Author: Adam_Admin

What the NSW $1.6 billion coronavirus stimulus package will mean for you

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As a result of the coronavirus outbreak in NSW and a decline in economic activity throughout the state, on 17 March 2020, the NSW government announced its own $2.3 billion coronavirus stimulus package which includes direct efforts to assisting small businesses.

Out of the $2.3 billion, $700 million will go into health funding, while the rest will be for economic stimulus, mainly through financial assistance for small businesses. As per the ATO’s announcement, much of the stimulus package’s budget will go towards tax relief options for small businesses which are most likely to experience cashflows problems as a result of the coronavirus and a corresponding drop in demand.

Of the remaining $1.6 billion for economic stimuli, $450 million will go to remitting payroll tax for businesses with payrolls of up to $10 million. Currently, the payroll threshold sits at $1 million.

Capital works and maintenance projects are also set to be brought forward by the NSW government, although nothing specific has been announced.

Businesses in industrial trades, as well as cafes, bars and restaurants, are eligible for tax relief as well, with $80 million out of the coronavirus stimulus package dedicated to cancelling or postponing regular business fees and charges.

The NSW government is also looking to increase job opportunities, with more than $250 million going towards hiring more cleaners for public buildings, including schools.

For more details on such tax relief options, businesses are encouraged to contact the ATO personally to discuss their specific circumstances so that the correct tax relief options are applied to eligible businesses.

Managing longevity risk and your superannuation

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Longevity risk is a common and important factor to consider when planning for your retirement funds. Longevity risk refers to the risk of outliving your savings and arises as people enter retirement, and in most cases, with a fixed amount of money to use during their retirement years. Managing your longevity risk is important because retirees often have no idea of how long they will need their retirement funds for. Here are a few strategies to help you manage your longevity risk:

Purchase an account-based pension:

An account-based pension is a regular income stream you can buy with the money from your super after you retire and reach your preservation age. When buying an account-based pension, you can choose how much of your super funds you’d like to transfer to the pension phase, the size and frequency of your payments (within a set limit) and how you want your money to be invested through your pension.

If you were thinking of purchasing an account-based pension to begin with, now may be the time as the Government is temporarily reducing superannuation minimum drawdown rates for account-based pensions by 50%. The annual payment as a percentage of account balance currently has reduced rates between 2% and 7% (from age brackets from 55 to 95+ respectively).

Set up a lifetime annuity:

Lifetime income annuities and insurance products designed to provide income throughout your retirement. Annuities are bought from insurance companies with a lump sum of cash and in return, you can get regular income payments until you pass away or for the amount of time you’ve agreed upon.

To make sure you purchase the right annuity for your desires and circumstances, it is often wise to consult a financial adviser before making your decision or go through a reliable insurance broker. In the case that you’d like to avoid paying commission fees from an insurance broker, you can also purchase lifetime annuities from investment companies rather than a traditional insurance company.

Age pension as a safety net:

While there are a number of retirement safety net options available to retirees, age pension is the most obvious and most reliable. An age pension is a means-tested Government-backed safety net for retirees who are unable to fully provide for themselves in retirement. While a stable income stream to take note of, age pensions usually only provide their recipients with the bare minimum and hence considering some of the strategies listed above will give you more leeway with your funds and lifestyle after retirement.

ATO introduces new working from home deduction scheme

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COVID-19 is forcing many businesses to work from home, meaning that you now have to pay for expenses such as heating and lighting that were previously covered by employers.

The ATO has introduced a new ‘shortcut method,’ where you can claim additional running expenses at a rate of 80 cents for each hour you work from home as a result of COVID-19.

Deductible running expenses include:

  • Utilities such as heating, cooling and lighting.
  • Cleaning costs for your work area.
  • Mobile or landline phone expenses for work calls.
  • Internet connection.
  • Computer consumables and stationery.
  • Repair costs for home office equipment and furniture.
  • Depreciation of home office equipment, computers, furniture and fittings.
  • Small capital items such as a computer (purchased for the purpose of working from home) can be claimed if they cost under $300. If the cost exceeds $300, the decline in value can be deducted.

The shortcut will apply from 1 March 2020 to 30 June 2020. A record of hours worked such as timesheets or rosters must be kept as proof. If you only undertake minimal work tasks from home such as occasionally checking emails or taking calls, then you are not eligible for the deduction. To claim the deduction, you must specify your claim with the note “COVID-hourly rate” when lodging your upcoming 2019-20 tax return.

There are two pre-existing alternative methods to claim working from home deductions that individuals may choose to use, however, they are generally more tedious:

  • One way you can file a claim on your expenses is the actual cost method, where you keep a diary that details the work portion of your household running expenses. This can include receipts and documents supporting your claim. If you don’t provide supporting documents displaying the portion of expenses that were incurred for work, the ATO may reject your claim.
  • The fixed-rate method allows you to claim a fixed rate of 52 cents per hour worked. This applies for electricity and decline in furniture expenses, but a separate claim can be made for phone and internet expenses, the depreciation of office equipment and computer consumables and stationery.

These deductions are only eligible for the proportions of the expenses that are actually used for work purposes. For example, if you’re using your own phone to make work calls, then only the portion of the bill that was incurred due to work calls can be claimed. If the room you are working in is shared with others, you can only claim electricity expenses for the hours you were exclusively using that room for work purposes.

Expenses such as rent, mortgage and insurance cannot be claimed unless you have a permanent home office.

Setting up your myGovID

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If you haven’t set up your myGovID yet, you need to do it before you can lodge your next business activity statement (BAS).

AUSkey, including Manage ABN Connections, will be replaced by the ATO’s myGovID and Relationship Authorisation Manager (RAM) from 27 March 2020. After this change, you will no longer be able to access government online services through an AUSkey. Device AUSkeys will be replaced by new machine credentials.

Business owners will need to set up a myGovID soon if they haven’t already done so and link it to RAM. Your myGovID is separate from your myGov account and will allow you to prove your identity online. RAM is an authorisation service that uses your myGovID to provide you with access. When linked with your myGovID, RAM will allow you to act on behalf of your business online.

Desktop and browser-based versions of myGovID will not be supported as these devices are easily accessible. To set up your myGovID, you will need an email address (that you do not share with anyone else) and a smart device that uses iOS 10 or later on Apple devices, or Android 7.0 or later (not including devices that use Android Go operating systems). You can download the myGovID app for free through the AppStore or Google Play.

Depending on what government online services you wish to access through myGovID, you will have to provide certain identity documents to authenticate your account. You can generally have a Basic or Standard identity strength. A Basic identity strength is where you provide only one or no identity documents, aside from your personal details (such as your date of birth and email address). Only some government online services will accept a Basic identity strength, such as Bankruptcy Register Search, ACMA Lodgement Portal and Debt Agreements Online.

A Standard identity strength requires two Australian identity documents, such as:

  • A passport, no more than three years past its expiry date
  • A driver’s license, including a learner permit
  • A birth certificate
  • A Medicare card.

This will allow you to access all participating government online services, including the Business Portal where you can lodge your BAS.

Expert advice on early superannuation access as a result of COVID-19

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Under the coronavirus stimulus package released and revised by the Australian Federal Government on 22 March 2020, individuals in financial trouble due to the negative economic impacts of COVID-19 will be able to access their superannuation funds early. However, while the option is available, it is recommended that individuals only consider withdrawing from their super in the case of absolute emergencies and treat it as a last resort.

With the new rules on superannuation, workers whose incomes are reduced by at least 20% due to the COVID-19 outbreak are allowed to take $10,000 out of their super for the 2019-20 financial year and another $10,000 for 2020-21. Individuals will also not need to pay tax on any withdrawn amounts and existing welfare payments will not be affected either.

While the introduced early access to superannuation funds may be inviting for newly unemployed workers, it is important to consider whether the temporary relief is necessary and worth foregoing super funds available for long term investment. For example, even when accounting for Australia’s slowing economy in the coming years, $10,000 is predicted to be worth over $65,000 in another 30 years.

Especially for younger workers who are less likely to have access to other savings, the choice to give up future savings for current comfort is a difficult one. Experts instead are recommending Australians to apply for the other payments and benefits made available to vulnerable Australians through the coronavirus stimulus package, such as added $550 fortnightly supplements to Australians on JobSeeker payments and other welfare recipients and pensioners.

Experts also predict that the Australian Government will introduce more stimuli for increased cash flow in the Australian economy and more payments for unemployed, struggling and vulnerable Australians in the case of COVID-19 becoming more of a serious economic issue. Hence, withdrawing funds from your superannuation account should be considered a last resort and not for the sake of unnecessary temporary relief.

In addition to being allowed early access into individual super funds, superannuation minimum drawdown rates will also be temporarily reduced by 50% for account-based pensions and others similar until 2021.

The Government has also reduced the upper and lower social security deeming rates by a further 0.25 percentage points, with upper at 2.25% and lower at 0.25% which will come into effect on 1 May 2020.

New JobKeeper payments for employers

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The Federal Government introduced a third COVID-19 support package of $130 billion on 30 March 2020. The package includes additional support for businesses, including a new JobKeeper payment to help businesses retain employees.

Businesses who have been affected by COVID-19 may be able to receive a Government subsidy to help them continue to pay their employees. To be eligible, employers must:

  • Have more than a 30% reduction in their turnover for at least a month compared to last year if the business has an overall turnover of less than $1 billion.
  • Have more than a 50% reduction in their turnover for at least a month compared to last year if the business has an overall turnover of $1 billion or higher.
  • Not be subject to the Major Bank Levy.
  • Have been in an employment relationship with eligible employees as at 1 March 2020.

JobKeeper payments must only be made to eligible employees, which are employees who:

  • Are under current employment with the employer.
  • Were already employed by the employer on 1 March 2020.
  • Are employed on a full-time or part-time basis, or are a long-term casual who has been employed on a regular basis for over 12 months as at 1 March 2020.
  • Are at least 16 years old.
  • Have an Australian citizenship or are an eligible visa holder.
  • Are not also receiving a JobKeeper payment from another employer.

To receive the JobKeeper payment, employers need to:

  • Go onto the ATO website and register an intention to apply with an assessment stating they have or will experience the 30% turnover reduction.
  • Provide the ATO with eligible employee information, including how many employees had been engaged as at 1 March 2020. This can be done using Single Touch Payroll data.
  • Confirm that eligible employees each receive at least $1,500 per fortnight before tax.
  • Notify eligible employees about receiving the Jobkeeper payment.

BAS lodging and government funding eligibility

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As part of the second $66 billion support package in response to COVID-19 and its negative effects on the Australian economy, the Federal Government has expanded tax-free cash payments to small and medium businesses with a minimum payment of $20,000 and maximum of $100,000, up from the previous $2000 to $25,000 range.

However, it is important to note that payments are only given to eligible businesses after they lodge their BAS (business activity statements) by the 28 July and 28 October 2020 due dates.

The new enhanced scheme will be delivered in two phases:

  1. Employers are set to receive a first payment equal to 100% of their salary and wages withheld (a maximum of $50,000) when lodging their activity statements at quarterly due dates.
  2. An additional payment equal to the first payment made after businesses lodge their BAS by 28 July and 28 October 2020.

Businesses will receive payments based on their BAS lodgement schedules. For example, a business that receives a payment for the period up until June 2020 will receive the same amount for the period up until September 2020 upon the lodgement of their BAS in two separate occasions.

For monthly BAS lodgers, businesses will receive their first payment for the March 2020, April 2020, May 2020 and June 2020 lodgements, with a 300% calculation in the March activity statement to provide the same treatment as quarterly lodgers. Similarly, the second payment businesses which lodge their BAS monthly will be released once they lodge their June 2020, July 2020, August 2020 and September 2020 lodgements.

To remain eligible to receive the new government funding for small to medium-sized businesses, remember to lodge your BAS on time as per your usual schedule. There are several options you can consider to lodge your BAS:

  1. Lodge online through your myGov Business Portal
  2. Lodge through your tax or BAS agent (who can access your myGov)
  3. Lodge as “Nil BAS” if you have nothing report for the period online or through phone
  4. Lodge by mail

Working-from-home web tools you should utilise

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Traditionally, it has always been much easier to manage employees and ensure collaborative productivity through onsite and in-office procedures. However, with the COVID-19 outbreak forcing many businesses to continue their operations online business owners and employees are understandably struggling to keep productive and synergised while working individually from home. To help with keeping businesses running ensuring employees are able to work together through the web, here are a few helpful web features to utilise.

Video conferencing/online messaging:
Live video conferencing and messaging through a number of efficient programs and apps available through the internet is a good way to keep your employees accountable to their tasks, keep up to date with any business developments and help employees communicate with each other.

Organising daily video conferences in which all employees are required to participate and contribute will keep workers motivated and aware of any upcoming projects, developments or business activities relevant to them. Scheduled live meetings will also mean employees are required to stay on top of their work even when working from home. Instant messaging apps specific to businesses will also work as a separate space for employees to communicate and collaborate and act as a virtual working space functioning similarly to an office.

File sharing:
Instead of having important files, software and documents saved onto one physical hard drive or computer in an office, having a virtual platform that all employees can access from their accounts on any computer will prove to be a useful web tool when implementing working from home strategies.

Not only is having one virtual space where all important materials are congregated convenient for employees, but it also means employees can easily share documents and even work on the same files at the same time. File sharing platforms provide a more open and collaborative space for employees and assist them in accessing their work when working from home.

Team management platform:
Team management platforms are those which outline and record the progress of any given task and project in a company. Starting from employers adding certain projects, to delegating tasks to employees and having employees upload their work while marking their progress, it is much easier to keep track of company progress remotely through the usage of team management platforms.

While there are many third-party platforms to consider, make sure you take advantage of any free trials first to learn how to best use the platforms and if they are the right fit for your company operations. Otherwise, conduct background research on any team management platforms you find interesting and make sure they include the functions you desire.

Deferring and refunding GST on imported goods

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Importing goods and services with extra-added GST costs but not sure how you can apply for refunds or deference? The ATO has outlined a series of steps for all Australian businesses to follow when deferring or refunding any GST payments from imported goods to help better manage your cashflow.

Instead of paying GST every time you purchase an imported good, the ATO is now introducing a deferred payment scheme, where you can defer GST payments until the first activity statement lodged after your goods are imported.

An online application for the deferred GST scheme must be submitted for eligible businesses. To be able to apply for the deferred GST scheme, businesses must meet the following requirements:

  • Have an ABN
  • Be registered for GST
  • Lodge your activity statements monthly and online
  • Make your activity statements electronically
  • Comply with customs regulations on imported goods and services

According to the ATO, you can also apply for GST refunds when you return a low-value imported digital good or service. If your purchase possesses a custom value of $1000 or less, there are almost always GST costs attached to the product. While the GST added cost for one product may not be much, these tax payments do add up and it is important to consider applying for a refund when you choose to return these imported items.

When returning an imported good, your overseas supplier should always refund the paid amounts including GST but on the off-chance that they don’t, the ATO is always open to helping out with refund requests for imported GST costs. The ATO encourages contacting them directly for any GST-related problems concerning your business.

With the recent outbreak of COVID-19 and its resulting negative economic impacts on small Australian businesses, it is also worth noting that the ATO has also introduced some tax relief options including GST refunds, whereby businesses can acquire their GST refunds faster by reporting GST monthly rather than the usual quarterly reports.

COVID-19 crisis: reviewing your super

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While the coronavirus has been causing Australia’s economy to take a recessive turn due to reduced cash flow, there is still no reason to panic about your superannuation investments just yet.

However, if you are a middle-aged worker or a soon-to-be retiree, reviewing your superannuation investment strategy may prove helpful for other future unexpected economic problems. Here are some suggestions on how you can manage your super with a minimised risk strategy:

Build a cash buffer:
Cash will always be a conservative option when it comes to super allocation. For those approaching retirement, investing in cash is a low-return but also a low-risk strategy to protect your savings. Not only should middle-aged workers work towards investing their super funds in cash, but they should also build a physical cash buffer and save on the side without contributing the extra money into super funds. This way, in the off chance that something does go terribly wrong with your super funds, at least you have a cash buffer to help you out.

Financial planner/personal accountant:
If you can spare some extra money to do so, hiring a personal accountant or financial planner will always benefit you in the long run. Unlike super funds which invest your money into outlets deemed profitable by the company itself, a financial planner will help you invest your money into avenues that you personally prefer. While this may mean converting into a self-managed super fund, having sole control of your super funds is never a bad idea.

Pay attention to super fees:
The one thing that you as a super fund holder can choose is the fees you wish to pay a super fund for managing your super. Do your research before committing or switching to a super fund and focus on the fundamentals, such as fees. High fees will obviously negatively impact your retirement savings and while rates may increase at a seemingly minuscule rate, they will add up by the time you can take out your super. Always choose a super fund which is most aligned with your personal values and monetary goals and do adequate market research beforehand.