Clients should not act solely on the basis of the material contained in this newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas.
This newsletter is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.
Please contact us if you wish to discuss how the points raised in this edition specifically affect you.
80 cents per hour 'shortcut' method for home office expenses has been extended
Back in April 2020 the ATO announced that a 'shortcut' method was to be made available to use from 1 March 2020 until 30 June 2020 for individuals claiming home office expenses due to COVID-19. The ATO has recently announced an extension of this shortcut method to also include 1 July 2020 to 30 September 2020.
In summary, a taxpayer can claim a deduction of 80 cents for each hour they work from home due to COVID-19 as long as the individual is:working from home to fulfil their employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls; and incurring additional deductible running expenses as a result of working from home.
A taxpayer does not have to have a separate or dedicated area of their home set aside for working, such as a private study.
The shortcut method rate covers all deductible running expenses such as: electricity and gas used for heating/cooling and running electronic items used for work purposes; depreciation and repair of assets used for work purposes; work-related phone and internet costs.
Note: If you are working from home due to COVID-19 and have queries about what deductions you can claim, contact our office.
Treasury Laws Amendment (2020 Measures No 3) Bill 2020
Treasury Laws Amendment (2020 Measures No 3) Bill 2020 has passed both Houses of Parliament and is now law.
Extending the Instant Asset Write-Off
This legislation amends the income tax law to allow a business with an aggregated turnover for the income year of less than $500 million to immediately deduct the cost of a depreciating asset (instant asset write-off). The asset must cost less than a threshold of $150,000 and be first used or installed ready for use for a taxable purpose by 31 December 2020. Without these amendments the $150,000 instant asset write-off would have ended on 30 June 2020.
By extending the previous end date of 30 June 2020 to 31 December 2020, the amendments give businesses additional time to access the $150,000 instant asset write-off for their acquisitions of depreciating assets, including those purchases that have been delayed by supply chain disruptions. Further, the amendments extend cash flow support to businesses through the early stages of the recovery from the economic conditions caused by COVID-19.
It will be interesting to see if this timeframe is further extended at some later point. Note that, come 1 January 2021, if there is no further extension, the $150,000 threshold for the instant asset write-off for depreciating assets will collapse to $1,000 and the turnover threshold for eligibility for the outright deduction of less than $500 million will fall to a turnover of less than $10 million.
Note: Please contact our office if you are considering purchasing a depreciating asset for your business and want to know if you will be eligible for the instant asset write-off.
Treasury Laws Amendment (2019 Measures No 3) Bill 2019
Treasury Laws Amendment (2019 Measures No 3) Bill 2019 has passed both Houses of Parliament and is now law.
Testamentary trusts and minors
This legislation contains amendments to ensure the tax concessions available to minors in relation to income from a testamentary trust only apply in respect of income generated from assets of the deceased estate that are transferred to the testamentary trust (or the proceeds of the disposal or investment of those assets).
Broadly speaking, when a trustee distributes income to a minor it is taxed at the highest marginal rate (plus Medicare levy). However, there are certain exceptions to this rule. One such exception is where the trust is a testamentary trust – being a trust that was established as a result of the will of a deceased individual. Income from a testamentary trust is a type of ‘excepted trust income’ that is generally taxed at ordinary rates.
Prior to this legislation being passed, the previously existing law did not specify that the assessable income of the testamentary trust be derived from assets of the deceased estate (or assets representing assets of the deceased estate). As a result, assets unrelated to a deceased estate that were injected into a testamentary trust may, subject to anti-avoidance rules, generate excepted trust income that was not subject to the higher tax rates on minors. This was an unintended consequence, which allowed some taxpayers to inappropriately obtain the benefit of concessional tax treatment.
This legislation clarifies that excepted trust income of the testamentary trust must be derived from assets transferred to the testamentary trust from the deceased estate or from the accumulation of such income.
This change will apply in relation to assets acquired by or transferred to the trustee of a testamentary trust on or after 1 July 2019.
Regulations confirm no SG obligation on JobKeeper payments where work is not performed
The federal government has registered the Superannuation Guarantee (Administration) Amendment (Jobkeeper) Payment Regulations 2020.
These regulations ensure that amounts of salary or wages that do not relate to the performance of work and are only paid to an employee to satisfy the wage condition for getting the JobKeeper payment are prescribed by the Regulations as excluded salary or wages.
The effect is that these amounts are excluded from the calculations of an employer’s superannuation guarantee shortfall and the minimum compulsory superannuation contribution an employer is required to make in respect of an employee to avoid a superannuation guarantee charge liability.
Likewise, the Regulations recognise that an employer is only entitled to a JobKeeper payment for its employees if the business has suffered a substantial decline in turnover. In these circumstances, it is appropriate to require employers to only make minimum superannuation contributions in respect of amounts that are required to be paid to an employee for the performance of work.
Employers would not be required to make contributions in relation to additional amounts paid to satisfy the wage condition (for example, the amount by which $1,500 exceeds an employee’s normal pay).
Note: If you are concerned about the calculation of compulsory superannuation for any employees supported by JobKeeper, please contact our office.