Practice Update - September 2020

Lowe Lippmann Chartered Accountants

Practice Update - September 2020

How COVID-19 may affect your return?

The ATO has released a range of new recording methods to make tax time easier for businesses and individuals under COVID-19 circumstances.

Working from home

The ATO has introduced a new "shortcut method", which applies from 1 March 2020 to 30 September 2020 . Under this new method, employees working from home as a result of COVID-19 can claim expenses incurred at a rate of 80 cents for each hour worked from home .

Employees must keep a record of the hours they worked from home as evidence to support their claim. Deductible running expenses include:

Utilities such as heating, cooling and lighting.
Cleaning costs for your work area.
Mobile or landline phone expenses for work calls.
Internet connection.
Computer consumables and stationery.
Repair costs for home office equipment and furniture.
Depreciation of home office equipment, computers, furniture and fittings.

Small capital items such as a computer (purchased for the purpose of working from home) can also be claimed if they cost under $300. If the cost exceeds $300, the decline in value (ie. depreciation) can be deducted.

COVID-19 protective equipment

Occupations that require public interactions may be able to claim personal protective equipment ( PPE ), including face masks, sanitiser, anti-bacterial spray, and gloves. This would typically apply to industries such as healthcare, retail and hospitality. Many workplaces now have this PPE available for employees, however employees who pay for their own COVID-19 PPE without reimbursement will be able to make a claim .

JobKeeper

Sole traders receiving JobKeeper payments on behalf of their business are required to include these payments as assessable business income in their individual tax return.

Businesses that are a partnership, trust or company receiving JobKeeper do not have to include it as assessable income in the business owner's individual tax return. However, these businesses will need to report JobKeeper payments as business income in their partnership, trust, or company tax return.

Employees under the scheme will have their JobKeeper payments automatically filled out in their tax return, and will not have to do anything differently. The payments will be included as salary and wages, or an allowance that appears on the regular income statement or payment summary provided by employers.

Government cash flow support

The support received by employers as part of the Government's COVID-19 boosting cash flow for employers scheme is tax-free as it is considered non-assessable non-exempt (NANE) income . Cash flow boost amounts should be included in tax returns in the same manner as other NANE income. Employers under the scheme will still be entitled to a deduction for the PAYG withholding paid.

Accelerated depreciation deductions

Businesses may also be able to accelerate their depreciation deductions on the purchase of certain new depreciable assets if they have an aggregated turnover of less than $500 million. This applies to eligible assets that were held and first used, or installed and ready to use from 12 March 2020 to 30 June 2021.

ATO increases car expense deduction rate

Small businesses with low annual travel distances will benefit from the ATO's new increased cents per kilometre rate for cars, from 68 cents to 72 cents , effective from 1 July 2020 .

What is the cents per kilometre method?

You can claim car deductions using the cents per kilometre method if you are a sole trader or partnership. The cents per kilometre method is calculated using a set rate for each kilometre travelled for business purposes, and the rate takes all of your vehicle running expenses (including registration, fuel, serving and insurance) and depreciation into account, and is currently 72 cents per kilometre for 2020-21 .

Claiming requirements

The ATO allows you to claim a maximum of 5,000 business kilometres per car in a year and does not require written evidence to show the exact distance travelled. However, the ATO may ask you to show how you worked out your business kilometres, for example, with diary records.

To make sure your claim is eligible, records you need to keep include:

Details of the kilometres travelled for business and private use.
Receipts for fuel, oil, repairs, servicing and insurance over.
Loan or lease documents.
Tax invoices.
Registration papers.
Details of how you calculated your claim.

It is important to note that the cents per kilometre method is only applicable when using a "car", which is defined by the ATO to include: a motor vehicle designed to carry both a load less than one tonne and a maximum of nine passengers.

Superannuation guarantee rate increase update

Recently, arguments both for and against increasing the rate of compulsory superannuation guarantee ( SG ) have continued to be debated. The SG is the compulsory amount of superannuation an employer must pay into an eligible employee's chosen super fund.

The rate of SG has been frozen at 9.5% of an employee's ordinary wages since July 2014, but from 1 July 2021 it is due to incrementally increase (by 0.5% each financial year) until it ultimately reaches 12% in July 2025.

While the SG rate is currently set to increase to 10% from 1 July 2021 , we must note that at this time, despite a lot of media coverage, no formal announcement has been made to change the scheduled SG rate increase .

Superannuation guarantee amnesty ends on 7 September 2020

Also on the topic of the superannuation guarantee, time is quickly running out for employers to apply for the SG amnesty and catch up on past unpaid super without incurring a penalty.

The ATO encourages employers to apply for the amnesty and make payments as early as they can. Importantly, eligible amnesty amounts paid by 7 September 2020 are tax deductible .

The ATO must receive amnesty applications by 11:59 pm (local time) on 7 September 2020 . Broadly, to be eligible for the SG amnesty:

the unpaid super must be for a quarter between 1 July 1992 and 31 March 2018;
the shortfall cannot have already been disclosed to the ATO; and
the ATO cannot already be examining the shortfall.

If an employer cannot pay in full, the ATO will work with them to set up a flexible payment plan.

Superannuation guarantee payments and PRNs

Applicants will need their payment reference number ( PRN ) to make SG amnesty payments. The ATO has been sending employers their PRN within 14 business days of receiving their application, however, if an amnesty application has not been lodged by mid-August, they can get their PRN:

from a super guarantee charge related statement issued for the same Australian Business Number; or
by phoning the ATO on 1800 815 886 between 8.00am and 6.00pm from Monday to Friday.

Are you eligible for the small business income tax offset?

The small business income tax offset can be used to reduce the tax you pay by up to $1,000 a year. Also known as the "unincorporated small business tax discount", the offset is worked out on the proportion of tax payable on your business income.

The rate of offset is 13% for the 2020-21 income year and 16% for the 2021-22 income year and onwards. The offset is only available to entities with an aggregated turnover of less than $5 million (from 2016-17 financial year onwards) and is capped at $1,000 .

The ATO will work out your offset based on your income tax return and uses your:

net small business income you earned as a sole trader; or
share of net small business income from a partnership or trust.

Conditions for sole traders

The offset is calculated based on net small business income for sole traders (which is the sum of your assessable income from carrying on your business, minus any deductions). Sole traders are not entitled to the offset in the event that their net small business income is a loss.

Income and deductions that you need to include in your net small business income include:

farm management deposits claimed as a deduction;
repayments of farm management deposits included as income;
net foreign business income related to your sole trading business; and
other income or deductions such as interest or dividends derived in the course of conducting your business.

Conditions for partnership and trust distributions

You may be eligible for the tax offset if:

you have a share of net small business income distributed from a partnership or trust that is a small business entity;
you were a partner or beneficiary of that small business partnership or trust;
the business income was derived by the small business partnership or trust from carrying on its own business activities; or
your assessable income includes a distribution or share of net income from that partnership or trust.

What can you do when you can not pay your tax on time?

Businesses that can not pay their taxes on time can set up an agreed payment plan with the ATO to avoid late payment penalties. This may be especially useful for businesses during the post COVID-19 period.

In response to the economic effects of COVID-19 on businesses, the Government has provided cash flow support as part of their stimulus package. However, some support measures such as the cash flow boosts and the Coronavirus SME Guarantee Scheme are set to end in September 2020. As a result, businesses relying on Government support may find themselves struggling financially when October arrives. It is therefore important that businesses are prepared for this period, and one way to do this is by setting up a tax payment plan.

A payment plan allows businesses to pay off their tax debt in instalments when they are not able to make a complete payment by the due date, as follows:

For debts of $100,000 or less – businesses can propose a payment plan through the ATO's online Business Portal or through their tax agent; and
For debts over $100,000 – businesses must contact the ATO directly to discuss their options.

Interest will generally continue to accrue on unpaid debts even when a business has made a payment plan. However, a 12-month payment plan free of interest may be available for small businesses with an activity statement debt. This will require businesses to pay their debt through direct debit within 12 months.

To be eligible, businesses must:

Have an annual turnover of less than $2 million.
Have a recent activity statement debt of $50,000 or under that was paid within 12 months of it being due.
Have no overdue activity statement lodgements.
Have had a maximum of one payment plan default within the last 12 months.
Be unable to obtain finance, such as a loan.
Meet all of their other tax payment and lodgement obligations.

The ATO may require businesses to demonstrate their viability for a payment plan , to assess the business' ability to meet their ongoing financial commitments by considering factors such as gross margin, cash flow, liquidity, and asset/liability position. Businesses wishing to go on a payment plan are still required to lodge their activity statements and tax returns on time to avoid penalties.

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.