While the Australian Government has provided businesses with many relief measures during the COVID-19 pandemic, such as the JobKeeper subsidy payment scheme, major changes to instant asset write-off and also rental relief for commercial tenants, the ATO has also provided additional tax support measures that may help your business further.

The ATO is providing businesses with financial relief in terms of interest payment and penalties. Such measures include:

• The ATO will consider remitting interest and penalties incurred after 23 January 2020.
• Low interest payment plans can be discussed with the ATO if you need help to pay your existing and ongoing tax liabilities.
• Income tax, FBT and excise payment due dates can be deferred until 12 September 2020.

The ATO is also encouraging businesses to consider temporarily changing their GST reporting cycle in order to get quicker access to their GST refunds. For example, for businesses which usually report their GST quarterly, moving to monthly reporting if you are due for a GST refund means you can get quicker access to the GST refunds you are entitled to. However, before you make the change, consider that:

• You can only change your reporting cycle from the start of a quarter.
• Changing your GST reporting cycle does not mean changing your PAYG reporting cycle.
• Choosing to report and pay GST monthly means committing to reporting monthly for at least 12 months before electing back to quarterly reporting.
• Your fuel tax credits will need to be reported with your GST.

The new additional tax support measures also means that you can vary your PAYG instalments on your activity statement. You may also be able to claim a refund for any instalments made during the 2019-20 financial year. Penalties or interest will not be applied to where you choose to vary your PAYG instalments for the 2019-20 financial year as well.

Registering for an ABN and applying for GST refunds when you don’t own a business or are not eligible is fraud.

The Australian Taxation Office (ATO) has identified a significant number of GST refund fraud attempts, totalling an estimated $850 million to around 40,000 individuals. This fraud involves predominantly participants inventing fake businesses to claim false refunds.

Sophisticated risk models deployed by the ATO, coupled with intelligence received from banks including through the AUSTRAC-led Fintel Alliance and the Reserve Bank of Australia, identified a recent spike in suspicious refunds. Currently, the ATO has stopped $770 million in payments from being issued.

The fraud involves offenders inventing fake businesses and Australian Business Number (ABN) applications, many in their own names, then submitting fictitious Business Activity Statements in an attempt to gain a false GST refund.

Currently, this fraudulent activity has been circulating as online advertising and content, particularly on social media and their platforms. 

Reminders For The Community

• The ATO does not offer loans. If you see someone advertising a way to get a loan from the ATO, it’s not legitimate.
• The ATO does not administer COVID disaster payments.
• If you are not operating a business, you do not need an ABN, and you don’t need to lodge a GST return.
• Backdating your business registration so you can apply for a refund will flag you as high risk in our systems.
• False declarations may impact eligibility for other government payments.
• The ATO possess the data matching ability to detect these patterns and stop fraud.
• If something seems too good to be true, seek independent advice from an adviser who has no connection to the arrangement before taking any action, or phone the ATO.

What This Means For Businesses:

• Legitimate businesses may face extra steps to receive their refunds as extra controls are put in place.
• To prevent people from lodging fraudulent claims, the ATO has engaged tighter controls around ABN and GST registration.

Were You Involved?

The ATO is urging anyone already involved to come forward now on a voluntary basis rather than face tougher consequences later. They will be recouping the funds, and there will likely be a better outcome for you if you approach them first. 

People who have participated in this fraud may have unwittingly followed advice they have read online, claiming to help access a loan from the ATO, or receive other financial government support such as a disaster payment.

However, for others where there was nothing accidental or unintentional about setting up a fake business in their own name and seeking an unearned refund, harsher penalties could be faced.

If you become involved in this arrangement, you need to speak with the ATO now. They will be able to support you with a range of self-help options. You may be able to correct it yourself, the ATO may be able to assist you, or you may be referred to a trusted advisor like a tax agent (such as us) to help you.

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.

To qualify for small business CGT concessions, an asset must meet the conditions of the Active Asset Test to apply. An asset is considered active when you own it and it is used or held ready for use in relation to a business. You can also have an intangible active asset if it is inherently connected with a business you carry on.

An active asset of yours has been held for a certain amount of time, based on how long you have owned the asset and the test period to meet the requirements of the Active Asset Test. The test period begins when you acquired the asset, and ends at the earlier of

• the CGT event, or;
• when the business ceased, if the business in question ceased in the 12 months before the CGT event.

Assets owned for over 15 years need to have been held for at least 7.5 years within the test period and assets owned for 15 years or less need to have been held for at least half of the test period to satisfy requirements.

When the assets are shares or trusts, passing this basic active asset test is not enough to qualify for CGT concessions. In addition, the asset will need to pass a further test, called the 90% test, to determine whether it is to be counted as an active asset or not. The test is satisfied if CGT concession stakeholders in the company or trust in which the shares or interest are held have a total small business percentage in the entity claiming the concession of at least 90%.

The periods in which the asset is active does not have to be continuous, however, they must total the minimum periods specified. An asset does not need to be active just before the CGT event.