After an unusual and challenging second half of the 2019/20 financial year, we’re certainly not out of the woods yet. Not only is COVID-19 still very much a threat, the various government stimulus measures have presented some unique obligations and considerations now that June 30 has come and gone. As you prepare to lodge (or have a tax agent lodge) your 2019/20 tax return for yourself or your business, it is worth considering the implications that things like JobKeeper may have on this year’s tax.
The Australian Taxation Office (ATO) is being especially vigilant in ensuring everyone does the right thing, and they have already been leveraging data-matching processes and information brought through their tip-off line to catch out those attempting to defraud the system or circumvent the rules. Businesses are on high alert about making sure they’re doing the right thing, so what are some things that the ATO are looking for, and how can you ensure your business’ year-end compliance is up to standard?
What the ato is looking out for
Through various means of monitoring businesses and individuals, the ATO are keeping an eye on just about everything they can when it comes to lodging tax returns and other compliance matters. However, the COVID-19-related payments, deductions, schemes and other tax implications are top of their list at the moment.
For businesses, this includes ensuring that only eligible businesses claim COVID-19 government assistance (e.g. JobKeeper subsidy) and pass that onto their eligible employees where applicable; and clamping down on businesses who manipulate their figures to fraudulently claim assistance (e.g. businesses who falsify their turnover reduction to satisfy relevant tests in order to become eligible for JobKeeper).
For individuals, the ATO is looking at things such as the early release of super, where people may falsely apply for early release; supply false statements; or withdraw super and then re-contribute for a tax advantage. Disaster Recovery Payments (DRPs) such as those from government agencies, charities, community groups or an employer are also on the radar. DRPs are exempt from income tax, however if you have received a DRP you still need to include it on your return.
How to remain compliant
As is often the case with tax, education is key to staying on top of things. Familiarise yourself with the tax implications of any COVID-19 assistance yourself or your business has received, including things like reporting and inclusion on tax returns. Here is a brief look at some prominent stimulus measures and their impact on year-end tax returns.
|JobKeeper Payment (for employers)||Taxable, however, tax neutral as JobKeeper wage payments are claimed as a tax deduction.|
|JobKeeper Payment (for employees)||Taxable, at marginal rates.|
|PAYG-W Cash Boost||Tax-free payments (i.e. Non-assessable Non-exempt).|
|Early release of superannuation||Must satisfy Covid-19 conditions of release to access payments of up to $10,000 per annum (tax-free).|
|Instant Asset Write-Offs||Eligible asset purchases up to $150,000 (increased from $30,000) can be deducted in full for items installed ready for use between 12/03/2020 and 31/12/2020* conditions apply|
|50% Accelerated Depreciation||Eligible asset purchases of more than $150,000 can have 50% of the value deducted in the year of purchase (in addition to standard depreciation claims).|
|Two $750 stimulus payments to pensioners, social security, veteran and other income support recipients and eligible concession card holders (12 March and 13 July 2020)||Payments are tax-free and will not count as income for social security, farm household allowance and veterans’ payments.|
|Payroll Tax Grant ($17,500)||• One-off grant paid to employers (or groups of employers) with taxable wages between $1m and $4m per annum.
• March-June payroll tax to be waived for employers WA wages <$7.5m at 30 June 2020
|Tax Payment Deferral Options||Eligible businesses can defer the following for up to six months:
• BAS amounts due (including PAYG instalments),
• Income tax assessments,
• FBT assessments, and
|Tax Reporting Variations||• Business may vary PAYG instalment amounts to zero for the March 2020 quarter; businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters
• Businesses on a quarterly reporting cycle may opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.
Also, ensure you keep all the necessary documentation, receipts and logbooks to substantiate deductions you wish to claim. If you’re unsure or have any concerns, seek professional advice!
COVID-19 compliance – the bottom line
The ATO has made it clear that they are happy to work alongside businesses when they make genuine mistakes, so long as the business is honest about it and cooperates fully. MP+ can assist with representation and advice to ensure compliance obligations are satisfied.