COVID: so... you're a boss?

***as at 14 April 2020***

 One of my favourite sayings is "I'm not bossy, I am the boss", though the word bossy is still quite a trigger for me! 

This blog is all about support and options available to employers through covid. We have a separate blog for sole trader specific covid stuff, focused on the 'self-employed' rather than employer of other people. It is a bit confusing, I know... 

If you are a sole trader, with no employees, this is not for you.

If you are a sole trader employing others or a Company, Trust, Not For Profit etc that employs you and/or others, then please read on... and also check out the other blog because there might be some relevant info in there for you as an individual. 

If you are feeling confident about your ability to understand Scomo and his team, then head here for the official Treasury info. 

If not, then let me help translate the government info for you so you know what support might be available to you. 

EMPLOYERS

As a sole trader, you are your business, meaning you are the one legal entity. You can employ others, just not yourself. Whereas if you were operating through a Company or a Trust, that would be a separate 'being' to you, the individual. This entity can employ you (the individual) and others! Confused already? No worries, check out this blog on the different structures.

There a few things the Government have released that might be applicable to your business, and that we will go through here:

• Job Keeper - the government giving employers (including the self-employed) money to help them keep people employed.
• PAYG-W "cash bonus" - a government payment to employers in relation to the tax they withhold from employees. 
• Tax Obligations - lodgement extensions, payment plans, reduce your instalment amounts.

Other stuff they have on offer, but that doesn't apply to a lot of my clients so not covered in this blog (email me if you want to chat through these further!):

• Increased 'small business write off' threshold - if you happen to be looking to invest significantly in assets, then this might be useful to your business. 
• Government going guarantor on loans - the Government have lifted the 'responsible lending guidelines' for lenders, and have offered to go guarantor on some business loans. Be cautious of repayment plans and interest rates still. 
• Relief for "financially distressed" businesses - I know we are all feeling like that applies to us, but there are some specific conditions and definitions here. 
• Subsidy for those with apprentices - A wage subsidy to help ease cash-flow.

Job Keeper

Ah yes, what we all wish we were, right? 

This is a new shiny thing released by the government on the 30th of March 2020. ***legislation now released*** 

Here is the actual legislation.

Job Keeper is designed to help employers keep their staff employed, but the government has kindly said this will apply to the "self-employed" too. 

NEW INFO - The legislation now says ALL ENTITIES (with a few exceptions that don't really apply to my main client base).

It is basically a payment of $1,500 per employee per fortnight (pre-tax), from the government to the 'employer', for them to pay to their employee.

Who is eligible?

• employers and the 'self employed'
• NEW INFO - now includes one eligible business participant too
• includes not for profits
• business turnover of less than $1 billion*
• turnover has fallen by more than 30%
• business is not subject to any Major Bank Levy

*if you have turnover of more than a billion dollars, thanks for signing up to my newsletter firstly, but also, please kindly check out the government info that is relevant to you (because this blog is not), and also donate to all of my creative friends and clients because we need you right now.

Tell me about this 30% drop...

We don't know the details yet, but what we believe you will need to show is that in this last quarter (or month, depending on your usual reporting cycle), you have 30% or more of a drop in total sales (income) of the business when compared the same month/quarter in 2019. If your business is new, then a drop compared to it's average/usual conditions. 

NEW INFO - You (employer) will need to report monthly to the ATO re your earnings to ensure you are still eligible.

NEW INFO - You (employer) will need to show that April 2020 (eligible month) has seen a drop of 30% or more as compared to a comparable period in 2019 i.e. April 2019. The fact sheet suggests you can use alternative estimates, averages, periods etc. if you have lumpy income.

Which employees count?

Self-employed individuals will be eligible to receive the Job Keeper Payment, and we're pretty sure it will just be paid directly into your nominated account. Keep in mind this is taxable income so don't spend it all at once! 

NEW INFO - You need to have registered your interest and then make monthly reports in order to get the payment in arrears from the ATO. 

For those of you who employ other people, this is pretty important to understand. You will receive the $1,500 per fortnight for each of the eligible employees on your books at 1 March 2020. No sneaky back dating off stuff! 

Eligible employees include:

• full time
• part time
• long-term casuals (i.e. have been with the employer for the 12 months to 1 March 2020)
• stood down employees (if stood down after 1 March 2020)
  So, if you have been stood down, chat to your ex-employer!! 
  
• who are Australian citizens, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder.

How does it work?

• Employers elect to get this - "opt in" kind of thing
• NEW INFO - Employees need to do a nomination. We need more info on the form/format/content.
• Application/election will be done via to ATO
• Employees cannot double dip - individuals can only receive the payment once, so they need to determine which employer (if you are one of a few) the primary one, and it is that one which will elect with the ATO. If you are the employer, maybe give your employees a quick call to check on their situations! 
  
• If you are the employee/self-employed and receive the Job Keeper payments, be sure to report this to Services Australia. Heads up: It might impact your Job Seeker payments.

How much do I receive? How much do I pay my employees?

The employer/self-employed receives $1,500 per eligible employee per fortnight, for up to 6 months, in arrears.

NEW INFO - Timing: the first 'job keeper fortnight' begins 30 March 2020, and the payments will be received by the employer in arrears (not a sexual reference). This means 'after the fact' i.e. the employer pays the employee through April, then receives a kind of 'reimbursement' from the ATO from 1 May 2020 (and so on). This arrangement is planned to end 27 September 2020.

***get in touch with us today if you need help setting this all up in your accounting software!***

If the employer chooses to/has to keep them on at their usual (higher) rate, then this acts like a subsidy - think like when the parents of the birthday girl subsidise the drinks at the 18th birthday. The government are pitching in so the employer just pays the top-up amount. 

Example A:

• usual wage is $1,800 per fortnight
• the employer now receives $1,500 from the government
• employer pays that $1,500 plus the $300 they have to cover themselves as employers
• employee has no change in their income

Example B:

• usual wage is $1,000 per fortnight
• employer receives $1,500 from the government
• employer pays that full $1,500 to the employee
• employee feels amazing

Example C: 

• employee was employed at 1 March 2020, but then stood down
• employer receives $1,500 from the government
• employer pays that full $1,500 to the stood down employee
• they feel better, and more secure, but probably bored without work

The same applies if the employee ceased work and then was re-engaged. 

Also, it is up to the employer whether they will pay the extra superannuation on any amounts paid above the usual wage. 

NEW INFO - What if I work in my business but I am not 'employed'?

Firstly, you should book a meeting with us to discuss pros and cons of the approach you have taken.

Secondly, it is going to be ok - the government updated the offer to cover what they refer to as business participants. 

Your entity is entitled if:

• The fortnight is a 'job keeper fortnight'
• The entity is not a not-for-profit
• The entity meets the other eligibility criteria (like the 30% drop etc. - see above)
• The individual (you) are the eligible business participant for the entity for the fortnight
• The entity has lodged their form with the ATO
• The entity must have had an ABN at 12 March 2020 (or you need to get Commissioner approval)

Please note your entity can only have one business participant receiving the Job Keeper payment. Your entity cannot be entitled if  another entity is entitled re that same individual. 

Your entity needs to notify you (the individual) of the nomination to be the eligible entity.

You are an eligible business participant if:

• You are not employed by the entity for that fortnight
• You meet the other general requirements (see above)
• The individual is actively engaged in the carrying on of the business
• If the business is a sole trader, then the individual is the entity
• If the business is a partnership, then the individual must be a partner in the partnership
• If the business is a trust, then the individual must be an adult beneficiary of the trust
• If the business is a Company, then the individual must be a shareholder or Director of the company

NEW INFO - Reporting Requirements

You have 7 days from the end of the calendar month to make your reports to the 'commissioner' (AKA the ATO). 

Too good to be true?

Kind of. One thing to keep in mind is that the payment from the government will be in arrears. That is not a sexy reference. In arrears kind of means after the fact. So, if cash-flow is an issue, this might help but not perfectly. As the employer, you probably need to cover the actual wages paid to employees through April, and then the subsidy will be paid by the government to the employer from the first week of May 2020. 

Check out more examples at the end of this fact sheet. 

PAYG-W "cash bonus"

I sure loved reading the legislation on this one! To be honest, how all of the calculations are going to happen is something we're still working through, but you don't need to worry about that level of detail if we're your accountant anyway.

This is a cash bonus from the government, to help employers keep their employees employed. The official name is 'boosting cash flow for employers' and the fact sheet is here. If you get super bored, here is the bill for the Act that eventually makes this law.

The general gist: the Government will provide up to $100,000 (previously $25,000) to eligible small and medium businesses and not-for-profits that employ people with a minimum payment of $20,000 (previously $2,000).

Don't get too excited just yet...

Who is eligible?

• Small and medium sized business entities with aggregated annual turnover under $50 million that employ workers will be eligible. Pretty sure that is all of my readers?
• Must have an ABN and be registered for PAYG-W
• Derived business income in the 2018–19 income year and lodged its 2019 tax return on or before 12 March 2020. I can hear you freaking out... 
  OR
  Made GST taxable, GST-free or input-taxed sales in a previous tax period (since 1 July 2018) and lodged the relevant activity statement on or before 12 March 2020.
  Hoping you guys have been lodging those BAS on time!
• Made eligible payments...

Not for profits, please check out the fact sheet for your specific eligibility criteria! 

What is an eligible payment?

• salary and wages
• director fees
• eligible retirement or termination payments
• compensation payments
• voluntary withholding from payments to contractors.

In terms of employees, which is the most common eligible payment my clients would have made...

• Must have been employing someone before 12 March 2020 to be eligible. No funny business and no back dating. 
• Paid employee and withheld tax in March quarter.

GOOD NEWS: All eligible entities that received initial cash flow boosts may be entitled to additional cash flow boosts.

How much will the employer receive?

The first BOOST

• Quarterly reporters: Under this enhanced measure, employers will receive a payment equal to 100% of their PAYG withheld (previously was 50%) with the maximum increased from $25,000 to $50,000, the minimum payment being $10,000.
• Monthly reports: 300% of the March month PAYGW amount.
• An additional payment (up to $50,000) will be introduced for the period July to October 2020. We don't know much about this just yet.

One catch: if you withheld between $0-$9,999 in the march quarter, your business may not be eligible to receive any more cash flow boosts until the PAYG withholding exceeds $10,000 over the relevant periods.

Example (credit: Treasury):

Tim owns and runs a small paper delivery business in Melbourne, and employs two casual employees who each earn $10,000 per year. In the March 2020 quarterly activity statement, Tim reports withholding of $0 for his employees as they are under the tax-free threshold. The March 2020 quarter is the first period Tim is eligible for an initial cash flow boost. His withholding of $0 is less than $10,000 so Tim’s initial cash flow boost will be the minimum amount $10,000. Tim will not receive any further initial cash flow boosts unless his withholding in the June 2020 quarter is greater than $10,000.

The additional BOOST

The amount you get in the additional boost depends on what you go in the first one:

• Quarterly reports: the additional boost = 50% of the total initial boost for each actitivity statement (March and June)
• Monthly reporters: the additional boost = 25% of its total initial cash flow boosts for each activity statement.

Example (credit: Treasury): 

Tim received initial cash flow boosts of $10,000. When Tim lodges his June and September 2020 quarterly business activity statements he will receive additional cash flow boosts as follows: $5,000 for quarter ended June 2020 and $5,000 for quarter ended September 2020.

How does it work?

• The payment will be delivered by the ATO as a credit in the activity statement system from 28 April 2020 when you (employer) lodge the BAS or IAS.
• Minimum credit should be $10k for the first quarter (March)
• The reporting all happens through the monthly or quarterly BAS - Quarterly lodgers will be eligible in both the March 2020 and June 2020 BAS’s, and Monthly lodgers will be eligible to receive the payment for the lodgement months of March 2020, April 2020, May 2020 and June 2020. 
• This payment will be tax free and will be automatically calculated by the ATO

Tell me WHEN!

"The cash flow boosts will be applied to reduce liabilities arising from the same activity statement. This will result in eligible entities being required to pay less to the ATO. Generally where a credit exceeds a business’ other tax liabilities, the business will be refunded the excess amount. [this means it could reduce GST payable too!] A business may also receive a refund if it overpays its activity statement because the business’ system was unable to take the cash flow boost into consideration when working out how much was payable. If a business is placed in a refund position, it will generally receive the refund within 14 days."

• now is the time to reconcile your books, ready for the March Qtr BAS
• the first payments will be made by the ATO after 28 April 2020
• unfortunately early lodgers (before 28 April) won't receive payment of the bonus early. SAD FACE.
• deferred lodgers will have the boost applied when they eventually do lodge
• additional payments will be paid through July to September 2020

Tax Obligations

I might be biased but now seems like the perfect time to put some energy into organising your finances and getting on top of your tax. This also helps me, your friendly neighbourhood accountant, to negotiate special things for you with the ATO. 

Following covid, the ATO and government decided on giving us a bit of help when it comes to our reporting and tax payment obligations:

• Deferring by up to 4 months the payment of tax amounts due through the BAS (including PAYG instalments and PAYG withholding), income tax assessments, FBT assessments and excise by affected businesses
  If you are not sure what these acronyms mean, please check out my other blogs by clicking on the links!
  

One catch: As the cash flow boost (discussed above) is generated on lodgment of an eligible activity statement, if you defer lodgement, then you also defer receiving the cash-flow boost. This ensures that eligible entities that have received deferrals, for example, due to recent natural disasters, do not miss out on the payment or have to forgo their extended time to lodge to qualify.

• Allowing affected 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. 
  This might ease cash in the short term, but keep in mind it does not make the tax payable go away... 
  
  
• Remitting any interest and penalties, incurred by affected businesses on or after 23 January 2020, that have been applied to tax liabilities; and
  
  
• Allowing affected businesses to enter into low-interest payment plans for their existing and ongoing tax liabilities.

These are not automatically applied, and you need to call the ATO. If you need a hand, you know where to find me! 

Phewf!! (another) big blog. 

I hope that this has been useful to you and your friends. Please share this amongst your community too. We will endeavour to keep it up to date for you. 

Feel free to email or DM me any questions you have, and please share handy links and resources you find. We're happy to collaborate and share the love and knowledge around!

Stay safe

xxx Lauren