The ATO has been charged with the important task of administering many of the Government’s packages and with several programs commencing this week, there’s much to be done and no time to waste. We consider three of the Australian Government’s COVID-19 stimulus measures and what you should be doing now.
With around 94 per cent of all businesses in Australia using a tax agent, it is anticipated that the tax agent will handle much of the application process for their business clients, and in many cases work has already commenced. However, based on feedback from members, the work has not yet begun for some as they wait for more complete details about some of the tests and the Commissioner of Taxation’s discretion.
Enrolments for JobKeeper are now open via Online services for agents. The enrolment will require details of the number of eligible employees, including that employers have confirmed employee eligibility and agreement be nominated. Applications to receive the JobKeeper payments will then be open from 4 May to 31 May. Clients can also undertake this process themselves through the Business Portal.
The ATO has now published information on the basic decline in turnover test which requires the use of actual turnover for March 2020, or projected turnover for the month of April or the June quarter. Typically, current turnover will equal GST exclusive sales less input taxed supplies. At the time of writing we are still to see the Commissioner’s legislative instrument for alternative tests where, for example, the business is new or has been affected by drought.
The accruals basis of accounting can be used and if activity statements are prepared on a cash basis, the ATO will allow you to calculate both the current and projected GST turnovers on a cash basis.
For the self-employed, they cannot claim JobKeeper if they are also employees, other than a casual employee, of another business. The nominated individual must also be actively engaged in the business and satisfy the other eligibility requirements. It is important to note there is a separate nomination process to access JobKeeper payments under the business participation entitlement.
What needs to be done now
- Assess clients’ eligibility including the decline in turnover test. This requires monthly GST data for March 2019 and 2020, or actual 2019 data to be compared against projected April (monthly) or June (quarterly) 2020 turnover.
- Check whether the business can afford to make the payments to all eligible employees before being reimbursed by the ATO monthly in arrears.
- Ensure that eligible businesses are paying all eligible employees the required amounts by the end of each JobKeeper fortnight, and that the superannuation guarantee is paid, with exception for any additional payments that are made to employees as a result of JobKeeper.
- Ensure employers notify employees and receive completed employee nomination forms by the end of April to claim JobKeeper for April.
- Enrol for April payments by the end of April.
Cash flow boost
We are well-into the March lodgment cycle and activity statements can continue to be lodged, with cash flow boost credits appearing on eligible taxpayers’ accounts from the 28 April. The cash flow boosts will first be applied to reduce liabilities arising from the same activity statement. The ATO has now confirmed if there is credit remaining, any excess credit from the activity statement that received the cash flow boost amount will be refunded, rather than offset against any other tax debts.
For entities that are yet to report business income or taxable supplies, the lodgment of 2018-19 income tax returns or activity statements up to February 2020 by the deferred due date becomes critical to ensure access to the cash flow boost.
What needs to be done now
For the cash flow boost, it is essential that PAYG withholding is correctly reported on the March 2020 activity statement. If there is any change in PAYG withholding patterns, we recommend that agents ensure that the treatment of payments is correct, records properly reflect the facts and circumstances, and that contemporaneous documentation is maintained to address any ATO queries.
Early access to super
The ATO has opened applications for early access to super are open and ASIC has now provided regulatory relief that allows tax agents to provide advice to clients on early access to superannuation. There are eligibility requirements and the ATO has cautioned against schemes.
When talking to clients about this measure, it is important to be mindful that early access is not without longer-term consequences. As such, it should not be viewed as the first port of call for those in financial difficulties.
What needs to be done now
Applications have opened but individuals have until 30 June to apply for the first $10,000 amount. Agents may therefore wish to consider deferring these conversations in order to focus on JobKeeper and cash flow boost access for their clients.
While the focus of business and advisers is now turning to the abovementioned fiscal stimulus measures, tax agents should also ensure that they monitor their lodgment programs and apply for deferrals as required. This will be particularly important for clients who are dependent on on-time lodgment for access to the stimulus measures.
CPA Australia is providing support through our COVID-19 site and our latest community campaign is encouraging businesses to engage with their tax agent. Listen to our JobKeeper podcast, read our summaries and review our resources to stay up-to-date.