COVID-19 Update

COVID-19 Superannuation

Below is an outline of the measures behind this package.

Accessing your super
  1. The ATO will be solely responsible for assessing applications for the early release of superannuation by individuals impacted by the Coronavirus.
  2. The Government has legislated to allow eligible individuals to release tax-free up to $10,000 over 2 financial years from their superannuation on compassionate grounds. Eligible individuals can apply to access up to $10,000 in this financial year to 30 June 2020, and a further $10,000 from July until September 2020.
  3. Applications can be made from mid-April 2020 directly to the ATO through the myGov website. A person will need to certify that they meet the eligibility criteria. The ATO will verify the applicant, assess the application, record the bank account details, and make a decision. The ATO will then direct the nominated super fund to release the requested amount to the bank account that is specified by the applicant. You do not need to contact your super fund at any stage.
  4. Some Criteria for accessing your superannuation is summarized below (Meet any 1):
    • Unemployed
    • Eligible to receive Jobseeker, Youth Allowance or Parenting payment on or after 1 January 2020.
    • Made redundant
    • Working hours were slashed by 20%
    • Sole trader whose business was suspended or turnover fell by 20% or more.
  5. Withdrawals are tax-free.

COVID-19 Business Help

Below is an outline of the measures behind this package.

PAYG cash credits to SME employers and charities
  1. It will now provide a tax-free credit up to $100,000 for eligible small and medium sized entities (SMEs), and not-for-profits (including charities) that employ people, with a minimum credit of $20,000. These tax-free credits seek to help businesses’ and NFPs’ cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff.
  2. SMEs with aggregated annual turnover under $50m and that employ workers are eligible. NFPs entities, including charities, with aggregated annual turnover under $50m and that employ workers will now also be eligible. This will support employment at a time where NFPs are facing increasing demand for services.

COVID-19 Business Help – Job Keeper Scheme

Below is an outline of the measures behind this package.

Job Keeper Payment
  1. To be eligible for the Job Keeper subsidy:
    • Business with turnover of less than $1 Billion where it has fallen by more than 30%
    • Business with turnover of $1 Billion or more where it has fallen by more than 50%
    • Business is not subject to Major Bank Levy
  2. Guidance from Treasury:
    • To establish that a business has faced either a 30 (or 50) per cent fall in their turnover, most businesses would be expected to establish that their turnover has fallen in the relevant month or three months (depending on the natural activity statement reporting period of that business) relative to their turnover a year earlier.
    • Where a business was not in operation a year earlier, or where their turnover a year earlier was not representative of their usual or average turnover, (e.g. because there was a large interim acquisition, they were newly established or their turnover is typically highly variable) the Tax Commissioner will have discretion to consider additional information that the business can provide to establish that they have been significantly affected by the impacts of the Coronavirus.
    • The Tax Commissioner will also have discretion to set out alternative tests that would establish eligibility in specific circumstances (e.g. eligibility may be established as soon as a business has ceased or significantly curtailed its operations). There will be some tolerance where employers, in good faith, estimate a greater than 30 (or 50) per cent fall in turnover but actually experience a slightly smaller fall.

Trustee Resolutions

  1. As we lead up to the end of the Financial Year, if you have a trust, please ensure that you make trustee resolutions to distribute the 2017/18 Trust income by 30 June 2018. Failure to do so could result in the undistributed income being taxed in the Trustee’s hand at 45%.
  2. The manner of distributions are dictated or governed by your Trust deed. It is important that the trustees are familiar with the terms of their trust deed so that distributions can be made properly. The ATO has ruled that a written record is essential if you wish to effectively stream capital gains or franked dividends.
  3. Most trust deeds contain a default beneficiary clause which makes that particular beneficiary entitled to the Trust’s income if no other resolution is made by the 30 June. Therefore if you wish to distribute to someone other than the default beneficiary, it is important to have a resolution in place by the 30 June. Depending on circumstances, it is easier to allocate distributions by percentages rather than fixed amounts. This will ensure that any tax adjustments that might lead to a different trust income reported at year end can still be distributed out without residual income caused by the adjustments.

SALARY VS ORDINARY TIMES EARNINGS

Below is a table detailing the differences between “salary” and “ordinary time earnings (OTE)”. It is important as the definition also affects the superannuation payable for an employee. Therefore the superannuation calculated is:

OTE times Superannuation Rate

OTE ($3000) x Rate (9%) = $270 (Superannuation Payable)

Employers must use ordinary time earnings (OTE) to work out the minimum superannuation contribution for their employees. If this base is different from the one in use, and the superannuation calculated is lower than the minimum threshold, the employer could be liable for the SGC (Superannuation Guarantee Charge) and also possible audit from the ATO.

Payments to an employee in relation to: Salary or wages? Ordinary time earnings?
Awards and agreements:
Overtime hours – award stipulates ordinary hours to be worked and employee works additional hours for which they are paid overtime rates Yes No
Overtime hours – agreement prevailing over award Yes No
Agreement supplanting award removes distinction between ordinary hours and other hours Yes – all hours worked Yes – all hours worked
No ordinary hours of work stipulated Yes – all hours worked Yes – all hours worked
Casual employee:
shift-loadings Yes Yes
overtime payments Yes No
Casual employee whose hours are paid at overtime rates due to a ‘bandwidth’ clause Yes No
Piece-rates – no ordinary hours of work stipulated Yes Yes
Overtime component of earnings based on ‘hourly driving rate’ formula stipulated in award Yes No
Allowances:
Allowance by way of unconditional extra payment Yes Yes
Expense allowance expected to be fully expended No No
Danger allowance Yes Yes
Retention allowance Yes Yes
Hourly on-call allowance in relation to ordinary hours of work for doctors Yes Yes
Payment of expenses
Reimbursement No No
Petty cash No No
Reimbursement of travel costs No No
Payments for unfair dismissal No No
Workers’ compensation:
returned to work Yes Yes
not working No No
Leave payments:
Annual leave Yes Yes
Parental leave – eg maternity leave, paternity leave, adoption leave No No.
Ancillary leave – eg jury duty, defence reserve service No No.
Termination payments:
in lieu of notice Yes Yes
unused annual leave Yes No
Bonuses:
Performance bonus Yes Yes
Bonus labelled as ex-gratia but in respect of ordinary hours of work Yes Yes
Christmas bonus Yes Yes
Bonus in respect of overtime only Yes No