ECONOMIC STIMULUS PACKAGE

The economic stimulus package has been announced today and we have been receiving a lot of calls and emails from our clients, asking whether they will be entitled to receive some of the cash assistance that the stimulus package includes.

At this stage, the stimulus package as far as we are aware, is only announced in the PMs Media Release, and has not been given royal assent. However, given the urgency of this package, it should pass through as legislation fairly soon. However, there is not enough information from the government at this stage, regarding how this stimulus package will be implemented and who will be entitled to receive a payment.

Here is the official information available from the PM’s website:

The Morrison Government has today announced a $17.6 billion economic plan to keep Australians in jobs, keep businesses in business and support households and the Australian economy as the world deals with the significant challenges posed by the spread of the coronavirus.

Our targeted stimulus package is focused on keeping Australians in jobs and helping small and medium sized businesses to stay in business. 

The package has four parts:

• Supporting business investment

• Providing cash flow assistance to help small and medium sized business to stay in business and keep their employees in jobs

• Targeted support for the most severely affected sectors, regions and communities;

• Household stimulus payments that will benefit the wider economy

The measures are all temporary, targeted and proportionate to the challenge we face.  Our actions will ensure we respond to the immediate challenges we face and help Australia bounce back stronger on the other side, without undermining the structural integrity of the Budget.

Prime Minister Scott Morrison said as part of the plan up to 6.5 million individuals and 3.5 million businesses would be directly supported by the package.

“Just as we have acted decisively to protect the health of the Australian people, based on the best evidence and medical advice, our support package responds to the economic challenges presented by this pandemic in a timely, proportionate and targeted way,” the Prime Minister said.

“Our plan will back Australian households with a stimulus payment to boost growth, bolster domestic confidence and consumption, reduce cash flow pressures for businesses and support new investments to lift productivity.

“Australia is not immune to the global coronavirus challenge but we have already taken steps to prepare for this looming international economic crisis.

“We’ve balanced the budget and managed our economy so we can now use this to protect the health, wellbeing and livelihoods of Australians.

“Our targeted stimulus package will focus on keeping Australians in jobs and keeping businesses in business so we can bounce back strongly.

“The economy needs temporary help right now to bounce back better so the livelihoods of all Australians are protected.”

Treasurer Josh Frydenberg said Australia is approaching the economic challenge from the Coronavirus from a position of strength with IMF and the OECD both forecasting Australia to grow faster than comparable countries including the UK, Canada, Japan, Germany and France.

“Our plan keeps businesses operating, supports jobs and provides a stimulus to households,” the Treasurer said.

“The Government has worked hard over the last six and a half years to return the budget to balance so we have the flexibility to respond to the serious economic challenges posed by the Coronavirus.”

“Given Australia’s strong economic and fiscal position, the international credit rating agency Standard and Poor’s indicated that temporary stimulus would be “unlikely to strain Australia’s creditworthiness.

“In our response, we have been very careful not to repeat the mistakes of previous stimulus programs and not undermine the structural integrity of the budget.

“Today’s announcement will provide the support businesses need to stay in business and keep Australians in a job.

“By acting decisively this package will put Australia in the strongest possible position to deal with the economic challenges we face and to make sure our economy bounces back even stronger.”

Delivering support for business investment

• $700 million to increase the instant asset write off threshold from $30,000 to $150,000 and expand access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020. For example, assets that may be able to be immediately written off are a concrete tank for a builder, a tractor for a farming business, and a truck for a delivery business.

• $3.2 billion to back business investment by providing a time limited 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct an additional 50 per cent of the asset cost in the year of purchase.

These measures start today and will support over 3.5 million businesses (over 99 per cent of businesses) employing more than 9.7 million employees or 3 in every 4 workers. The measures are designed to support business sticking with investment they had planned, and encouraging them to bring investment forward to support economic growth over the short term.

Cash flow assistance for businesses

• $6.7 billion to Boost Cash Flow for Employers by up to $25,000 with a minimum payment of $2,000 for eligible small and medium-sized businesses. The payment will provide cash flow support to businesses with a turnover of less than $50 million that employ staff, between 1 January 2020 and 30 June 2020. The payment will be tax free. This measure will benefit around 690,000 businesses employing around 7.8 million people. Businesses will receive payments of 50 per cent of their Business Activity Statements or Instalment Activity Statement from 28 April with refunds to then be paid within 14 days.

• $1.3 billion to support small businesses to support the jobs of around 120,000 apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.

Stimulus payments to households to support growth

• $4.8 billion to provide a one-off $750 stimulus payment to pensioners, social security, veteran and other income support recipients and eligible concession card holders. Around half of those that will benefit are pensioners. The payment will be tax free and will not count as income for Social Security, Farm Household Allowance and Veteran payments. There will be one payment per eligible recipient. If a person qualifies for the one off payment in multiple ways, they will only receive one payment.

Payments will be from 31 March 2020 on a progressive basis, with over 90 per cent of payments expected to be made by mid-April.

Assistance for severely-affected regions

• $1 billion to support those sectors, regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on industries such as tourism, agriculture and education. This will include the waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and Commonwealth National Parks. It will also include additional assistance to help businesses identify alternative export markets or supply chains. Targeted measures will also be developed to further promote domestic tourism. Further plans and measures to support recovery will be designed and delivered in partnership with the affected industries and communities.

The Government is also offering administrative relief for certain tax obligations, including deferring tax payments up to four months. This is similar to relief provided following the bushfires for taxpayers affected by the coronavirus, on a case-by-case basis.  The ATO will set up a temporary shop front in Cairns within the next few weeks with dedicated staff specialising in assisting small business. In addition, the ATO will consider ways to enhance its presence in other significantly affected regions to make it easier for people to apply for relief, including considering further temporary shop fronts and face-to-face options.

The Government’s economic support package is proportionate, timely and scalable to respond to the economic challenges presented by the spread of the coronavirus.

Through our response today and the actions we have taken to bring the Budget back to balance over the last six and a half years, Australians can be confident that our nation is one of the best prepared to respond to the economic impacts of the coronavirus.

We can assure you that once we know more about which taxpayers and businesses will be entitled to grants, payments or tax concessions, we will send an announcement about this through our newsletter. Please sign up to the newsletter here to stay informed.

CGT Main Residence Exemption

In December 2019, new legislation was passed regarding the CGT Primary Place of Residence (PPR) exemption for non-resident taxpayers.

Effective from 1st July 2020, if you are a non-resident for tax purposes and you dispose of an Australian real property asset (which you held prior to 9th May 2017 (7.00pm AEST) you will have to pay CGT on the entire capital gain, even if the property was used as your PPR. There are a few exceptions that may apply in limited circumstances, but generally speaking, if you are planning to sell your property while living overseas, you should consider whether the timing of the sale will be affected by the change in legislation.

Please note that the absence rule still applies if you do not dispose of your property. Generally speaking, you can maintain the PPR status of your home after you move out for up to 6 years while it is used to produce income, and indefinitely if you never use it to produce income. This rule applies even if you are living overseas, as long as you do not treat any other dwelling as your PPR during that time.

For properties purchased on or after 9th May 2017 (7.00pm AEST), the PPR exemption is not available.

For more information about foreign residents and main residence exemption, please click here.

Changes to Superannuation Legislation

From 1 January 2020, salary sacrifice amounts can no longer be used to reduce employers’ SGC obligations. Prior to this date, salary sacrificed amounts to super reduced the employer obligation of 9.5% of gross salary.

For example, an employee receiving $100,000 salary would ordinarily be entitled to $9500 superannuation guarantee. If they salary sacrificed $10,000 into Super, the gross salary would be reduced to $90,000 and the employer obligation would be $8550 (9.5% of $90,000). Under the new legislation, the obligation would still be $9500 despite the reduced wage after salary sacrifice.

For more information regarding these changes, please visit ATO website here:

https://www.ato.gov.au/Business/Super-for-employers/In-detail/Salary-sacrifice/Salary-sacrificing-super---information-for-employers

Annual Holiday Closure

Please note that our office will be closed over the Christmas and New Year period, including the first 2 weeks of January. We will have minimal admin support during this period, attending to post, banking and urgent emails only. Please do not drop off documents at our office, as there won’t be anyone available for collection.

Our official closure dates are 21st Dec 2019 - 19th January 2020.

Dorin will return to the office in late January 2020.

All emails should be directed to

We want to take this opportunity to thank all of our clients for another year with us, and wish you all a happy and safe festive season.

Division 293 Tax

The Division 293 Tax is not widely discussed. In fact, most taxpayers do not even realise it exists.

The tax only affects high income earners with an adjusted taxable income of $250,000 or more (At the date of publishing this article) and who have taxable contributions made to their superfunds (e.g. employer superannuation guarantee contributions, salary sacrificing into superannuation etc).

This flowchart explains how the ATO calculates your income and tax liability for the purpose of Division 293 tax.

Some of our clients have started receiving Notice of Assessments for Division 293 tax. The NOA includes a cover letter from ATO and an authority to release funds from the taxpayer's superfund, for the purpose of paying the Div 293 tax. 

To have the tax paid from your superfund, please log into your MyGov account to nominate your superfund to make the payment.

For more information about this tax, please visit the ATO website.

Low and middle income tax offset now law

BREAKING NEWS

From the 2018–19 income year:

• The low and middle income tax offset increases from a maximum amount of $530 to $1,080 per annum and the base amount increases from $200 to $255 per annum.

• Taxpayers with a taxable income:

  • of $37,000 or below can now receive a low and middle income tax offset of up to $255

  • above $37,000 and below $48,000 can now receive $255, plus an amount equal to 7.5% to the maximum offset of $1,080

  • above $48,000 and below $90,000 are now eligible for the maximum low and middle income tax offset of $1,080

  • above $90,000 but is no more than $126,000 are now eligible for a low and middle income tax offset of $1,080, less an amount equal to three per cent of the excess.

If your tax return has already been lodged, you will receive an adjustment to your refund if you are eligible for any additional tax offsets.

This increase has been implemented in order to boost growth in the midst of a major economic downturn.

Benefits of a Corporate Trustee for SMSF

This is a question that has come up numerous times, so we thought we would write a blog about it.

The biggest benefit of a corporate trustee has to do with succession and ease of removing/adding a member. If a member/individual trustee dies or exits the fund, the administrative repercussions would be far greater, as the ownership documents of the SMSF assets would have to be changed, and the trust deed would need updating as well. With a corporate trustee, you can easily change the directors of the company.

With a corporate trustee, you can have just 1 member in the SMSF. This means if someone exits the SMSF later down the line, the fund will still comply with legislation. Without a corporate trustee, the fund must have at least 2 members.

It is usually easier to apply for finance with a corporate trustee. Most banks will not lend to a SMSF (through a limited recourse borrowing arrangement) without a corporate trustee.

A corporate trustee is also a separate legal entity to the SMSF so there is a clear separation of assets, and greater level of protection of assets as well. Note that individuals can be personally liable for any legal issues within the trust.

Overall, Corporate Trustees do incur higher set up costs and ongoing management is a little more complicated, but there are numerous benefits that outweigh these negatives.

Here is ATO’s summary of the different SMSF structures:

Member and trustee requirements

Individual trustees

• Two to four members.

• Each member of the fund must be a trustee, and each trustee must be a member of the fund.

• A member cannot be an employee of another member – unless they are relatives.

Corporate trustee

• One to four members.

• Each member of the fund must be a director of the corporate trustee, and each director of the corporate trustee must be a member of the fund.

• A member cannot be an employee of another member – unless they are relatives.

Cost

Individual trustees

• There are no Australian Securities & Investments CommissionExternal Link(ASIC) fees, so establishment costs and ongoing administrative requirements are less.

• A trustee cannot be paid for their duties or services as a trustee.

Corporate trustee

• ASIC charges a fee to register a corporate trustee for the first time.

• There is an annual review fee, which is lower if the corporate trustee acts solely as a super fund trustee, but higher if the corporate trustee also performs another function, such as running a business.

• A corporate trustee cannot be paid for its services as a trustee, and directors of the corporate trustee cannot be paid for their duties or services as directors in relation to the fund.

Ownership of fund assets

Individual trustees

• If an individual trustee is removed or another added, you must change the titles of the SMSF's assets. This can be costly and time-consuming.

• State government authorities may charge a fee for title changes.

• Most financial institutions also charge a fee for title changes.

Corporate trustee

• Recording and registering assets can be simpler, particularly for changes in membership.

• When a person starts or stops being a member of the SMSF, they become, or cease to be, a director of the corporate trustee.

• You must notify us, and ASIC of any change in director.

• The corporate trustee doesn't change, so the titles of the SMSF’s assets are unchanged.

Separation of assets

Individual trustees

• Fund assets must be in the fund's name

• Fund assets must not be combined with personal assets.

Corporate trustee

• Fund assets must be in the fund's name.

• Fund assets must not be combined with director's personal assets.

• Companies have limited liability, so a corporate trustee offers greater protection if the trustee is sued for damages.

Penalties

Individual trustees

• If super laws are breached, administrative penalties are levied on each trustee.

• For example, for failing to prepare financial accounts and statements, each trustee is liable for a $2,100 penalty (10 penalty units). This would amount to $8,400 if there were four trustees.

• The value of a penalty unit is $210.

Corporate trustee

• If super laws are breached, administrative penalties are levied on the corporate trustee.

• For example, for failing to prepare financial accounts and statements, a corporate trustee would be liable for a $2,100 penalty (10 penalty units).

• The value of a penalty unit is $210.

Succession

Individual trustees

• Where changes in trustees occur, the fund is not likely to continue to operate as usual unless an appropriate succession plan has been prepared.

Corporate trustee

• A corporate trustee continues in the event of a member's death.

• In the event of the death or incapacity of a member, control of an SMSF and its assets by a corporate trustee is more certain.

Instant write-off for assets over $30,000

From 2nd April 2019, the instant asset write-off threshold increased to $30,000 (prior to this, it was $25,000).

This means that if your business purchases an asset that costs less than $30,000 (net of GST), you can claim an immediate deduction for it, instead of depreciating the asset over it’s useful life.

With the end of financial year approaching, now is a good time to have a think about whether your business needs new assets or replacement of old assets. Consider if the timing is right - look at your business profit - is it higher than expected? If you have extraordinary profit this year, it might be a good idea to utilise this tax concession in order to save your business some tax this year.

More information about the instant asset write-off can be found here.