7 October 2020
Last night the Federal Government released the 2020-21 Budget “The Economic Recovery Plan for Australia”. The Budget was focused on providing a response to the economic impact of the COVID-19 pandemic. Today we look into the Budget to decipher what it means for our clients.
Bringing forward the Personal Income Tax Plan and retaining the middle-income tax offset
- The Government intends to bring forward the second stage of their Personal Income Tax Plan by two years to 1 July 2020. This second stage involves three tax changes:
- The top threshold of the 19 per cent personal income tax bracket will increase from $37,000 to $45,000.
- The low-income tax offset (LITO) will increase from $445 to $700.
- The top threshold of the 32.5 per cent personal income tax bracket will increase from $90,000 to $120,000.
- The Government also intends to retain the low and middle income tax offset (LMITO) for the 2020-21 income year, this was due to be removed at the commencement of the second stage of the Personal Income Tax Plan. The LMITO provides low and middle income taxpayers with a tax benefit of up to $1080.
Increasing and expanding access to the instant asset write off
The Government has proposed support for businesses with aggregated annual turnover of less than $5 billion by enabling them to deduct the full cost of eligible depreciating assets acquired from 7:30pm AEDT on 6 October 2020 (Budget night) and first used or installed by 30 June 2022. (Please note that we have not received confirmation of what will be eligible an asset).
Small business entities (aggregated turnover of less than $10 million) will also be able to deduct the full balance of their small business depreciation general pool.
Small business entities
Medium business entities
Larger business entities
Other qualifying business entities
Aggregated annual turnover
< $10 million
> $10 million to
< $50 million
> $50 million to
< $500 million
> $500 million to
< $5 billion
First used or installed by
By 30 June 2022
Application to second-hand assets
27 September 2020
As outlined in our eAlert last week, the ATO has released information on the extension of JobKeeper and the changes that will come into effect today (28 September 2020). Please refer to our original eAlert here for further information, including key dates.
On the 22 September 2020, Treasurer Josh Frydenberg released the legislative instrument which outlines the alternative tests for decline in turnover for business entities where there is no appropriate relevant comparison period.
The alternative tests can be used to determine whether an entity has satisfied the actual decline in turnover test for the September 2020 quarter or the December 2020 quarter.
If an entity satisfies the basic test, it does not need to satisfy an alternative test. Also, you only need to satisfy one of the alternative tests listed below even if more than one could apply.
Please be aware that while the alternative decline in turnover tests for JobKeeper 2.0 remain relatively the same, there have been some minor changes made.
Circumstances where an alternative test applies:
- The entity commenced business after the relevant comparison period but not on or after 1 March 2020
- The entity acquired or disposed of part of its business from the start of the relevant comparison period but before the applicable turnover test period (for multiple acquisitions or disposals the requirement to use the period after the last transaction has been removed)
- The entity restructured the whole or part of the entity’s business from the start of the relevant comparison period but before the applicable turnover test (for multiple restructures the requirement to use the period after the last transaction has been removed)
- The entity’s turnover substantially increased by:
- 50% or more in the 12 months immediately before the applicable turnover test period or before 1 March 2020, or
- 25% or more in the 6 months immediately before the applicable turnover test period or before 1 March 2020, or
- 12.5% or more in the 3 months immediately before the applicable turnover test period or before 1 March 2020.
- The entity was affected by drought or other declared natural disaster during the relevant comparison period in 2019
- The entity has a large irregular variance in their turnover for the quarters ending in the 12 months before the applicable turnover test period or 1 March 2020, excluding entities that have cyclical or regular seasonal variance in their turnover, or
- The entity is a sole trader or small partnership with no employees where sickness, injury or leave have impacted an individual’s ability to work which has affected turnover.
It is important to note that the actual decline in turnover tests only use quarters, the original decline in turnover tests used months or quarters.
For the purposes of the September 2020 actual turnover test, the start of relevant comparison period is 1 July 2019 and the start of the applicable turnover test period is 1 July 2020.
More information on how to apply the alternative tests can be found on the ATO website here or contact your local Boyce Accountant.
18 September 2020
The following changes will apply to JobKeeper fortnights commencing 28 September 2020.
Actual decline in turnover test:
For JobKeeper fortnights from 28 September 2020 you will need to meet an actual decline in turnover test. An actual decline in turnover test will need to be met for each extension period:
- Extension 1: from 28 September 2020 to 3 January 2021
- Extension 2: from 4 January 2021 to 28 March 2021
The actual decline in turnover test is similar to the original decline in turnover test. However:
- It must be done for specific quarters only. For Extension 1 - September 2020 quarter must be compared to the September 2019 quarter. For Extension 2 - December 2020 quarter must be compared to the December 2019 quarter.
- You must use actual sales made in the relevant quarter, not projected sales, when working out your turnover
- You must allocate sales to the relevant quarter in the same way you would report those sales to a particular business activity statement if you were registered for GST.
If you are not eligible for JobKeeper under Extension 1 because you do not satisfy the turnover test, you may still be eligible for JobKeeper under Extension 2 if you satisfy the later turnover test. If the “basic” actual turnover test is not appropriate to your circumstances, an alternative turnover test may be available. Details of the alternative tests are yet to be released by the ATO or Treasury.
Rates of payment
For an employee or eligible business participant to receive the Tier 1 (higher) rate of JobKeeper payments in each extension period they will need to satisfy the 80-hour threshold:
The Tier 1 rate will apply to:
- Eligible employees who worked for 80 hours or more in the four weeks prior to the last day of the pay period that ended before either 1 March 2020 or 1 July 2020, and
- Eligible business participants who were actively engaged in the business for 80 hours or more in February 2020 and provide a declaration to that effect.
In some circumstances, alternative reference periods may apply for determining the 80 hour threshold (e.g. where the employee was on unpaid emergency leave during the relevant 4 week period).
- Businesses will have to wait until the end of September when they complete their BAS before applying the decline in turnover test for the Extension period 1 (as the test is now based on actual GST turnover).
- For the JobKeeper fortnights stating 28 September and 12 October 2020, the ATO is allowing employers until 31 October to meet the wage condition for employees.
- Monthly business declarations for October (the first two fortnights of the extension) will need to be made by 14 November 2020. If you were eligible for JobKeeper 1.0 you need to tell the ATO whether the Tier 1 (higher) or Tier 2 (lower) payment rate applies to your eligible employees or business participants in the monthly declaration form.
For further information please see the ATO website or contact your local Boyce accountant
18 August 2020
Earlier this month the Federal Government announced a key change to the JobKeeper employee eligibility requirements. From 3 August 2020, workers employed from 1 July 2020 and meet the other eligibility requirements will become eligible for JobKeeper.
The ATO has now released further information on this change, and details of how it will be administered.
Please note that this change to employee eligibility will affect the current JobKeeper scheme as well as the extended JobKeeper scheme (JobKeeper 2.0). The change in employment date to 1 July 2020 does not apply for JobKeeper fortnights that ended before 3 August 2020 (that is, employees must continue to satisfy the 1 March 2020 test to be an eligible employee for JobKeeper fortnights ended before 3 August 2020).
Overview of eligibility requirements from 3 August 2020
An employee is an eligible employee for a JobKeeper fortnight starting on or after 3 August 2020 if they:
- are employed by at any time in the JobKeeper fortnight;
- didn't receive any of these payments during the JobKeeper fortnight:
- government parental leave or Dad and Partner Pay;
- a payment in accordance with Australian workers compensation law for an individual’s total incapacity for work;
- agree to be nominated;
- were either an eligible employee for a JobKeeper fortnight ended before 3 August 2020 using the 1 March test or they meet certain conditions at 1 July 2020 (the 1 July test):
- At 1 July 2020 they were employed as either a:
- non-casual employee; or
- long term casual employee not a permanent employee of any other employer;
- they were 18 years or older (if they were 16 or 17, they can also qualify if they were independent or not studying full time on 1 July 2020); and
- were an Australian resident under the Social Security Act 1991 or a Special Category (Subclass 444) Visa Holder.
- At 1 July 2020 they were employed as either a:
14 August 2020
Reconciling the market disconnect
- It’s apparent that many investors were ‘voting’ for a sharp rebound once the dark COVID-19 clouds cleared. The S&P/ASX 200 Index ticked past 6,000 points in early July and is once again in bull market territory.
- The past three months of hyper growth rates in online sales have been the equivalent of the past three years of cumulative growth. In the U.S, a similar story, as investor sentiment recovered during the quarter on optimism that the negative economic impacts of Covid-19 will not be as severe as initially feared and hopes that monetary policy support will avert a deep, prolonged global recession.
- Despite the optimism, spates of volatility continued to hamper global equities during the quarter, exacerbated by simmering geopolitical concerns and fears of a potentially more disruptive second wave.
- While markets have shown strength, risks remain. Geopolitical risks, while ever present, continue to impact market volatility. Tensions between the US and China are elevated, and the outcome of the US presidential election in November remains uncertain.
Where to from here?
- The Australian economy contracted by a relatively mild -0.3% in the March quarter but given the full impact of shutdowns likely to be felt in the June quarter, it is almost certain that the Australian economy is in its first recession in 29 years.
- Against that backdrop, the question now becomes “where to from here” and without a doubt one of the most important factors in the coming months will be the extent to which governments continue with fiscal measures to support the economy.
- To date, businesses and households have received significant government support from the JobKeeper and JobSeeker programs, the launch of the $25,000 Homebuilder program, and other incentives by state governments.
- Further easing of lending criteria by APRA in addition to loan repayment deferrals by the major banks has lent further support.
- In late July, the Government announced the extension of the JobKeeper program (albeit at a lower rate), which was no doubt welcomed by the broader business community, particularly retail as we move towards the end of 2020.
- The Reserve Bank of Australia’s outlook for the economy and interest rates was recently described by Governor Lowe as a world “where there’ll be a shadow from the virus for quite a few years”, causing “deflationary forces” and “large output gaps.” The RBA kept rates on hold at 0.25% at its July meeting and is prepared to scale up bond purchases if needed.
Disclaimer: The information contained in this document is based on information believed to be accurate and reliable at the time of publication. Any illustrations of past performance do not imply similar performance in the future. To the extent permissible by law, neither we nor any of our related entities, employees, or directors gives any representation or warranty as to the reliability, accuracy or completeness of the information; or accepts any responsibility for any person acting, or refraining from acting, on the basis of information contained in this newsletter. This information is of a general nature only. It is not intended as personal advice or as an investment recommendation.