TAX

STEPHEN

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.
STEPHEN

PROPERTY INVESTORS

Taxation For Property Investors

Rental Deductions 2017-18

Depreciation Claims

Due to changes in legislation, property investors may no longer be able to claim depreciation on used and second-hand depreciation assets in residential rental properties. While this has created a restriction on depreciation claims, it will also have the corresponding benefit of paying less capital gains tax when they sell the property.

Those who purchase brand new property will continue with the existing depreciation regime where these changes will not affect them. In addition, these proposed changes will only impact residential property. Commercial, industrial, retail and other non-residential properties will also not be affected.

Building allowance and claims on the structure of the properties remains unchanged. Investors will still need to obtain a depreciation schedule to calculate the deductions.

STEPHEN

GST For Lawyers

Agency relationship and disbursements

One common area where GST for lawyers is not widely understood is in the area of legal disbursements. Hopefully this blog will summarize some of the key practical points for legal professionals and clarify GST for lawyers.

Below is an extract from GSTR 2000/37 where it relates to agency relationship applied in scenarios for GST on solicitors and lawyers.

  1. Agents may incur expenses on a client matter both as an agent of the client and as a principal in the ordinary course of providing their services to the client. For example, in most cases, even though agreements between solicitors and clients may not use the term agent or agency, it is clear that the clients have authorised the solicitors to act on their behalf in the particular matter. When the solicitor acts as an agent for the client, the general law of agency applies so that the solicitor is ‘standing in the shoes’ of the client.
  2. If a disbursement is made by a solicitor and incurred in the solicitor’s capacity as a paying agent for a particular client, then no GST is payable by the solicitor on the subsequent reimbursement by the client. This is because the goods or services to which the disbursement relates are supplied to the client, not to the solicitor, by a third party. Also, the reimbursement forms no part of the consideration payable by the client for the supply of services by the solicitor. However, if goods or services are supplied to the solicitor to enable the solicitor to perform services supplied to the client, GST is payable by the solicitor on any reimbursement by the client of expenses incurred on those goods or services, whether the reimbursement is separately itemised or included as part of the solicitor’s overall fee. This is because the reimbursement is part of the consideration payable by the client for services supplied by the solicitor.
GST Not Payable

The following are examples of common fees and charges, for which a client is liable, that may be paid for by a solicitor as a paying agent of the client. If the solicitor makes the payment, GST is not payable on the subsequent reimbursement by the client to the solicitor for:

  • Application fees
  • Registration Fees
  • Court Fees
  • Barrister’s Fees when barrister is engaged by the client
  • Incorporation Fees
  • Most fees in connection with registering and maintaining the status of particular legal relationships such as companies, partnerships, societies or associations. A common example would be registering a company through ClearDocs where the client could have done it directly through them.
  • Fines, penalties, stamp duty and taxes
  • Probate fees
GST Payable

The following are examples of common disbursements that, depending upon the contractual arrangements between the client and the solicitor, can be incurred by a solicitor and then reimbursed by a client as part of the consideration payable for legal services provided to the client by the solicitor. If the following disbursements are incurred by a solicitor, GST is payable on the subsequent reimbursement by the client to the solicitor:

  • Search fees
  • Municipal search fee (eg rates; zoning; permits)
  • Birth/death/marriage certificate fees
  • Barrister’s fees when the barrister is engaged by the solicitor
  • Witness fees
  • Fees for recording court proceedings
  • Service of document fees
  • Fees for expert report or attendance in court
  • Fees to obtain court transcript

The above GST treatment of disbursements is consistent with the income tax treatment of disbursements as explained in Taxation Ruling TR 97/6.

The following are examples of costs that a solicitor may incur in carrying on the business of providing a legal service to the client. GST is payable on any subsequent payment by the client to the solicitor for the supply of the legal service for:

  • Telephone expenses
  • Postage expenses
  • Photocopying expenses
  • Courier expenses
  • Word processing expenses
  • Travel expenses of the solicitor and staff

Example 10

A law firm acting for a client charges the client for costs incurred in providing a legal service and receives a fee for its professional services. The firm acts as a paying agent for the client with respect to the outgoings which the client is legally obliged to pay (such as the payment of land taxes and court costs) for supplies made to it. However, an agency relationship generally does not apply to those circumstances where the law firm provides a legal service for a client, pays for taxable supplies on its own behalf and then charges the client for those expenses (such as photocopying and telephone calls).