TECE News - April

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:

• Entities with turnover less than $1 billion – 30%
• Entities with turnover greater than $1 billion – 50%
• Australian Charities and Not-For-Profit Commission (ACNC) registered charities – 15%

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:

• Australian Government and its agencies
• State and Territory governments and their agencies
• Foreign governments and their agencies
• Local council governments
• Wholly-owned corporations of any of the above, and
• A business subject to the Major Bank Levy.

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:

• Family day care services
• Outside school hours care, and
• In home care program.

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. 

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.

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:

• Individuals
• Employers
• Payments to the ATO
• Payments and reporting
• Interest and penalties
• Cancelled supplies and events
• International business
• Self-managed super funds
• Pausing or ceasing your business

The ATO will be updating this information regularly.