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.
Claiming Home Office Expenses in Your 2020 Tax Return – Holly Laidlaw
In response to the demand for workers to work from home, for the 2019/2020 Tax Year there have been some changes to the options available to taxpayer’s wanting to claim expenses related to them working from home. There are three options available to taxpayers, we have detailed each of these below.
(1) Shortcut method – new due to COVID-19 and only available 1 March to 30 June 2020 Using this method, you can claim 80 cents per hour for each hour you work from home during the period 1 March to 30 June 2020. The shortcut method covers all additional deductible running expenses, including:
If you use this method, you cannot claim on any other expenses for working from home during this period. You do not need to have a dedicated work area to use this method. However, you must keep a record of the number of hours you have worked from home. If you had a work from home arrangement before 1 March 2020, you would need to use one of the existing methods to calculate your deduction for the period 1 July 2019 to 29 February 2020.
(2) Fixed Rate Method (52 cents p/hr) You can claim a deduction of 52 cents for each hour you work from home for the work-related expenses you incur for additional running expenses. The fixed rate covers all expenses you incur for:
To claim using this method, you must keep a record of your actual hours spent working at home for the year or a diary for a representative four-week period. The four-week representative period can be applied across the remainder of the year to determine your full deduction amount. To use this method, you need to have a dedicated work area. This method does not include phone expenses, internet expenses, computer consumables and stationery and decline in value of equipment. Therefore, you will need to separately calculate your work-related use for these expenses and ensure you keep a record detailing this.
(3) Actual Cost Method Under the actual cost method, you can claim the additional running costs you directly incur because of working from home. To calculate the work-related portion of your actual expenses you will need to keep a record of the number of actual hours you work from home during the income year or keep a diary for a representative four-week period. You will then need the following records to assist in determining your deduction under this method:
If a member of your household is using the same area of the house or the same service when you are working, you must apportion your expenses accordingly. To claim a deduction for an asset that cost $300 or more, you need to calculate the decline in value for both the period you owned the assets during the income year and used the assets for work-related purposes.
FBT and Ride Sourcing- Extension of Taxi Travel – Genevieve Rajakulendran
The ATO have now confirmed that for fringe benefit purposes, the taxi travel exemption has been extended to include ride sourcing vehicles such as Uber’s. This is now law.
Previously, the Fringe Benefits Tax Act 1986 defined a taxi as a ‘motor vehicle that is licensed to operate as a taxi’. The amendment will now extend to ride sourcing vehicles exempting travel from workplace to home provided by an employer to an employee.
For the taxi exemption to apply the single trip to or from the employee’s workplace
Trips that are exempt:
If it is a single trip to or from the employee’s workplace:
Travel by an employee in such a vehicle on or after 1 April 2019 is also exempt if it is as the result of sickness of, or injury to, the employee, and whole or part of the journey is directly between:
What these changes mean for you:
Any benefit arising from travel by an employee using a registered taxi or ride sourcing vehicle other than a limousine is now exempt from FBT subject to meeting certain criteria.
Note: Review if the amendment would impact your 2020 FBT return and advise if an amendment is necessary.
SUPER GAURANTEE AMNESTY - Eric Zhang
Disclosing previously unpaid or underpaid super guarantee
What is it?
On 6 March 2020, the government introduced a superannuation guarantee (SG) amnesty (the amnesty).
The amnesty provides employers a one-off chance to rectify historical non-compliance or mistakes with their superannuation guarantee obligations, without needing to pay the additional administration fee or receive a penalty. The amnesty allows employers to disclose and pay previously unpaid super guarantee charge (minimum 9.5% superannuation payments made to all employees) between the dates of 1 July 1992 to 31 March 2018.
What is the benefit of the amnesty?
Without the application of the amnesty, if the Australian Taxation Office (ATO) determines that your business has missed payments, you will be liable for:
The benefit of the amnesty is that, if you qualify, you:
Are you eligible for the amnesty?
To be eligible for the amnesty you must meet the following requirements:
For further information including how to apply for the amnesty, please refer to the link to the ATO website below:
Guidance on JobKeeper reporting via STP
The ATO has issued guidance to help employers reporting eligible employees and JobKeeper top-up payments through Single Touch Payroll (‘STP’). For each eligible employee, employers must notify the ATO:
The ATO says this process will be managed through the 'STP Pay Event' by entering the relevant JobKeeper description (as outlined below) in the 'Other Allowances' field.
To report the JobKeeper start fortnight for an eligible employee:
Use the description ‘JOBKEEPER-START-FNXX’ where ‘XX’ represents the JobKeeper fortnight from which the first payment is made.
Report the amount as ‘zero’, or as $0.01 if the software does not support reporting ‘zero’.
To report a top-up payment for an eligible employee ordinarily earning less than $1,500 per fortnight:
Use the description 'JOBKEEPER-TOPUP' for the top-up amount.
To report the first full JobKeeper fortnight an employee became ineligible:
Use the description ‘JOBKEEPER-FINISH-FNXX’ where ‘XX’ represents the JobKeeper fortnight in which the last payment is made.
For example, an employee resigns, and their last payment was on 13 May 2020. As this falls in JobKeeper fortnight 04 (being 11/05/2020 – 24/05/2020), the description 'JOBKEEPER-FINISH-FN04' should be used to notify the ATO that the employee is not eligible for JobKeeper from FN05.
Making corrections to (previously reported) JobKeeper start and finish informationThe ATO’s guidance identifies several situations where errors made in reporting the JobKeeper start or finish information may need correction and sets out options for doing so.
In particular, guidance is provided for making corrections where:
The ATO is urging employers to exercise extreme caution to ensure the accuracy of originally reported information as multiple corrections cannot be made through the STP Pay Event, 'Other Allowances' field.
Please contact our office if you require more information or assistance on reporting JobKeeper payments through STP.
COVID-19 and tax depreciation reports – are physical inspections necessary?
Property investors and businesses will often engage a specialist quantity surveyor to prepare a tax report on capital works and depreciation deductions available to them under the tax law in respect of their income-producing properties – for example, a rental property, office building or factory.
A thorough physical inspection of the property by a quantity surveyor plays a vital role in this process in order to, amongst other things:
We have become aware that some quantity surveyors are promoting tax depreciation reports that do not include a physical inspection of the property due to COVID-19 precautions.
Usually the reports are provided, with an offer to do an inspection at a later time when it is possible to do so.
However, in some cases, no offer of a site inspection is made at all.
Where a physical inspection of premises is not performed, this increases the risk of deductions being missed or errors being made. This could result in costly adjustments if a taxpayer has to subsequently amend their tax return or is audited.
Please contact our office if you require more information about using quantity surveyor tax depreciation reports.
COVID-19 and Division 7A relief
The ATO has announced some limited relief for private companies that have loans to their shareholders or related parties that are governed by what are referred to as “complying loan agreements”.
A complying loan agreement is entered into to avoid triggering an assessable deemed dividend that could potentially be equal to the amount of the loan from the private company.
When there is a complying loan agreement between a private company and a borrower, the borrower must make the minimum yearly repayment (MYR) by the end of the private company’s income year. This avoids the borrower being considered to have received an unfranked dividend, generally equal to the amount of any MYR shortfall.
As a result of the COVID-19 situation, the ATO understands that some borrowers are facing circumstances beyond their control. To offer more support, the ATO will allow an extension of the repayment period for those borrowers who are unable to make their MYR by the end of the lender’s 2019–20 income year (generally 30 June).
Requesting the extension
A request for a 12-month extension can be made through the completion of an online application. Borrowers will be asked to confirm the shortfall, that the COVID-19 situation has affected them and that they are unable to pay the MYR as a result.
When the ATO approves an application, it will let the borrower know they will not be considered to have received an unfranked dividend.
This is subject to the shortfall being paid by 30 June 2021. It will not be necessary to submit further evidence with the application. This particular streamlined process established by the ATO only applies to applications for an extension of up to twelve months for COVID-19 affected borrowers. It is still open to a borrower to apply to obtain a longer extension of time outside the streamlined process.
If you have been affected by the COVID-19 situation and need more to time to make your minimum yearly repayment (MYR) in relation to complying loans from private companies, contact our office for assistance.