September 2021 – Practice Update

September 13, 2021

Extending administrative relief for companies to use technology

The Government has passed legislation renewing the temporary relief that allows companies to use technology to meet regulatory requirements under the Corporations Act 2001.

These temporary relief measures will allow companies to hold virtual meetings and use electronic communications to send meeting-materials and execute documents until 31 March 2022.  This should ensure that companies can meet their obligations as they continue to deal with the uncertainty of the COVID-19 pandemic.

With the extension of this temporary relief, the Government will now seek to introduce permanent reforms later this year to give companies the flexibility to use technology to hold meetings, such as hybrid meetings, and sign and send documents.

Expansion of support for SMEs to access funding

The Government is providing additional support to small and medium sized businesses (‘SMEs’) by expanding eligibility for the SME Recovery Loan Scheme.

Specifically, in recognition of the continued economic impacts of COVID‑19, the Government will remove requirements for SMEs to have received JobKeeper during the March quarter of 2021, or to have been a flood affected business, in order to be eligible under the SME Recovery Loan Scheme.

As with the existing scheme, SMEs who are dealing with the economic impacts of the coronavirus with a turnover of less than $250 million will be able to access loans of up to $5 million over a term of up to 10 years.

Other key features include:

• The Government guarantee will be 80% of the loan amount.
• Lenders are allowed to offer borrowers a repayment holiday of up to 24 months.
• Loans can be used for a broad range of business purposes, including to support investment, as well as to refinance any pre-existing debt of an eligible borrower.
• Loans can be either unsecured or secured (excluding residential property).

The loans will be available through participating lenders until 31 December 2021.

ATO warns property investors about common tax traps

In 2019/20, over 1.8 million Australians owned rental properties and claimed $38 billion in deductions, so the ATO is reminding property investors to beware of common tax traps that can delay refunds or lead to an audit costing taxpayers time and money.

The most common mistake rental property and holiday homeowners make is neglecting to declare all their income, including failing to declare any capital gains from selling an investment property.

Assistant Commissioner Tim Loh said: “To put it simply, you should expect tax consequences for any property that you earn income from that isn’t your main residence.”

“We are expanding the rental income data we receive directly from third-party sources such as sharing economy platforms, rental bond authorities, and property managers.  We will contact taxpayers about income they’ve received but haven’t included in their tax return.  This will mean they need to repay some of their refund,” Mr Loh said.

So far, the ATO has adjusted more than 70% of the 2019/20 returns selected for a review of rental information.

“Most people we contact about their rental deductions are able to justify their claims.  However, there are instances where we have to knock back claims where taxpayers didn’t keep receipts, claimed for personal use, or claimed for ineligible deductions,” Mr Loh said.

Div.293 concessional contribution assessments have been issued

The ATO has recently issued approximately 30,000 Division 293 assessments for the 2018/19 and 2019/20 financial years.

Editor: Division 293 tax is an additional tax on super contributions, which reduces the tax concession for individuals whose combined income and contributions are greater than the Division 293 threshold (currently $250,000).

Due to a system issue, concessional contributions reported for these financial years were not included in Division 293 assessments where that super account was also reported as closed during that financial year.  This reporting issue was resolved in June 2021, and this has resulted in affected members receiving either an initial or amended Division 293 assessment.

Travel allowances and ‘LAFHAs’

The ATO has released a Ruling explaining:

• when an employee can deduct accommodation and food and drink expenses when travelling on work;
• the FBT implications, including the application of the ‘otherwise deductible rule’, where an employee is reimbursed for accommodation and food and drink expenses, or where the employer provides or pays for these expenses; and
• the criteria for determining whether an allowance is a ‘travel allowance’ or a ‘living-away-from-home allowance’ (‘LAFHA’) benefit.

Whether accommodation and food and drink expenses are deductible depends on the facts and circumstances of each case, so the Ruling uses examples to show how to determine the deductibility of these expenses in a range of situations.

Time running out to register for the JobMaker Hiring Credit

The JobMaker Hiring Credit scheme’s third claim period is now open, so if a taxpayer has taken on additional eligible employees since 7 October 2020, they may be able to claim JobMaker Hiring Credit payments for their business.

Eligible businesses can receive up to:

• $10,400 over a year for each additional eligible employee hired aged 16 to 29 years; and
• $5,200 over a year for each additional eligible employee hired aged 30 to 35 years.

The JobMaker Hiring Credit is available to businesses for each additional eligible employee hired before 6 October 2021, so, if a business is thinking about taking on extra staff, they should check if they are eligible to participate in the scheme.

Labor commits to income tax cuts and certainty on negative gearing

The ALP has formally announced that, if elected to Government, they will deliver “the same legislated tax relief . . . as the Morrison Government”.

This means they have committed to upholding the legislated changes to personal income taxes, and will also maintain the existing regimes for negative gearing and capital gains tax to provide “certainty and clarity to Australian working families after a difficult two years for our country and the world”.

Summary of Programs, Assistance and Funds that you need to know

There has been an announcement from the Victorian Government regarding extended support for Victorian businesses.

This support will provide a critical four-week boost to small and medium-sized Victorian businesses most impacted by the current public health lockdown. The expended business support is jointly funded by the Victorian and Federal Government.

The unprecedented joint package of up to $2.34 billion will aim to deliver certainty to around 175,000 Victorian businesses as the state bands together to restrict the spread of infection while the drive to vaccinate 70 per cent, then 80 per cent, of the population accelerates.

Business Costs Assistance Program 

• Payments will continue to be made at rates of $2,800, $5,600 and $8,400 a week over September (depending on payroll size). The vast majority of payments will be deposited automatically into businesses’ bank accounts where annual payroll is at these thresholds –

• Payroll below $650,000 = $2,800 a week.
• Between $650,000 – $3 million = $5,600 a week.
• Payroll between $3 million – $10 million = $8,400 a week.

Licensed Hospitality Venue Fund

• Eligible cafes, restaurants and bars will continue to receive payments of between $5,000 and $20,000 per week.

Small Business COVID Hardship Fund

• A major boost to the Small Business COVID Hardship Fund will increase the grant amount to $20,000 for around 35,000 businesses, and the deadline for applications will be extended. (Previously the grant amount was $14,000) Applications close 10 September 2021.

To read more about the above mentioned, and others such as COVID-19 Disaster Payments, Click here.

Changes to Income Protection Cover:

Income Protection Cover (also known as Salary Continuance Cover) provides a replacement monthly income stream of usually up to a maximum of 75% of your employment income during periods when you are unable to work due to injury or illness.

Some will say Income Protection Cover is the most important of the four types of personal insurance covers available (Life, Total & Permanent Disability & Trauma being the other three) because when you think about it, your salary may be the most important asset you have!

An Income Protection Cover has the following features:

• It can be held within your superannuation fund or in your personal name. If held in your personal name, you may be able to claim a tax deduction on your insurance premiums.
• There is a ‘Waiting Period’, which is the time that must elapse after you suffered an illness or injury which has led you to cease work, before the claim starts to be paid out. Standard period times vary from 30 days to 2 years.
• The ‘Benefit Period’ is the period that the policy will continue to pay you whilst you are unable to return to work. The Benefit Period can vary from 2-5 years to up to when you attain age 65/70.
• The ‘Payment Type’ of the policy can either be an Indemnity Value or an Agreed Value.
  • For an Indemnity value policy the insurer will assess your monthly benefit based on your income at the time of claim.
  • For an Agreed value policy the insurer will assess your monthly benefit based on your income at the commencement of the policy. So if you took a pay cut after the commencement of the policy and make a successful claim on your income protection, you will paid your pre-cut monthly benefit. The Agreed Value is usually the more expensive of the two options, however this feature is no longer available for new Income Protection policies.

From 1 October 2021, the Australian Prudential Regulation Authority (APRA) has issued new Income Protection Guidelines for insurance companies to deal with the unprecedented high levels of Income Protection claims. Broadly, these changes are the following:

• Benefit Periods that are longer than five years will have stricter disability definitions for those on claim for long periods (i.e. more than 2 years).
• Insured income will based on income earned in the previous 12 months prior to lodging a claim, instead of the best 12 months over the previous 36-month period.
• Income Replacement will be limited to 90% of earnings in the first six months of claim, and then reduced to 70% of earnings afterwards.

Furthermore, from 1 October 2022 Income Protection policies will no longer be ‘guaranteed renewable, after five years, in contrast to current Income Protection policies which are guaranteed renewable for the life of the policy (usually up to age 65). This means that after five years, the insurer can impose further terms and conditions on your Income Protection cover based on your personal and financial circumstances at the time.

Now is probably the best time to review your insurance arrangements in light of the changes above. If you wish to review your insurance arrangements, please contact your HOC representative to discuss.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances

 

Tags: ATO, Coronavirus, COVID-19, GST, JobKeeper, JobKeeper Payment, JobKeeper Payment Extension, self-managed super, superannuaction, superannuation guarantee amnesty

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