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Welcome to the December 2020 edition of the Spry Roughley Report.

As we look forward, hopefully, to a Happy Christmas, we reflect on the year past and the topsy-turvy emotional ride we have had. Whilst some have been devastated by the bush fires, drought and COVID, others have escaped the pain and even recovered with a record cropping season and the boom in sections of consumer spending since the March lock-downs. And now a regional lockdown in NSW!  Interesting times indeed. One hopes we are not entangled with the Chinese proverb of living in interesting times and that sense will prevail on that front so far as it relates to our trade, and hopefully, relationship with China.

Christmas of course brings forth family considerations for most of us and perhaps discussions around how parents or grand-parents might assist their off-spring with some financial help. There is much written about the Bank of Mum & Dad and this can be fraught if not handled carefully.

I am reminded of an article I read earlier this year by Smith Hancock, insolvency practitioners, on the dangers of lending to loved ones. In particular they addressed the situation of parents and children buying real estate as joint tenants, with the parents advancing the majority of the funding. The situation gets complicated if one of the parties becomes bankrupt. Without adequate documentation the trustee in bankruptcy is entitled to rely on the presumption of advancement, meaning that without evidence to the contrary, the funds advanced are treated as intended to be a gift and thus without recourse. Even with a mortgage it is not uncommon for a bank to seek a declaration that funds advanced to cover a deposit are a gift. If this is something you are contemplating, please seek advice and ensure the arrangements are documented.

As another aspect of our "interesting times" there was a reference in the Australian Financial Review last week about how interest rates on Australian treasury notes had turned negative for the first time in Australia's history. This related to part of a larger offer in which one investor took out a $500 million tranche with a weighted average yield on the note of 0.0099 per cent! This was possibly a play in currency trading rather than a representation that money is worthless, but it is indicative of the current situation. Unprecedented times indeed. Interestingly, even with the massively larger Government debt, the interest cost is substantially reduced compared to last year because of the engineered lower prevailing rates. I do hope this doesn't end in tears – which it won't if the Government of the time has the fortitude to rein in the debt when inflation re-emerges.

It was pleasing to see that the Government has abandoned the Cash Payments Reporting proposals that were promising to be a "red tape" nightmare. The principle was perhaps worthwhile but that needs much deeper thought to capture the extent of the unreported cash economy in an efficient manner. Will we end up copying India or China with primarily mandated electronic transactions at some stage? That technology is available now if the political will is there to implement it!

An interesting item we have been following is the proposal for self-managed superannuation funds to be allowed 6 members instead of the current limit of 4. The Senate Committee that was examining this has now recommended that this legislation be passed. That will be good news if passed.

We note that a number of businesses are in discussion regarding new property lease arrangements and in this market, incentives are often available. If this affects you then please talk to us as the tax treatment of incentives can have a significant impact on your after-tax benefit yet not necessarily prejudice the other party. Fruitful territory to have a win!

A reminder that the company tax rate for base rate entities – most trading businesses with turnover under $50 million - is now 26% for the 2020/21 year. Good for business but hard on those relying on franking credits as they will also decline. This caused some difficulty for the Tax Office in issuing tax instalments as they initially didn't take account of this. More on this, and other items below ……. 

As usual, please do not hesitate to call us on (02) 9891 6100 should you wish to discuss how any of the points raised in the report specifically affect you, or click here to send us an email.

Warm regards,

Martin

Martin Roughley, Director
Spry Roughley Services Pty Limited


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Coronavirus Supplement extended (but reduced)

The Federal Government's Coronavirus Supplement has been extended for a further three months. The Supplement payments were due to end on 31 December 2020, but the latest extension will allow them to run until 31 March 2021, which will be welcome news for many individuals still struggling with unemployment and other economic difficulties associated with the COVID-19 pandemic. However, the Supplement rate will be further cut from 1 January 2021 to $150 per fortnight.

The supplement was originally introduced in April 2020 at a rate of $550 per fortnight, which effectively doubled the rate of certain social security payments, including JobSeeker, Youth Allowance and Austudy. Individuals eligible for these payments received the full amount of the $550 Coronavirus Supplement on top of their payment each fortnight, lifting the total payment to $1,100 for most people.

The initial supplement was extended until 31 December 2020 at $250 per fortnight, and while the latest extension may be welcome news for unemployed or underemployed Australians, the supplement will now be further reduced to $150 per fortnight from 1 January 2021 (until 31 March 2021).

Previous arrangements that increased the income-free area of the JobSeeker payment to $300 per fortnight will continue from 1 January 2021 to 31 March 2021, meaning that recipients of various payments can earn income of up to $300 per fortnight and still receive the maximum payment rate. The partner income test cut-out will be retained at an increased rate of $3,086.11 per fortnight ($80,238.89 per year), allowing recipients to continue accessing various payments.

Those on various support payments need to also be aware of the return of mutual obligation requirements which apply to recipients in all states and territories except Victoria (at the time of writing). This includes performing tasks and activities in the individual's Job Plan, attending to tasks in online employment services, and/or attending all appointments with their employment provider either over the phone, online or in person. Failure to fulfil these mutual obligations could lead to suspensions of payments, and penalties.

Former employees, sole traders and self-employed individuals thinking of applying for the JobSeeker payment should also be aware that the assets test now applies, as well as the liquid assets waiting period, which could see those with savings having to wait up to 13 weeks to receive payments.

Learn more about this...


Additional $250 Economic Support Payments on the way 

Two additional Economic Support Payments of $250 each will soon be available to people who get any one of the following:

  • Age Pension;
  • Carer Allowance;
  • Carer Payment;
  • Commonwealth Seniors Health Card;
  • Disability Support Pension;
  • Double Orphan Pension;
  • Family Tax Benefit Part; or
  • Pensioner Concession Card.

The $250 payments are not available to anyone who receives the Coronavirus Supplement.

To be eligible for the additional payments, you must receive an eligible payment (or have an eligible card) on:

  • 27 November 2020 to get a $250 payment in December 2020; and
  • 26 February 2021 to get a $250 payment in March 2021.

These additional cash payments follow the two $750 stimulus payments made in April and July 2020 for social security and veteran income support recipients and concession card holders.

Learn more about this...


ATO advises of PAYG instalment and company tax rate error 

On 10 November 2020, the ATO advised that the recent reduction in the company tax rate had not been applied correctly in its systems from 1 July 2020. The error, which resulted in pay-as-you-go (PAYG) instalments being calculated using the former rate of 27.5% and not the correct 26%, affected companies that are base rate entities with an aggregated turnover of less than $50 million.

The ATO has now corrected the error and will issue a new PAYG instalment letter to affected companies reflecting their correct instalment rate or amount.

The ATO says that all future activity statements will have the correct rate applied.

If you have varied your instalment rate or amount, the variation will continue until the start of the next income year. You can continue to vary your activity statements if your rate or amount does not reflect your current trading situation.

If your business has a tax amount payable, there are a range of ATO support options available, including the ability to enter into a payment plan.

Small businesses who have lodged and paid

If you have lodged your activity statements and paid an amount based on the incorrect instalment calculation, the ATO will refund the overpaid amount shortly. No further action is needed.

Small businesses yet to lodge

When you lodge:

  • if you choose to lodge based on the current instalment calculation on your activity statement, the ATO will apply the correct rate and refund any excess amount due to the error; or
  • if you have intended to vary your instalment rate or amount, you can still vary, and the ATO will not adjust the varied amounts.

Learn more about this...


ATO post-COVID expectations for businesses 

The ATO has recently outlined its expectations for businesses post-COVID. Overall, it warns companies against using loopholes to obtain benefits from the various government stimulus packages and urged them to follow not only the letter of the law, but also the spirit of the law. Specifically, it reminds taxpayers that measures such as the expanded instant asset write-off and the loss carry-back scheme should not be used in artificial arrangements for businesses to obtain an advantage.

In a recent speech, ATO Second Commissioner of Client Engagement Jeremy Hirschhorn outlined the expectations for businesses, noting that while companies are largely compliant – with 92.5% voluntary compliance at lodgment and 96.3% after compliance activity – the ATO is seeking to increase the percentages to 96% and 98% respectively.

Corporate taxpayers can use ATO information to compare their performance against those of their peers in relation to income tax. The ATO also urges those taxpayers to use its GST analytics tool, which allows businesses to reconcile financial statements to business activity statements (BASs) and to follow its GST best practice governance guide.

Businesses have been entrusted with leading economic recovery via access to a range of government stimulus measures, and with this trust comes increased expectations around corporate behaviour – including tax. Ultimately, Mr Hirschhorn said, a tax system is about underpinning a country's social contract by collecting the revenue that funds its program and services.

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JobMaker Hiring Credit up to $200/week: draft rules 

The Federal Government has released an exposure draft of the rules for the JobMaker Hiring Credit, which was announced in the 2020–2021 Budget in October.

JobMaker will take the form of a payment to employers for each new eligible job they create over the next 12 months. It is estimated that the scheme will cost $4 billion and support about 450,000 employees.

Generally, the amount of the JobMaker Hiring Credit payment depends on the age of the eligible additional employee when their employment starts. Employers can receive up to $200 per week for each eligible additional employee aged 16 to 29 years, and up to $100 per week for each eligible additional employee aged 30 to 35 years.

JobMaker starts on 7 October 2020 and ends on 6 October 2022, but payments will only apply for eligible people who commence employment between 7 October 2020 and 6 October 2021 (that is, during the first year).

If you're planning to employ more staff, there are things you and your prospective employees can be doing right now that will help you qualify for JobMaker payments. Contact us if this applies to you.

Learn more about this...

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  • Our firm is built on being attentive to and extensively knowledgeable about our clients so we can work with them to help them to both achieve their goals and protect them from risk. We are forward looking in our advice and always aim to be practical and right.
    - Martin Roughley, Managing Director
  • In business, there is so much going on and you don’t always have all the answers. That’s when you need to know who to call. Our clients call us.
    - Shaun Madders, Director
  • Going beyond the compliance and routine is what we do. By maintaining open and frank communication we are able to provide valuable insights and assist in driving the changes required to help our clients achieve their goals.
    - Fergus Roughley, Director