Practice Update - October 2020

Lowe Lippmann Chartered Accountants

Practice Update - October 2020

Special COVID-19 Superannuation Condition of Release Extended

Regulations that extend the time frame of the special condition of release to access $10,000 from superannuation for individuals experiencing financial difficulties due to COVID-19 have been formally registered.

The ability to withdraw up to $10,000 from superannuation (if certain conditions are met) was initially set to expire on 24 September 2020.

The Regulations will now enable an eligible individual to withdraw up to $10,000 from superannuation (which is not assessable to the individual) until 31 December 2020 .

To be eligible, a citizen or permanent resident of Australia (and New Zealand) must require the COVID-19 early release of super to assist them to deal with the adverse economic effects of COVID-19.

In addition, one of the following circumstances must apply :

The individual is unemployed;
The individual is eligible to receive one of the following;
- JobSeeker payment;
- Youth Allowance for job seekers (unless they are undertaking full-time study or are a new apprentice);
- Parenting payment (which includes the single and partnered payments);
- Special Benefit; or
- Farm Household Allowance;
On or after 1 January 2020 either;
- they were made redundant;
- their working hours were reduced by 20% or more (including to zero); or
- they were a sole trader and their business was suspended or there was a reduction in turnover of 20% or more (partners in a partnership are not eligible unless the partner satisfies any other eligibility criteria).

We recommend you speak to your Lowe Lippmann Partner when you are considering accessing the early release of your superannuation.

Tax treatment of JobKeeper Payments

Broadly, JobKeeper Payments received by an employer are assessable income to the employer . Likewise, the payments an employer subsequently makes to an employee that are funded (in whole or in part by the JobKeeper Payment) are generally tax deductible to the employer .

The ATO has recently issued some guidance for employers in receipt of JobKeeper Payments, as follows:

For sole traders , they will need to include the payments as business income in their individual tax return.
For partnerships or trusts , JobKeeper payments should be reported as business income in the relevant partnership or trust tax return.
For a company , report JobKeeper payments as income in the company tax return.
For a taxpayer that has repaid (or is in the process of repaying) any of their JobKeeper payments to the ATO, these amounts do not need to be included in their tax return.

We note that a business would be required to refund JobKeeper payments to the ATO if it had been discovered that the business had incorrectly claimed JobKeeper payments, and had either voluntarily disclosed this to the ATO, or the ATO made this determination as a result of audit activity.

Tax deductibility

The normal rules for deductibility apply in respect of the amounts a taxpayer pays to their employees, even where those amounts are subsidised by the JobKeeper payment. That is, if the underlying salary is deductible, then it is still deductible to the employer where it has been subsidised by a JobKeeper payment.

Assessable income

For employees who have received JobKeeper payments, these will be included as salary and wages (or an allowance) in their income statement (or payment summary) as provided by their employer.

Insolvency reforms to support small business

The government recognises that despite various support measures enacted to help get through the COVID-19 pandemic, not all businesses are going to remain viable.

Many small businesses will have significantly increased levels of debt in order to remain in business during the COVID-19 pandemic. The government is introducing a number of permanent and temporary measures to expand the availability of insolvency practitioners to deal with this expected increase in the number of businesses seeking to restructure or liquidate.

The package of reforms features three key elements:

1) Debt Restructuring

Currently, requirements around voluntary administration in Australia are more suited to larger or more complex company insolvencies. The new debt restructuring process will adopt a " debtor possession model " where the business can continue to trade under the control of its owners, while a debt restructuring plan is developed and voted on by creditors.

2) Liquidation Pathway

The costs of liquidation can consume much of the value of a small business, leaving little for creditors. Under the government's new process, regulatory obligations will be simplified, so that they are commensurate to the asset base, complexity and risk profile of an eligible small business.

3) Temporary Relief Measures Extended

The government announced a further extension of relief measures to 31 December 2020 . The temporary increase in the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000; and a temporary increase in the time companies have to respond to statutory demands they receive from 21 days to 6 months. In addition, there is temporary relief for directors from any personal liability for trading while insolvent, with respect to any debts incurred in the ordinary course of the company's business.

The temporary relief measures give businesses needed breathing space and highlight the importance of working with financial professionals as soon as required, ensuring that your small business has the best chance of success.

If your business is going through tough financial times, please contact your Lowe Lippmann Relationship Partner if you wish to discuss these issues. We can also introduce you to Gideon Rathner, our Insolvency & Restructuring Partner, who specialises in corporate insolvency and all aspects of business restructuring.

Entering a partnership: pro and cons

Whether you are in business already or setting your sights on a new business venture, starting a partnership may be an appropriate structure for your circumstances.

A partnership business structure is an incorporated business with 2-20 owners. The individual owners work together to achieve the goals of the business; sharing responsibility and profits. There are two types of partnerships - general and limited.

A general partnership is where all partners are equally responsible for the day-to-day management of the business.

On the other hand, a limited partnership has at least one general partner who is responsible for controlling the day-to-day operations and is liable for the debts and obligations of the business. The passive partners in this type of partnership are called limited partners , which generally contribute a defined amount of capital, and their liability is limited to the amount of capital that is contributed.

We recommend that the following advantages and disadvantages are considered in detail before starting or joining a partnership:

Advantages

A partnership structure is easy and inexpensive to set up. Unlike operating as a sole trader, there is increased opportunity for income splitting, more capital available and higher borrowing capacity.
Working as a team can also provide more perspective than working as an individual. High performing employees can also be made partners.
From a tax perspective, partnerships do not need to pay tax on their income. Each partner pays tax on the share of the net partnership income they receive. Superannuation is a responsibility of the individual partner, as partners are not considered employees .
There is limited external regulation and reporting requirements.
Removing partners is generally straightforward. The only condition is that at least two partners are left in the business.
If a partner wishes to resign from the partnership, it is relatively simple to dissolve the partnership and recover their share.

Disadvantages

This type of business structure carries unlimited liability , meaning the business owners are liable for the debts of the business and are subject to reasonably cover what is owed or risk seizure of their personal assets.
Each partner is responsible for the debts and liabilities of the business (with the extent depending on the type of partnership) including the actions of other partners. This can cause disputes and friction among partners, resulting in unfavourable circumstances. For example, one partner may have a differing vision or a different opinion on administrative control or profit sharing for the business compared with the other partners.
Although the process of adding and removing partners is simple, partners will most likely need to value partnership assets which can be expensive.

Tips to upscale your business

Set realistic and actionable goals

Businesses should set realistic and actionable small goals which they can work towards, rather broad goals which provide no direction. Setting broad and unrealistic goals is demotivating and makes any progress made seem insignificant. Every person in the business should be given a target to meet over a reasonable timeline which contributes towards achieving a larger goal.

Establishing standardised and automated processes

Small businesses can make the mistake of "doing things as they come" but this means that as business grows, adjusting to high scale tasks is difficult. To avoid this, business should standardise all processes of work.

Any individual placed into a role should be able to follow standardised procedure and yield a product which is of similar quality to the previous one. Investing money into automation tools is worthwhile for this procedure. This can include automating management of social media, email, and customer relationships. Both of these will contribute to creating structures which support growth.

Identify competitive strengths and weaknesses

Recognising the strengths and weaknesses of one's business is essential. Strengths will allow businesses to hone in on unique qualities they possess which give them a competitive advantage. Weaknesses will reveal which areas require growth so that changes can be made before upscaling takes place.

Network

Businesses should continue to develop relationships with service providers, sales channel partners, suppliers and customers. Keeping an open mind about partnerships or potential collaborations could open up different avenues of business growth.

We note that 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.

Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.

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Tax Alert - Draft legislation offers alternative to restructuring and avoid the 30% minimum trust tax

September 4, 2026

Yesterday, Treasurer Jim Chalmers released draft legislation to implement the key components of the 30% minimum trust tax on discretionary trusts announced in the Federal Budget during May 2026.

Practice Update – September 2026

September 2, 2026

Discretionary trusts and the proposed 30% minimum tax Discretionary trusts, often referred to as family trusts, have been a popular structure for Australian families and businesses for many decades. They are commonly used to operate family businesses, hold investments and assist with succession planning. Their flexibility, together with asset protection and estate planning benefits, has made them an attractive option for many groups. In the 2026–27 Federal Budget, the Government announced a significant proposed change. From 1 July 2028 , trustees of discretionary trusts would generally be required to pay a minimum tax of 30% on the trust's taxable income . According to the Government, the proposal is intended to better align the tax paid on trust income with that paid by salary and wage earners, while reducing opportunities to split income between family members. However, the announcement has generated considerable debate. Professional bodies, business groups and tax advisers have expressed concerns that the changes could increase complexity and compliance costs for many genuine family businesses and investment structures. How the proposal is expected to work Under the proposal, the trustee would generally pay the minimum 30% tax on the trust's taxable income. Where trust income is distributed to individual beneficiaries or certain other non-corporate beneficiaries , those beneficiaries would generally receive a non-refundable tax offset recognising the tax already paid by the trustee. This is intended to reduce the risk of the same income being taxed twice, but while maintaining the impact of the 30% minimum tax rate. Importantly, the minimum tax would not apply to every trust . The Government has indicated that a number of trusts would be excluded, including fixed trusts, widely held trusts, complying superannuation funds, charitable trusts, deceased estates, special disability trusts and genuine testamentary trusts. Primary production income and certain income relating to vulnerable minors would also be excluded. The Government has also stated that more than 90% of small businesses are not expected to be affected. While that may be reassuring for some taxpayers, there are still some important issues that could affect family groups using discretionary trusts. What could this mean in practice? One area likely to receive close attention is the use of companies as beneficiaries of family trusts. Many family groups have historically distributed some trust income to a company. This can provide flexibility in managing cash flow, retaining profits within the business and funding future growth. Under the proposed rules, however, the corporate beneficiary would not receive a tax offset for the tax already paid by the trustee . In many cases this will mean that income distributed from a discretionary trust to a company would be subject to double taxation. Another practical impact of the proposed change is that some family groups may find it more difficult to fully utilise existing tax losses. While the impact will depend on each group's circumstances, the proposed minimum tax is likely to reduce some of the flexibility that currently exists when managing taxable income across a family structure within many groups. The Government has also proposed a temporary three-year rollover period, commencing from 1 July 2027, to help restructure into alternative business structures , such as companies or fixed trusts, without triggering immediate income tax or capital gains tax consequences. While this may assist some groups, restructuring is rarely straightforward. Depending on the circumstances, it might be necessary to consider things like stamp duty, loan approvals, financing arrangements, contract changes, licensing requirements and professional advice. Even relatively simple restructures can involve significant time and cost, so careful planning will be important. The rules are not yet final At this stage, the proposal remains subject to consultation . Treasury released a consultation paper in July 2026 seeking feedback on a range of design issues, including how the new rules would operate in different situations. Final legislation has not yet been introduced , meaning aspects of the proposal could still change before the rules become law. For this reason, most groups utilising discretionary trust structures should avoid making major structural decisions based solely on the announcement. Instead, it is sensible to monitor developments while considering whether existing structures are likely to remain appropriate if the proposal proceeds. What should you do now? For many families, discretionary trusts are about much more than tax. They can continue to provide valuable asset protection, succession planning and business flexibility. The proposed changes do not remove those benefits, nor do they prevent discretionary trusts from continuing to be used. However, the proposal does have the potential to change the tax outcomes for some family groups, particularly those with more complex structures or those that regularly distribute income to companies. With the proposed start date still some time away, there is an opportunity to pause and carefully understand how the changes may affect your circumstances and consider whether any planning or restructuring might be appropriate. As the legislation develops, we can help you assess the impact on your business or investment structure and determine whether any action is warranted.

Practice Update – August 2026

August 4, 2026

Government to permanently extend $20,000 instant asset write-off The Government has recently introduced legislation that would make the $20,000 instant asset write-off permanent for small businesses (as announced in the 2026 Federal Budget). If enacted, the changes would: permanently set the instant asset write-off threshold at $20,000 (instead of $1,000) for eligible depreciating assets first used, or installed ready for use, for a taxable purpose from 1 July 2026; and permanently set the general small business pool threshold at $20,000 from 1 July 2026. The changes would also further suspend the 'lock-out rule' until 30 June 2027. This rule otherwise prevents a business that has chosen not to use the simplified depreciation rules from re-entering the regime for five years.