Crypto in 60 seconds

Crypto in 60 seconds
Crypto currencies (e.g. BitCoin, Etherium, etc.) can be treated in 2 ways:
– Capital Assets (CGT rules apply)
– Revenue Assets (Trading stock rules apply)

This brief guide focuses on what things taxpayers need to consider regarding Crypto CGT assets, and does not delve in high Crypto volume trading and profit making schemes, or Crypto being used in a business (e.g. accept payments).

Below, we’ve summarised a few of the common situations:

$ > Crypto
If you’ve recently converted fiat currency (e.g. Australian or US dollars) to a crypto currency (e.g. BTC), and are holding crypto as an investment, no taxing point has occurred. You have simply acquired a CGT asset, just like a share or a property. At this point, you cannot claim anything spent to acquire that asset, but it may reduce a future capital gain

$ > Crypto > $
If you’ve previously purchased a parcel of crypto currency and have sold it during the financial year – you have triggered a CGT Event A1 and will need to calculate your gain or loss on that parcel. The 50% CGT discount may apply if you’ve held the parcel for over 12 months and you’ll also be able to include some costs (e.g. brokerage). If you don’t sell all of your crypto, you’ll need to calculate the cost base for the portion that was sold, and the remaining amount will be counted against the crypto still held.

$ > Crypto > Crypto > Crypto or $
If you’ve purchased a common crypto currency (e.g. BTC), then purchased another currency (e.g. DOGE), then returned back to BTC or converted to $ you will have triggered 2 x CGT Event A1. The ATO regards each transaction of crypto as a disposal/acquisition (not when converting to fiat currency like AUD), which need to be individually calculated:
1) Profit/loss on BTC when transferring to DOGE
2) Profit/loss on DOGE when transferring back to BTC or $

We recommend using specialist software (e.g. Koinly), and importing all your wallets to match transactions and determine a spot value for the individual transfers.

Some of the issues we’ve recently seen:

1) Large gain in an ALT coin converted to BTC (e.g. $1m profit). ATO is taxing the large gain, but client doesn’t have cash. Recent drop in BTC may cause cashflow issues: BTC now valued at AUD$700,000 but client has a tax bill of close to $450,000. Capital losses need to be carefully managed coming up to 30 June 2021. Be aware of ATO’s Part IVA anti-avoidance wash rules.

2) Lots of trades between crypto currencies. Clients will need specialist software to calculate the profit/loss on each transfer, as no single trading platform available (e.g. CommSec for shares)

3) Individuals may be treated as a business due to high volume of trade. Adverse tax consequences regarding trading stock rules at 30 June 2021.

4) Superannuation funds investing in crypto. We see a few issues here: too much invested (fail sole purpose test), wallets not correctly set up (e.g. not in the legal name of the SMSF), wallets not segregated from personal funds, SMSFs mining crypto, deed does not allow investing in Crypto, investment strategy needs to be updated. Note most financial planners and accountants will not give advice on the suitability and application of crypto investments in an SMSF. Tread carefully in this space as breaches will need to be reported by the auditor to the ATO.

The advice is general in nature and no warranty is provided by Jigsaw Tax and Advisory. If this applies to your situation, please seek professional advice from a qualified person.

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NSW Small Business Fees and Charges Rebate

The NSW Government have released a new small business grant that is in place from April 2021 until 30 June 2022.  The grant is to relieve eligibly businesses of some of the licence fees and charges that the NSW government impose on businesses.

Before you get too excited, although the grant is for $1500, it is not money that will get put into your bank account.  If eligible, you will receive a credit of $1500 in your Service NSW account and you can use this credit against future charges.  You do not need to use it all at once.  You can just take up the credit as the licence fees are levied on your business.

To be eligible you need to have an ABN that is registered or physically located in NSW.  Your total Australian wages need to be under $1.2 million (the NSW Payroll tax threshold).  You need to be registered for GST and your turnover needs to be over $75,000 per year.  You will require a confirmation letter from your accountant prior to lodging your application.  Sole traders are eligible for this rebate, you do not need to be employing staff.

While an extensive list of applicable licence fees and charges is not provided, the website says that the rebate is eligible for any state government fees and charges, with the exception of those specifically excluded.  Remember this is just for state government charges, not to be confused with the federal government charges.

Excluded fees and charges include fines and penalties, NSW or Commonwealth taxes, rent on government premises and fees and charges that are designed to discourage or induce behaviour changes (such as parking space levies or clean up notices).  For the full list of exclusions I suggest you read the scheme guidelines at the link below.

https://www.service.nsw.gov.au/small-business-fees-and-charges-rebate-guidelines#eligible-businesses

Included are trade licences, food authority licences, council rates and it would seem business registered motor vehicle registrations.

This is definitely worth looking into if you are an eligible small business or not for profit organisation.  Like other state government grants, they are heavily audited and you will need to have all your documents ready when you make the application, so read the guidelines and get your paperwork together, and if you are comfortable that you comply, go ahead and make the application.

https://www.service.nsw.gov.au/small-business-fees-and-charges-rebate#eligibility

Please note if you are a client of Jigsaw Tax we will be charging a nominal fee to prepare the letter for this application.

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Franking Credits

Most of you would have heard of Franking Credits.  You might know that it is something to do with tax, company shares, and important enough to significantly impact the Australian election results in 2019 when Labor’s policy pledged changes to their tax treatment.  Do you really understand what they are?

I am going to try to explain this as simply as I can which is not going to be easy.  Stick with me to the end and you will hopefully understand them a little better.

Franking Credits relate to companies.  While you may hear of franking credits in trusts and superannuation funds, ultimately they are the result of an investment in a company.  We will just stick to companies for this article.

A company has shares.  The owners of the shares collectively are the owners of the company.  This means that the shareholders have a right to share the profits of the company that they own. The way that shareholders share in the profits of the company is by way of a dividend. A dividend can be franked or unfranked, but we will talk about that difference later.

Let’s consider a very basic company that has one shareholder.  It trades for the year and makes a profit of $1,000.  Let’s also assume for the purposes of this exercise that the company is taxed at a rate of 27.5%.  There are other factors to consider but we are keeping this very simple.

Profit:                                $1,000

Tax on Profit                    $275

Profit after tax                 $725

If the shareholder wants to draw a dividend on this profit, they have $725 that they can physically take out of the business because that is all that is left after the tax has been paid.

A franked dividend is drawn for $725 and this will be taxable income to the shareholder in the year that the dividend is paid.

When the shareholder prepares their tax return they report that they have been paid a franked dividend of $725.  The franked dividend has a franking credit for the tax paid by the company, so the franking credit is $275.  In the tax return both the dividend and the franking credit are added together and become taxable income to the shareholder.  The shareholder would have $1,000 in taxable income even though they only physically received $725.

Tax is then calculated on the shareholders total taxable income, including the dividend.  The shareholder then gets a credit for the franking credit against the tax calculated.

As an example, the shareholder’s other income is $130,000 so they have a marginal tax rate of 37%.  We need to add a 2% Medicare levy to this, so their true marginal rate is 39%.

$1000 x 39% = $390. This is the additional tax that will be payable due to the dividend.

A credit of $275 will be applied due to the franking credit.

$390 – $275 = $115 which is the additional tax that will be paid on the dividend.  It is not as much as the shareholder’s marginal tax rate, but it is not “tax free” either.  Many people think a franked dividend is tax free and that is not true.

Now assume the shareholder had very little income so that their total income (including the dividend) is below the tax free threshold.  Tax on the $1,000 dividend is nil, but the $275 credit will still apply.  The shareholder would get back the full franking credit of $275.  Happy days.

The two biggest groups on a low a tax rate are retirees and superannuation funds.  A self-managed superannuation fund with its members in pension mode has a 0% tax rate.  Franking credits are gold to retirees who have structured their investments effectively. Any wonder taking them away was an election issue.  The Labor party have now released a statement that they will not be suggesting any policy changes to franking credits in the future.

There is a lot more to this, particularly as income tax rates are changing and to draw a dividend a company needs to have paid tax and have a distributable surplus (in other words have retained earnings in the business – or more assets than liabilities), but that is for your accountant to help you determine.

If tax has not been paid on the profits a franking credit cannot be applied to the dividend.  In this case a dividend is unfranked, and it is taxed as normal without any credits.

The rules are pretty much the same whether your shares are in a listed company (such as Telstra) or your own Pty Ltd company.  The tax rates may be different as listed companies will have a 30% tax rate, but the principles on how the dividend is taxed in the hands of the shareholder at the same.

Important to remember:

·       A franked dividend is grossed up (the physical amount received plus the franking credit) so you are paying tax on the full amount of profit that the company would have earned before tax, and effectively getting a credit for the tax the company paid on that profit.

·       The company needs to have paid tax to the ATO before it can draw a franked dividend.

·       A company needs to have sufficient retained earnings to draw a dividend.

·       A dividend is taxable in the year that it is paid, not when it is declared.

It is a difficult concept but hopefully this has helped you to understand franking credits a little more.

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What is the Tax Gap?

The ATO like other businesses release an Annual Report, and one of the elements explored in this report is the Tax Gap.  The details for the 2017-2018 year have recently been released and they show some interesting facts.

The Tax Gap is an estimate of the amount of tax collected by the ATO, and the amount that should have been collected if all tax returns were lodged correctly, to the letter of the law.  The latest figures look at 15 different tax areas, providing the most comprehensive analysis so far.  The Tax Gap has been calculated at $31 billion, or 7% of the total expected tax collection.

 

The ATO have identified the three reasons that a Tax Gap can exist:

·       Reporting is different due to a misunderstanding

·       Reporting is different by choice

·       Reporting is different due to a different interpretation of the tax law.

 

While the Tax Gap is essentially an estimate, the ATO have many tools available to check the data we report and come up with this estimate.  Realistically we will never have a zero Tax Gap, but the aim is to improve this gap each year.  The trend does indicate that the gap is improving, and improvement comes from the ATO understanding where to target their compliance activity.  As a small business owner, this is something you should be a little concerned about.

 

The largest contributor to the Tax Gap is Small Business, with a Net Tax Gap of 11.5%, or $11.1 billion.  The ATO define a small business as a business with a turnover of less that $10 million, and includes companies, trust, partnerships and sole traders.  There are over four million such entities in Australia and it is likely your entity fits into this category.

What this means is that small business will continue to be seen as a risk area and will continue to be a target for audit activity.  We have had a hiatus on audit activity since COVID-19.  The ATO have been extremely lenient and compassionate, but don’t expect this to continue into 2021.  We are already seeing audit activity regarding the stimulus packages, and we will soon start to see other compliance activities resuming.

The ATO have been quite specific about their observations, giving us a clue as to the audit targets. Straight up they have identified the Shadow Economy as the main contributor to the Small Business Tax Gap, with 68% of the gap ($6.7 billion) being due to omitted income.  Just a reminder that undeclared “cash” jobs are part of the shadow economy.

 

The other main observations are that small business owners may fail to account for the private use of business assets, and that small business owners may have inadequate record keeping system, and may fail to keep the required documents.

Think about your business.  Are you a target for this kind of activity?  Now is the time to get your house in order before the ATO come knocking on the door.  If you are doing everything correctly you have nothing to worry about.  The ATO have more and more information at their finger tips and can target audit activity.  Don’t get caught out.

 

The information for this article came from the ATO website. For more information use this link https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Tax-gap/

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JobMaker Hiring Credits

Unlike most other stimulus measures the Government has announced, the JobMaker Hiring Credits have been more scrutinised by our politicians.  The Bill to introduce the scheme has been referred to a Senate Committee and we are expecting a report on 6 November.  When you look at the details of this scheme, you can see why it is being questioned.

The intention of the JobMaker Hiring Credit was to incentivise business to create jobs and hire our unemployed youth.  In theory, this is a lovely idea, but when you start looking at the practicalities of this, we start to see flaws that may have not been immediately evident on Budget night.

If you think back to Budget night (as I am sure it was the highlight of your year), the JobMaker Hiring Credit was something that has not been leaked, and was no doubt meant to be a headline item.  The scheme is estimated at $4 billion and expected to create 450,000 new jobs.  The budget speech announced the basics; a credit of $200 per week for eligible employees aged 16-29, and $100 per week for those aged 30 -35.

Almost instantly questions were being raised about how to take advantage of this extra money.  Can one new full time job be broken into two part time jobs so that more funds are received?  Would this result in a “clearing out” of older employees, replacing them with younger employees?

There was also a lot of talk about the government missing the target by applying the credit only to people between the age of 16-35 who had been on either Jobseeker, Youth Allowance (other) or Parenting Payment.  What about the unemployed who do not fit into that criteria? Isn’t this going to make get a job much more difficult for those who are not eligible for the credit?

Now that the Parliamentary Bill is available we have a much better understanding of how it may be difficult to get access to this money.

Conditions that must apply

The employer must:

·       Have an ABN

·       Be up to date with their tax lodgements

·       Be registered for PAYG Withholding

·       Report through Single Touch Payroll

·       Create a new job for more than 20 hours a week.

·       Make sure the new employee works an average of 20 hours per week over the quarter.

·       The ATO will be monitoring your headcount and it needs to be greater than the headcount for the 30 September payroll.

·       You cannot get Jobkeeper as well as the JobMaker Hiring Credit.

The employee must have been on JobSeeker (not JobKeeper), Youth Allowance (Other) or Parenting Payment for at least 1 of the 3 months before you hired them.   You cannot have hired them prior to 7 October 2020.

Who is not going to benefit

There are a number of small family businesses who have elected not to use Single Touch Payroll.  They will not be eligible.  Neither will the many businesses who are not up to date with their lodgements.  Realistically, this is an incentive to get up to date with your taxes and start to use Single Touch Payroll.  Single Touch Payroll is eventually going to be mandatory for everyone, and having your taxes up to date is a legal requirement.

Of more concern in my mind is that employers are incentivised to choose one potential employee over another, purely because of this payment.  They may not be the best person for the job.  The employer may be excluding someone as much in need of the job, who may do the job better.  I understand why the employment groups are raising concerns.

Not everyone who is unemployed is on JobSeeker.  Young people who try to obtain Youth Allowance are subject to income tests based on their parent’s income.  Likewise, not all people on JobSeeker are under the age of 35.  There are many people between the ages of 36-65 who are unemployed and I question why their right to work is less important than that of our younger people.

How it will work

The credit is available for 1 year and will be administered through the ATO. Claims will start to be paid from February 2021 and will be paid on a quarterly basis.  Whether this money is used to offset PAYG Withholding obligations (like Cashflow Boost) is yet to be seen, but I imagine that would be the simplest way to administer the payment.

Doing the math, the payment will be either $10,400 or $5,200 (depending on the age of your employee) if you manage to maintain the employee and extra position for the full year.  It will definitely help some employers, but is it really going to make you create a new role?

If you are interested in applying for the JobMaker Hiring Credit make sure you get your facts straight.  Make sure your business is eligible.  Make sure the employee is eligible.  Make sure you have created a new job.  If these things all genuinely apply, then please make the most of this.  There are a number of unemployed young people who are eager to work, and hopefully the right one is waiting for your job.

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JobKeeper Update

I am craving a time when our world is not all about COVID-19, and our work as accountants is not consumed with Jobkeeper changes, but that time seems a long way away. As my inbox continues to be filled with questions about Jobkeeper I think it is time for another update.

We were eagerly awaiting the legislation for Jobkeeper 2.0 to be introduced to parliament last week so that we could gain some clarity, however the legislation that was introduced failed to provide the answers we were seeking. It is clear that the government is going to take a more cautious approach with Jobkeeper 2.0. The Bill that was introduced only provided for an extension of the Jobkeeper scheme until 28 March 2021.

The Bill also provided extensions to Fair Work concessions for Jobkeeper qualified employees while also extending the concessions to “legacy” employers. Legacy employers are those who are currently on Jobkeeper 1.0 but will fail to meet the 30% decline in turnover test required to access Jobkeeper 2.0. They will still be able to a apply the Fair Work concessions if they have demonstrated a 10% or more decline in turnover in the September quarter.

Retesting for Jobkeeper 2.0

As mentioned above we are still waiting on clarification of testing for Jobkeeper 2.0 which is the extension of Jobkeeper beyond 28 September. You do not need to retest for Jobkeeper until then.

Although you need to report your turnover on a monthly basis as part of Jobkeeper 1.0, you are not doing this to pass any tests. It is just reporting. You have qualified for Jobkeeper 1.0 and you continue to be eligible for Jobkeeper 1.0 until the 28 September 2020. Your last payments will be received in October.

To continue after 28 September you will need to retest. If you pass this new test you will get Jobkeeper 2.0 until 3 January 2021. The rates will be reduced for Jobkeeper 2.0 to a two-tiered system of $1200 per fortnight or $750 per fortnight depending on the number of hours worked. An explanation on the “hours worked” test is below.

There will be another retest for the period 4 January 2021 – 28 March 2021 with the payment rates dropping to $1000 per fortnight and $650 per fortnight based on the two-tier system.

What we know is that the retest will be based on your turnover for the September quarter. The indications are that this retest will be comparing your Business Activity sales figures (G1-1A) between quarters. No doubt there will be some alternative tests available but I believe the testing criteria will be more defined for Jobkeeper 2.0. You will be required to retest for the January- March payment based on your December quarter turnover.

The expectation is that many businesses who qualified for Jobkeeper 1.0 will not qualify for Jobkeeper 2.0. 60% of the participants are expected to come from Victorian businesses. Unless you are in a highly impacted industry (such as travel or entertainment), you have probably seen sufficient recovery to not qualify for Jobkeeper 2.0.

My suggestion is to have a look at the BAS you lodged in September 2019. Work out the reduction of 30% that you would need to meet to qualify again. See where you are up to now, and see if there is any likelihood of qualifying for Jobkeeper 2.0. If not, forget about it. It is not designed for any where near as many businesses as Jobkeeper 1.0.

The Two-Tiered Payment Criteria

If you are eligible for Jobkeeper 2.0, the amount of payment will depend on the average hours that were worked in the business over a four week “reference”period. That period will be either the 4 week pay periods prior to 1 March (so February) or 1 July (so June). If the employee qualified from 1 March they take the highest of these four week period averages.

Based on the average calculated the employee will either have worked more than 20 hours, or less than 20 hours, and the payment amount will be based on the tier they fit into.

This is the same for business participants. If you are claiming Jobkeeper 2.0 as a business participant, you will need to determine the hours you were actively engaged in the business in the reference period to work out which level of payment you will receive.

Still more questions

Of course we have many questions that still need to be answered. With Jobkeeper 1.0 we anticipated the issues, anticipated the answers and then were frustrated when the rules were changed over and over again. This time, we wait for clarification.

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JobKeeper 2.0

Yesterday, Tuesday 21st of July, the Prime Minister Scott Morrison and Treasurer, Josh Frydenberg have released details for the much touted Jobkeeper extension program.

 

Jigsaw Tax will await the formal legislative governance set to be provided by Treasury in the Economic Release due on Thursday, 23rd of July 2020 before advising on the implications of the Jobkeeper 2.0 program for our clients. As in the first program, we anticipate there will be a substantial volume of information and legislation to digest before being able to advise on the matter. Please bear with our team while we work through this.

 

We wish to assure clients that the Federal Government has advised that the current Jobkeeper program will continue unchanged to its legislated conclusion of 27th of September, 2020.

 

We look forward to working with you on your regular compliance work in the meantime and thank you for your continued support during what has been proved to be a difficult year for business owners.

 

For up to date information, please ensure you tune into Jigsaw Tax’s Facebook feed where we regularly provided links to webinars, discussion forums, and podcasts on the rapidly changing Australian business landscape.

 

We thank you for your patience as we all navigate our way through this changing climate and we look forward to helping you with all your requirements.

 

The Jigsaw Team.

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The Apprentice

Love them or hate them, Tradies almost certain started their career as an Apprentice.  It may be challenging to employ a young person and teach them your trade, but there are some advantages to hiring apprentices in your workforce.

In March 2019 there was 276,250 workers in training making up 2.2% of the workforce.  In the 12 months prior to 31 March 2019, 73,650 trade apprentices commenced their apprenticeship.  While the figures may be a little different this year, there is no doubt that the government want you to employ apprentices and they are key to keeping youth unemployment manageable.

The COVID-19 recovery is going to be led from the construction industry.  Construction was one of the few industries that could continue to work during the COVID-19 lockdowns but this doesn’t mean the industry has not been impacted.  We know that many projects were cancelled or delayed, and a large number of construction businesses are receiving support for employees through Jobkeeper.  However, one proven way to stimulate an economy is to create large infrastructure projects, and clearly that is part of the plan of our federal and state governments.  These projects last for years, providing many jobs. This in turn allows those employed on the projects to spend in other sectors of the economy, helping with the recovery.

However, in order to execute these projects our country needs a skilled workforce.  The way to skill up the workforce is to encourage apprenticeships.  The stimulus packages announced in March contain incentives to retain apprentices and this incentive has just been extended.

In the first round of stimulus measures there were incentives for small businesses to retain their apprentices by providing a 50% subsidy on the wages of qualifying apprentices of up to $7,000 per quarter.  To qualify the business needed to employ fewer than 20 people and the apprentice needed to be signed up by 1 March 2020.  The original measure was to run until 30 September 2020, providing a maximum of $21,000 per employee.

Recently the government announced that this was to be extended to 31 March 2021.  It is also available to medium employers with 199 or fewer staff.  To qualify the apprentice needed to be signed up prior to 1 July 2020.  This will be a great benefit for those who are getting Jobkeeper for their apprentices.  There will be something to encourage you to retain them when the Jobkeeper measures come off at the end of September.  You have until 1 October to lodge your claim, so while you can’t get both Jobkeeper and the subsidy at the same time, you can be prepared for October.

If you don’t have an apprentice already, the good news is that you can hire an apprentice who had qualified with the 1 July 2020 sign up date but had been let go.  If you hire one of these apprentices you can continue to get the subsidy regardless of the size of your business.

Note, these measures extend to employees obtained through Group Training Organisations, which may make it easier to find a qualifying apprentice.

There are other incentives available based on the industry you are in and the apprentice you take on.  If you are interested, I suggest you find out more information from the Australian Apprenticeship website.

https://www.australianapprenticeships.gov.au/aus-employer-incentives

Remember that rebates are applied for apprentices for both workers compensation and payroll tax making them a cost effective form of labour.

Still not sure?  Why not speak to a Group Training Organisation.  They employ the apprentices and hire them out, taking on the management and risk of the apprentice.  If you are not sure if you need an apprentice for the entire term of their apprenticeship, or not feeling confident with the recruitment process, this could be the perfect option for you.

Times are tough and everyone is struggling right now but finding a good quality apprentice may be the key to getting through this difficult time.  Give someone a chance to learn your trade. Our country is counting on it.

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How To Record Stimulus (Intuit QBO)

We’ve put together a few quick and easy to follow video guides on how to correctly record your stimulus payments in QBO

How to record JobKeeper payments
Step 1 – Create a new account for JobKeeper income
https://www.loom.com/share/d094d5d180a8409eb847a1f2f5a18091

Step 2 – Reconcile payment from ATO to the JobKeeper income account
https://www.loom.com/share/70049d1690e44d4f93f1ccb2e64016ec 

How to record Cash Boost
Step 1 – Create a new account for Cash Boost income
https://www.loom.com/share/b728e96b85c54f059ad984460309169e

Step 2a – Reconcile net payment from ATO to ATO income account (Jigsaw will reconcile at EOFY)
https://www.loom.com/share/20a9f62ddff14a08aeaf0eb208452e7f

Step 2b – Reconcile gross payment cash boost to ATO liability account (balance sheet) and ATO income account (P&L)
https://www.loom.com/share/cf74c481c5e34c23ac9afdd4e0f85c69

How to record NSW/VIC Grants
Step 1 – Create a new account for NSW/VIC Grant income
https://www.loom.com/share/2d241721725a4c878c5e66a8afaa5073

Step 2 – Reconcile payment from ATO to the Grant income account
https://www.loom.com/share/9766e45c70d144f0856994282fa49aad

Don’t worry too much – as we’ll be correctly reconciling these when we complete your next BAS / EOFY. If you have any concerns about your JobKeeper, Cash Boost or grants don’t hesitate to contact the team for more information.

FAQs 
JobKeeper:

  • JobKeeper is paid monthly, as a reimbursement for the last 2 fortnights (September payment will include 3 fortnights in August)
  • Every JobKeeper participant is required to lodge a monthly declaration, which will trigger the ATO to release the reimbursement (approx. 14 days from lodgement)
  • The forward month projection is your best guess at your future income. It will NOT be held against you if you are incorrect
  • Once you reach the required reduction in turnover in a month, you can continue claiming JobKeeper for the entirety of the scheme – even if your sales increase
  • Jigsaw Tax does not get notified whether your JobKeeper has been paid. Please let us know if it hasn’t been paid

Cash Boost:

  • Every business that is eligible and reports wages at W1/W2 will have the calculated boost applied automatically
  • The boost will be initially applied to ATO Integrated Client Account debt. Only excess will be refunded
  • The bank details provided for JobKeeper are not applied to Cash Boost refunds. We may have to confirm these again from you

NSW/VIC grants:

  • All grant income must be expended on business expenses (non-JobKeeper staff / top-ups, operating expenses such as rent, maintenance etc.)
  • Do not claim the grant unless you will be able to show expenditure on operating expenses
  • For NSW, we will provide a letter of support and you will be required to lodge documentation with the state Government
  • NSW has advised that compliance and verification action will occur after COVID
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We’re confused, tired, and now getting a bit cranky!

This evening, enjoying a glass of red wine from my favourite winery, something came across my screen that would sour my evening. It wasn’t Josh Frydenberg’s face… no no. It was what was written below. This is a bit different to my normal articles – but tries to express the frustrations of the industry.

In my previous article, I mentioned an example of a small business who had lost 60% of their income but facing a wage bill 3x higher than normal due to being required to front the first 2 jobkeeper payments. There are countless similar stories in the media

The Government, unable to implement such a large scheme quickly, offloaded its funding and processing responsibilities to the mums and dads of Australia – requiring each one of them to become experts in the tax and GST Acts, Fairwork and HR laws, banking and finance – all within a fortnight.

I’ve been fairly understanding of the ‘policy on the fly’ we’re seeing – but tonight I’ve decided to share what accountants are feeling.

As we complete many JobKeeper applications today, and our staff return over the weekend to keep processing – one thing has become clear: no 2 situations are the same, and each require careful analysis of the myriad of complex rules, guides, instruments released from the PM, the Treasurer, the Treasury, the ATO etc.

Over the last 48 hours, we thought we had finally locked the rules down and the JobKeeper workflow freight train started to pick up speed. It started of slow, as we made sure we had everything covered, but by this evening it was starting to hum along.

As we broke for dinner, we were confident we’ll get the best result for our clients. This meant we’d had identified eligible businesses, identified eligible employees and advised our clients to make the necessary catchup payments. Many small businesses by this afternoon had started making catch up payments, so they could be reported by next Wednesday/JK-Day (30 April) in STP.

But Josh had other ideas – he issued his latest JobKeeper media release this evening. There were some sensible amendments, like expanded rules for service entities, flexibility for NFPs (charities, religious practitioners, Foreign NGOs) that the industry was asking for, and a few small other changes – these will now keep all those accountants hoping for a break busy over the weekend.

But  this one paragraph is the cause of my latest grievance. Please read and let it sink in – remember all the small businesses that have had to fund junior casuals, from their home loans or personal credit cards

Full time students aged 16 and 17 years old:  As noted in the explanatory statement to the existing rules, the benefit of the JobKeeper payment to workers over the age of 16 is justified for those who are financially independent and who require the security provided by participation in the JobKeeper scheme and the maintenance of the working relationship that it affords.  The rules will provide that full time students who are 17 years old and younger, and who are not financially independent, are not eligible for the JobKeeper Payment.  This clarification will apply prospectively, which would mean an eligible employer that has already met the wage condition of paying such an employee $1,500 for a fortnight could be entitled to a JobKeeper Payment in arrears for that fortnight.

On the whole, it seems a reasonable adjustment and a fair result. But literally 6 days before JK-Day… or 2/3 business days now? And worse – a Friday night, after I’d opened my favourite bottle of wine.

This should have been picked up in the first draft that was scribbled down on a napkin at the Parliament House bar. Everyone could see that this was neither equitable nor attainable. A mortgage holder with 2 kids getting paid the same amount as a school student; a small business needing to fund 10’s of casuals who, due to a Fairwork Act technicality, needed to receive a JobKeeper; legitimate employees connected with an employer excluded due to being a casual rather than a part-timer (a casual had to be hired before 1 March 2019; a part-timer could be hired on 29 February 2020).

While a reasonable adjustment – the devil is always in the detail when we’ve got policy on the fly:
– how do I, as an accountant helping my client determine eligibility, determine if you’re in school full time or part-time
– what about if you’re 18 and at school
– what if you’re at school and 17 years old now, but you will be 18 years old in the next 6 months (i.e. you received April JobKeeper because it was already paid, nothing in May/June, but turned 18 in July… do I need to pay under one in / all in?
– what if you drop out of school, but you weren’t originally eligible. Are you now eligible?
– what if you only paid them some of the $3000, but not all of it – do you still need to top up
– what if you’ve made the payments, but haven’t enrolled in the ATO system?

The modelling for one client tonight, shows their payroll for April (inc. JKP) would have dropped from $42,000 to $22,000.

I’m not one to look a gift horse in the mouth, but hopefully the horse stays still enough for me to have a glance.

There is NO excuse for a policy pivot of this size, and a mere 6 days away from JK-Day, to be released on Friday night at 8pm. And make no mistake – this is a complete 180 degree reversal on what we’ve heard for over a month: initially, the PM proudly stood in front of the press gallery, announcing the JobKeeper scheme as the panacea for the economy – it will keep everyone employed at a minimum of $750 and be the fuel of the economy. The Treasurer, the Treasury and the ATO all repeated the same “one in / all in” principle in every release. The media, the professional bodies, unions and small businesses asked similar questions about the young casuals – but it was clear that there was to be NO flexibility, even for a casual who would work only 3 hours a fortnight. They, with the other employees, MUST BE PAID $3000 for April, or no one gets JobKeeper. No back payments allowed. The PM said “go to your bank” – yet the banks hadn’t gotten that memo until the 11th hour / 6 days out (sneaky NAB had purchased 1800 JOBKEEPER for their 24 hour hotline).

After attending webinars, tele-conferences, speaking with colleagues, it is apparent that Treasury is a closed shop. Experts in the field were jumping up and down, private practitioners could see the issues in the first releases, the media asked good, tough questions – but Treasury would not listen.

Insofar my criticism has been focussed on Treasury, but the ATO is not without criticism. It has at last released its alternative tests – in the evening on Thursday the 23rd of April. When over 1,000 Tax Institute members, like our senior team, attended a webinar on Friday morning – the slides on the presentation hadn’t been updated for the tests. How can such an important test be issued less than 7 days before JK-Day, without a heads up to the professional bodies? Small releases to assist accountants to spread the workload of interpreting, reviewing, and applying the tests would have been preferable than all the tests being issued at once. Clients who did not pass JobKeeper earlier this week, now pass – so the merry-go-round starts again. With these changes, our working papers, templates and workflow all change.

Finally I’ll also mention changes to the Business Boost – we were told businesses weren’t eligible for the Business Boost due to PAYG/W registrations or extension dates, but now the ATO says they are under a discretion; but no information is provided how to apply for said discretion. The banks were to provide low interest, unsecured, $250k loans. Not only have they not been released to the market, but they are neither low interest, unsecured or a guarantee you’ll get $250k.

While the Government response to COVID19 should be commended in many aspects – just look at how Australia and New Zealand are placed – the policy intent and technical implementation of hundreds of billions of stimulus dollars has been flawed since the first day. With a little leeway (e.g. back payments, reporting and enrolling requirements etc.), input from professionals on the ground on how to implement, and Treasury putting aside its tin ear, I truly believe the JobKeeper Scheme could have been initially drafted as a great scheme.

/by
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