INCOME HOLDERS TO BENEFIT FROM GOVERNMENT INCENTIVE
The Morrison Government will provide a boost to the economy by cutting red tape as part of an Economic Recovery Plan to allow for a uniform scheme for automatic mutual recognition (AMR) of state and territory based occupational licences and registrations.
Under this reform, builders, electricians, plumbers, architects, real estate agents, security guards, and other workers who hold an occupational licence in their home state or territory and who want to do the same work in another state or territory will be automatically deemed to have the necessary licence. These workers will also not need to pay any additional fees or apply for additional licenses.
The current mutual recognition regime for licensed occupations across Australia is complex, costly, and imposes an excessive regulatory burden on businesses that operate across jurisdictions. Currently, around 20 per cent of workers in the economy are required to be licensed.
In November 2020, the National Cabinet endorsed a uniform, national scheme for AMR, and in December 2020 the Prime Minister, State Premiers, and the Northern Territory Chief Minister signed an intergovernmental agreement for the federal government to establish the scheme and the states and territories to implement it.
This reform will directly benefit over 124,000 workers who currently work across borders and an additional 44,000 who are expected to work across borders following these reforms. In particular, the reforms will benefit those workers living in border regions, those who relocate temporarily for work, fly-in fly-out workers, and people who provide services remotely. The time and cost savings associated with AMR for these workers is expected to increase GDP by $2.4 billion over 10 years.
A uniform scheme means businesses can operate more seamlessly across Australia, which helps to create jobs, increase output, competition, and innovation, and lower prices for consumers.
RESPONSIBLE LENDING CHANGES PASS LOWER HOUSE
In March, the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 has passed the House of Representatives without amendment. This amends the National Consumer Credit Protection Act to provide that responsible lending obligations apply only to small amount credit contracts, small amount credit contract-equivalent loans provided by authorised deposit-taking institutions, and consumer leases. Reverse mortgage schemes are also exempted from the application of the Age Discrimination Act as well as other amendments.
ATO CIRCLES PRIVATELY OWNED AND WEALTHY GROUPS AS AUDITS HEAT UP
Speaking at an Accountants luncheon in March, Jonathan Ortner, a partner at law firm Arnold Bloch Leibler, warned practitioners the ATO may ramp up its auditing efforts, notably larger companies after compliance activities were deferred due to COVID-19.
According to Mr Ortner:
- The ATO has deferred disputes due to COVID-19 but this is likely to end soon.
- It is likely that companies and individuals that fit the criteria of the Tax Office’s Top 500 and Next 5,000 programs are likely to attract auditing efforts. Here the ATO is likely to take an industry-by-industry approach.
- Emerging privately owned and wealthy groups with a combined annual turnover — including associated subsidiaries — of more than $10 million, or controlled wealth of over $5 million, are also likely to be captured by the ATO audits, due to a tax gap of 7.7% indicating $772 million in lost revenue.
What Attracts Attention
The following behaviours and characteristics of privately owned and wealthy groups may attract ATO attention:
- tax or economic performance not comparable to similar businesses
- low transparency of their tax affairs
- large, one-off, or unusual transactions, including the transfer or shifting of wealth
- aggressive tax planning
- tax outcomes inconsistent with the intent of the tax law
- choosing not to comply, or regularly taking controversial interpretations of the law, without engaging with the ATO
- lifestyle not supported by after-tax income
- accessing business assets for tax-free private use
- poor governance and risk-management systems.
GOVERNMENT PROGRAMS EXTENDED
The Morrison Government will expand and extend its ‘SME Loan Guarantee Scheme’ as part of its commitment to support up to $40 billion in lending to small and medium enterprises.
Under the existing Scheme, more than 35,000 loans worth more than $3 billion have already been provided, helping thousands of small businesses get to the other side of this pandemic.
As Australia moves into the recovery phase, the Scheme will be targeted and tailored to support those businesses that have been relying on JobKeeper during the March quarter.
The SME Recovery Loan Scheme will benefit from an increased Government guarantee, increasing from the current 50/50 split between the Government and the banks to an 80/20 split. This will encourage more banks to support small businesses and demonstrates the Government’s commitment to back those businesses that are prepared to back themselves.
The expanded Scheme will also increase the size of eligible loans, increasing from $1 million under the current Scheme to $5 million. Businesses with a higher turnover will also benefit under the expanded Scheme, with the maximum eligible turnover increased from $50 million to $250 million.
Maximum loan terms under the expanded Scheme will also be increased from 5 to 10 years – providing businesses and lenders with greater flexibility.
The expanded Scheme will also allow lenders to offer borrowers a repayment holiday of up to 24 months.
Importantly, the Scheme will also be able to be used by eligible businesses to refinance their existing loans. This will allow SMEs to access the more concessional interest rates available under the program and to better manage their cash flows through an extended loan term and lower combined repayments.
The Government has also extended the following programs to 30 September 2021:
- the successful Domestic Aviation Network Support (DANS) and Regional Aviation Network Support (RANS) programs
- the 50 per cent waiver of domestic air services charges for Regular Public Transport (RPT) and aeromedical flights
- the International Freight Assistance Mechanism.
The $50 million Business Events Grants Program will also be extended by three months to support Australian businesses to hold multi-day business events, covering up to 50 per cent of costs incurred in participating business events during the 2021 calendar year. This will help restart Australia’s business events sector.
ATO UPDATE ON THE IMPACT OF COVID-19 ON CAR PARKING AND MOTOR VEHICLE FRINGE BENEFITS
In February, the ATO updated its Covid-19 guidance relating to car parking and vehicles.
No car parking fringe benefit will arise if:
- a work car park is closed due to COVID-19, as no car space will have been available for use by the employee for more than 4 hours between 7 am and 7 pm on that day
- all commercial parking stations within a one km radius of business premises are closed on a particular day due to COVID-19, or
- the reduced rates at commercial parking stations on 1 April 2020 within a one km radius of the business premises for all-day parking were less than $9.15.
The ATO has also provided guidance on cars returned to the employer’s business premises during the period of COVID-19 restrictions. A car fringe benefit will no longer arise where:
- the car is returned to your business premises
- your employee cannot gain access to the car, and
- your employee has relinquished an entitlement to use your car for private purposes.
WHAT HAPPENS WHEN AN EMPLOYEE RUNS OUT OF SICK LEAVE?
Personal leave cannot always fit into a tidy 10 days. What should you do when an employee runs out of sick leave?
Getting sick can be intensely stressful on many fronts. When it comes to working, if an employee runs out of sick leave and has to take extended time off, things can get complicated.
All full-time employees in Australia are granted ten days of paid ‘personal/carer’s leave’ – commonly called sick leave – each year. And part-time employees accrue leave on a pro-rata basis. But long-term illness can demand much more than this.
For employers, long-term absence scenarios are a balancing act. You need to act with compassion for the employee while also considering the needs of the business.
Understand Employee Protections
All employers need to be aware of the general protections extended to employees who get sick. After the requisite ten paid days of personal leave, the employee may request to take out annual or long-service leave if they have it saved up. The employer does not necessarily have to grant this but will have to prove there are “reasonable business grounds” if they refuse.
On the other hand, an employer can “arguably” request an employee take out annual leave, but this will be dependent on the circumstances, qualified by awards and EBAs, and generally be avoided where an employee is on long-term sick leave due to the potential legal risks involved.
However, it is certainly open to an employer to offer the option to an employee.
After paid leave has been used up, employees are generally entitled to the protection of three months of unpaid leave over a 12-month period. Within this time, the Fair Work Act rules that the worker cannot be dismissed.
After these three months, things get a little blurrier as the Fair Work Act does not provide specific protection to the employee.
So, it is possible to terminate them because they are on [extended] sick leave. However, that is not the end of the matter, as there may still be other claims available to the employee arising from the termination, such as unfair dismissal, general protections, and discrimination claims.
In the case someone is hired in place of the absent employee; this should clearly be a temporary arrangement. If not, and the original employee loses their job, again, you could face an unfair dismissal, general protections, or discrimination claim.
Be mindful when that person comes back from extended leave that you are not doing anything detrimental to their position by holding them back, or giving their duties permanently to this temporary person, or making their position redundant.
Unfair dismissal and discrimination claims will be assessed on a case-by-case basis. A key aspect that may be scrutinised is whether efforts were made to make “reasonable adjustments” to support the original employee back to work.
Seek legal advice if you are in this situation and want to cover all your bases.
Consider Flexible Working Arrangements
Employees generally have the right, under the Fair Work Act and anti-discrimination legislation, to request flexible working arrangements and “reasonable adjustments” to their role.
An employee could say, because of my illness I need to work different days or hours, or work part-time for a while, or change duties or location – for example, work from home.
The question for the employer will be: what are the reasonable business grounds to refuse that? Are there going to be significant hardships to the business in agreeing to the request, for example?
Seek Extra Medical Evidence
An employee needs to support their absence with medical evidence. If the employer considers this lacking, they can direct the employee to provide additional medical information.
Because an employer has duties of safety under common law, and under the Work Health Safety Act, they can issue directions for that information. For example, the business may request to speak to the employee’s medical professional directly or appoint another medic to do an independent assessment of the employee.
It is useful to get the medical information as early as possible and have proactive early and ongoing discussions with employees who are on extended leave, this way, employers know what the issue is, the likely triggers, and how someone’s need for time off may fluctuate.
Develop A Clear Long-Term Absence Policy
Having a policy on long-term absences helps keep employers and employees on the same page. It does not have to be lengthy, and it can sit under a general leave policy.
This should outline employees’ rights to paid and non-paid sick leave under the Fair Work Act or other instruments, such as awards and enterprise agreements. It can also outline potential outcomes of long-term absence scenarios, without necessarily committing to them.
The employer is entitled to include something about putting the employee on notice about the fact that, if it is a very extended period of sick leave, one potential reality could be the termination of employment – if it gets to that point.
It is always best practice to include what the company’s policies and processes are around providing information. Outlining the evidence, the employee needs to provide and how this will be managed are also useful.
Also, make sure there is a clause in there around sick employees providing relevant, up-to-date information to their supervisors, so that their employers and managers can make informed decisions.
GOVERNMENT EXTENDS CREDIT RELIEF FOR SMALL BUSINESSES
On 15.3.2021, the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020 through the House of Representatives.
The credit reforms contained in the Bill are important for continuing to enable the Australian economy to recover from the COVID-19 pandemic. The reforms will reduce the cost and time it takes to access credit for Australian consumers and businesses, removing unnecessary barriers to accessing credit, which in turn will facilitate more economic activity.
These reforms follow on from the Government’s swift action during the onset of the pandemic to exempt the provision of credit to small businesses from the responsible lending obligations. This exemption was due to expire on 2 April 2021.
As part of the Government’s commitment to these reforms, the small business exemption will be extended until the Government secures passage of its credit reforms through the Senate.
The extension will continue to provide the certainty and confidence necessary to allow small businesses to access credit in a timely and efficient manner.
JOBMAKER HIRING CREDIT – THREE SIMPLE STEPS
The ATO has outlined three steps required of employers to apply for the JobMaker Hiring Credit.
- Register – using ATO online services, online services for business or the business portal, or through a registered tax or BAS agent.
- Nominate the eligible additional employees – by running payroll events through your Single Touch Payroll (STP)-enabled software by 27.4.2021; and
- Claim payments – using ATO online services, online services for business or the business portal, or through a registered tax or BAS agent.
The scheme is available for employers who create new positions for eligible young people between 7.10.2020 and 6.10.2021.
TOP 10 TIPS TO HELP RENTAL PROPERTY OWNERS AVOID COMMON TAX MISTAKES
1. Apportioning expenses and income for co-owned properties
If you own a rental property with someone else, you must declare rental income and claim expenses according to your legal ownership of the property. As joint tenants, your legal interest will be an equal split, and as tenants in common, you may have different ownership interests.
2. Make sure your property is genuinely available for rent
Your property must be genuinely available for rent to claim a tax deduction.
- you must be able to show a clear intention to rent the property
- advertising the property so that someone is likely to rent it and set the rent in line with similar properties in the area
- avoiding unreasonable rental conditions.
3. Getting initial repairs and capital improvements right
Ongoing repairs that relate directly to wear and tear or other damage that happened as a result of you renting out the property can be claimed in full in the same year you incurred the expense. For example, repairing the hot water system or part of a damaged roof can be deducted immediately.
Initial repairs for damage that existed when the property was purchased, such as replacing broken light fittings and repairing damaged floorboards are not immediately deductible, but a deduction may be claimed over a number of years as a capital works deduction. These costs are also used to work out your capital gain or capital loss when you sell the property.
Replacing an entire structure like a roof when only part of it is damaged or renovating a bathroom is classified as an improvement and not immediately deductible. These are building costs which you can claim at 2.5% each year for 40years from the date of completion.
If you completely replace a damaged item that is detachable from the house and it costs more than $300 (e.g., replacing the entire hot water system) the cost must be depreciated over a number of years.
4. Claiming borrowing expenses
If your borrowing expenses are over $100, the deduction is spread over five years. If they are $100 or less, you can claim the full amount in the same income year you incurred the expense. Borrowing expenses include loan establishment fees, title search fees, and costs of preparing and filing mortgage documents.
5. Claiming purchase costs
You cannot claim any deductions for the costs of buying your property. These include conveyancing fees and stamp duty (for properties outside the ACT). If you sell your property, these costs are then used when working out whether you need to pay capital gains tax.
6. Claiming interest on your loan
You can claim interest as a deduction if you take out a loan for your rental property. If you use some of the loan money for personal use such as buying a boat or going on a holiday, you cannot claim the interest on that part of the loan. You can only claim the part of the interest that relates to the rental property.
7. Getting construction costs right
You can claim certain building costs, including extensions, alterations, and structural improvements as capital works deductions. As a general rule, you can claim a capital works deduction at 2.5% of the construction cost for 40 years from the date the construction was completed.
Where your property was owned by someone else previously, and they claimed capital works deductions, ask them to provide you with the details so you can correctly calculate the deduction you are entitled to claim. If you cannot obtain those details from the previous owner, you can use the services of a qualified professional who can estimate previous construction costs.
8. Claiming the right portion of your expenses
If your rental property is rented out to family or friends below the market rate, you can only claim a deduction for that period up to the amount of rent you received. You cannot claim deductions when your family or friends stay free of charge or for periods of personal use.
9. Keeping the right records
You must have evidence of your income and expenses so you can claim everything you are entitled to. Capital gains tax may apply when you sell your rental property. So, keep records over the period you own the property and for five years from the date you sell the property.
10. Getting your capital gains right when selling
When you sell your rental property, you may make either a capital gain or a capital loss. Generally, this is the difference between what it cost you to buy and improve the property, and what you receive when you sell it. Your costs must not include amounts already claimed as a deduction against rental income earned from the property, including depreciation and capital works. If you make a capital gain, you will need to include the gain in your tax return for that income year. If you make a capital loss, you can carry the loss forward and deduct it from capital gains in later years.
Please note: Our Newsletters are not the place for the giving or receiving of financial advice concerning investment decisions or tax or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Any ideas and strategies should never be used without first assessing your own personal needs and financial situation, or without consulting or engaging with us as your professional advisors.