Blog Layout

Practice Update -February 2022

Lowe Lippmann Chartered Accountants

COVID-19 testing to be tax-deductible and FBT free


The Federal Government has announced that COVID-19 tests (including Polymerase Chain Reaction and Rapid Antigen Tests) will be tax deductible and exempt from FBT for businesses, where they are purchased for work-related purposes.

 

This deduction will be available from the beginning of the 2021-22 tax year and will be in place permanently.  It will apply both when an individual is required to attend the workplace or has the option to work remotely.

 

The Government will also introduce legislation confirm that work-related COVID-19 test expenses incurred by individuals will be tax deductible and FBT in the appropriate circumstances.



COVID-19 vaccination incentives and rewards


The ATO has reminded employers to consider their tax and super obligations when employees are provided with incentives or rewards for getting their COVID-19 vaccination.

 

When employees are provided a cash payment, including paid leave for employees to get their COVID-19 vaccination (or additional paid leave to recover from any vaccination side effects), employers should withhold PAYG withholding and make super contributions on the amount.

 

Furthermore, the payment must be reported to the ATO via Single Touch Payroll (STP) as part of the employee's salary or wage.

 

On the other hand, employers must consider the FBT consequences of providing non-cash benefits as an incentive for their employees to get vaccinated.

 

Such benefits may include:

  • Goods or services provided to the employee.
  • Vouchers and gift cards.
  • Prizes won by an employee in a competition (ie. a raffle).

 

We note that certain FBT exemptions and reductions may apply in some circumstances. For example, if an employer provides or pays for an employee's transport to get their COVID-19 vaccination, there is generally no FBT payable.



ATO support for businesses in difficult times


The ATO has reminded taxpayers that it has a range of support available for small businesses experiencing difficult situations, such as natural disasters, mental health challenges or financial hardship.

 

Depending on the business taxpayer’s circumstances, the ATO may be able to:

  • give the business extra time to pay its tax;
  • set up a payment plan tailored to its situation;
  • re-issue tax returns, activity statements and notices of assessment;
  • help the business reconstruct lost or damaged tax records;
  • prioritise any refunds the business is owed; and
  • remit penalties or interest charged during the time the business has been affected.



Government extends SME Recovery Loan Scheme to 30 June 2022


The Government has recently extended the SME Recovery Loan Scheme by a further six months (to 30 June 2022) to support SMEs adversely economically affected by the Coronavirus Pandemic.

 

Under the Scheme, eligible businesses can obtain loans through participating bank and non-bank lenders with the backing of a Government loan guarantee.

 

Around 80,000 loans worth approximately $7.3 billion have been written to date since the Scheme commenced in March 2020.

 

SMEs who are dealing with the economic impacts of COVID-19 with a turnover of less than $250 million will be able to access loans of up to $5 million over a term of up to 10 years.

 

Other key features of the Scheme include the following:

  • Lenders can offer borrowers a repayment holiday of up to 24 months.
  • Loans can be used for a broad range of business purposes, including to support investment.
  • Loans may be used to refinance any pre-existing debt of an eligible borrower.
  • Loans can be either unsecured or secured (excluding residential property).

 

Importantly, the Government’s loan guarantee has been reduced to 50% (down from 80%) for loans available from 1 January 2022 until 30 June 2022.



Higher PAYG withholding rates continue to apply to backpackers


The High Court has recently held that the 'working holiday maker tax' (also known as the “backpackers tax”) did not apply to a taxpayer on a working holiday visa from the United Kingdom who was also an Australian tax resident (in Addy v Commissioner of Taxation [2021] HCA 34)  This was due to the application of the Double Tax Agreement between Australia and the United Kingdom.

 

This tax treatment will only apply where the working holiday maker is both an Australian resident for tax purposes and from Chile, Finland, Japan, Norway, Turkey, the United Kingdom, Germany or Israel.

 

However, the ATO has recently told employers that the higher PAYG withholding rates continue to apply to working holiday maker employees.

 

This is regardless of the country they are from (unless the employer receives an PAYG variation notice from the ATO).

 

Broadly, the working holiday maker withholding rates apply as follows:

  • If the employer is registered with the ATO as an employer of working holiday makers, they should withhold tax at the tax rate of 15% from the first dollar the working holiday maker employee earns up to $45,000. Tax rates change for amounts above $45,000.
  • If the employer is not registered with the ATO as an employer of working holiday makers, they must withhold tax at 32.5% from every dollar the working holiday maker employee earns up to $120,000. The foreign resident withholding rates must be applied to income over $120,000.

 

If a working holiday maker employee has had excessive amounts of PAYG withheld from their salary, they can lodge a tax return at the end of the income year to receive a tax refund (where eligible).



Single Touch Payroll exemption extended for WPN holders


The ATO has extended the Single Touch Payroll (STP) reporting exemption available to entities that have a withholding payer number (WPN).

 

As a result of this extension, certain entities that have a WPN (but not an ABN) will not be required to report under STP for the 2021‑22 and 2022-23 financial years.

 

This continues the exemption that has been provided to relevant entities since the commencement of the 2018-19 financial year.

 

We note that any entity covered by the exemption may still choose to voluntarily report under STP.



Payment extension relating to JobKeeper objections


The JobKeeper rules have been amended to ensure the ATO can make payments to certain taxpayers after 31 March 2022.

 

Where a taxpayer has objected to an ATO decision relating to JobKeeper, a payment can be made by the ATO after 31 March 2022 to give effect to the objection decision and decisions of the AAT or a court.

 

Importantly, this extended payment date will only apply where a valid objection was given to the ATO on or before 30 November 2021.



Car parking fringe benefits and the impact of COVID-19 lockdowns


A car parking benefit should arise for FBT purposes when (amongst other conditions) a “commercial parking station” is located within a one-kilometre radius of where the employee’s car is parked.

 

In other words, a car parking benefit should not arise during any period in which all commercial parking stations within a one-kilometre radius of where the employee’s car is parked have closed, or the parking station has provided free parking – this is particularly relevant during periods of lockdowns caused by COVID-19.

 

In circumstances where all relevant car parks were closed or offering free parking, no commercial parking station will be regarded as being located within the one-kilometre radius during this period.

 

Under the FBT rules for providing car parking fringe benefits, the relevant testing time for reviewing the applicable all-day car parking threshold ($9.25 for the 2022 FBT year) within your one-kilometre radius is “on the first business day of an FBT year”, which is 1 April 2021.

 

Therefore, if on 1 April 2021 the lowest fee charged for all-day parking by all commercial parking stations located within a one-kilometre radius of the premises on which a car is parked, was no more than $9.25, then a car parking fringe benefit may not arise with respect to those premises for the entire 2022 FBT year.

 

This assumes the lowest fee is a “representative” fee, as anti-avoidance rules can apply if car parking rates are artificially low. The ATO has acknowledged that this situation arises where all of the commercial parking stations discounted their all-day parking rate (to at or below $9.25) due to COVID-19 on and around 1 April 2021.



ATO releases guidance on starting an SMSF


The ATO has released a new guide (Starting a self-managed super fund) to help taxpayers

consider whether a Self-Managed Super Fund (SMSF) is right for them.  Topics in the guide include the following:

  • What is an SMSF?
  • Choosing a structure.
  • An outline of the relevant obligations.
  • Registering an SMSF
  • Getting professional advice.

 

Furthermore, the guide contains a checklist of steps that must be undertaken in the initial stages of starting and running an SMSF.

 

The guide is the first in a set of three SMSF “lifecycle” publications to help taxpayers understand each stage throughout the life of an SMSF.  The other guides (‘Running a self-managed super fund’ and ‘Winding up a self-managed super fund’) will be available in the future.

 

If you wish to discuss the details surrounding starting a SMSF, please do not hesitate to contact your Lowe Lippmann Relationship Partner.




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

February 19, 2025
Will credit card surcharges be banned? If credit card surcharges are banned in other countries, why not Australia? This alert looks at the surcharge debate and the payment system complexity that has brought us to this point. In the United Kingdom, consumer credit and debit card surcharges have been banned since 2018. In Europe, all except American Express and Diners Club consumer surcharges are banned. And in Australia, there is a push to follow suit. But is the issue as simple as it seems?
February 17, 2025
Is there a problem paying your super when you die? The Government has announced its intention to introduce mandatory standards for large superannuation funds to, amongst other things, deliver timely and compassionate handling of death benefits. Do we have a problem with paying out super when a member dies? The value of superannuation in Australia is now around $4.1 trillion. When you die, your super does not automatically form part of your estate but instead, is paid to your eligible beneficiaries by the fund trustee according to the fund rules, superannuation law, and any death benefit nomination you made. Complaints to the Australian Financial Complaints Authority ( AFCA ) about the handling of death benefits surged sevenfold between 2021 and 2023. The critical issue was delays in payments. While most super death benefits are paid within 3 months, for others it can take well over a year. The super laws do not specify a time period only that super needs to be paid to beneficiaries “as soon as practicable” after the death of the member.
February 13, 2025
Why the ATO is targeting babyboomer wealth “Succession planning, and the tax risks associated with it, is our number one focus in 2025. In recent years we’ve observed an increase in reorganisations that appear to be connected to succession planning.” ATO Private Wealth Deputy Commissioner Louise Clarke The Australian Taxation Office ( ATO ) thinks that wealthy babyboomer Australians, particularly those with successful family-controlled businesses, are planning and structuring to dispose of assets in a way in which the tax outcomes might not be in accord with the ATO’s expectations. If you are within the ATO’s Top 500 (Australia's largest and wealthiest private groups) or Next 5,000 (Australian residents who, together with their associates, control a net wealth of over $50 million) programs, expect the ATO to be paying close attention to how money flows through the entities you control. A critical issue for many business owners is how to effectively (and compliantly) benefit from a successful business. In many cases, the owners have spent years building the business and the business has become not only a substantial asset, but a lucrative source of income either through salary and wages, dividends, or through the sale of shares or assets. Generally, under tax law, you can legitimately structure assets if there is a good reason to do so - like for asset protection, but if you tip across the line and the only viable reason for a structure is to reduce tax, then you risk the ATO taking a very close look at your operations or worse, denying any tax benefits under the general anti-avoidance rules in Part IVA of the tax rules, designed to combat “blatant, artificial or contrived” tax avoidance activities.  “We’re seeing that succession planning behaviour is primarily done by group heads who are approaching retirement. They typically own groups that family members are a part of, and wealth is transferred to the next generation to keep it within the family (via trusts and other means),” ATO Private Wealth Deputy Commissioner Louise Clarke said in a recent update.
More Posts
Share by: