travel expenses between worksites or client locations (but not the commute to and from home).

If an expense was for both work and private purposes, you can only claim a deduction for the work-related portion.

As a result of COVID-19, the ATO expects to see increased deductions for working from home and protective items required for work. They’re also expecting reduced claims for laundry, motor vehicle and travel expenses. You can’t claim the cost of travelling to and from work and working from home as a result of COVID-19.

Your usual pattern of work may have changed during the year due to COVID-19 or other circumstances. If so, you may need to prepare an additional record for the period your work pattern changed, especially where claims are calculated using representative periods.

Make sure you keep receipts, diaries and documents to back up your claims and show how you calculated your private use percentage. The ATO publishes fact sheets for a range of occupations.

Be aware that the ATO checks work-related deductions closely and uses real-time analytics to detect claims that appear out of the ordinary.

Remember, for an expense to qualify:

• you must have spent the money yourself and weren’t reimbursed
• it must directly relate to earning your income, and
• you must have a record to prove it.

Home office expenses

Working from home may entitle you to claim a deduction for home office expenses like electricity, office equipment depreciation and phone and internet expenses.

However, coffee, snacks and toilet paper aren’t deductible and, for most employees, neither are rent, mortgage interest, water or rates.

There are three ways you can claim home office expenses:

1. shortcut method
2. fixed rate method
3. actual cost method.

You must have a dedicated work area such as a home office to use the fixed rate method, and under the actual cost method you’re unlikely to be able to claim much if you don’t have a home office.

You should consider which method will get you the biggest deduction particularly if you have pricey assets to depreciate or high running costs.

The shortcut method is available for expenses between 1 July 2020 and 30 June 2021. It allows you to claim a deduction of 80 cents per hour worked at home and doesn’t require you to have a dedicated work area, such as a private study. But be careful – if you use this method, no other expenses for working from home such as depreciation can be claimed for that period. You must keep a record of the number of hours you worked from home. This could be a timesheet, roster, diary, or similar document that sets out the hours you worked. For your claim, you just need to calculate the number of hours worked and multiply by 0.8.

The fixed rate method gives you 52 cents for each hour for home office expenses and covers the decline in value of furniture and furnishings, electricity and gas, and the cost of repairs. You need to keep a record of hours worked as well as a diary for four-weeks to show your usual work-from-home pattern.

The actual cost method is exactly that – your actual costs. If you don’t have a dedicated work area, such as a home office, you will generally only incur minimal additional running expenses. All actual cost claims need to be supported by records of hours worked, receipts and how you worked out the amounts claimed particularly if you work in a shared space.

The ATO has information for employees working from home during COVID-19 to help calculate your expenses.

Self-education expenses

You can claim self-education expenses provided your studies are directly related to either maintaining or improving current occupational skills or are likely to increase income from your current employment. If your study is unrelated to your work, the expenses incurred are not deductible.

Typical self-education expenses include course fees, textbooks, stationery, student union fees and the depreciation of assets such as computers, tablets and printers.

You must also disallow the first $250 of self-education expenses incurred from a place of education, such as from university or college. This $250 can be offset by non-deductible amounts such as childcare while attending self-education activities or capital expenses related to self-education.

Higher Education Loan Program (HELP) repayments are not deductible.

Car expenses

If you use your motor vehicle for work travel, you have two choices for how to claim:

1. cents per kilometre method
2. logbook method.

The cents per kilometre method provides 72 cents per kilometre for travel up to 5,000 kilometres. This amount includes all your vehicle running expenses, including depreciation. The ATO and your tax agent (if you have one) may ask you to show how you worked out your business kilometres. The ATO is concerned that some taxpayers are automatically claiming the 5,000 kilometre limit regardless of the actual amount travelled.

If your work travel exceeds 5,000 kilometres, you must use the logbook method to claim a tax deduction for the work-related portion of your car expenses. You’ll need to keep odometer readings, receipts and invoices to support your claim.

In most situations, you can’t claim any expenses under these methods relating to a car owned or leased by someone else, including your employer or another member of your family.

Travel expenses

You can claim certain travel expenses incurred when travelling overnight for work. These may include meals, accommodation, transport fares, bridge and road tolls, car parking, car hire fees and other incidental costs.

You will need to reduce your claim if your trip and travel expenses are partly private. For example, travelling with family members or combining personal and work activities in the same trip may require you to make adjustments to the amount deducted. You may also need to adjust the amount claimed if you receive a travel allowance.

Trips between home and work are generally considered private travel and aren’t deductible. There are some situations that you can claim such as travelling from your home to an alternative workplace, when you need to carry bulky tools or equipment or when you do itinerant work.

If you’re ‘travelling on work‘ during COVID-19 and must quarantine, you can claim a deduction for accommodation, food, drink and incidental expenses. No deduction is available for private quarantine expenses or when you travel to or from a work location and need to quarantine.

How you report and claim allowance and expense amounts will depend on whether it’s shown on your income statement and how much you spent.

The record-keeping rules depend on whether you receive a travel allowance, travel for six nights or more and whether you are claiming less than the reasonable amount. We suggest that you keep track of your travel allowances, maintain a travel diary and store your receipts to make it easier to support your claim.

Depreciation

Immediate deductions can be claimed for assets that cost under $300 to the extent the asset is used to generate non-business income. These include tools, calculators, briefcases or computer equipment.

Assets over $300 that are used for an income producing purpose can be written off (depreciated) over a period of time as a tax deduction.

The amount of the deduction is generally determined by the asset’s value, its effective life and the extent to which you use it for work purposes.

Be aware that if you use the ATO’s 80 cents per hour shortcut method for working from home claims, you cannot claim depreciation for your home office expenses.

Expenses for contactors

You can claim a deduction for most costs you incur in running your business, for example travel, car, marketing, home-based business expenses and business finance costs. For asset purchases, consider the simplified depreciation rules. Make sure you account for private use correctly, and keep good records.

Donations

The ATO will pre-fill your tax return with information they have received about gifts and donations. Make sure you add in any donations that weren’t included where the receipt shows your donation is tax deductible.

If you made a donation of $2 or more to bucket collections conducted by an approved organisation for natural disaster victims, you can claim a tax deduction of up to $10 for the total of those contributions without a receipt.

If you made donations to an approved organisation through workplace-giving, you need to record the total amount of your donations. Your income statement or payment summary, or other written statement from your employer showing the donated amount, is sufficient evidence to support your claim. You do not need to have a receipt.

Superannuation contributions

Consider maximising your concessional or non-concessional contributions before the end of the financial year with a concessional contribution cap of $25,000 for the 2021 income year.

Check your superannuation contribution limits and don’t leave it until 30 June to make your contributions as your super fund will not receive the contribution in time.

Carry-forward rules also allow you to make extra concessional contributions – above the $25,000 concessional contributions cap – without having to pay extra tax.

If you’re aged 67 or over, you will have to satisfy the work test to contribute superannuation. If you’re under 18 at 30 June, you can only claim the contribution as deduction if you earned income as an employee or business owner. Other eligibility criteria also apply.

You may be able to claim a tax deduction for personal super contributions that you made from your after-tax income and will need to lodge a Notice of intent to claim or vary a deduction for personal contributions form.

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Tax offsets

Tax offsets directly reduce your tax bill. Eligibility for tax offsets generally depends on your income, family circumstances and specific conditions. Some offsets are automatically applied while you’ll have to provide additional information on your return for others. Most offsets are non-refundable meaning they can reduce your tax bill to zero but any excess isn’t refunded to you.

Examples of offsets include the low and middle-income tax offset, the low-income tax offset, senior Australians and pensioners offset and the offset for superannuation contributions on behalf of a low-income spouse.

The small business income tax offset of up to $1,000 is available for sole traders with turnover of less than $5 million. The offset rate is 13 per cent of the income tax payable on the portion of an individual’s taxable income that is their ‘total net small business income’.

If you receive certain government allowances and payments, you are eligible for the beneficiary offset that ensures you do not have to pay tax on those payments. You may, however, have to pay tax on other income, such as wages or investment income. The ATO provides a beneficiary tax offset calculator to estimate your offset.

You may also be eligible for the low income super tax offset which is automatically paid into your super fund after you lodge your tax return.

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Superannuation

If you’re an employee and are paid more than $450 before tax in a calendar month or are under 18 and work more than 30 hours per week, your employer should be making contributions into your nominated superannuation fund. You can check if you’re entitled to super payments and can report your employer if they haven’t paid them. If you want to get a head start on your super and subject to eligibility, you might want to consider the super co-contribution where the government gives you up to $500 extra in your fund when you make personal contributions.

You might also have a number of small-balance super accounts from working different jobs. From 1 July 2019, inactive low-balance accounts started to be consolidated, exit fees were removed and insurance will be provided on an opt-in basis for members under 25 or with balances below $6000. To find your lost super check out Searching for lost super on the ATO website.

The First Home Super Saver Scheme allows you to save money for your first home with the concessional tax treatment of superannuation. If you’re eligible, you can make additional voluntary salary sacrificed superannuation contributions up to $15,000 per year ($30,000 in total) into your complying fund. The tax savings go towards your first home deposit, helping you save faster.

Salary sacrifice arrangements

You may wish to review your remuneration arrangements with your employer and consider a salary sacrifice arrangement. This means you forego future gross salary in return for receiving exempt or concessionally taxed fringe benefits and/or making additional superannuation contributions under a valid salary sacrifice arrangement.

You should seek financial advice before entering into a salary sacrifice arrangement.

TAXATION

The environment is hardening against those who seek to hide or extract income tax-free. Here’s how to ensure your clients are correctly accounting for their income and use of assets.

The Australian Taxation Office (ATO) is increasing its scrutiny of small businesses’ tax affairs through the tax gap random audit program and its wider efforts to eradicate the black economy.

The regulator has an ever-growing bank of information at its fingertips and is actively investing in its data capability. 

It is increasingly able to crosscheck and risk assess the flow of funds within closely held groups.

This includes matching data from the taxable payments reporting system (TPRS), Single Touch Payroll (STP), land titles, motor vehicles and bank accounts against group structures to better identify incorrect reporting and unexplained wealth.

Data matching has highlighted that small business owners operating through companies and closely held structures may not be correctly reporting the use of company funds and assets by company directors, shareholders and their associates.

COMPLIANCE LANDSCAPE EVOLVES

The compliance landscape is changing for small businesses with the removal of deductions for unreported directors’ fees and increased reporting visibility through the TPRS and STP. 

We expect that the Modernising Business Registers program will also improve the quality of company and director information held by the federal government. 

In addition, the JobKeeper and Cash Flow Boost stimulus packages also resulted in many taxpayers bringing their lodgment and reporting obligations up to date.

These growing connections between different tax and transfer policies, reporting requirements and government agencies mean that the environment is hardening against those who seek to hide or extract income tax-free.

5 WAYS TO COMPLY

In its general guidance, the ATO outlines five ways to properly use company money or assets for private purposes:

1. salary, wages, or directors’ fees
2. repayments of a loan previously made to the company
3. a fringe benefit
4. dividends
5. a loan from the company.

The ATO’s detailed business record-keeping requirements can also assist in educating clients about its expectations for small business records and which can be used to develop good practices for your clients to make tax time easier.

COVID-19 economic recovery Bill receives assent

The COVID-19 economic recovery Bill containing several 2020-21 Federal Budget measures has now received assent as Act No 92 of 2020. The measures in the Treasury Laws Amendment (A Tax Plan For The COVID-19 Economic Recovery) Bill 2020 include: Personal income tax cuts: increase to low income tax offset and changes to income tax thresholds brought forward, low and middle income tax offset retained for 2020-21. Temporary loss carry back: corporate tax entities with an aggregated turnover of less than $5 billion to carry back a tax loss for the 2019-20, 2020-21 or 2021-22 income year and apply it against tax paid in a previous income year as far back as the 2018-19 income year. Expanded access to certain small business entity concessions: eligible entities with aggregated turnover from $10 million to $50 million to have access to some existing small business GST, excise, FBT and income tax concessions in phases from 1 July 2020. Research and development (R&D) tax incentive changes: expenditure threshold increase, changes to R&D tax offset rate and thresholds, and amendments to the R&D administrative framework. Temporary full expensing of depreciating assets: businesses with aggregated turnover less than $5 billion will be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed from 6 October 2020 to 30 June 2022.See our Budget bulletin for a further details of these measures. Please contact our office if you wish discuss if you are eligible and tax benefits.

JobKeeper Payment Scheme Extension

The purpose of this Fact Sheet is to enable you to make a quick assessment of your eligibility for the Government’s JobKeeper Payment Scheme extension beyond the original end date of 27 September 2020.  It is not a comprehensive guide as the enabling legislation and rules are not yet available and the announced details may be subject to further change.  If, after you have examined the information in this Fact Sheet and believe that you may be eligible, please contact us immediately so we may assist you further.

The original JobKeeper Payment scheme (the Scheme) was announced on 30 March 2020 by the Prime Minister and the Treasurer. The purpose of the Scheme is to keep people employed even though the business they work for has suffered a downturn including a ‘hibernation’ or close down for a temporary period. The Scheme was to run from Monday 30 March 2020 to Sunday 27 September 2020

The JobKeeper extension (JobKeeper extension) was announced on 21 July and will extend the scheme until 28 March 2021.  Further refinements were announced by the Treasurer on Friday 7th August 2020 mainly as a result of the Victorian Stage 4 Restrictions.

The original scheme enabled eligible employers to claim a fortnightly payment of $1,500 per eligible employee from 30 March 2020, for a maximum period of 6 months.  The extension of the scheme will see a more targeted and tapered approach with a two-tier wage subsidy and two additional JobKeeper periods of three months each.

What’s new?

From Monday 3 August 2020:

•  the employee eligibility test date will move from 1 March 2020 to 1 July 2020. The new reference date will apply for the last four fortnights of the legislated scheme as well as the duration of the proposed extended period. Staff who were hired after 1 March 2020 may now be eligible for JobKeeper.

From 28 September 2020:

• a two-tier payment rate will apply based on the worker’s average weekly work hours
• the current $1,500 per fortnight payment rate will be reduced on 28 September 2020 and reduced further on 4 January 2021
• the decline in turnover will be retested on a quarterly basis, and
• the decline in turnover test will be based on actual GST turnover.

From 28 September 2020 to 3 January 2021, the JobKeeper Payment rates will be:

• $1,200 per fortnight for all eligible employees and for eligible business participants who were working for 20 hours or more a week on average in the four weeks of pay periods before either 1 March 2020 or 1 July 2020, and
• $750 per fortnight for other eligible employees and business participants.

From 4 January 2021 to 28 March 2021, the JobKeeper Payment rates will be:

• $1,000 per fortnight for all eligible employees and for business participants who were working for 20 hours or more a week on average in the four weeks of pay periods before either 1 March 2020 or 1 July 2020; and
• $650 per fortnight for other eligible employees and business participants.

Is your business eligible for your employees in the extension period(s)?

An employer is entitled to the JobKeeper payment in respect of an individual (an employee) in relation to an extension period if it meets the revised eligibility rules.

Decline in turnover Test

Decline in turnover test

From 28 September 2020, businesses seeking to claim the JobKeeper payment will be required to demonstrate that they have suffered a decline in turnover using actual GST turnover (rather than projected GST turnover).

From 28 September 2020, businesses will be required to reassess their eligibility with reference to their actual GST turnover in the September quarter 2020 to be eligible for the JobKeeper Payment from 28 September 2020 to 3 January 2021 (the first extension period).

From 4 January 2021, businesses will need to further reassess their turnover to be eligible for the JobKeeper Payment. They will need to demonstrate that they have met the relevant decline in turnover test with reference to their actual GST turnover in the December quarter 2020 to be eligible for the JobKeeper Payment from 4 January 2021 to 28 March 2021 (the second extension period).

For the first extension period, businesses will need to demonstrate that their actual GST turnover has fallen in the September quarter 2020 (July, August, September) relative to a comparable period (generally the corresponding quarter in 2019).

For the second extension period businesses will need to demonstrate that their actual GST turnover has fallen in the December quarter 2020 (October, November, December) relative to a comparable period (generally the corresponding quarters in 2019).

The Commissioner of Taxation will have discretion to set out alternative tests that would establish eligibility in specific circumstances where it is not appropriate to compare actual turnover in a quarter in 2020 with actual turnover in a quarter in 2019, in line with the Commissioner’s existing discretion.

How much does my actual decline in turnover need to be?

Aggregated turnover was > $1 Billion	50%
Aggregated turnover was <$1 Billion	30%

Eligible employees

Employees are eligible in the extension period if they:

• are currently employed by an eligible employer (including if you were stood down or rehired)
• were for the eligible employer (or another entity in their wholly-owned group) either:
  • a full-time, part-time or fixed-term employee at 1 July 2020; or
  • a long-term casual employee (employed on a regular and systematic basis for at least 12 months) as at 1 July 2020 and not a permanent employee of any other employer.
• were aged 18 years or older at 1 July 2020 (if you were 16 or 17 you can also qualify if you are independent or not undertaking full time study).
• an Australian resident.

Some employees are not eligible if they receive certain forms of Government assistance.

Wage condition

You satisfy the wage condition in respect of an employee for a JobKeeper fortnight in the extension period where their gross pay will exceed the relevant JobKeeper rate.

From 28 September 2020 to 3 January 2021, the JobKeeper Payment rates will be:

• $1,200 per fortnight for all eligible employees and for eligible business participants who were working for 20 hours or more a week on average in the four weeks of pay periods before either 1 March 2020 or 1 July 2020, and
• $750 per fortnight for other eligible employees and business participants.

From 4 January 2021 to 28 March 2021, the JobKeeper Payment rates will be:

• $1,000 per fortnight for all eligible employees and for business participants who were working for 20 hours or more a week on average in the four weeks of pay periods before either 1 March 2020 or 1 July 2020, and
• $650 per fortnight for other eligible employees and business participants.

The Commissioner of Taxation will have discretion to set out alternative tests where an employee or business participant’s hours were not usual during the February and/or June 2020 reference period (the period with the higher number of hours worked is to be used for employees with 1 March 2020 eligibility).

Guidance will be provided by the ATO where the employee was paid in non-weekly or non-fortnightly pay periods and in other circumstances the general rules do not cover.

The JobKeeper Payment will continue to be made by the ATO to employers in arrears. Employers will continue to be required to make payments to employees equal to, or greater than, the amount of the relevant JobKeeper Payment (before tax), based on the payment rate that applies to each employee.

You are required to give information about the entitlement for the fortnight, including details of the individual and the relevant rate, to the Commissioner, in the approved form. 

The following questions are intended to assess eligibility for the Extension to the JobKeeper Scheme.

Eligibility Criteria
Employer Conditions	Yes	No
Was my business being carried on 1 March 2020?
Has my actual GST Turnover declined by the required percentage? (Turnover >$.1 billion –  50%  Turnover < $1 billion –    30%)
Notification -I have or I will advise the ATO on the approved form of my intention to participate in the extended JobKeeper Scheme?
Is the fortnight a JobKeeper fortnight? (28 September 2020 – 3 January 2021 – first extension) (4 January 2021 to 28 March 2021 – second extension)
I have or I will provide the ATO with information in the approved form?
Employee Conditions Was my employee?	Yes	No
Employed at any time in the fortnight?
At 1 March 2020 and or I July 2020 –
Aged 16 or over?
Full or part time? or             Long term Casual Employee (> 12 months)?
Australian Resident?
The Employee has agreed to be nominated and has or will provide me with notification?
Wages Condition Have I paid my employee Gross Pay at the relevant JobKeeper Rate for the relevant fortnight?
Not Opted Out You have NOT notified the ATO that you no longer want to participate?

If you have answered “yes” to ALL of the above you may qualify for the JobKeeper Payments from the ATO.  We can assist you in confirming your eligibility and completing all necessary forms.  Please contact us as a matter of urgency.

If you have answered any question “No”, you are unlikely to qualify for the JobKeeper Payment Scheme.

If you have answered “yes” to ALL of the above you may qualify for the JobKeeper Payments from the ATO.  We can assist you in confirming your eligibility and completing all necessary forms.  Please contact us as a matter of urgency.

Business Participant Eligibility
Entity Requirements	Yes	No
Was my entity carrying on business on 1 March 2020?
Has my actual GST Turnover declined by the required percentage? (Turnover >$.1 Billion  –  50%  Turnover < $1 Billion –    30%)
Is the fortnight a JobKeeper fortnight? (28 September 2020 – 3 January 2021 – first extension) (4 January 2021 to 28 March 2021 – second extension))
Have I provided the ATO with information in the approved form?
Individual – Business Participant Requirements
The individual was actively engaged in the business at any time in the fortnight?
The Individual is a relevant Business Participant If a Sole trader the sole trader If a Partnership – a partner If a Trust – an adult beneficiary of the trust If a Company – a Shareholder or Director
At 1 March 2020 and or 1 July 2020 –	Yes	No
Aged 16 or over?
Full or part time? or             Long term Casual Employee (> 12 months)?
Australian Resident?
The individual has agreed to be nominated and provided the entity with notification?
Has the Entity satisfied the integrity Rule?

If you have answered any question “No”, you are unlikely to qualify for the JobKeeper Payment Scheme.

Many Australians invest in property, financial markets and other assets, both here and overseas. In 2016-17, almost 4 million individuals received dividend income of $23.4 billion while 2.1 million reported rental income totalling $44 billion. $20 billion in capital gains were reported by almost 700,000 individuals while more than 900,000 reported capital losses of $27 billion. 

Assessable foreign source income of almost $6 billion was reported by 730,000 individuals. 

The ATO’s data matching and information exchange capabilities continue to evolve and now cover many capital transactions and investment revenue streams. 

It is therefore more important than ever to report investment income including from overseas, maintain accurate records, correctly calculate capital gains or losses on disposal and to ensure you comply with the various rules and concessions available to investors.

INVESTMENT INCOME DEDUCTIONS

You can claim a deduction for expenses incurred in earning interest, dividend or other investment income but not if you receive an exempt dividend or other exempt income.

Examples of deductions include:

• account-keeping fees for an account held for investment purposes
• interest charged on money borrowed to buy shares and other related investments from which you derive assessable interest or dividend income 
• ongoing management fees or retainers and amounts paid for advice relating to changes in the mix of investment
• a portion of other costs if they were incurred in managing your investments, such as some travel expenses, investment journals and subscriptions and borrowing costs.

If you attend an investment seminar, you are only entitled to claim a deduction for the portion of travel expenses relating to some investment income activities.

RENTAL PROPERTIES

The ATO continues its focus on checking rental deductions and matching reported income against details from AirBnb and other providers. From this year, a multi-property rental schedule for individuals is required to be lodged with tax returns.

COVID-19 has raised a number of tax issues for rental property owners for agents to consider, including: 

• deductions for properties where tenants are not paying their full rent or have temporarily stopped paying rent as their income has been affected due to COVID-19
• reductions in rent for tenants whose income has been adversely affected by COVID-19, to enable these tenants to stay in the property 
• assessable receipts of back payments of rent or an amount of insurance for lost rent 
• interest deductions on deferred loan repayments for a period due to COVID-19
• cancellation of bookings due to COVID-19 for a property that is usually rented out for short-term accommodation, but has also previously had some private use by the owner
• the private use of a rental property owner (e.g. holiday home) to isolate during COVID-19 and adjusting available deductions
• changes to advertising and other fees for short-term rental properties during COVID-19 due to no demand for the property. 

The ATO has produced information on holiday homes, renting out part or all of a home and holiday apartments in commercial residential properties, as well as factsheets on:

• Top 10 tips to help rental property owners avoid common tax mistakes
• Borrowing expenses.

Owners of rental properties that are being rented out or are ready and available for rent can claim immediate deductions for a range of expenses such as:

• interest on investment loans
• land tax
• council and water rates
• body corporate charges
• insurance
• repairs and maintenance
• agent’s commission
• gardening
• pest control
• leases (preparation, registration and stamp duty)
• advertising for tenants.

Landlords may be entitled to claim annual deductions for the declining value of depreciable assets (such as stoves, carpets and hot-water systems), and capital works deductions spread over a number of years (for structural improvements, like remodelling a bathroom).

Remember that landlords are no longer allowed travel deductions relating to inspecting, maintaining or collecting rent for a rental property.

Further, deductions for the depreciation of plant and equipment for residential real estate properties are limited to outlays actually incurred on new items by investors in residential real estate properties. For example, for properties acquired from 9 May 2017, landlords can no longer depreciate assets that were in the property at the time of purchase; however, should they purchase a new (not used or refurbished) asset, they can depreciate that asset.

Plant and equipment forming part of residential investment properties as of 9 May 2017 will continue to give rise to deductions for depreciation until either the investor no longer owns the asset, or the asset reaches the end of its effective life.

Ensure that interest expense claims are correctly calculated, rental income is correctly apportioned between owners, claims for costs to repair damage and defects at time of purchase are depreciated and that holiday homes are genuinely available for rent.

DEDUCTIONS FOR VACANT LAND

Changes to legislation to limit deductions that can be claimed for holding vacant land received royal assent on 28 October 2019. These changes apply to costs incurred on or after 1 July 2019, even if the land was held before that date.

Deductions for expenses incurred for holding costs of vacant land can continue to be claimed by corporate tax entities, superannuation plans (other than self-managed superannuation funds), managed investment trusts, public unit trusts and unit trusts or partnerships where all the members are the previous entity types.

There are some entities and circumstances where deductions for vacant land can still be claimed – for example, where the entity holding the land is a company, where you use the land in carrying on a business, or exceptional circumstances apply. Expenses of holding land remain deductible if they are incurred in carrying on a business such as farming or gaining or producing assessable income.

The ATO has produced a flowchart to assist in determining if deductions for expenses related to vacant land are limited. 

RESIDENTIAL PROPERTY AND NON-RESIDENTS

A change in law on 12 December 2019 means if you are a foreign resident for tax purposes at the time you dispose of your residential property in Australia, you will not qualify for exemption from CGT unless you satisfy the life events test.

For properties held before 7.30pm (AEST) on 9 May 2017, the CGT main residence exemption will only be able to be claimed for disposals that happen up until 30 June 2020, provided the taxpayer satisfies the other existing requirements for the exemption.

CRYPTOCURRENCIES AND CROWDFUNDING

The ATO is now matching transaction data obtained from digital exchanges so it is more important than ever to ensure cryptocurrency gains and losses are correctly reported. If you are currently, or have been, involved in acquiring or disposing of cryptocurrencies in the past, you need to be aware of the income tax consequences. These vary depending on the nature of your circumstances.

A person involved in cryptocurrency transactions needs to keep appropriate records for income tax purposes. If you have dealt with a foreign exchange and/or cryptocurrency, there may also be taxation consequences for your transactions in the foreign country.

The tax consequences of crowdfunding vary depending on the nature of the arrangement, your client’s role (i.e. promoter, intermediary or contributor) and the circumstances.

The tax laws which apply to investment and financial activity undertaken in a conventional manner (for example, buying goods and services, buying shares, lending money) apply in the same way to investment and financial activity conducted under crowdfunding.

CAPITAL GAINS TAX PLANNING

Careful planning should be undertaken in planning the timing of the disposal of appreciating assets which may trigger a capital gain. In this context, it is important to recognise that CGT is triggered when you enter into a contract for the sale of a CGT asset rather than on its settlement.

This is particularly important where the entry and settlement of the contract straddle year-end. In these circumstances, it may be preferable from a cash flow perspective to defer the sale of the CGT asset to the subsequent year where other relief may be available, such as a capital loss sold on another asset.

Care should also be taken to ensure that an eligible asset is retained for the 12-month holding period required under the CGT discount, and to recognise that the CGT discount is not available to the extent that any capital gain accrued after 8 May 2012 and you were a foreign resident or temporary resident at any time after that date.

The ATO publishes guidance on capital gains tax.

Keep proper records for all of your investments and ensure that you keep them for at least five years after a capital gains tax event occurred.

FOREIGN INVESTMENTS

If you are an Australian resident with overseas assets you need to include any capital gains or capital losses you make on those assets in your tax return and may have to include income you receive from overseas interests in your tax return. You can ‘receive income’ even if it is held overseas for you.

If you receive foreign income or gains that are taxable in Australia and you paid foreign tax on that income, you may be entitled to an Australian foreign income tax offset.

Individual taxpayers may be able to apply the CGT discount to the gains made on the shares with the recent decision in Burton v Commissioner of Taxation [2019] FCAFC 141 clarifying the availability of foreign income tax offsets to apply against the tax on the capital gain.

The ATO has published information on foreign source income and property and a guide to foreign income tax offset rules.

Be aware that the ATO has information exchange agreements with revenue authorities in many foreign jurisdictions and therefore is likely to receive data on any of your overseas investments and income.

PRODUCT RULINGS

A product ruling is a type of public ruling which gives certainty to participants (or potential participants) on the tax consequences of an arrangement, provided it is carried out as described in the ruling. The ATO publishes product rulings on its legal database.

An ATO product ruling isn’t a sanction or guarantee any product as an investment. Nor does the product ruling give any assurance that the product is commercially viable, that charges are reasonable, appropriate or represent industry norms, or that projected returns will be achieved or are reasonably based.

Potential participants must form their own view about the commercial and financial viability of a product. They need to consider issues such as whether the projected returns are realistic, the ‘track record’ of the management, the level of fees compared with similar products, and how the investment fits an existing portfolio.

If you are considering such an investment, seek independent advice before making a decision.

INVESTMENT PRODUCTS PROMOTED AS TAX EFFECTIVE

The end of the financial year often sees the promotion of investment products that may claim to be tax effective. If you are considering such an investment, seek independent advice before making a decision, particularly from your CPA Australia-registered tax agent.

Tax time is an opportunity to obtain essential business advice from your professional advisor, especially if you’ve been disrupted by the impacts of COVID-19.

Small businesses need to ensure their bookkeeping and lodgments are correct and up to date. You should obtain professional tax advice, especially in areas where more complex tax issues arise. This includes refinanced debt, losses, restructures, capital gains tax, personal services income, trust declarations and distributions, and private company loans. 

COVID-19 ISSUES

Losses

Businesses may find themselves in a taxable loss position or seek to use prior year losses when their business operations or structure has changed during the year. 

We recommend seeking professional advice on issues like ensuring the loss tests (continuity of ownership and same (similar) business tests are satisfied, the effect of capital injections on continuity of ownership tests and unrealised losses from reductions in asset values.

Bad debts

Businesses should review outstanding debts to assess their likely recoverability with a view to identifying genuine bad debts which could be written off for tax purposes. This includes ensuring that there is little to no prospect of recovery and that the debt is written off prior to year-end.

There may also be Division 7A consequences for the forgiveness of a shareholder’s or associate’s debt.

Trading stock

Many businesses use the simpler trading stock rules as the value of their trading stock doesn’t vary by more than $5000 a year. However, COVID-19 has affected the sales and consequently the inventory levels of some businesses quite significantly and the market selling value or replacement value basis may be more tax-effective. Where COVID-19 has materially reduced the market value of trading stock below its cost, such as for obsolete stock, this may result in your closing stock being valued at an amount less than cost and will effectively generate an allowable deduction.

Instant asset write-off

To assist in maximising your depreciation deductions, from 12 March 2020 until 30 June 2020 the instant asset write-off:

• threshold amount for each asset is $150,000 (up from $30,000)
• eligibility has been expanded to cover businesses with an aggregated turnover of less than $500 million (up from $50 million).

The government has also announced an extension of these increased thresholds until 31 December 2020.

JobKeeper

JobKeeper payments are assessable and you can claim deductions for the payments made to employees and business participants. If you have been making JobKeeper claims for your eligible employees and business participants, ensure that your reporting and documentation is up-to-date and correct, and keep this information for five years after the payment was made.

The ATO has identified behaviours of concern including falsifying records or revising activity statements to meet the fall in turnover test or failing to pass on the full $1500 JobKeeper payment to eligible employees. The ATO has signalled a focus on the application of the decline in turnover test, for example where actual and projected turnover have significantly diverged as well as issues identified in PCG 2020/4 Schemes in relation to the JobKeeper payment. 

Contact the ATO to rectify any errors or mistakes, as the ATO has limited discretion in relation to overpayments which can be exercised in certain circumstances.

Cash flow boost

Check that you have correctly received cash flow boost amounts and contact the ATO if you find that you have either received an amount in error or have not received a credit when entitled. To assist, the ATO has produced an eligibility companion guide and PSLA 2020/1 Commissioner’s discretion to allow further time for an entity to register for an ABN or provide notice to the Commissioner of assessable income or supplies.

Cash flow boost payments are classified as non-assessable, non-exempt income so no tax will be payable. The cash flow boost is not subject to GST and you are still entitled to a deduction for PAYG withholding paid.

If you distribute the cash flow boost from the business to another entity (for example, making a trust distribution or paying a dividend to shareholders) there may be tax consequences for the recipient.

GST adjustments

Businesses may have had contracts cancelled or had to cancel sales or refund purchases due to the impact of COVID-19. As a result, GST adjustments may be required. ATO guidance is available to assist with adjusting business activity statements and holding adjustment notes.

The ATO has worksheets to assist in calculating GST adjustments for sales, purchases, bad debts, creditable purpose and adjustments summary.

PAYG instalment indexation suspended

The government is in the process of passing legislation that suspends the indexation of PAGY and GST instalment amounts for small businesses in 2020–21. Taxpayers may still vary their quarterly instalments. The changes will apply to instalment quarters commencing on or after 1 July 2020 if the Bill receives Royal assent before 21 August 2020, or otherwise on or after 1 October 2020.

Businesses in financial distress

Unfortunately, COVID-19 has left many businesses facing cash flow difficulties or severe financial distress. Government support such as JobKeeper, rent relief, business grants and temporary changes to the insolvency rules may help some to survive the impacts, however there are other businesses who may need to review their business viability and financial options.

It is important to create a budget and seek to improve the financial position of your business. CPA Australia has produced a factsheet on the meaning of insolvency including indicators such as continuing trading losses, cash flow difficulties, difficulties selling stock or collecting debts. There are tax obligations to consider when deregistering a company and the ATO provides information for businesses in financial difficulty. Individuals facing serious financial hardship can apply for release from their tax debts with the ATO’s approach outlined in PS LA 2011/17 Debt relief, waiver and non-pursuit.

If you think your business is in financial difficulty, it is critical to get proper accounting and legal advice as early as possible. 

RECORD-KEEPING TIPS

• Record cash income and expenses
• Account for personal drawings
• Record goods for your own use
• Separate private expenses from business expenses
• Keep valid tax invoices for creditable acquisitions when registered for GST
• Keep adequate stock records
• Keep adequate records to substantiate motor vehicle claims.
   

BE UP-FRONT AND HONEST WITH YOUR AGENT AND THE ATO

Getting the basics right has never been more important – good record keeping, substantiation, correct account codes, properly accounting for private use and declaring all cash transactions are essential to assure yourself, your tax agent and the ATO that your tax affairs are in order.

The ATO is getting smarter with its data and taxpayers are increasingly being contacted regarding their income and expense claims. With a focus on discrepancies in returns when compared against pre-fill data or business benchmarks, and increased resources to deal with the cash economy, the onus is on business owners to correctly report their income, claim their expenses and have the appropriate records.

Your tax agent is required to take reasonable care when preparing your return which means they may ask you detailed questions about your cashflow, business performance, personal use of assets and records.

The end of the financial year also sees the promotion of investment products that may claim to be tax effective, and COVID-19 has also increased promoter activity in relation to tax and financial services. If you are considering such an investment, seek independent advice before making a decision.

If you are seeking advice, have made errors or need to correct your business records, speak with a CPA Australia-registered tax agent who can work with you and the ATO to get things right. 

MAXIMISE DEPRECIATION DEDUCTIONS

A key feature for small business is the instant asset write off which the government recently increased to $150,000 as part of COVID-19 stimulus measures.

The write-off amount will depend on the date the asset is first used or installed ready for use for a taxable purpose. For businesses registered for GST, the threshold is calculated on a GST-exclusive basis, but for businesses not registered for GST, the threshold is calculated on a GST-inclusive basis.

Eligible business’s aggregated turnover	Date range for when asset first used or installed ready for use	Threshold
Less than $500 million	12 March 2020 to 30 June 2020*	$150,000
Less than $50 million	7.30pm (AEDT) on 2 April 2019 to 11 March 2020	$30,000
Less than $10 million	29 January 2019 to 7.30pm (AEDT) on 2 April 2019	$25,000
Less than $10 million	1 July 2016 to 28 January 2019	$20,000
Less than $2 million	7.30pm (AEST) on 12 May 2015 to 30 June 2016	$20,000

*For eligible businesses with an aggregated turnover from $10 million to less than $500 million, the $150,000 threshold applies for assets purchased from 7.30pm (AEDT) on 2 April 2019 but not first used or installed ready for use until 12 March 2020 to 30 June 2020.

If you purchase a car for your business, the instant asset write-off is limited to the business portion of the car limit of $57,581 for the 2019–20 income tax year. You cannot claim the excess cost of the car under any other depreciation rules.

You can claim a deduction for the balance of your small business pool if it’s less than $150,000 at 30 June 2020 before applying depreciation deductions.

Where the cost of the asset is not available for the instant asset write-off deduction, it will be allocated to the general small business pool and depreciated at the appropriate rate depending on if it is eligible for accelerated depreciation. Where a balancing adjustment occurs during the year, the asset’s termination value must be deducted from the pool.   

PAY THE CORRECT COMPANY TAX RATE AND APPLY THE CORRECT RATE FOR IMPUTATION

Most companies with an aggregated annual turnover of less than $50 million will pay tax at 27.5 per cent in 2019–20. However, some companies with a turnover below $50 million will continue to pay tax at 30 per cent, especially companies that earn nearly all their income from passive investments such as rental income or interest income. 

To qualify for the lower tax rate:

• a company must have an aggregated turnover of less than $50 million where aggregated turnover is the sum of the company’s ordinary income and the ordinary income of any connected affiliate or entity, and 
• no more than 80 per cent of their assessable income is base rate entity passive income. 

The full company tax rate of 30 per cent applies to all companies that are not eligible for the lower company tax rate. The ATO view is set out in LCR 2019/5 Base rate entities and base rate entity passive income.

As a corollary to the base rate passive entity income rules in determining the tax rate of a company, there have also been changes to the dividend imputation rules that apply to the franking of dividends by a company.

These differential rates create a number of complexities for companies, especially companies holding investments, as well as for the owners of companies. Your CPA Australia-registered tax agent is best placed to assist you with these issues.

SMALL BUSINESS INCOME TAX OFFSET

You will be eligible for the small business income tax offset of up to $1000 for the year ended 30 June 2020 if you carry on business and your aggregated turnover for the 2020 year is less than $5 million. The offset rate is 8 per cent of the income tax payable on the portion of an individual’s taxable income that is their ‘total net small business income’.

The ATO will work out the offset based on the net small business income earned as a sole trader and share of net small business income from a partnership or trust, as reported in the income tax return. 

SMALL BUSINESS CGT CONCESSIONS

There are significant capital gains tax savings potentially available to small business where an eligible active asset used in a business is sold for a profit and the taxpayer can satisfy either the $6 million maximum net asset value test immediately before the CGT event or the $2 million CGT small business entity test for the 2019 year.

Additional conditions must now be met when a taxpayer disposes of an active asset being a share in a company or an interest in a trust on or after 8 February 2018.

Given the complexity of the small business CGT concessions, taxpayers should consult their CPA Australia-registered tax agent for advice.

CONSIDER TAX IMPACTS FROM ANY RESTRUCTURING

Small businesses can change the legal structure of their business without incurring any income tax liability when active assets are transferred by one entity to another.

This rollover applies to active assets that are CGT assets, trading stock, revenue assets and depreciating assets used, or held ready for use, in the course of carrying on a business.

However, caution must be exercised. Business restructuring is complex, so you should first speak to your CPA Australia-registered tax agent.

REVIEW YOUR PRIVATE COMPANY LOANS

The income tax laws can potentially treat the following as an unfranked deemed dividend for a taxpayer unless an exemption applies:

• a payment or a loan by a private company to a shareholder or an associate (like a family member)
• the forgiveness of a shareholder’s or associate’s debt
• the use of a company asset by a shareholder or their associate, or
• the transfer of a company asset to a shareholder or their associate.

The most common exemption is to enter into a written loan agreement requiring minimum interest and principal repayments over a specified loan term, which may be seven or 25 years depending on whether the loan is secured.

There are various things a private company can do before its 2019–20 income tax return needs to be lodged to minimise the risk of a shareholder or an associate deriving a deemed dividend. 

Depending on the circumstances, these strategies may include repaying a loan, declaring a dividend or entering a complying loan agreement before the return needs to be lodged.

COVID-19 may have created issues in relation to Division 7A obligations and the rules around private company loans are complex and changing, therefore you should consult your CPA Australia-registered tax agent on this.

INCREASED ACCESS TO COMPANY LOSSES

The ‘same business test’ for losses has been supplemented with the ‘similar business test’ for losses made in income years starting on or after 1 July 2015. The new test will expand access to past year losses when companies enter into new transactions or business activities.

The similar business test allows a company (and certain trusts) to access losses following a change in ownership where its business, while not the same, is similar, having regard to a number of considerations.

The ‘same business test’ and the ‘similar business test’ will be collectively known as the ‘business continuity test’ and the ATO has provided its view in LCR 2019/1 The business continuity test – carrying on a similar business.

The rules around losses can be complex and taxpayers should consult their CPA Australia-registered tax agent for advice.

WRITE OFF BAD DEBTS

Businesses can only obtain income tax deductions for bad debts when various conditions are met as set out by the ATO in TR 92/18 Income tax: bad debts.

A deduction will only be available if the debt still exists at the time it is written off. Thus, if the debt is forgiven or compromised before it is written off as bad in the accounts, no deduction will be available.

The debt must also be effectively unrecoverable and written off in the accounts as bad in the year the deduction is claimed. The bad debt must have been previously brought to account as assessable income or lent in the ordinary course of carrying on a money-lending business.

Certain additional requirements must be met where the creditor is either a company or trust.

ISSUES FOR TRUSTS

Make trust resolutions by 30 June

As always, trustees of discretionary trusts are required to make and document resolutions on how trust income should be distributed to beneficiaries for the 2019–20 financial year by 30 June.

If a valid resolution is not executed by 30 June, any default beneficiaries under the deed will become presently entitled to trust income and subject to tax (even where they do not receive any cash distribution), or the trustee will be assessed at the highest marginal tax rate on any taxable income derived but not distributed by the trust.

A trustee must be able to show how an effective resolution was made through minutes, file notes or an exchange of correspondence documented before year end. However, the trust’s accounts do not need to be prepared by 30 June.

As a corporate trustee may need time to notify its directors that a meeting must be convened to pass and record a resolution, such a notice should be sent out well before the 30 June deadline.

Document the streaming of trust capital gains and franked dividends to beneficiaries

Broadly, trustees of discretionary trusts can stream capital gains and franked dividends to different beneficiaries if the trust deed allows the trustee to make a beneficiary “specifically entitled” to those amounts. The trustee must document this resolution before 30 June and the beneficiary receives or is entitled to receive an amount equal to the net financial benefit of that gain or dividend.

These streaming rules are complex, and taxpayers should consult their CPA Australia-registered tax agent for advice.

Prevent deemed dividends in respect of unpaid trust distributions

An unpaid distribution owed by a trust to a related private company beneficiary that arises on or after 1 July 2016 will be treated as a loan by the company, if the trustee and the company are controlled by the same family group. In these circumstances, the associated trust may be taken to have derived a deemed dividend for the unpaid trust distribution in 2019–20.

However, a deemed dividend may be prevented if the unpaid distribution is paid out, or a complying loan agreement is entered into before the company’s 2019–20 income tax return needs to be lodged. 

Alternatively, a deemed dividend will not arise if the amount is held in an eligible sub-trust arrangement for the sole benefit of the private company, and other conditions are satisfied.

Trustees and beneficiaries should consult their CPA Australia-registered tax agent on the full implications of these very complex rules if applicable.

ADDITIONAL TIPS

Claim deductions for professional advice when starting a business

Professional expenses associated with starting a new business, such as legal and accounting fees, are deductible in the financial year those expenses are incurred rather than deductible over a five-year period as was the case previously.If you established a business during the year, you should speak to your CPA Australia-registered tax agent about claiming professional advice fees as an expense.

Check if the personal services income rules apply

Personal services income (PSI) is income produced mainly from your personal skills or efforts as an individual. You can receive PSI even if you’re not a sole trader. If you’re producing PSI through a company, partnership or trust and the PSI rules apply, the income will be treated as your individual income for tax purposes.If the PSI rules apply, they affect how you report your PSI to the ATO and the deductions you can claim.

Paying employee bonuses

If you pay staff bonuses and you want to bring expenses into the 2019–20 year, ensure they are quantified and documented in a properly authorised resolution (e.g. Board minute) prior to year-end to enable a deduction to be incurred for employee bonuses where such amounts are not paid or credited until the subsequent year.

Pay any outstanding superannuation entitlements

Ensure superannuation guarantee payments for employees are up-to-date, and report and rectify any missed payments to the ATO. From 1 April 2019, there are new powers and offence penalties related to the payment of superannuation guarantee obligations. 

Employers can also claim deductions for superannuation contributions made on behalf of their employees in the financial year they are made.

Disaster assistance payments

Most one-off assistance payments are tax-free while emergency assistance in the form of gifts from family and friends is not taxable. Regular Centrelink payments however remain taxable, unless specifically exempted by the government.

Australian Government Disaster Recovery Payments are exempt while Disaster Recovery Allowance and Natural Disaster Relief and Recovery Arrangements are generally taxable. The tax treatment of ex-gratia recovery payments depends on the specific circumstances of the payments.

If you use an assistance payment to purchase items for your business, the normal conditions for deductibility apply. The fact that money from a relief fund is used to purchase an item doesn’t affect the deductibility of that item.

Farm management deposits (FMDs)

One of the best tax planning measures available to primary producers is effectively utilising the farm management deposits scheme, or FMDs. They are an effective business and cash flow planning tool.

Primary producers can deposit up to $800,000 in an FMD account, they can have early access to their FMD account during times of drought, and they may be able to offset the interest costs on primary production business debt.

Income averaging

Tax averaging enables primary producers to even out their income and tax payable over a maximum of five years to allow for good and bad years. This ensures that farmers don’t pay more tax over time than taxpayers on comparable but steady incomes.

Primary producers who opted out of income tax averaging for 2009–10 will be automatically reinstated in 2019–20 but can choose to withdraw from averaging and pay tax at ordinary rates for 10 years.

Other primary producer-specific tax specific concessions

Also, don’t forget to consider:

• the uncapped immediate write-off for capital expenditure on water facilities and fencing assets
• the deduction for the full cost of a fodder storage asset if the expense was incurred or it was first used or installed ready for use on or after 19 August 2018
• the outright deduction for capital expenditure for landcare operations and carbon sink forests, and
• the accelerated write-off for horticultural plants and grapevines.

Do you know which tax deductions and offsets you might be eligible this financial year? The following tips may help you to legitimately reduce your tax liability in your 2019-20 return.

With so much information being pre-filled into your tax return this year, it’s best to wait until all the data is finalised before lodging. This is usually by the end of July but can take up until mid-August.

Check that your income statement from your employer says ‘tax ready’ and your private health insurance, dividend and interest information is available before visiting your tax agent. Otherwise, you’re potentially lodging your return with unfinalised data and may need to amend your tax return and pay additional tax.

If you’ve used the myDeductions tool in the ATO app,  you can email your data or upload it to prefill your tax return. If you use a tax agent, they can access your uploaded data through their practice management software.

DECLARE YOUR INCOME

Your income statement will show as ‘tax ready’ when finalised by your employer. Employers need to make a finalisation declaration by Tuesday 14 July if they have 20 or more employees, or Friday 31 July if they have 19 or fewer employees.

JobKeeper payments are treated the same as your usual salary or wages from your employer. If you receive JobKeeper as an employee, it will be included on your income statement as either salary and wages or as an allowance, depending on your circumstances. JobKeeper and JobSeeker payments will be included automatically by the ATO in your tax return by the end of July.

You also need to include income protection, sickness or accident insurance payments, redundancy payments and accrued leave payments in your tax return.

If you take leave, are temporarily stood down or lose your job and receive a payment from your employer, there are different tax rules that may apply for the different payments.

If you have received access to your superannuation due to COVID-19, you will not need to pay tax on these amounts and will not need to include these amounts in your tax return.

REPORT INCOME AND EXPENSES FROM THE CASH OR ONLINE ECONOMY

If you drive people around, do odd jobs, rent out your possessions, run social media accounts or sell products, your income from such activity may be assessable and your expenses deductible. This can include barter and cryptocurrency payments as well.

The ATO is receiving data from a range of websites including AirTasker, Uber, AirBnb and eBay which is matched against tax returns. Make sure you keep records and report correctly.

For some activities such as online selling, you’ll need to first determine whether you are in business.

CLAIM YOUR EXPENSES

Work-related deductions

Claiming all work-related deduction entitlements may save considerable income tax. Typical work-related expenses include employment-related mobile phone, internet usage, computer repairs, union fees and professional subscriptions that the employee paid themselves and for which they were not reimbursed.

Be aware that the ATO continues to check work-related expense claims and expects to see a substantial increase in deductions for working from home or protective items required for work, and a reduction in claims for laundry expenses or travel expenses. You cannot claim the cost of travelling to and from work and working from home as a result of COVID-19.

If your usual pattern of work has changed during the year due to COVID-19 or other circumstances, you may need to complete an additional record for the period your work pattern changed, especially where claims are calculated using representative periods.

Just remember that for an expense to qualify:

• you must have spent the money yourself and weren’t reimbursed
• it must directly relate to earning your income, and
• you must have a record to prove it.

Work from home and home office expenses

When you are an employee who regularly works from home and part of your home has been set aside primarily or exclusively for the purpose of work, a home office deduction may be allowable. Typical home office costs include heating, cooling, lighting and office equipment depreciation.

The ATO is also allowing the use of a shortcut method for working from home claims between 1 March 2020 and 30 June 2020 which enables you to claim a deduction of 80 cents per hour. You can use this method if:

• are working from home to fulfil your employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls, and
• have incurred additional running expenses as a result of working from home.

The shortcut method doesn’t require you to have a dedicated work area, such as a private study. If this method is chosen, no other expenses for working from home for that period can be claimed.

You must keep a record of the number of hours you have worked from home. This could be a timesheet, roster, diary, or similar document that sets out the hours you worked.

If you use the other methods, you must also keep a record of the number of hours you worked from home along with records of your expenses.

The ATO has published a series of occupation-specific fact sheets and information on employees working from home during COVID-19.

Find more information on home office expenses here or talk to your CPA Australia-registered tax agent.

Self-education expenses

Self-education expenses can be claimed provided the study is directly related to either maintaining or improving current occupational skills or is likely to increase income from your current employment. If you obtain new qualifications in a different field through study, the expenses incurred are not tax deductible.

Typical self-education expenses include course fees, textbooks, stationery, student union fees and the depreciation of assets such as computers, tablets and printers.

Higher Education Loan Program (HELP) repayments are not deductible. You must also disallow $250 of self-education expenses, which can include non-deductible amounts such as child-care costs.

Motor vehicle deductions

If you use your motor vehicle for work-related travel, there are two choices of how you can claim.

If the annual travel claim does not exceed 5000 kilometres, you can claim a deduction for your vehicle expenses on the cents-per-kilometre basis. This figure includes all your vehicle running expenses, including depreciation.

The allowable rate for such claims changes annually; this year’s rate can be obtained from the ATO or your CPA Australia-registered tax agent.

You do not need written evidence to show how many kilometres you have travelled, but the ATO and therefore your tax agent may ask you to show how you worked out your business kilometres. The ATO has flagged concerns that taxpayers are automatically claiming the 5000-kilometre limit regardless of the actual amount travelled.

If your business travel exceeds 5000 kilometres, you must use the log book method to claim a deduction for your total car-running expenses. 

You can contact your CPA Australia-registered tax agent to clarify what constitutes work-related travel and which of the above methods can be applied to maximise your tax position.

Depreciation

Immediate deductions can be claimed for assets that cost under $300 to the extent the asset is used to generate income. Such assets may include tools for tradespeople, calculators, briefcases, computer equipment and technical books purchased by an employee, or minor items of plant purchased by a landlord.

Assets costing $300 or more that are used for an income producing purpose can be written off over a period of time as a tax deduction. 

The amount of the deduction is generally determined by the asset’s value, its effective life and the extent to which you use it for income-producing purposes.

Donations

The ATO will pre-fill your tax return with the gifts and donations information they have received. Make sure to add in any donations not included where the receipt shows your donation is tax deductible.

If you made donations to an approved organisation through workplace-giving, you still need to record the total amount of your donations at this item. 

Your payment summary, or other written statement from your employer showing the donated amount, is sufficient evidence to support your claim. You do not need to have a receipt.

Claim a tax deduction for your superannuation contributions

Claiming a tax deduction for personal superannuation contributions is no longer restricted to the self-employed. The rules changed on 1 July 2017 and anyone under the age of 75 will be able to claim contributions made from their after-tax income to a complying superannuation fund as fully tax deductible in the 2018-19 tax year.

Any contributions you claim a deduction on will count towards your concessional contribution cap. Such a deduction cannot increase or create a tax loss to be carried forward. 

If you’re aged 65 or over, you will have to satisfy the work test to contribute and if you’re under 18 at 30 June you can only claim the deduction if you earned income as an employee or business owner. Other eligibility criteria apply.

To claim the deduction, you will first need to lodge a Notice of intent to claim or vary a deduction for personal contributions form with your superannuation fund by the earlier of the day you lodge your tax return or the end of the following income year. 

SUPERANNUATION

Superannuation contribution limits 

Watch your superannuation contribution limits. You may wish to consider maximising your concessional or non-concessional contributions before the end of the financial year but keep in mind the contribution caps were reduced to $25,000 from 1 July 2017.

Concessional contributions include any contributions made by your employer, salary sacrificed amounts and personal contributions claimed as a tax deduction by self-employed or substantially self-employed persons.

If you’re making extra contributions to your super, and breach the concessional cap, the excess contributions over the cap will be taxed at your marginal tax rate, although you can have the excess contribution refunded from your super fund.

Similarly, the annual non-concessional (post-tax) contributions cap is only $100,000 and the three-year bring forward provision is $300,000. Individuals with a balance of $1.6 million or more are no longer eligible to make non-concessional contributions.

High-income earners are also reminded that the contributions tax on concessional contributions is effectively doubled from the normal 15 per cent rate to 30 per cent if their combined income plus concessional contributions exceeds $250,000.

Importantly, don’t leave it until 30 June to make your contributions as your super fund may not receive the contribution in time and it will count towards next year’s contribution caps, which could result in excess contributions and an unexpected tax bill.

Consider the superannuation co-contribution

An individual likely to earn less than $53,564 in the 2019-20 tax year should consider making after-tax contributions to their superannuation to qualify for the superannuation co-contribution if their circumstances permit.

The government will match after-tax contributions 50 cents for each dollar contributed up to a maximum of $500 for a person earning up to $38,564. The maximum then gradually reduces for every dollar of total income over $38,564 reducing to nil at $53,564.

Consolidate your super

For most employees, it makes a lot of sense to have your entire super in one place. You’ll reduce the amount of fees you’re paying, only receive one lot of paperwork and only have to keep track of one fund.

Consider consolidating the super funds you do have into one fund. Compare your funds to work out which best suits your needs. Important things to look at are fees and charges, the investment options available and life insurance cover.

In particular, if you have insurance cover in a fund check you can transfer or replace it in the new fund so you don’t end up losing the benefit altogether. You can look at past investment performance as well but remember it is no guarantee of how the fund will perform in the future.

Once you’ve chosen the fund you want to keep, contact them and they can help transfer the money from your other super funds.

From November 2019, the ATO has been proactively consolidating these unclaimed super monies into eligible active super accounts, if an individual hasn’t requested a direct payment or for it to be rolled over to a fund of their choice. You will be notified by the ATO if this has been done.

If you’ve moved around or changed jobs occasionally, your old super fund may have lost track of you and you may miss out on some of your super when you need it. To find your lost super check out SuperSeeker on the ATO website at www.ato.gov.au. 

CONSIDER SALARY SACRIFICE ARRANGEMENTS

You may wish to review your remuneration arrangements with your employer and forego future gross salary in return for receiving exempt or concessionally taxed fringe benefits and/or making additional superannuation contributions under a valid salary sacrifice arrangement.

You should consult a licensed CPA Australia financial planner to consider the merits of exploring these options. 

TAX RESIDENCY AND COVID-19

The tests used to work out residency status for tax purposes are not the same as residency tests used for other purposes such as immigration. The ATO publishes information on residency and the relevant tests.

For non-residents temporarily in Australia as a result of COVID-19, the ATO has advised that if the client is in Australia temporarily for some weeks or months then they will not become an Australian resident for tax purposes as long as they usually live overseas permanently and intend to return there as soon as they are able.

FIRST HOME SUPER SAVER SCHEME

The First Home Super Saver (FHSS) Scheme allows you to save money faster for your first home with the concessional tax treatment of super. You can make additional voluntary salary sacrificed superannuation contributions up to $15,000 per year (and $30,000 in total) into your complying superannuation fund which can be withdrawn to help finance a first home deposit.

Compulsory superannuation employer contributions and contributions in respect of defined benefit funds are not eligible for the FHSS scheme. Various other eligibility conditions must be satisfied.

The FHSS scheme is primarily aimed at low to middle income earners – speak to your CPA Australia-registered tax agent to get more information.

MAXIMISE TAX OFFSETS

Tax offsets directly reduce your tax payable and can add up to a sizeable amount. Eligibility for tax offsets generally depends on your income, family circumstances and conditions for particular offsets.

Taxpayers should check their eligibility for tax offsets which include, amongst others, the low and middle-income tax offset, senior Australians and pensioners offset and the offset for superannuation contributions on behalf of a low-income spouse.

From 1 July 2019, the tax offset for net medical expenses for disability aids, attendant care or aged care is no longer available.

BEWARE OF BIG PROMISES AND VERY LOW FEES

Like most things in life, you tend to get what you pay for and tax is no different. You should be careful about who you ask to prepare your return to ensure that your tax affairs are reported correctly and that you are able to prove your claims if the ATO ask any questions. If your refund is too good to be true, then you – or your agent – have probably broken the law.

Firstly, check that your tax agent is registered with the Tax Practitioners Board. It’s also recommended that they’re a member of a professional accounting organisation such as CPA Australia so that you know they’re abiding by professional and ethical standards.

A registered tax agent will never ask you for your myGovID credentials or seek to lodge your tax return through myTax.

Every tax agent is legally obliged to take reasonable care. This means checking your tax history, ensuring you have documentation such as receipts, and asking questions about your income, expenses and assets. They should provide a tailored service and only include information that you have provided to them.

Things you should watch out for include agents who:

• offer a very low fixed fee
• promise large refunds
• charge a percentage of your refund as a fee
• spend very little time with you or on your tax return
• don’t ask for receipts
• don’t ask questions or enter information that you can’t substantiate
• ask you to sign blank or incomplete returns, or blank voluntary disclosure forms, or
• ask to lodge your tax return through myTax.

Make sure that you check the tax return in detail before signing. All of your assessable income should have been reported and your deductions correctly recorded. Ensure that you can back up every dollar of the claims.

Remember that ultimately, it’s your responsibility what gets lodged and you are the one who has to pay the extra tax plus penalties and interest if anything is wrong on your tax return. 

BE CAREFUL OF SCAMS AND PROTECT YOUR IDENTITY

There has been a significant increase in Australians being targeted with COVID-19 scams, fraud attempts and deceptive email and SMS schemes. If you’re unsure whether an ATO interaction is genuine, do not reply. If you receive an SMS or email claiming to be from the ATO, check with the ATO first to confirm it’s genuine.

During this time of heightened scam activity, the ATO encourages individuals to:

• run the latest software updates to ensure operating systems security is current
• update antivirus software
• always exercise caution when clicking on links and providing personal identifying information
• never share personal information on social media, such as your TFN, myGov or bank account details.
• avoid accessing online government services via a hyperlink in an email or SMS – only via an independent search
• always access the ATO’s online services directly via ato.gov.au or my.gov.au or the ATO app
• call the ATO on an independently sourced number to verify an interaction if in doubt
• don’t click on a link, open an attachment or download a file if in doubt.

Thieves only need some basic details such as name, date of birth, address, myGov details, or tax file number (TFN) to commit identity crime. If criminals steal your identity, it can take a long time to fix. It may be difficult for you to get a job, a loan, rent a house, or apply for government services or benefits.

Ensure your digital identity, such as your myGovID, is secure. Your digital identity is unique to you and shouldn’t be shared, as this will enable others access to your personal data across services such as tax and health. 

If you suspect your TFN or ABN has been stolen, misused or compromised, phone the ATO as soon as possible on 1800 467 033 between 8.00am and 6.00pm Monday – Friday so they can investigate and place additional protective measures on your account.

JobKeeper Payment Scheme

The purpose of this Fact Sheet is to enable you to make a quick assessment of your eligibility for the Government’s JobKeeper Payment Scheme.  It is not a comprehensive guide as the rules are quite complex.  If, after you have examined the information in this Fact Sheet and believe that you may be eligible, please contact us immediately so we may assist you further.

The JobKeeper Payment scheme was announced on 30 March 2020 by the Prime Minister and the Treasurer. The purpose of the scheme is to keep people employed even though the business they work for has suffered a downturn including a ‘hibernation’ or close down for a temporary period.

Businesses impacted by the Coronavirus will be able to access a wage subsidy from the Government to assist in continuing to pay their employees. Eligible employers will be able to claim a fortnightly payment of $1,500 per eligible employee from 30 March 2020, for a maximum period of 6 months.  The Scheme will run from Monday 30 March 2020 to Sunday 27 September 2020.

IMPORTANT:     Urgent Action Required by 31 May 2020

If you believe you are eligible from the 30 March, you need to act now!

Employers must elect to take part in the JobKeeper scheme. It is not mandatory for eligible employers to participate.

Is your business eligible for your employees?

An employer is entitled to the JobKeeper payment in respect of an individual (an employee) in relation to a fortnight if it meets seven conditions.

Condition 1

• on 1 March 2020, you carried on a business in Australia; and
• you satisfy the decline in turnover test on or before the fortnight

Decline in turnover test

Under this test turnover is calculated on the same basis as it is for GST purposes.  The decline in turnover test operates by comparing:

• your projected turnover for a turnover test period; with
• your current turnover for a relevant comparison period

For example, you can compare either:

• the whole of the month of March 2020 with March 2019; or
• the June 2020 quarter with the June 2019 quarter.

If an entity does not meet the decline in turnover test on 30 March 2020, but does so at a later time, the entity will become eligible for the JobKeeper payment from that later time.  The JobKeeper payment is not backdated to 30 March 2020.

Where there is no relevant comparable period there are special rules under an alternate test – see Supplementary Fact Sheet.

How much does my decline in turnover need to be?

Aggregated Turnover was > $1 Billion	50%
Aggregated Turnover was <$1 Billion	30%

The basic test may not accurately reflect the downturn in activity that your business has suffered. The Commissioner of Taxation (the Commissioner) has been empowered with discretion to set out an alternative test, where the Commissioner is satisfied that there is not an appropriate relevant comparison period in 2019. For example, a business that started on 1 January 2020.

Condition 2 -The fortnight is a JobKeeper fortnight

A JobKeeper fortnight is defined as:

• the fortnight beginning on Monday, 30 March 2020 (i.e. and ending on Sunday, 12 April 2020);
• each subsequent fortnight, ending with the fortnight ending on Sunday, 27 September 2020

Condition 3 – Notification

You must notify the Commissioner that you elect to participate in the JobKeeper scheme

For the first or second JobKeeper fortnight (i.e. fortnights ending 12 and 26 April 2020) you must notify by 31 May 2020).

For later or subsequent fortnights, you must notify by the end of the fortnight.

Condition 4 – Eligible employees

Your Employees will be eligible employees for a fortnight where:

• they are employed by you at any time in the fortnight; and
• on 1 March 2020;
  • they were aged 16 years or over, and
  •  were either:
    • a full-time or a part-time employee of yours; or
    • a ‘long term casual employee’ of yours — i.e. they had been employed by you on a ‘regular and systematic basis’ during the period of 12 months ending on 1 March 2020. A long term casual employee cannot be an employee (other than a casual employee) of another entity.
  •  they were either:
    •  an Australian resident (for social security law purposes); or
    •  a tax resident and held a special category Subclass 444 visa (for New Zealanders).
  •  they agree to be nominated by you as an eligible employee for the purposes of the JobKeeper scheme.

You can claim JobKeeper for employees that were stood down after 1 March 2020. Even if they remain stood down, the employer must nevertheless pay them a minimum of $1,500 per fortnight in order to remain eligible.

Where you let employees go after 1 March 2020 but subsequently re-hired them, you can claim JobKeeper in relation to these employees. This is the case even if the employer needs to immediately stand them down, so long as they are employed. The employees must have been employed by the same employer on 1 March 2020 and let go only after that date.

Employees who were not engaged by you on 1 March 2020 are not eligible.

Some employees are not eligible if they receive some Government assistance.

Your employees must give you a ‘nomination notice’ in the approved form. It needs to be returned to you by the end of May in order for you to claim JobKeeper for April.

You must advise your employees whether they have been nominated as an eligible employee, within seven days of notifying the Commissioner of the individual’s details.

Condition 5 – Wage Condition

You satisfy the wage condition in respect of an employee for a JobKeeper fortnight where their gross pay will exceed $1,500: Gross Pay includes;

• amounts paid to the employee as salary, wages, commission, bonuses or allowances;
• amounts withheld under the PAYG withholding rules for employees;
• salary sacrificed superannuation contributions
• other salary sacrificed amounts

Where an employee has previously been paid less than $1500 per fortnight, you will need to “top up” to ensure they receive a minimum of $1500 per fortnight.

The JobKeeper payment cannot be claimed for employees who were not paid the full amount of $1,500 for the fortnight. Further, the payment is a reimbursement and cannot be paid in advance.

Where your pay run period is usually longer than a fortnight, those payments can be allocated to one or more fortnights in a ‘reasonable manner’ for the purposes of the wage condition. For example, if your ordinary arrangement is to pay an employee every four weeks, it may be reasonable for the purposes of satisfying the wage condition if the employee is paid at least $3,000 for every four-week period.

The Commissioner has discretion to treat a particular event as having happened in a different fortnight(s) to the extent that it is reasonable to do so in his opinion. The Commissioner has extended the payment for the first two fortnights until 8 May 2020.

Condition 6 – Information given to the Commissioner

You are required to give information about the entitlement for the fortnight, including details of the individual, to the Commissioner, in the approved form.  You will also provide information about your current and projected business turnover to the Commissioner.

Condition 7 – You have not opted out of the scheme

An employer is not entitled to the JobKeeper payment if they notify the Commissioner that they no longer wish to participate in the JobKeeper scheme. This notification must be made in the form approved by the Commissioner.

Is your business eligible for your owners who are not employees?

Eligibility based on ‘business participants’ who are not employees

The Rules also allow a limited entitlement to the JobKeeper payment for certain individuals who are not employees of entities but who are actively engaged in the business carried on by a sole trader, partnership, trust or company (i.e. not passive partners, shareholders and beneficiaries).

Entity                                     The Individual

Sole trader                            The sole trader
Partnership                           A partner in the partnership
Trust                                       An adult beneficiary of the trust
Company                               A shareholder in or a director of the company

In relation to a fortnight, the individual must be ‘actively engaged’ in the business carried on by the entity. They cannot also be an employee of the entity at any time during the fortnight.

The individual must have met the following conditions on 1 March 2020:

• they were aged 16 years or over;
• they were actively engaged in the business;
• their relationship to the entity was as outlined above;
• they were either:
• an Australian resident.

The individual must give their entity a ‘nomination notice’ in the approved form, and at the time of the nomination, they cannot be an employee (other than a casual employee) of another entity.

The entity must satisfy the general eligibility requirements for employers outlined above, and the individual is an ‘eligible business participant’ and not an employee. The entity must notify an individual in writing within seven days of giving the individual’s information to the Commissioner for the fortnight (except for sole traders).

There can only be one eligible business participant nominated for each entity.

Integrity rule

An entity is not entitled to a JobKeeper payment for an eligible business participant unless the entity had an ABN on 12 March 2020 (or a later time allowed by the Commissioner) — i.e. an entity that is recently created to access the JobKeeper payment will not qualify.

In addition, the entity must be able to demonstrate that it was in business and has notified the Commissioner by either:

• an amount was included in the entity’s assessable income for the 2018–19 income year in relation to it carrying on a business, and the Commissioner was notified on or before 12 March 2020 (or a later time allowed by the Commissioner); or
•  the entity made a taxable supply in a tax period that started on or after 1 July 2018 and ended before 12 March 2020, and the Commissioner was notified on or before 12 March 2020 (or a later time allowed by the Commissioner).

The following questions are intended to assess eligibility for the JobKeeper Scheme.

Eligibility Criteria
Employer Conditions	Yes	No
Was my business being carried on 1 March 2020?
Has my Turnover declined by the required percentage? (Turnover >$.1 Billion  –  50%  Turnover < $1 Billion –    30%)
Notification -I have or I will advise the ATO on the approved form of my intention to participate in the JobKeeper Scheme?
Is the fortnight a JobKeeper fortnight? (30 March 2020 – 27 September 2020)
I have or I will notify my employee that I have nominated them for the JobKeeper Scheme?
I have or I will provide the ATO with information in the approved form?
Employee Conditions Was my employee?	Yes	No
Employed at any time in the fortnight?
At 1 March 2020 –
Aged 16 or over?
Full or part time? or             Long term Casual Employee (> 12 months)?
Australian Resident?
The Employee has agreed to be nominated and has or will provide me with notification?
Wages Condition Have I paid my employee a minimum of $1500 Gross Pay for the relevant fortnight?
Not Opted Out You have NOT notified the ATO that you no longer want to participate?

If you have answered “yes” to ALL of the above you may qualify for the JobKeeper Payments from the ATO.  We can assist you in confirming your eligibility and completing all necessary forms.  Please contact us as a matter of urgency.

If you have answered any question “No”, you are unlikely to qualify for the JobKeeper Payment Scheme.

Business Participant Eligibility
Entity Requirements	Yes	No
Was my entity carrying on business on 1 March 2020?
Has my Turnover declined by the required percentage? (Turnover >$.1 Billion  –  50%  Turnover < $1 Billion –    30%)
Notification -I have or I will advise the ATO on the approved form of my intention to participate in the JobKeeper Scheme?
Is the fortnight a JobKeeper fortnight? (30 March 2020 – 27 September 2020)
Have I notified my business participant that I have nominated them for the JobKeeper Scheme?
Have I provided the ATO with information in the approved form?
Individual – Business Participant Requirements	Yes	No
The individual was actively engaged in the business at any time in the fortnight?
The Individual is a relevant Business Participant If a Sole trader the sole trader If a Partnership – a partner If a Trust – an adult beneficiary of the trust If a Company – a Shareholder or Director
At 1 March 2020 –
Aged 16 or over?
Full or part time? or             Long term Casual Employee (> 12 months)?
Australian Resident?
The individual has agreed to be nominated and provided the entity with notification?
Has the Entity satisfied the integrity Rule?

If you have answered “yes” to ALL of the above you may qualify for the JobKeeper Payments from the ATO.  We can assist you in confirming your eligibility and completing all necessary forms.  Please contact us as a matter of urgency.

If you have answered any question “No”, you are unlikely to qualify for the JobKeeper Payment Scheme.

The Victorian Government has launched the $500 million Business Support Fund to help small businesses survive the impacts of the coronavirus (COVID-19) pandemic and keep people in work.

The Fund is part of the Victorian Government’s $1.7 billion Economic Survival Package.

Eligibility criteria and application guidelines are outlined below. Please read them before completing an application.

Small businesses are eligible if they meet all these criteria:

• Employ staff
• Have been subject to closure or is highly impacted by shutdown restrictions announced by the Victorian Government to-date. For more information on affected sectors refer to the Non-Essential Activity Directions issued by the Deputy Chief Health Officer.
• Have a turnover of more than $75,000
• Have payroll of less than $650,000

Further eligibility criteria are outlined below in these guidelines.

Businesses will be required to attest to their eligibility and provide supporting documentation (including BAS statements) through the application process. Applicants will be subject to audit by the Victorian Government or its representatives.

Eligible businesses will be provided with a grant to support them to manage in these unprecedented circumstances.

Please read these guidelines before completing the application form.

Completed application forms are to be submitted to the Department of Jobs, Precincts and Regions.

Applications can be made via this link:

https://businessvic.secure.force.com/PublicForm?id=bsf2020

The JobKeeper Payment will support employers to maintain their connection to their employees. These connections will enable business to reactivate their operations quickly – without having to rehire staff – when the crisis is over.

Eligible employers

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Employers will be eligible for the subsidy if:

• their business has a turnover of less than $1 billion and their turnover will be reduced by more than 30 per cent relative to a comparable period a year ago (of at least a month), or
• their business has a turnover of $1 billion or more and their turnover will be reduced by more than 50 per cent relative to a comparable period a year ago (of at least a month), and
• the business is not subject to the Major Bank Levy
• The employer must have been in an employment relationship with eligible employees as at 1 March 2020, and confirm that each eligible employee is currently engaged in order to receive JobKeeper Payments.
• Not-for-profit entities (including charities) and self-employed individuals (businesses without employees) that meet the turnover tests that apply for businesses are eligible to apply for JobKeeper Payments.

Eligible employees

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Eligible employees are employees who:

• are currently employed by the eligible employer (including those stood down or re-hired);
• were employed by the employer at 1 March 2020
• are full-time, part-time, or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020)
• are at least 16 years of age
• are an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder
• are not in receipt of a JobKeeper Payment from another employer.

If your employees receive the JobKeeper Payment, this may affect their eligibility for payments from Services Australia as they must report their JobKeeper Payment as income.

Payment process

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Eligible employers will be paid $1,500 per fortnight per eligible employee. Eligible employees will receive, at a minimum, $1,500 per fortnight, before tax, and employers are able to top-up the payment.

Where employers participate in the scheme, their employees will receive this payment as follows.

• If an employee ordinarily receives $1,500 or more in income per fortnight before tax, they will continue to receive their regular income according to their prevailing workplace arrangements. The JobKeeper Payment will assist their employer to continue operating by subsidising all or part of the income of their employee(s).
• If an employee ordinarily receives less than $1,500 in income per fortnight before tax, their employer must pay their employee, at a minimum, $1,500 per fortnight, before tax.
• If an employee has been stood down, their employer must pay their employee, at a minimum, $1,500 per fortnight, before tax.
• If an employee was employed on 1 March 2020, subsequently ceased employment with their employer, and then has been re-engaged by the same eligible employer, the employee will receive, at a minimum, $1,500 per fortnight, before tax.

It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment.

Payments will be made to the employer monthly in arrears by the ATO.

Timing

---

The subsidy will start on 30 March 2020, with the first payments to be received by employers in the first week of May. Businesses will be able to register their interest in participating in the Payment from 30 March 2020 on the ATO website.

How to apply

---

Businesses with employees

Initially, employers can register their interest in applying for the JobKeeper Payment via The Australian Taxation Office (ATO) from 30 March 2020.

Subsequently, eligible employers will be able to apply for the scheme by means of an online application. The first payment will be received by employers from the ATO in the first week of May.

Eligible employers will need to identify eligible employees for JobKeeper Payments and must provide monthly updates to the ATO.

Participating employers will be required to ensure eligible employees will receive, at a minimum, $1,500 per fortnight, before tax.

It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment.

Further details for businesses for employees will be provided on ato.gov.au.

Businesses without employees

Businesses without employees, such as the self-employed, can register their interest in applying for JobKeeper Payment via The Australian Taxation Office (ATO) from 30 March 2020.

Businesses without employees will need to provide an ABN for their business, nominate an individual to receive the payment and provide that individual’s Tax File Number and provide a declaration as to recent business activity.

People who are self-employed will need to provide a monthly update to the ATO to declare their continued eligibility for the payments. Payment will be made monthly to the individual’s bank account.

Example of the JobKeeper Payment

Self-employed

Melissa is a sole trader running a florist. She does not have employees. Melissa’s business has been in operation for several years. The economic downturn due to the Coronavirus has adversely affected Melissa’s business, and she expects that her business turnover will fall by more than 30 per cent compared to a typical month in 2019.

Melissa will be able to apply for the JobKeeper Payment and would receive $1,500 per fortnight before tax, paid on a monthly basis.

Worker with multiple jobs

Michelle currently works two permanent part-time jobs, at an art gallery during weekdays, and at the local café on the weekend. Due to the impact of the Coronavirus, the gallery has closed and Michelle has been stood down without pay under the Fair Work Act. Michelle continues to work at the café delivering take-away orders.

Michelle can only receive the JobKeeper Payment once, from the employer from whom she nominates as her primary employer. As Michelle only claims the tax free threshold from her job at the art gallery, this will be treated as her nomination of the art gallery as her primary employer.

The art gallery is eligible for the JobKeeper Payment. The art gallery will pass the JobKeeper Payment on to Michelle, so she will receive $1,500 per fortnight before tax. During the application process, the art gallery will notify the ATO that Michelle receives the payment from them. The art gallery is also required to advise Michelle that she has been nominated to the ATO as an eligible employee to receive the payment.

The café is not eligible to receive the JobKeeper Payment for Michelle. The income that Michelle receives from her job at the café does not change her entitlement to the JobKeeper Payment she receives from the art gallery.

Employee made redundant after 1 March

Miles worked as a permanent part-time personal trainer at a gym for six months and was made redundant on 20 March 2020 in response to the Government directive that gyms close. Miles was not entitled to redundancy pay due to his length of service.

In response to the announcement of the JobKeeper Payment, the gym decides they want to re-engage Miles so they are well placed to resume their operations once the Coronavirus restrictions are lifted.

After being made redundant, Miles had registered an intent to claim with Services Australia for access to the JobSeeker Payment and the Coronavirus Supplement. Miles is single, with no children and in total he would be eligible to receive $1,124.50 before tax per fortnight.

If Miles chooses to be re-hired by the gym, under the JobKeeper Payment he will receive $1,500 a fortnight before tax while he is stood down. Miles will need to advise Services Australia of his income. He is no longer eligible for the JobSeeker Payment and the Coronavirus Supplement from Services Australia as a result of receiving the JobKeeper Payment.

Employer with 5 employees who all currently get paid more than $1,500 per fortnight

Sara runs a landscaping company, and employs five full-time gardeners. Sara is paying her employees $1,700 per fortnight before tax. She expects that her turnover will decline by more than 30 per cent over the coming months and that she will either need to lay staff off, or reduce their wages significantly.

As a result of the JobKeeper Payment, Sara will be able to keep employing every gardener, and only needs to pay the $200 wage cost per fortnight before tax per employee above the $1,500 per fortnight (before tax) JobKeeper Payment.

Employee who has been stood down and applied for income support

Phoebe works in administration services of a large retail company as a permanent full-time employee, but she has been stood down under the Fair Work Act without pay. Phoebe had registered an intent to claim with Services Australia for access to the JobSeeker Payment and the Coronavirus Supplement. Phoebe is single, with no children and in total she would be eligible to receive $1,124.50 before tax per fortnight from Services Australia.

Phoebe’s employer has decided to apply for the JobKeeper Payment for all its eligible employees for up to six months. This would entitle Phoebe to $1,500 per fortnight before tax. Phoebe’s employer is required to advise her that she has been nominated as an eligible employee to receive the payment.

If Phoebe elects to receive income support though Services Australia, she will need to report her income from the JobKeeper Payment to Services Australia. Phoebe may no longer be eligible for income support from Services Australia as a result of receiving the JobKeeper Payment.

https://treasury.gov.au/coronavirus/businesses Click on link: The Australian Government is supporting Australian businesses to manage cash flow challenges and retain employees. Assistance includes cash flow support to businesses and temporary measures to provide relief for financially distressed businesses.

https://treasury.gov.au/coronavirus/households – Click on link: The Australian Government is providing financial assistance to Australians. This assistance includes income support payments, payments to support households and temporary early releases of superannuation.

Summary

Federal initiatives:

• Eligible employers with a turnover of up to $50 million that employ workers will be eligible for tax-free payments up to $100,000
• Apprentice wages subsidies up to $21,000 per apprentice
• SME loan guarantee scheme to provide access to unsecured loans for SMEs and relief from responsible lending obligations on lenders
• Accelerated and additional tax deductions in the form of increased instant asset write-off and 50% investment incentive
• Temporary relief in relation to director liability and other insolvency aspects for financially distressed businesses
• $750 stimulus payments now and in July to welfare recipients
• Reduced pension deeming rates
• $550 per fortnight Coronavirus supplement payment to certain welfare recipients, employees who are stood down and sole traders, self-employed and casual workers meet income tests
• Reduced waiting times for applications for Jobseeker, Youth Allowance and Parenting payments
• Access to up to $20,000 of superannuation tax free to recipients of the coronavirus supplement or where income has reduced by 20% or more since 1 January 2020
• Minimum superannuation pension withdrawals reduced by 50% for the 2020 and 2021 financial years

State Government initiatives

• Payroll tax refunds and relief for employers with payrolls less than $3m per annum
• State government assistance for businesses in the form of hardship payments, small grants and tailored assistance
• State Government assistance to help workers who have lost their jobs find new opportunities

Commonwealth Assistance

Cash Flow Assistance for Employers

In the latest package, cash flow assistance for employers been significantly enhanced from the first round of measures. It now specifically includes not-for-profit organisations. The amounts have increased and the period extended. This assistance is available to all organisations with turnover up to $50 million. It only applies to active employers prior to 12 March 2020 but not-for-profits are excluded from this in recognition that some may be established to specifically deal with the Coronavirus fallout. The details are now as follows:

Cash payments up to $100,000

Eligible employers with a turnover of up to $50 million that employ workers will be eligible for tax-free payments up to $100,000. It will be delivered in two tranches.

• The first tranche of payments will be 100% of the amount withheld from employees’ salary and wages during March, April, May and June 2020 up to a maximum of $50,000.
  • This will be paid from late April to July.
  • Businesses that pay salary and wages but do not have to withhold tax will receive a payment of $10,000.
• The second payment tranche will, in total, be the same amount as the first payment, but will be delivered in equal instalments in the June – September activity statements.

This will result in a minimum credit delivered under this scheme of $20,000 and a maximum credit of $100,000. The payments will be delivered as a credit in the activity statement system by the Australian Taxation Office (ATO) and where this results in a refund, the ATO will deliver this within 14 days.

Example 1:

An employer withholds $5,000 per month from employees. The payments (as a credit against the IAS or BAS) are as follows:

• If the employer remits PAYG quarterly
  • March: 3 x $5,000 = $15,000
  • June: $15,000
  • Total for 1st tranche – $30,000
  • The 2nd tranche payments will also total $30,000 and $15,000 will be applied against the June and September BASs
• If the employer remits PAYG monthly
  • March: 3 x $5,000 = $15,000
  • April: $5,000
  • May: $5,000
  • June: $5,000
  • Total for 1st tranche – $30,000
  • The 2nd tranche payments will also total $30,000 and $7,500 will be applied to the June BAS, July and August IAS and September BAS

Example 2:

An employer with less than $10,000 PAYG to be reported in the March to June period, will be entitled to the minimum payments which will be paid as follows:

• March activity statement credit $10,000
• June and September activity statement credits of $5,000 each

Apprentice and Trainee Support

Businesses employing fewer than 20 full-time employees who have engaged an apprentice or trainee prior to 1 March 2020 will be eligible for a wage subsidy of 50% of the apprentice’s or trainee’s wage over the 9 month period between 1 January 2020 – 30 September 2020. This will be capped at a maximum amount of $21,000 per apprentice ($7,000 a quarter). Registrations will open in early April 2020 and final claims must be lodged by 31 December 2020.

Support for Cash Flow Needs for SMEs

SME Loan Guarantee Scheme

Starting in early April, the Government will provide a guarantee of 50% to SME lenders for new unsecured loans to be used for working capital. This will apply to businesses with a turnover of less than $50 million.

The maximum loan size will be $250,000 per borrower and the loans will be for up to 3 years with a six month repayment holiday. No assets will have to be provided as security for the loan.

Lenders are encouraged to provide facilities to SMEs that only have to be drawn if needed by the SME.

The scheme is worth up to $20 billion to guarantee support for up to $40 billion of loans.

Exemption from the responsible lending obligations

Lenders providing credit to existing small business customers will be relieved of the responsible lending obligations. The aim is to increase the speed at which businesses can access credit.

Business Investment

This remains the same as what was announced in the first round of measures. We have repeated them here for clarity:

Instant Asset Write Off

Currently, businesses with a turnover of up to $50 million can claim tax deductions in full for assets costing less than $30,000 (GST exclusive) instead of having to claim the cost over a number of years.
The asset threshold is proposed to be increased to include assets costing up to $150,000 for businesses with a turnover of up to $500 million, if they are first used or installed ready for use between the date of the announcement and 30 June 2020.
The instant asset write off threshold is due to revert to $1,000 for businesses with a turnover of less than $10 million from 1 July 2020.

Investment Incentive

This is a time limited 15 month investment incentive for the purchase of new assets that are not eligible for the instant asset write off. This will apply to assets greater than $150,000 until 30 June 2020 and to assets greater than $1,000 from 1 July 2020. It will run until 30 June 2021 and businesses with a turnover of under $500 million will be eligible.

The incentive is a deduction of 50% of the cost with existing depreciation rules applying to the balance. There is no cost threshold for the assets in this incentive.

Temporary Relief for Financially Distressed Businesses

These are new measures that have been introduced in this package for the next 6 months:

• Temporary increase in thresholds – these measures will increase the thresholds from $2,000 to $20,000 at which creditors can initiate insolvency or bankruptcy and increase the time to respond from 21 days to 6 months.
• Director liability – this measure will provide temporary relief for directors for any personal liability for trading while insolvent – this is only in respect to debts incurred in the ordinary course of the company’s business
• There will also be some additional flexibility introduced in relation to provisions of the Corporations Act 2001 to assist in dealing with unforeseen events arising from the current crisis.

Assistance for individuals and households

Stimulus payment
More than 6 million welfare recipients, including pensioners, carers, veterans, families, young people and jobseekers will now get one tax free cash payment of $750 from 31 March 2020 and a second payment of $750 from 13 July 2020 and both will be paid automatically.

The Treasury website has the complete list of those eligible (including a handy table with clear guidance on what is in and out).

Deeming rates
The deeming rates for pensioners will be cut by a further 0.25% in response to the latest interest rate cut by the Reserve Bank of Australia. This should increase the fortnightly pension payments for pensioners affected by the income test.

Income Support
A new, time-limited Coronavirus supplement will be introduced at rate of $550 per fortnight on top of the normal fortnightly payments to eligible recipients. It will be paid to existing and new recipients of the eligible payment categories and will apply for the next 6 months.

The eligible recipients are those eligible for the Jobseeker Payment, Youth Allowance Jobseeker, Parenting Payment (Partnered and Single), Farm Household Allowance and Special Benefit recipients.

Income Support
Eligibility to the income support payments listed above is to be expanded and will be available for permanent employees who are stood down or lose their employment, sole traders, the self-employed, casual workers and contract workers who meet the income tests.

Asset testing for Jobseeker Payment, Youth Allowance Jobseeker and Parenting payment will be waived for the period of the Coronavirus supplement. The waiting times will also be reduced and the application processes will be made easier.

Early release of super
Eligible individuals will be able to apply online through myGov to access up to $10,000 of their superannuation before 1 July 2020 and a further $10,000 from 1 July for approximately 3 months. The withdrawals will be tax free and will not impact Centrelink entitlements.

This is available for those eligible for the Coronavirus supplement and people whose working hours or income has been affected by at least 20% since 1 January 2020

Minimum Drawdown requirements
The minimum pension amounts that must be drawn from superannuation pension accounts will be temporarily reduced by 50% for the years ended 30 June 2020 and 2021.

Waiting times for a government payment for eligible casual workers forced into self-isolation will be waived. 

State Government Assistance

Some of the State Governments have also responded to the crisis by announcing a series of measures to assist businesses. We have focused on the Victorian measures here but please contact us to discuss the state measures relevant to you.

The Victorian Government announced a $1.7 billion package includes:

Payroll tax refunds and relief – Businesses with a payroll of less than $3 million will receive payroll tax refunds from this Friday for all payroll tax paid for the first 3 quarters of the 2019/2020 financial year. The final quarter payroll tax liability will be waived. The same businesses will be able to defer payroll tax in the September 2021 quarter until 1 January 2021.

Business Support Fund – $500 million will be put into hardship payments, small grants and tailored support as part of a Business Support Fund and will be targeted at the hardest hit sectors, including hospitality, tourism, accommodation, arts and entertainment, and retail. The Government will work with the Victorian Chamber, Australian Hotels Association and AI Group to administer the fund which is intended to help businesses that may not be eligible for payroll tax refunds, to survive.

Liquor licensing fees – The Government will support the hospitality sector by waiving liquor licensing fees for 2020 for affected venues and small businesses.

Working for Victoria Fund – The Government will establish a $500 million Working for Victoria Fund in consultation with the Victorian Council of Social Services and Victorian Trades Hall Council. The fund will help workers who have lost their jobs find new opportunities, including work cleaning public infrastructure or delivering food.

Many Australians invest in property, financial markets and other assets, both here and overseas. In 2016-17, almost 4 million individuals received dividend income of $23.4 billion while 2.1 million reported rental income totalling $44 billion. $20 billion in capital gains were reported by almost 700,000 individuals, while more than 900,000 reported capital losses of $27 billion.

Assessable foreign source income of almost $6 billion was reported by 730,000 individuals.

The ATO’s data matching and information exchange capabilities continue to evolve and now cover many capital transactions and investment revenue streams.

It is therefore more important than ever to report investment income including from overseas, maintain accurate records, correctly calculate capital gains or losses on disposal, and to ensure you comply with the various rules and concessions available to investors.

RENTAL PROPERTIES

The ATO has received a large boost in funding to close the $8.7 billion individuals tax gap. Part of its focus is to ensure taxpayers are returning all rental income as well as claiming only the rental property expenses to which they are entitled. Some of this additional funding will go to improving the checking of claims in real time, additional audits and prosecutions.

TAX TIPS FOR SMALL BUSINESS

The ATO continues its focus on small business as part of its efforts to close the $10 billion tax gap indicated by the Commissioner earlier this year. The ATO has received additional funding through the Black Economy Taskforce and its enhanced enforcement covers lodgment, employee entitlements, mobile strike teams, tax system integrity and the use of data and technology. The new Tax Integrity Centre and whistleblower protections will allow the community to report suspected or known black economy, tax evasion and illegal phoenix activities to a Black Economy Hotline.

Small businesses need to ensure their bookkeeping and lodgments are correct and up-to-date. You should obtain professional tax advice, especially in areas where more complex tax issues arise. This includes structures, capital gains tax, personal services income, trust declarations and distributions, and private company loans.

PRE-1 JULY 2019 TO-DO LIST

Make trust resolutions
Document the streaming of trust capital gains and franked dividends
Review private company loans
Consider deferring certain income, and bringing forward certain deductible expenses
Write-off bad debts
Pay employee bonuses and employee superannuation entitlements

RECORD-KEEPING TIPS
Record cash income and expenses
Account for personal drawings
Record goods for your own use
Separate private expenses from business expenses
Keep valid tax invoices for creditable acquisitions when registered for the goods and services tax (GST)
Keep adequate stock records
Keep adequate records to substantiate motor vehicle claims

BE UP-FRONT AND HONEST WITH YOUR AGENT AND THE ATO
Getting the basics right has never been more important – good record keeping, substantiation, correct account codes, properly accounting for private use and declaring all cash transactions are essential to assure yourself, your tax agent and the ATO that your tax affairs are in order.

The ATO is getting smarter with its data, and taxpayers are increasingly being contacted regarding their income and expense claims. With a focus on discrepancies in returns when compared against pre-fill data or business benchmarks, and increased resources to deal with the cash economy, the onus is on business owners to correctly report their income, claim their expenses and have the appropriate records.

Your tax agent is required to take reasonable care when preparing your return, which means they may ask you detailed questions about your cashflow, business performance, personal use of assets and records.

If you’ve made errors or need to correct your business records, speak with a CPA Australia-registered tax agent who can work with you and the ATO to get things right.

MAXIMISE DEPRECIATION DEDUCTIONS
A key feature for small business in the 2019-20 Federal Budget on 2 April 2019 was the announcement that a small business entity (SBE) may potentially qualify for an asset write-off one under one of three varying caps during the year ended 30 June 2019.

A medium sized business entity (MSBE) will also be able to claim the instant asset write-off in respect of a depreciating asset that is both first acquired for a cost of less than $30,000 on or after 7.30pm on 2 April 2019 which is used or installed ready for use by 30 June 2020.

The write-off amount will depend on the date the asset is first used or installed ready for use for a taxable purpose. For businesses registered for GST, the threshold is calculated on a GST-exclusive basis, but for businesses not registered for GST, the threshold is calculated on a GST-inclusive basis.

Asset cost threshold:

Small business entity From 7.30pm 12 May 2015 1 July 2018 – 28 January 2019 $20,000
Small business entity
From 7.30pm 12 May 2015 29 January 2019 – 7.30pm 2 April 2019 $25,000
Small business entity
From 7.30pm 12 May 2015 7.30pm 2 April 2019 – 30 June 2020 $30,000
Where the cost of the asset is not available for the instant asset write-off deduction, it will be allocated to the general small business pool and depreciated at a rate of 15 per cent regardless of the date of acquisition during the 2019 year, provided the asset starts to be used or is installed ready for use during the year ended 30 June 2019.

For assets included in the pool at the start of the 2019 year, the opening pool balance will be depreciated at the rate of 30 per cent. Where a balancing adjustment occurs during the year, the asset’s termination value must be deducted from the pool.

However, where the closing balance of the SBE’s general small business pool is less than $30,000 as at 30 June 2019, the SBE will be entitled to a full deduction for the amount of the pool’s closing balance.

MAKE SURE YOU PAY THE CORRECT COMPANY TAX RATE AND APPLY THE CORRECT RATE FOR IMPUTATION
Most companies with an aggregated annual turnover of less than $50 million will pay tax at 27.5 per cent in 2018-19. However, some companies with a turnover below $50 million will continue to pay tax at 30 per cent, especially companies that earn nearly all their income from passive investments such as rental income or interest income.

To qualify for the lower tax rate in 2018-19:
a company must have an aggregated turnover of less than $50 million, where aggregated turnover is the sum of the company’s ordinary income and the ordinary income of any connected affiliate or entity
no more than 80 per cent of their assessable income is base rate entity passive income (replacing the requirement to be carrying on a business).
The full company tax rate of 30 per cent applies to all companies that are not eligible for the lower company tax rate.
As a corollary to the base rate passive entity income rules in determining the tax rate of a company, there have also been changes to the dividend imputation rules that apply to the franking of dividends by a company.

The company tax rate for franking distributions needs to assume that the aggregated turnover, assessable income, and base rate entity passive income is the same as 2017-18.
Where the company did not exist in the previous year, its corporate tax rate for imputation purposes will be deemed to be at the lower corporate tax rate of 27.5 per cent for that initial year.

These differential rates create a number of complexities for companies, especially companies holding investments, as well as for the owners of companies. Your CPA Australia-registered tax agent is best placed to assist you with these issues.

SMALL BUSINESS INCOME TAX OFFSET
You will be entitled to the small business income tax offset for the year ended 30 June 2019 if you carry on business and your aggregated turnover for the 2019 year is less than $5 million. The offset rate is 8 per cent of the income tax payable on the portion of an individual’s taxable income that is their ‘total net small business income’.

The ATO will work out the offset based on the net small business income earned as a sole trader and share of net small business income from a partnership or trust, as reported in the income tax return.

SMALL BUSINESS CGT CONCESSIONS
There are significant tax savings potentially available where an eligible active asset used in a business is sold for a profit and the taxpayer can satisfy either the $6 million maximum net asset value test immediately before the CGT event or the $2 million CGT small business entity test for the 2019 year.

Additional conditions must now be met when a taxpayer disposes of an active asset being a share in a company or an interest in a trust on or after 8 February 2018.

Given the complexity of the small business CGT concessions, taxpayers should consult their CPA Australia-registered tax agent for advice.

MAKE TRUST RESOLUTIONS BY 30 JUNE
As always, trustees of discretionary trusts are required to make and document resolutions on how trust income should be distributed to beneficiaries for the 2018-19 financial year by 30 June.

If a valid resolution is not executed by 30 June, any default beneficiaries under the deed will become presently entitled to trust income and subject to tax (even where they do not receive any cash distribution), or the trustee will be assessed at the highest marginal tax rate on any taxable income derived but not distributed by the trust.

A trustee must be able to show how an effective resolution was made through minutes, file notes or an exchange of correspondence documented before year end. However, the trust’s accounts do not need to be prepared by 30 June.

As a corporate trustee may need time to notify its directors that a meeting must be convened to pass and record a resolution, such a notice should be sent out well before the 30 June deadline.

DOCUMENT THE STREAMING OF TRUST CAPITAL GAINS AND FRANKED DIVIDENDS TO BENEFICIARIES
Broadly, trustees of discretionary trusts can stream capital gains and franked dividends to different beneficiaries if the trust deed allows the trustee to make a beneficiary “specifically entitled” to those amounts. The trustee must document this resolution before 30 June and the beneficiary receives or is entitled to receive an amount equal to the net financial benefit of that gain or dividend.

These streaming rules are complex, and taxpayers should consult their CPA Australia-registered tax agent for advice.

CLAIM DEDUCTIONS FOR PROFESSIONAL ADVICE WHEN STARTING A BUSINESS
Professional expenses associated with starting a new business, such as legal and accounting fees, are deductible in the financial year those expenses are incurred rather than deductible over a five-year period as was the case previously.

If you established a business during the year, you should speak to your CPA Australia-registered tax agent about claiming professional advice fees as an expense.

CONSIDER TAX IMPACTS FROM ANY RESTRUCTURING
Small businesses can change the legal structure of their business without incurring any income tax liability when active assets are transferred by one entity to another.

This rollover applies to active assets that are CGT assets, trading stock, revenue assets and depreciating assets used, or held ready for use, in the course of carrying on a business.

However, caution must be exercised – business restructuring is complex, so you should first speak to your CPA Australia-registered tax agent.

REVIEW YOUR PRIVATE COMPANY LOANS
The income tax laws can potentially treat the following as an unfranked deemed dividend for a taxpayer unless an exemption applies:

a payment or a loan by a private company to a shareholder or an associate (like a family member)
the forgiveness of a shareholder’s or associate’s debt
the use of a company asset by a shareholder or their associate
the transfer of a company asset to a shareholder or their associate.
The most common exemption is to enter into a written loan agreement requiring minimum interest and principal repayments over a specified loan term, which may be seven or 25 years depending on whether or not the loan is secured.

There are various things a private company can do before its 2018-19 income tax return needs to be lodged to minimise the risk of a shareholder or an associate deriving a deemed dividend.

Depending on the circumstances, these strategies may include repaying a loan, declaring a dividend or entering a complying loan agreement before the return needs to be lodged.

The rules around private company loans are complex and changing, therefore you should consult your CPA Australia-registered tax agent on this.

PREVENT DEEMED DIVIDENDS IN RESPECT OF UNPAID TRUST DISTRIBUTIONS
An unpaid distribution owed by a trust to a related private company beneficiary that arises on or after 1 July 2016 will be treated as a loan by the company, if the trustee and the company are controlled by the same family group. In these circumstances, the associated trust may be taken to have derived a deemed dividend for the unpaid trust distribution in 2018-19.

However, a deemed dividend may be prevented if the unpaid distribution is paid out, or a complying loan agreement is entered into before the company’s 2018-19 income tax return needs to be lodged.

Alternatively, a deemed dividend will not arise if the amount is held in an eligible sub-trust arrangement for the sole benefit of the private company, and other conditions are satisfied.

Trustees and beneficiaries should consult their CPA Australia-registered tax agent on the full implications of these very complex rules if applicable.

INCREASED ACCESS TO COMPANY LOSSES
The ‘same business test’ for losses has been supplemented with the ‘similar business test’ for losses made in income years starting on or after 1 July 2015. The new test will expand access to past year losses when companies enter into new transactions or business activities.

The similar business test allows a company (and certain trusts) to access losses following a change in ownership where its business, while not the same, is similar, having regard to a number of considerations.

The ‘same business test’ and the ‘similar business test’ will be collectively known as the ‘business continuity test’.

The rules around losses can be complex and taxpayers should consult their CPA Australia-registered tax agent for advice.

WRITE-OFF BAD DEBTS
Businesses can only obtain income tax deductions for bad debts when various conditions are met.

A deduction will only be available if the debt still exists at the time it is written off. Thus, if the debt is forgiven or compromised before it is written off as bad in the accounts, no deduction will be available.

The debt must also be effectively unrecoverable and written off in the accounts as bad in the year the deduction is claimed. The bad debt must have been previously brought to account as assessable income or lent in the ordinary course of carrying on a money-lending business.

Certain additional requirements must be met where the creditor is either a company or trust.

CHECK IF THE PERSONAL SERVICES INCOME RULES APPLY
Personal services income (PSI) is income produced mainly from your personal skills or efforts as an individual. You can receive PSI even if you’re not a sole trader. If you’re producing PSI through a company, partnership or trust and the PSI rules apply, the income will be treated as your individual income for tax purposes.

If the PSI rules apply, they affect how you report your PSI to the ATO and the deductions you can claim.

PAYING EMPLOYEE BONUSES
If you pay staff bonuses and you want to bring expenses into the 2018-19 year, ensure they are quantified and documented in a properly authorised resolution – for example, board minutes – prior to year-end to enable a deduction to be incurred for employee bonuses where such amounts are not paid or credited until the subsequent year.

PAY ANY OUTSTANDING SUPERANNUATION ENTITLEMENTS
Ensure superannuation guarantee payments for employees are up-to-date, and report and rectify any missed payments to the ATO.

From 1 April 2019, there are new powers and offence penalties related to the payment of superannuation guarantee obligations.

Employers can also claim deductions for superannuation contributions made on behalf of their employees in the financial year they are made.

PREPARE FOR SINGLE TOUCH PAYROLL
Single touch payroll (STP) reporting has been extended to all employers from 1 July 2019. A number of options are available depending on the number of employees you have, whether they are closely held and whether you report via your tax or BAS agent.

Check with your payroll software provider to find out if your software is STP compliant.

If you don’t currently use payroll software, you should consult your CPA Australia-registered tax agent for advice.

SEEK INDEPENDENT ADVICE ON INVESTMENT PRODUCTS PROMOTED AS BEING TAX EFFECTIVE
The end of the financial year often sees the promotion of investment products that may claim to be tax effective.

If you are considering such an investment, seek independent advice before making a decision, particularly from your CPA Australia-registered tax agent.

ADDITIONAL TIPS FOR PRIMARY PRODUCERS
Farm management deposits

One of the best tax planning measures available to primary producers is effectively utilising the farm management deposits scheme (FMDs). They are an effective business and cash flow planning tool.

Primary producers can deposit up to $800,000 in a FMD account, they can have early access to their FMD account during times of drought, and they may be able to offset the interest costs on primary production business debt.

Income averaging

Tax averaging enables primary producers to even out their income and tax payable over a maximum of five years to allow for good and bad years. This ensures that farmers don’t pay more tax over time than taxpayers on comparable but steady incomes.

Primary producers who opted out of income tax averaging for 2008-09 will be automatically reinstated in 2018-19 but can choose to withdraw from averaging and pay tax at ordinary rates for 10 years.

Other primary producer-specific tax specific concessions

Don’t forget to consider:

the uncapped immediate write-off for capital expenditure on water facilities and fencing assets
the deduction for the full cost of a fodder storage asset if the expense was incurred or it was first used or installed ready for use on or after 19 August 2018
the outright deduction for capital expenditure for landcare operations and carbon sink forests
the accelerated write-off for horticultural plants and grapevines.