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{{label}}28 April 2020
Legislation to implement the ‘JobKeeper’ Payment which allows employers to continue paying their employees during the Coronavirus pandemic is now law.
The $1,500 per fortnight JobKeeper Payment is the equivalent of about 70% of the median wage and represents about 100% of the median wage in some of the most heavily affected sectors, such as retail, hospitality and tourism.
The JobKeeper Payment will be paid in the first week of May (but backdated to 30 March) and will end on 27 September 2020. Employers and eligible recipients must qualify on a (rolling) fortnightly basis.
To be eligible, businesses (including sole traders and charities) must have suffered a "substantial decline" in turnover to be entitled to the fortnightly payment of $1,500 for each eligible employee.
Turnover is defined according to the calculation for GST purposes and is reported on Business Activity Statements. It generally includes all Australian based gross business income minus GST (further information about how to work out GST turnover can be found on the ATO website).
The turnover test requires an entity to measure its projected GST turnover and compare this to a ‘relevant comparison period’. Any shortfall is to be expressed as a percentage and if this equals or exceeds the following thresholds, the entity will satisfy the decline in turnover test:
The turnover test period must be a calendar month that ends after 30 March and before 1 October 2020, or a quarter that starts on 1 April or 1 July 2020. The relevant comparison period must be the period in 2019 that corresponds to this turnover test period.
The Government’s JobKeeper Payment fact sheet states that all business types, including not-for-profits, will be eligible with the exception of:
This means that government schools and local councils are not covered by the JobKeeper Payment rules, whereas non-government schools and private vocational education providers will be eligible.
Additionally, a company that is in liquidation, or a partnership, trust or sole trader in bankruptcy, will not be eligible.
The legislation provides the Treasurer with power to vary the eligibility for JobKeeper Payments and sub-delegate powers to the ATO to prevent the need to recall Parliament if further changes need to be made to the scheme.
For more information about the JobKeeper Payment, please refer to our COVID-19 technical update or the Government’s fact sheet.
Parents will receive free child care during the Coronavirus crisis in order to help child care centres remain open and viable during through the crisis. This measure will also benefit those parents who choose to keep their children at home during the pandemic as children can remain enrolled and keep their place for when the crisis is over, without having to pay any fees.
From 6 April 2020, the Government will make weekly payments directly to child care centres at the rate of 50% of the services' fee revenue or 50% of the existing hourly rate cap, whichever is lower.
The payments will be based on the attendance figures that each centre had in the fortnight before 2 March (i.e. From Monday 17 February through to 28 February), which is before parents started withdrawing their children in large numbers. The payments will be made whether or not children are attending services.
Parents who have kept their children at home since 23 March but have still been paying fees may be able to have their fees waived by the child care centre. However the fee waiver is a business decision and is therefore at the discretion of the child care centre.
In order to receive the payments, child care centres must remain open and not charge families for care. The payments will be paid in lieu of the Child Care Subsidy (CCS) and Additional Child Care Subsidy payments.
The payments will be made by the Government from 6 April until 28 June 2020. This means parents will not be charged fees during this time.
In addition to centre based day care services, the fee-free arrangements also apply to:
For parents, the current means-testing arrangements do not apply so free child care will apply to everyone, regardless of their means. However, priority will be given to parents who need to continue working (ie. essential workers), including when parents cannot care for their children safely at home. Other priorities include vulnerable and disadvantaged children and those who have recently been taken out of child care.
Affected child care centres may also be eligible for the JobKeeper Payment to support them in retaining their employees, such as their educators.
However certain business types, such as ‘local council governments’ who provide council-run child care centres will not be eligible for the JobKeeper Payment. Instead, it will be up to the State and Territory governments to provide extra funding to ensure childcare centres remain open through the Coronavirus pandemic.
For example, the NSW Government has announced it will provide a $133 million childcare package to prevent the mass closure of council-run childcare centres and make preschool free for six months. The rescue package will include $82 million to support centres ineligible for the JobKeeper Payment, while $51 million will cover the cost of preschool fees for up to six months so they can waive charges for parents.
Similarly, certain child care educators who are on temporary work visas or educators who are casuals that have been with a service for less than 12 months will also be ineligible for JobKeeper Payments. However casual workers may be able to benefit from the JobSeeker Payment (formerly Newstart Allowance) if they meet the eligibility criteria.
Parents should speak directly to their child care operator as there is no Government application process.
Note, parents who have cancelled their child’s enrolment since 17 February are being encouraged by the Government to get back in contact with their child care centre and re-start their arrangements. The Minister for Education (the Hon Dan Tehan MP) stated “re-starting your enrolment will not require you to send your child to child care and it certainly won’t require you to pay a gap fee. Re-starting your enrolment will, however, hold your place for that point in time when things start to normalise, and you are ready to take your child back to their centre.”
Further, parents wishing to increase their child’s hours or days in care have been advised to discuss it with their centre. The government has is encouraging people to show common-sense and have asked services to prioritise care to children of essential workers, vulnerable and disadvantaged children and children with existing enrolments. Services are not compelled to accept new enrolments or increase session lengths where parents request it as this is a business decision.
The free child care arrangements will be reviewed after one month and the Government will consider an extension after three months. It is expected that the system will last at least six months in total.
The JobSeeker Payment provides financial help for individuals aged between 22 and age pension age who are looking for work. It is also available when individuals are sick or injured and are unable to do their usual work or study.
The payment is means-tested, however the JobSeeker partner income test taper rate will be reduced from 60 cents to 25 cents from 27 April 2020.
This change will allow more couples to access the payment where one of the couple loses their job and goes onto the JobSeeker Payment, and the working partner is on a more modest income.
For the JobSeeker Payment (including Energy Supplement), the current cut-out for a couple in which only one partner earns income is $1,858.50 pf or $48,321 pa.
As a result of this change, the new partner income test cut-out for JobSeeker Payment will be $3,068.80 per fortnight.
This means a couple could have a combined income of roughly $94,000 pa when factoring in one partner’s employment income and the JobSeeker Payment (including the Coronavirus Supplement).
It is important to note that this change is temporary and will operate until the Coronavirus Supplement ceases to be payable (for the next six months from 27 April 2020).
The Department of Social Services has further information about these changes. Click here to find out more about this measure.
Claiming tax deductions for working from home due to Coronavirus is being made easier by the ATO.
The ATO is introducing a new ‘shortcut’ method which will allow people to claim 80 cents per hour for all their running expenses, rather than needing to calculate costs for specific running expenses.
The change will apply from 1 March to 30 June 2020. This means claims for working from home expenses prior to 1 March 2020 cannot be calculated using the shortcut method, and individuals must use the pre-existing working from home approach and requirements.
Multiple people living in the same house will be able to claim the new rate. For example, a couple living together could each individually claim the 80 cents per hour rate.
The ATO will review the shortcut arrangement for the next financial year as the COVID-19 situation progresses.
Further information can be found by accessing the ATO website.
SMSF trustees that own real property are able to give their tenant/s (including related party tenants) a reduction in rent if they are financially impacted due to COVID-19.
Charging a related party a price that is less than market value is usually a contravention of the superannuation laws. However, the ATO has confirmed they understand some landlords are giving their tenants a rent reduction or waiver because of the financial impacts of the COVID-19.
The ATO will not be taking any compliance action during the 2019/20 and 2020/21 financial years where an SMSF gives a tenant (who is also a related party) a temporary rent reduction or waiver during this period.
It is important that where temporary changes are made to the terms of the lease agreement (due to COVID-19) that the parties to the agreement document the changes and the reasons for the change. This could be by way of a minute or a renewed lease agreement or other documentation.
SMSF trustees who have been temporarily residing overseas but have been stranded due to COVID-19 causing them to be out of Australia for more than two years will still be treated as an Australian superannuation fund, according to the ATO.
An SMSF must be an Australian superannuation fund to be a complying fund and receive concessional tax treatment. To be an Australian superannuation fund, an SMSF must meet three residency conditions. The second and third conditions, being ‘central management and control test’ and the ‘active member test’, are relevant in this case.
As the COVID-19 health crisis has resulted in many countries imposing travel bans and restrictions around international travel, the ATO will not apply compliance resources to determine whether the SMSF meets the relevant residency conditions.
The ATO has released a frequently asked questions page on their website with answers to some common tax and superannuation questions about COVID-19.
Answers to frequently asked questions have been categorised for:
The ATO will be updating this information regularly.
Each year the Federal Government sets out the estimated revenue and spending of the Australian Treasury for the following financial year via a budget paper.
The Government was due to deliver the Federal Budget on 12 May, but that has now been delayed until 6 October because of the Coronavirus pandemic and a range of other events that have affected the economy including the drought, bushfires and the floods.
The Government has stated that putting budgets together and forecasts around the economy at a time when there is uncertainty is ‘simply not sensible’, so the Federal Budget will be postponed to when there is more certainty about the economic environment.
TECE will be releasing a comprehensive Budget Roundup on Wednesday 7 October so stay tuned.
The ATO has released updated superannuation rates and thresholds applicable for 2020/21.
The following thresholds remain unchanged for 2020/21:
The thresholds that will be changing in 2020/21 include:
2019/20 - current | 2020/21 - new | |
---|---|---|
Small business CGT lifetime cap | $1,515,000 | $1,565,000 |
Low rate cap amount | $210,000 | $215,000 |
Untaxed plan cap amount | $1,515,000 | $1,565,000 |
Employment termination payment cap | $210,000 | $215,000 |
Tax free part of genuine redundancy and early retirement scheme payments | $10,638 + $5,320 per year of service | $10,989 + $5,496 per year of service |
Maximum superannuation guarantee contributions base | $55,270 per quarter 9.5% SG percentage |
$57,090 per quarter $9.5% SG percentage |
A full list of the superannuation rates and thresholds that will apply for the 2020/21 year is available from the ATO website.
The ATO has released SMSF Regulator’s Bulletin SMSFRB 2020/1 which outlines its concerns in relation to SMSFs undertaking property development.
The ATO has seen an increase in the number of SMSFs entering into arrangements, with related or unrelated parties, involving the purchase and development of real property for subsequent disposal or leasing. In particular, the ATO are seeing a number of arrangements in which the investment activity is undertaken utilising joint venture arrangements, partnerships or investments through an ungeared related unit trust or company.
The ATO acknowledges that the legislation does not prohibit an SMSF from investing directly or indirectly in property development, however, certain aspects of the arrangement may give rise to breaches of the superannuation legislation and regulations.
Some of the legislative provisions that may be breached include:
The above relate specifically to superannuation legislation but additional concerns that SMSFs need to be conscious of relate to tax law, such as non-arm’s length income and general anti-avoidance provisions.
The ATO will continue to monitor property development arrangements involving SMSFs, particularly those that include LRBAs and related party transactions, to ensure that SMSFs are not contravening any of the provisions listed in their Bulletin.
SMSF trustees considering a property development arrangement should seek appropriate legal and tax advice before entering into these arrangements, as there may be significant adverse consequences for trustees and members including the forced sale of assets or having to wind up the SMSF. SMSF trustees may wish to seek specific guidance from the ATO to ensure the arrangement satisfies the legislative requirements.
From 1 January 2020 – 20 March 2020, the ACCC’s Scamwatch has received 94 reports of scams about COVID-19 and warns these numbers are increasing. Reports have been received of:
How can you protect yourself?
If you believe you have been a victim of a scam, you can make a report on the Scamwatch website as well as find out more information about where to get help.
Q: My client’s remuneration package includes the ability to salary sacrifice/package a range of items (ie. superannuation contributions, car expenses, health insurance, etc). Will an income protection policy cover up to 75% of my client’s pre-salary sacrificed income?
A: Yes. Income protection covers up to 75% of an individual’s pre-tax income received by ‘personal exertion’.
As salary sacrificing/packaging does not reduce the amount of income an individual earns in principle, an income protection policy is generally based on an individual’s pre-tax remuneration paid by an employer. This includes any fringe benefits and/or voluntary salary sacrifice contributions made by an employer.
Do you have a technical question about a financial advice strategy or need to find technical resource material? Don’t hesitate to email us at tece@aia.com
Kind regards,
The AIA Technical and Education Centre of Excellence (TECE) Team
Copyright © 2020 AIA Australia Limited (ABN 79 004 837 861 AFSL 230043). All rights reserved. This information is intended for financial advisers only and is not for wider distribution. This information is current at the date of distribution and is subject to change. This is general information in summary only, without taking into account the objectives, financial situation, needs or personal circumstances of any individual, and may not be exhaustive. It is not intended as financial, legal, medical, tax or other advice.