COVID-19 Tax Update 20 March

coronavirus

 

Economic response

On 12 March 2020, the Government announced its economic response to novel coronavirus (COVID-19). Subject to passage of legislation, ATO will implement a series of administrative measures to further assist Australians experiencing financial difficulty as a result of COVID-19.

 

Enhancing the instant asset write-off

The government is increasing the instant asset write-off (IAWO) threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million).

This proposal applies from 12 March 2020 until 30 June 2020, for new or second-hand assets first used, or installed ready for use in this timeframe.

Enhancing the IAWO will require legislative changes before it can take effect.

 

Backing business incentive

The government is introducing a time limited 15-month investment incentive to support business investment and economic growth over the short-term, by accelerating depreciation deductions.

A deduction of 50% of the cost of an eligible asset on installation will apply, with existing depreciation rules applying to the balance of the asset’s cost.

Businesses with aggregated turnover below $500 million will be eligible.

Eligible assets – new assets that can be depreciated under Division 40 of the Income Tax Assessment Act 1997 (that is, plant, equipment and specified intangible assets, such as patents). Does not apply to second-hand Division 40 assets, or buildings and other capital works depreciable under Division 43.

Assets must be acquired after announcement and first used or installed by 30 June 2021.

 

Boosting Cash Flow for Employers

The Boosting Cash Flow for Employers measure will provide up to $25,000 back to business, with a minimum payment of $2,000 for eligible businesses. The payment will provide temporary cash flow support to small and medium businesses that employ staff during the economic downturn associated with coronavirus. The payment will be tax free.

Small and medium business entities with aggregated annual turnover under $50 million and that employ workers will be eligible. Eligibility will generally be based on prior year turnover.

The payment will be delivered by the ATO as a credit in the activity statement system from 28 April 2020 when eligible businesses lodge upcoming activity statements.

Eligible businesses that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 50% of the amount withheld, up to a maximum payment of $25,000.

Eligible businesses that pay salary and wages will receive a minimum payment of $2,000, even if they are not required to withhold tax.

The Boosting Cash Flow will be applied for a limited number of activity statement lodgments. The ATO will deliver the payment as a credit to the business upon lodgment of their activity statements. Where this places the business in a refund position, the ATO will deliver the refund within 14 days.

Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020.

Monthly lodgers will be eligible to receive the payment for the lodgment months of March 2020, April 2020, May 2020 and June 2020. To provide a similar treatment to quarterly lodgers, the payment will be calculated at three times the rate (150%) in the March 2020 activity statement.

The minimum payment will be applied to the business’ first lodgment

 

Support available for businesses

To assist businesses experiencing financial difficulty as a result of COVID-19 ATO are implementing a series of relief options.

These relief options will not be automatically applied, so you need to contact us or ATO to discuss them.

 

Payment deferrals

If you or your business has been impacted by COVID-19, you may be able to defer some payments and vary instalments you have due, such as income tax, activity statement (including PAYG instalments), FBT and excise payments by up to four months.

 

Monthly GST credits

Businesses on a quarterly reporting cycle may elect to change their GST reporting and payment to monthly, to get quicker access to GST refunds you are entitled to. You can only change from the start of a quarter, so a change now will take effect from 1 April 2020.

Changing your GST reporting cycle to monthly doesn’t mean you have to change your PAYG withholding reporting cycle. You can manage this by specifying the roles you are changing.

Once you choose to report and pay GST monthly, you must keep reporting monthly for 12 months before you can elect to revert to quarterly reporting.

However, if your GST turnover is more than $20 million you must pay and report monthly.

If you’re registered for fuel tax credits, and change your GST reporting from quarterly to monthly, you will also need to claim your fuel tax credits monthly.

You can change your GST reporting cycle through your tax or BAS agent, in the business portal, or by phoning us on 13 72 26.

 

Pay as you go instalments

If you are a quarterly pay as you go (PAYG) instalments payer you can vary your PAYG instalments on your activity statement for the March 2020 quarter. You can do this by lodging a revised activity statement before your instalment is due and before you lodge your tax return for the year. Businesses that vary their PAYG instalment rate or amount can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.

 

Remitting interest and penalties

Where your business is affected by COVID-19, ATO will consider remitting interest and penalties applied to tax liabilities incurred after 23 January 2020.

 

Low interest payment plans

If your business has been affected by COVID-19 and you need help to pay your existing and ongoing tax liabilities, contact us to discuss entering a low interest payment plan.