Recent rain has brought a pleasant relief to an otherwise challenging 2019/20 financial year. We want you to achieve the best result possible, and here are some handy tips to consider when organising your business records.
What we need from you
Payroll tax relief
As part of the NSW Government’s economic package to help businesses impacted by COVID-19, several payroll tax relief measures have been implemented, including:
- a payroll tax deferral arrangement for all businesses until October 2020
- a 25 per cent reduction on the annual tax liability for 2019/20 for businesses with grouped Australian wages of $10 million or less
- tax-free threshold increase from $900,000 to $1 million for 2020/21.
The due date for lodgement and payment of the annual reconciliation has been extended to 30 October 2020.
Working from home? What you can claim
From 1 March 2020 until at least 30 June 2020, special arrangements are in place to make it easier for individuals to claim expenses they have incurred while working from home during the COVID-19 pandemic.
If you have incurred work-related expenses and you have not been reimbursed by your employer, you can claim these expenses at a rate of 80 cents for each hour you work. To use this method, you will need a record of the hours you have worked, such as a diary or timesheet.
The claim covers all of your additional running expenses such as:
- Electricity and gas
- Decline in value and repair of capital items such as office furniture
- Cleaning expenses
- Phone and internet expenses
- Decline in value of computers and devices
For example, if you worked from home for 7 hours a day on the weekdays between 1 March and 30 June 2020, that’s 84 working days (in NSW) or 588 hours. Using the 80 cents COVID-hourly rate, you could claim $470.40. The rate covers all of your expenses and you cannot claim individual items separately, such as office furniture or a computer.
The COVID-hourly rate can be claimed per individual (it is not limited by household). That is, if you have multiple people working from home in your household, each person can claim the 80 cents per hour rate for the hours they have worked from home.
Using the COVID-hourly rate is optional and aimed at people who do not normally work from home. For some, their expenses will be higher, such as those with a dedicated home office, or for those that normally operate their business from home. In these circumstances the normal rules will apply.
The ATO appears to be taking the view that occupancy costs such as mortgage interest payments and rent cannot generally be claimed by those who are temporarily working from home as a result of COVID-19.
Home based businesses
In general, if your business is a home-based business, you should be able to claim both occupancy and running expenses.
The JobKeeper payments are set to continue until 27 September 2020, if you did not initially meet the eligibility criteria, you can apply to start JobKeeper payments when you meet the eligibility criteria.
Employers must pay their eligible employees a minimum of $1500 per fortnight to receive the JobKeeper payments. The government will exempt from payroll tax any additional wages paid to employees to meet the requirements of the JobKeeper scheme.
$150,000 instant asset write-off
The instant asset write-off enables your business to claim an upfront deduction for the full cost of depreciating assets in the year the asset was first used or installed ready for use for a taxable purpose.
The COVID-19 stimulus measures temporarily increased the threshold for the instant asset write-off between 12 March 2020 and 30 June 2020 to $150,000.
For example, if you purchase an eligible asset for $140,000 (GST-exclusive) on 1 June 2020 (and install it ready for use by 30 June 2020), then a deduction of $140,000 can be claimed.
If the asset is a luxury car then the deduction will be limited to the luxury car limit ($57,581 in 2019-20).
The business use percentage of the asset also needs to be taken into account in calculating the deduction. For example, if a sole trader acquires a car for $40,000 but only expects to use it 80% in the business then the immediate deduction would be $32,000.
At this stage it is expected that the instant asset write-off threshold will be extended to 31 December 2020.
Rental properties, COVID-19 and beyond
If COVID-19 has impacted commercial or residential premises you own and rent out, from a tax perspective there is very little that has changed.
- If tenants remain in the property or the property remains genuinely available for rent, you can continue to claim expenses as usual, even if the rental rate has been reduced on a temporary basis or tenants have been unable to pay rent for a period of time.
- If you negotiated with your bank to defer mortgage repayments, you can continue to claim interest as the deferred interest is capitalised.
- If you received an insurance payment for rent defaults, or your tenant made a back payment of rent they owe, this income is taxable and will need to be declared in your tax return.
Early access to superannuation
Individuals in financial distress as a result of the coronavirus pandemic are able to self-certify and apply for early release of up to $10,000 of their superannuation in 2019-20, and again in 2020-21 (up until 24 September 2020).
To be eligible for early release, you should ensure you meet the eligibility criteria:
- You are unemployed, or
- You are eligible for jobseeker, parenting payment or special benefit or farm household allowance, or
- On or after 1 January 2020, you were made redundant, or
- Your working hours were reduced by 20% or more, or
- For sole traders, your income reduced by 20% or more.
The early release of superannuation measure is available to Australian citizens, permanent residents and New Zealand citizens with Australian held super. Eligible temporary visa holders can also apply for a single release of up to $10,000 before 1 July 2020.
Single touch payroll
Where payments to employees have been reported to the ATO through single touch payroll, a finalisation declaration generally needs to be made by 14 July 2020 for employers with 20 or more employees and 31 July for those with 19 or fewer employees.
Before you roll-over your software…
Before rolling over your accounting software for the new financial year, make sure you:
- Prepare your financial year-end accounts. This way, any problems can be rectified and you have a ‘clean slate’ for the 2020-21 year. Once rolled over, the software cannot be amended.
- Do not perform a Payroll Year End function until you are sure that your STP finalisation declaration is correct and printed. Always perform a payroll back-up before you roll over the year.
Cents per kms change for work-related car expenses
The rate at which work-related car expenses can be claimed using the cents per kilometre method will increase from 1 July 2020 from 68 cents to 72 cents per kilometre.
Using this method a maximum of 5,000 business kilometres can be claimed per year per car.
Do you have any questions? Give us a call on 02 5858 4100.