Government released more details in relation to businesses impacted by COVID-19
Lowe Lippmann Chartered Accountants
Government released more details in relation to businesses impacted by COVID-19
Since the Federal Government announced the economic stimulus package, some more details have become available in relation to some of the concessions available.
We must note that full details are still unknown, at this time, as the stimulus package will be legislated in four separate parts and Parliament does not sit again until 23 March 2020.
Business investment: Increase & extension of instant asset write-off
- From 12 March 2020, the instant asset write-off threshold will increase from $30,000 to $150,000, and access to the write-off will be expanded to include businesses with aggregated annual turnover of less than $500 million until 30 June 2020.
- The instant asset write-off is a tax deduction that reduces the tax liability of your business. It enables your business to claim an upfront deduction for depreciating assets in the year the asset was purchased and used (or installed ready to use).
- If your business is likely to make a tax loss for the year, then the instant asset write-off is unlikely to provide a short-term benefit to you.
- Assets will need to be used or installed ready for use from when the changes were announced on 12 March 2020 until by 30 June 2020 to qualify for the higher threshold. Anything previously purchased does not qualify for the higher rate but may qualify for one of the existing instant asset write-off thresholds.
- Please note that any asset purchased, but not installed ready for use by 30 June 2020, will not qualify.
Small & medium business:Tax-free payments up to $25,000 for employer
- Tax-free cash flow support between $2,000 and $25,000 will be available to eligible businesses with a turnover of less than $50 million that employ staff between 1 January 2020 and 30 June 2020.
- This is not a direct cash payment but a credit equal to 50% of the PAYG amounts withheld from salary and wages paid to employees. The employer will need to lodge an activity statement to trigger the entitlement.
- If the credit puts the business in a refund position the excess amount will be refunded by the ATO within 14 days.
- If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $2,000 will still be made.
- Businesses that lodge activity statements on a quarterly basis will be eligible to receive the credit for the quarters ending March 2020 and June 2020. Business that lodge on a monthly basis will be eligible for the credit for the March 2020, April 2020, May 2020 and June 2020 lodgments. The minimum $2,000 payment will be applied to the first lodgement.
- Eligibility for the measure will be based on prior year turnover. We will have to wait for the legislation for the finer details.
Small & medium business:Wage subsidy of up to 50% of an apprentice or trainee wage
- These payments are accessible to businesses with less than 20 employees.
- Eligible employers can apply for a wage subsidy of 50% of the apprentice's or trainee's wage for up to 9 months from 1 January 2020 to 30 September 2020. Employers will receive up to $21,000 per apprentice ($7,000 per quarter).
- Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.
- In order to qualify for this payment, the apprentice or trainee must have been in training with the business as at 1 March 2020.
- Employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will also be eligible for the subsidy.
- It is expected that employers will be able to register for the subsidy from early April 2020, and at this time, it is understood that final claims for payment must be lodged by 31 December 2020.
Casual employees: Are able to access the Newstart 'sickness payment'
- While not part of the stimulus package, it may be relevant for some of your staff.
- The Government has stated that casual employees required to self-isolate or who contract the coronavirus will be eligible for a sickness payment (ie. jobseeker payment) through Newstart.
- The normal waiting period for this payment will be waived.
ATO: Options available to assist businesses impacted by COVID-19
- While not part of the stimulus package, the ATO has identified some areas where they will be exercising some deferrals and extensions of time.
- Deferring by up to four months the payment date of amounts due through the BAS (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise.
- Allow businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.
- Allowing businesses to vary PAYG instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
- Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities.
- Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low interest payment plans.
- We must note that employers will still need to meet their ongoing super guarantee obligations for their employees.
We will bring you more details as soon as they become available.
Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.
Costs incurred in acquiring / forming a business. Further to the recent blog about capitalisation of costs when acquiring an asset, we have received a number of questions in relation to costs incurred in setting up / purchasing a business. Formation costs on establishing a business: These costs would include: Incorporation fees ASIC registration fees Legal fees Business name registration Pre-operating costs Pre-opening costs. The relevant standard for these costs is AASB 138 Intangible Assets and paragraph 69a confirms that these start-up costs are expensed when incurred. There is no identifiable asset controlled by the entity when the costs are incurred as the entity does not exist. Business acquisition costs These costs would include: Legal and accounting fees Due diligence and valuation costs Stamp duty Advisory or brokerage fees Project management costs related to the acquisition Internal costs allocated to the transaction In contrast to the asset acquisition discussed previously, AASB 3 Business Combinations requires all acquisition costs to be expensed as incurred. This means that they are not included as part of the consideration paid and therefore do not affect calculated goodwill. Entities purchasing businesses should be aware that these costs are not able to be capitalised as they can often be substantial, and purchasers often do not expect the costs to be taken directly to the income statement
ATO to include tax 'debts on hold' in taxpayer account balances From August 2025, the Australian Taxation Office ( ATO ) is progressively including 'debts on hold' in relevant taxpayer ATO account balances. A 'debt on hold' is an outstanding tax debt where the ATO has previously paused debt collection actions. Tax debts will generally be placed on hold where the ATO decides it is not cost effective to collect the debt at the time. The ATO is currently required by law to offset such 'debts on hold' against any refunds or credits the taxpayer is entitled to. The difficulty with these debts is that the ATO has not traditionally recorded them on taxpayer's ATO account balances. Taxpayers with 'debts on hold' of $100 or more will receive (or their tax agent will receive) a letter before it is added to their ATO account balance (which can be viewed in the ATO's online services or the statement of account). Taxpayers with a 'debt on hold' of less than $100 will not receive a letter, but the debt will be included in their ATO account balance. The ATO has advised it will remit the general interest charge ( GIC ) that is applied to 'debts on hold' for periods where they have not been included in account balances. This means that taxpayers have not been charged GIC for this period. The ATO will stop remitting GIC six months from the day the taxpayer's 'debt on hold' is included in their account balance. After this, GIC will start to apply.
How do we account for the costs incurred when acquiring an asset? When we acquire an asset such as property, plant and equipment, intangibles or inventory there are often significant other costs incurred as part of the purchase process, including delivery, stamp duty, installation fees. Whether we capitalise these to the value of the asset or expense them as incurred can make a significant difference to an entity’s reported position or performance. Since we have accounting standards for specific assets, the treatment can vary depending on the asset and the relevant standard. A summary of some common expenses and their treatment under four accounting standards has been included below. The four standards considered are: AASB 102 Inventories AASB 116 Property, Plant and Equipment AASB 138 Intangible Assets AASB 140 Investment Property.
