The Government announced on 7 February 2022 that they will ensure that COVID-19 testing expenses are tax-deductible for testing taken to attend a place of work.
This will also mean fringe benefits tax will not be incurred by employers if they provide COVID-19 tests to their employees for this purpose.
This measure is not yet law. The ATO will provide more detailed advice and guidance once the measure is enacted.
In the interim, if you have incurred expenses in relation to COVID-19 tests you should keep a record of those expenses.
The federal government will make COVID-19 tests tax-deductible for Australian individuals and exempt from fringe benefits tax (FBT) for businesses when they are purchased for work-related purposes.
- PCR tests and RATs will be tax-deductible, backdated to July 1, 2021
- Australians earning an income taxed at 34.5pc will receive a refund of about $6.90 for every $20 pack of two RATs
- Small businesses will reduce their FBT liability by about $20 for every dual pack of RATs purchased for $20
Initially, the change will see PCR and rapid antigen tests (RATs) become tax-deductible, but the government intends to include future medically approved tests in the scheme.
The legislation will be in effect from the 2021-22 FBT and income years and will be backdated to July 1, 2021.
Australians earning an income taxed at 34.5 per cent (including Medicare levy) will receive a tax refund of about $6.90 for every pack of two RATs purchased for $20.
Small businesses will reduce their FBT liability by about $20 for every dual pack of RATs purchased for $20 and provided to employees.
Treasurer Josh Frydenberg announced the changes to tax legislation in a speech to the Australian Industry Group on 7.2.2022.
If you lodge your business activity statement (BAS) quarterly, the last one was due on 28 February 2022.
Like many small businesses that continue to be affected by COVID, you may be having trouble meeting your BAS lodgement obligations. If that’s the case, these tips may help when preparing your next BAS.
- Even if you have nothing to report, you still need to lodge your BAS as ‘nil’.
- Lodge online and you may receive an extra 2 weeks to lodge and pay.
- If you’re reporting and paying pay as you go (PAYG) instalments, you may be able to vary the amount or rate for the current income year. If your business income is reduced, you can lodge a variation on your next BAS or instalment notice.
- Even if you can’t pay in full, it’s important to lodge on time and pay what you can. Once you lodge and have up-to-date records, you can then understand your tax position and find you the best support. If you can’t pay in full, payment options are available.
If you’re closing or selling your business, you need to cancel your GST registration. Remember to complete your lodgement and payment obligations before you cancel your GST registration.
Remember, your BAS can be lodged through a registered tax or BAS agent, and this gives you an additional two weeks grace. Not dealing with this important lodgement obligation could result in a fine of $222 for each week you are late. It is important to lodge on time.
Paying super is an important part of being an employer. While most employers do their best to keep up with paying your employees super, things don’t always go to plan.
If you missed or didn’t pay the full amount of your employees’ super guarantee (SG) for the quarter ended 31 December 2021, you’ll need to:
- lodge a Super guarantee charge statement to the ATO by 28 February 2022
- pay the SG charge to the ATO.
By law, the ATO is unable to extend the due date to pay SG.
The way you calculate the SG charge is also different from how much SG you pay to your employees’ funds. The SG charge is calculated on an employee’s total salary and wages (including overtime and some allowances) and includes interest and an administration fee of $20 per employee, per quarter.
Even if you can’t pay the full amount, you should still lodge an SG charge statement by the due date to avoid a late lodgement penalty. The ATO will work with you to find a solution tailored to your situation.
This is a fundamental question that has obvious tax consequences. While it is tempting to say, “Oh that’s a hobby”, this may not stand scrutiny with the ATO. In this article we will deal with:
- Characteristics of a business
- The sharing economy and tax
- Side hustles
There is no single factor that determines if you are in business, but some of the factors you need to consider include:
You’ve decided to start a business and have done something about it to operate in a businesslike manner, such as:
- Registered a business name.
- Obtained an ABN.
- You intend to make a profit – or genuinely believe you will make a profit from the activity – even if you are unlikely to do so in the short term.
- You repeat similar types of activities.
- The size or scale of your activity is consistent with other businesses in your industry.
- Your activity is planned, organised, and carried out in a businesslike manner.
This may include:
- keeping business records and account books
- having a separate business bank account
- operating from business premises
- having licenses or qualifications
- having a registered business name.
If you aren’t in business yet, it is important to keep these factors in mind as your activities change or grow, so you’ll know when you need to register for tax and other business responsibilities.
If you determine that you are not carrying on a business, you may still have tax obligations and need to report the income you earn.
The sharing economy is the economic activity through a digital platform (such as a website or an app) where people share assets or services for a fee.
If you provide services or assets through a platform for a fee, you need to consider how income tax and goods and services tax (GST) applies to your earnings.
Popular sharing economy activities include:
- providing ride-sourcing (sometimes also known as ridesharing) services for a fare, through platforms such as Uber, Hi Oscar, Shebah or GoCatch
- renting out a room or a whole house or unit on a short-term basis, through platforms such as Airbnb, HomeAway or Flipkey
- sharing assets, including cars, caravans/RVs, car parking spaces, storage space or personal belongings, through platforms such as Camplify, Car Next Door, Spacer, Toolmates or Quipmo
- providing personal services, including creative or professional services like graphic design, creating websites, or odd jobs like deliveries and furniture assembly, through platforms such as Oneflare, Mad Paws or Hark Hark. This is sometimes referred to as the ‘gig economy’.
There are some activities that aren’t considered to be part of the sharing economy, such as:
- online selling or classifieds, for example, Gumtree, eBay, or Carsales
- cryptocurrency exchanges
- peer-to-peer finance or crowdfunding
However, you still need to consider how income tax, GST and other obligations may apply to you if you earn income from these other activities.
The Australian Taxation Office (ATO) has reminded Australians that it is paying close attention to undeclared income from secondary work, including from the sharing or ‘gig’ economy this tax time.
According to Assistant Commissioner Tim Loh, the ATO noticed some confusion about when these side hustles cross the line and become taxable. His comments:
- Generally, when you provide your labour, skills, or goods for a fee, you need to report this income in your tax return. This applies regardless of whether you’re using a digital platform or more traditional means, such as word of mouth.
- The ATO knows lots of people have picked up a side hustle during the pandemic. This has included a wide range of activities such as freelancing, setting up a local market stall or receiving income from subscribers through platforms like Patreon, Twitch or OnlyFans.
It doesn’t matter whether you are an employee, independent contractor, carrying on a business, or none of these. When you receive payment for your services, the income needs to be reported – even if it’s a one-off.
The Pay As You Go Instalment system helps you set aside tax payments throughout the year to avoid bill shock.
The ATO routinely receives income information from a range of providers including financial institutions, online marketplaces, ride-sourcing applications, and short-term rental websites. The data received is growing, which means the places to hide are shrinking.
If you declare side hustle income, the good news is you can also claim deductions for expenses if you have kept your receipts and it directly relates to earning this side hustle income, this includes the cost of managing your tax affairs through a registered tax agent.
Importantly, you can only claim a deduction for the work-related part of your expenses. If you’re a food delivery rider, you can claim some of your bike costs, but you can’t claim your personal riding time and costs.
- It’s important not to rely on what other people claim as a guide to what you can claim. Every job is different, and what is required to earn an income for one occupation may not qualify in another.
- For instance, chefs can claim the knives and hairdressers can claim the scissors they use for their job, but a train driver or a salesman would have the same claims get knocked back.
If your side hustle becomes a side business, you may want to get advice from a registered tax agent. You will need to consider your additional tax obligations including the need for an ABN, registering for GST, implementing a record keeping system to track income and expenses. You will also need a plan for paying tax on your business income when you lodge your activity statements and annual tax returns.
Scenario – homemade jewellery as a side hustle
The taxpayer does not need to declare any income
Amber wears her homemade jewellery to meet up with a few friends. She offers to make them some pieces, after receiving compliments. Her friends shout her dinner as thanks for the gift.
As she was not paid for the jewellery, and this was a private arrangement there are no tax consequences for Amber.
The taxpayer needs to declare income
After the positive feedback from her friends, Amber decides to sell her jewellery on a regular basis with the intention of making a profit. She uses an existing online marketplace, pays sales fees, and sets up social media accounts to advertise her products.
Since Amber has increased the scale of her operations and is now making regular sales with the intention of making a profit, she needs to declare this income in her tax return.
While it’s not compulsory at this scale, Amber can choose to apply for an ABN. As her GST turnover is under $75,000, she does not need to register for GST.
On 10.2.2022 the Federal Government passed through the Parliament the Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Bill 2021 which will allow businesses to continue investing in their future and help Australians get into their own home.
The passage of the Bill will help more Australians own their first home by increasing the maximum amount of voluntary contributions that could be released under the First Home Super Saver Scheme (FHSSS) from $30,000 to $50,000. Since 1 July 2018, 26,800 new home buyers have released $371 million dollars worth of savings under the FHSSS.
The Bill will also increase the flexibility for older Australians to contribute to their superannuation by reducing the eligibility age for making downsizer contributions into superannuation from 65 to 60 years of age. This will allow more older Australians to consider downsizing to homes that better meet their needs, increasing the supply of larger homes for young families. From 1 July 2018 to the end of January 2022, 36,800 individuals have contributed $8.9 billion to their superannuation under this measure.
The passage of the Bill will also extend the Government’s temporary full expensing regime by 12 months to 30 June 2023, to further support businesses to invest, grow and create more jobs.
The temporary full expensing measure announced in the 2020‑21 Budget allows businesses with aggregated turnover of less than $5 billion to deduct the full cost of eligible depreciable assets in the year they are first used or installed and applies to over 99 per cent of businesses, employing approximately 11.5 million workers.
The Government’s unprecedented business investment incentives will provide businesses more than $50 billion in tax relief and support around $320 billion worth of investment. This has seen a significant upgrade in the investment outlook with new business investment forecast to increase 16 per cent over the next two years at its fastest rate since 2011-12 during the height of the mining investment boom.
On 10.2.2022 the Federal Government passed through the Parliament the Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Bill 2021 which will ensure superannuation continues to work in the best financial interests of all Australians.
The passage of the Bill will provide more flexibility for families and individuals preparing for retirement by allowing individuals aged between 67 and 75 to make non-concessional superannuation contributions under the bring-forward rule. The legislation also supports the repeal of the work test for non-concessional and salary sacrificed contributions made by individuals aged between 67 and 75.
The Bill also delivers on a key commitment in the 2021-22 Women’s Budget Statement by removing the $450 per month income threshold under which employees do not have to be paid the superannuation guarantee by their employer. This will remove an outdated structural feature of the superannuation system and in doing so will improve equity in the system.
These superannuation measures will take effect from 1 July 2022.
The Bill will also reduce costs and simplify reporting for superannuation funds by allowing trustees to use their preferred method of calculating exempt current pension income where the fund is fully in the retirement phase for part of the income year but not for the entire income year. This measure will apply for the 2021-22 income year onwards.
The Bill and explanatory material are available on the Parliament of Australia website.
Around a million businesses will save around $450 million in red tape each year after the Federal Government passed legislation on 10.2.2022 making permanent the temporary changes introduced at the height of the coronavirus crisis relating to AGMs and the signing and sending of electronic documents.
The Corporations Amendment (Meetings and Documents) Bill 2021 amends the Corporations Act 2001 allowing companies and registered schemes to use technology to meet regulatory requirements to hold meetings, such as annual general meetings, distribute meeting related materials and validly execute documents.
Specifically, the reforms provide greater certainty and flexibility to companies and registered schemes by:
- Allowing them to hold physical and hybrid meetings, and if expressly permitted by the entity’s constitution, wholly virtual meetings.
- Ensuring that technology used for virtual meetings allows members to participate in the meeting orally and in writing.
- Allowing them to use technology to execute documents electronically, including corporate agreements and deeds.
- Allowing them to send documents in hard or soft copy and giving members the flexibility to receive documents in their preferred format.
The Federal Government aims to support higher productivity across the economy by ensuring that regulatory settings are fit-for-purpose, providing businesses greater flexibility and enabling them to take advantage of technology to meet their regulatory requirements.
In January ASIC issued a timely warning on this subject.
- ASIC has noticed an increase in marketing recommending Australians switch from retail and industry superannuation funds to self-managed superannuation funds (SMSFs) so they can invest in a ‘high return’ portfolio
- SMSF trustees are being targeted to invest in crypto assets (or cryptocurrencies)
- Superannuation is an attractive target for scammers
- Crypto assets are high risk and speculative investment
- ASIC is reminding superannuation fund members it is best practice to seek advice from a licensed financial adviser before agreeing to transfer superannuation out of a regulated fund into an SMSF
Setting up an SMSF is one of the most significant decisions you can make relating to your retirement savings. Before making the decision to set up an SMSF, seek advice from a licensed financial adviser. Do not rely on social media ads or online contact from someone promoting an ‘investment opportunity’. Be wary of people ‘cold calling’, text messaging or emailing you with a recommendation to transfer your super to an SMSF or invest in crypto assets via your SMSF.
Australians who decide to self-manage their super should consider the risks before using their SMSF to invest in crypto assets. As the trustee of your SMSF, you ultimately bear responsibility for the fund’s decisions and for complying with the law even if you rely on other people’s advice – licensed or otherwise. ASIC recently issued warnings about an increase in scams involving crypto-assets, and their MoneySmart website contains information on how to spot an investment scam, SMSFs and crypto-assets (or cryptocurrencies). The ATO website also contains information on superannuation scams.
If you decide to set up an SMSF, you should seek professional advice to determine what investments to make. There are rules governing investments the SMSF can make and taxation consequences for investments, including cryptocurrencies. Any investment must be permitted under the fund’s trust deed and be in accordance with the fund’s investment strategy. When developing and reviewing your investment strategy you need to document how your fund’s investments will meet your retirement goals having regard to diversification, the risks of inadequate diversification, liquidity, and the ability of the fund to discharge its liabilities. You must also be able to demonstrate that the fund owns the asset. The ATO website contains information about these obligations. A licensed financial adviser can assist you with formulating an appropriate investment strategy.
Product issuers and market operators should also note ASIC’s latest publications on meeting regulatory obligations relating to crypto-asset exchange-traded products (ETPs) and other investment products.
In November 2021, ASIC moved to shut down unlicensed financial services business A-One Multi Services Pty Ltd, located in Queensland. The Gold Coast-based company appears to be engaging in unlawful activity, with ASIC alleging more than $2.4 million was transferred from A-One Multi to buy crypto-assets.
ASIC obtained interim orders and injunctions from the Federal Court in Queensland against A One Multi and its directors Aryn Hala and Heidi Walters to protect investors. Mr Hala appears to represent to investors that he can help them invest their superannuation in an SMSF, and then loan the money in their SMSF to A One Multi. ASIC alleges Mr Hala told investors that they would receive annual investment returns of over 20%.
Propose adding the following list of effective life determinations to the Commissioner’s schedule to apply to assets purchased (or otherwise first used or installed ready to use) from 1 July 2022 (within the meaning of section 40-95 of the Income Tax Assessment Act 1997).
|Table: under the heading E in Table B of the Commissioner’s schedule|
|E||Effective life (years)|
|Electric bicycles (e-bikes)||5|
|Electric scooters (e-scooters)||2|
Many employers have been encouraging employees to get COVID-19 vaccinations with incentives and rewards.
As previously outlined in December the ATO published a fact sheet outlining COVID-19 vaccination incentives and rewards. Employers providing non-cash benefits such as gift cards, vouchers, or raffle prizes to employees, will likely be subject to FBT, unless the minor benefits exemption or in-house reduction applies.
Refer to the below recently finalised ATO rulings and guidance when determining FBT treatment of travel expenses:
- TF 2021/1 – Income Tax: when are deductions allowed for employees’ transport expenses?
- TR 2021/4 – Income tax and fringe benefits tax: employees: accommodation and food and drink expenses travel allowances and living-away-from-home allowances
- PCG 2021/3 – Determining if allowances or benefits provided to an employee relate to travelling on work or living at a location – ATO compliance approach
Given the finalisation of these rulings and changes brought on by COVID-19, employers with mobile workforces should review their travel policies and arrangements. In the event, you are not applying PCG 2021/3 consider, given the hiatus in extensive executive travel due to the pandemic, now may be an opportune time for larger companies to revise protocols with respect to executive travel. This could reduce FBT.
The PCG sets a “safe harbour” of an aggregate period of fewer than 90 days in an FBT year for presence at a particular temporary work location to be treated as travelling on work. Provided that this requirement is met, the Guideline allows an employee to have numerous short stints of travel of up to and including 21 continuous days. Notably, Fly-in Fly-out or Drive-in Drive-out are excluded from the PCG so the safe harbour cannot apply in these scenarios.
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.