11 Feb 2021 This week in tax
This week, in the second of our two-part series, our Senior Advocate, Robyn Jacobson, CTA, discusses the approaching end dates of the various COVID-19 economic stimulus support measures and what this means for your clients.
The end of stimulus support
As I discussed in Part 1 last week, throughout 2020, the Federal Government passed more than 40 pieces of legislation to cushion the blow of the COVID-19 pandemic, designed to keep Australians in jobs and businesses in business.
Subject to any further announcement from the Government, various economic stimulus support measures will be reaching (or have already reached) their conclusion, some having been extended beyond their original end dates. Being across the status of these programs is essential to planning for your practices and your clients. The key measures are discussed in chronological order below, based on their end dates. Figures quoted are sourced from various media releases issued by the Treasurer.
Coronavirus supplement — ends 31 March 2021
The Coronavirus Supplement is a temporary supplement payable to eligible individuals receiving certain income support payments. The assessable payment per eligible recipient:
- was $550 per fortnight from 27 April 2020 to 24 September 2020;
- was $250 per fortnight from 25 September 2020 to 31 December 2020; and
- is $150 per fortnight from 1 January 2021 to 31 March 2021.
From 1 April 2021, income support payments will revert to the normal payment rate for the individual’s situation.
Apprentice/trainee wage subsidy — ends 31 March 2021
Originally, this measure provided eligible employers with a wage subsidy of 50% of an eligible apprentice’s/trainee’s wage paid during the 9 months from 1 January 2020 to 30 September 2020, up to a maximum of $21,000 per eligible apprentice/trainee ($7,000 per quarter).
The measure was extended so that small- and medium-sized employers can continue to access the subsidy equal to 50% of an eligible apprentice’s/trainee’s wage paid until 31 March 2021. An employer cannot claim the apprentice/trainee wage subsidy for any period where they choose to claim JobKeeper for the same apprentice/trainee.
HomeBuilder — ends 31 March 2021
The introduction of the original HomeBuilder program was explained in TaxVine on 12 June 2020 by our Senior Tax Counsel, Prof Bob Deutsch, CTA.
The program is designed to provide eligible owner occupiers with a tax-free grant to build a new home or substantially renovate an existing one. Originally, the program was planned to run from 4 June 2020 until 31 December 2020 with construction required to have commenced within three months of the contract date. On 29 November 2020, the Government announced that the HomeBuilder program would be extended from 31 December 2020 to 31 March 2021. Construction must now commence within six months of the contract date.
The tax-free grant:
- was $25,000 for contracts signed between 4 June 2020 and 31 December 2020; and
- is $15,000 for contracts signed between 1 January 2021 and 31 March 2021.
Eligibility criteria apply, including an income cap of $125,000 for singles or $200,000 for couples, and a new build price cap. Further information is available on the Treasury website.
The Assistant Treasurer advised on 1 February 2021 that the program has attracted more than 80,000 applications nationally which far exceeded the Government’s expectations. He also confirmed all the Government’s COVID-19 fiscal support is targeted and time-limited, and that the HomeBuilder program will end on 31 March 2021.
Backing Business Investment — ends 30 June 2021
The Backing Business Investment (BBI) measure — in Subdivision 40-BA of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A) — allows businesses with an aggregated turnover of less than $500 million to deduct 50% of the cost of an eligible depreciable asset on installation, with existing depreciation rules applying to the balance of the asset’s cost. SBEs can deduct 57.5% (instead of 15%) of the cost of assets added to general small business pools. The balance of the cost of the asset is subject to the normal pooling rules thereafter and continues to be deductible at the rate of 30% from the second year onwards.
The asset must be new, acquired on or after 12 March 2020, and first used or installed ready for use by 30 June 2021. The measure excludes second-hand assets, buildings and other capital works depreciable under Division 43 of the ITAA 1997. And yes, the car limit of $59,136 (for 2020–21) still applies!
Full expensing of depreciating assets (FEDA) — ends 30 June 2022
Business with an aggregated turnover of less than $5 billion can fully expense their depreciating assets first held on or after 7:30pm (AEDT) on 6 October 2020 where they are first used or installed ready for use by 30 June 2022.
The rules in Subdivision 40-BB of the IT(TP)A were modified in December to allow businesses to opt out of temporary FEDA and the BBI incentives on an asset-by-asset basis. However, this flexibility does not extend to the requirement for SBEs to fully deduct the balance of their general small business pools on 30 June 2021. The Tax Institute has discussed this inconsistency with the Government which has led to the lodgment on 1 February 2021 of a joint submission on the issue by several of the professional bodies.
Our practical infographics summarise the complex interaction of the FEDA measure, the BBI incentive and the small business pooling rules. To circle back to a comment in last week’s TaxVine Preamble, the reversion on 1 January 2021 of the $1,000 IAWO threshold for SBEs has no practical effect because the FEDA measure effectively supersedes this until 30 June 2022.
Loss carry back — only for 2020–21 and 2021–22 income years
Corporate tax entities with an aggregated turnover of less than $5 billion can carry back a tax loss for the 2019–20, 2020–21 and 2021–22 income years and apply it against tax paid in a previous income year as far back as the 2018–19 income year.
The loss carry back tax offset is claimable only in the 2020–21 and 2021–22 income tax returns. Guidance will be provided by the ATO on how to complete new labels in the tax return.
Our practical infographic summarises the key points of the loss carry back measure, including an integrity rule for carrying losses back in certain circumstances and the limit placed on the loss carry back tax offset by the balance in the franking account at the end of the claim year.
JobMaker Hiring Credit — ends 6 October 2022
A more recent measure, the JobMaker Hiring Credit, commenced on 7 October 2020 and is available for up to eight quarterly JobMaker periods until 6 October 2022, although the wage subsidy cannot be claimed for an eligible individual for more than 12 months.
Employers can receive fixed payments of $200 per week for an eligible employee aged 16 to 29 years and $100 per week for an eligible employee aged 30 to 35 years, paid quarterly in arrears by the ATO.
Our blog, JobMaker Hiring Credit: your complete guide, breaks down the need-to-know facts of JobMaker, and provides a useful example so you can see at a glance how the scheme applies in practice. Episode 4 of our TaxVibe podcast features James O’Halloran, Deputy Commissioner, Economic Stimulus Branch, ATO, discussing the JobMaker program.
Travel agents — until the funds are depleted
Under the COVID-19 Consumer Travel Support Program, the Government is providing one-off grants to travel agents and tour arrangement service providers who have been affected by the reduced consumer travel due COVID-19.
The taxable grants range from $1,500 to $100,000, depending on the annual turnover for the 2019 calendar year which must be at least $50,000 and no more than $20 million. Claimants must wait for Services Australia to obtain a certificate of tax information from the ATO.
There is currently some confusion, and inconsistency, relating to the manner in which supplies made by travel agents and tour arrangement service providers are reported on the business activity statement. Whether gross or net supplies are reported can affect the amount of the grant to which the business is entitled, if any. The Tax Institute has raised this issue with the ATO and, at the time of writing, is awaiting further information.
As I mentioned last week, the Government advised in the Mid-Year Economic and Fiscal Outlook 2020–21 on 17 December 2020 that it had provided $251 billion in direct economic support, and gross government debt will exceed $1.1 trillion in 2023–24. These are eye-watering figures.
Future generations may judge the decisions made in the heat of the crisis, but few would disagree that the measures have largely done their job to keep Australians in jobs and businesses in business.
As always, we welcome your views and thoughts, which you can provide here.
Robyn Jacobson, CTA