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01st Dec, 2020
On 10 November 2020, the ATO advised that the recent reduction in the company tax rate had not been applied correctly in its systems from 1 July 2020. The error, which resulted in pay-as-you-go (PAYG) instalments being calculated using the former rate of 27.5% and not the correct 26%, affected companies that are base rate entities with an aggregated turnover of less than $50 million.
The ATO has now corrected the error and will issue a new PAYG instalment letter to affected companies reflecting their correct instalment rate or amount.
The ATO says that all future activity statements will have the correct rate applied.
If you have varied your instalment rate or amount, the variation will continue until the start of the next income year. You can continue to vary your activity statements if your rate or amount does not reflect your current trading situation.
If you have lodged your activity statements and paid an amount based on the incorrect instalment calculation, the ATO will refund the overpaid amount shortly. No further action is needed.
When you lodge:
01st Dec, 2020
The ATO has recently outlined its expectations for businesses post-COVID. Overall, it warns companies against using loopholes to obtain benefits from the various government stimulus packages and urged them to follow not only the letter of the law, but also the spirit of the law. Specifically, it reminds taxpayers that measures such as the expanded instant asset write-off and the loss carry-back scheme should not be used in artificial arrangements for businesses to obtain an advantage.
In a recent speech, ATO Second Commissioner of Client Engagement Jeremy Hirschhorn outlined the expectations for businesses, noting that while companies are largely compliant – with 92.5% voluntary compliance at lodgment and 96.3% after compliance activity – the ATO is seeking to increase the percentages to 96% and 98% respectively.
Corporate taxpayers can use ATO information to compare their performance against those of their peers in relation to income tax. The ATO also urges those taxpayers to use its GST analytics tool, which allows businesses to reconcile financial statements to business activity statements (BASs) and to follow its GST best practice governance guide.
Businesses have been entrusted with leading economic recovery via access to a range of government stimulus measures, and with this trust comes increased expectations around corporate behaviour – including tax. Ultimately, Mr Hirschhorn said, a tax system is about underpinning a country’s social contract by collecting the revenue that funds its program and services.
01st Dec, 2020
The Federal Government has released an exposure draft of the rules for the JobMaker Hiring Credit, which was announced in the 2020–2021 Budget in October.
JobMaker will take the form of a payment to employers for each new eligible job they create over the next 12 months. It is estimated that the scheme will cost $4 billion and support about 450,000 employees.
Generally, the amount of the JobMaker Hiring Credit payment depends on the age of the eligible additional employee when their employment starts. Employers can receive up to $200 per week for each eligible additional employee aged 16 to 29 years, and up to $100 per week for each eligible additional employee aged 30 to 35 years.
JobMaker starts on 7 October 2020 and ends on 6 October 2022, but payments will only apply for eligible people who commence employment between 7 October 2020 and 6 October 2021 (that is, during the first year).
17th Nov, 2020
Several tax announcements from the 2020 Federal Budget have now been passed into law.
These include bringing forward changes to the personal income tax thresholds so that they apply from 1 July 2020. From that date, the top threshold of the 19% personal income tax bracket is increased from $37,000 to $45,000. The top threshold of the 32.5% tax bracket is increased from $90,000 to $120,000. The low income tax offset increases to $700 and the low and middle income tax offset (up to $1,080) is retained for 2020–2021.
A range of tax concessions already available to small businesses have been extended to medium sized businesses as well, and businesses with turnover less than $5 billion can deduct the full cost of eligible depreciating assets that are installed ready for use between 6 October 2020 and 30 June 2022.
The ATO has issued updated tax withholding schedules to reflect the 2020–2021 income year personal tax cuts. Employers must now make sure they are withholding the correct amounts for pay runs processed in their systems from no later than 16 November onwards.
With these changes coming partway through the income year, employees and other payees will receive their entitlement to the reduced tax payable for the entire 2020–2021 year when they lodge their income tax returns for that period.
17th Nov, 2020
The ATO advises that the “shortcut” rate for claiming work-from-home running expenses has been extended, in recognition that many employees and business owners are still required to work from home due to COVID-19 This shortcut deduction rate was previously extended to 30 September 2020, but will now be available until at least 31 December 2020.
Eligible employees and business owners, therefore, can choose to claim additional running expenses incurred between 1 March 2020 and 31 December 2020 at the rate of 80 cents per work hour, provided they keep a record (such as a timesheet or work logbook) of the number of hours worked from home during the period.
17th Nov, 2020
An additional category for alternative “decline in turnover” tests is now available for the purposes of the revised JobKeeper payment system (which commenced on 28 September 2020) for entities that temporarily ceased trading for some or all of the relevant comparative period.
Under the revised system, an entity must have had an actual decline in its turnover for the applicable quarter relative to the same quarter in 2019. This generally involves making a one-to-one comparison of the 2020 numbers to those in the corresponding period in 2019, to see if it exceeds the 15%, 30% or 50% decline threshold (depending the type of entity).
Alternative tests can only be used if there is not an “appropriate relevant comparison period” in 2019, and four requirements must be satisfied for an entity to use the alternative tests for the new “temporary cessation of business” category. That is, in the comparison period: