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New ASX rules apply to December statements

Government introduces FBT exemption for retraining

Australians refinance for lower rates


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COVID-19 and loss utilisation

Some businesses have changed the way they operate due to COVID-19. Many have had to make sudden changes to their business model or activities, while others have had to close temporarily. Some changes may affect whether businesses can utilise their carried-forward losses in the current or a future income year. For companies to utilise their carried-forward losses in a particular year, they need to satisfy the continuity of ownership test, or COT If they fail the COT, they then need to satisfy the business continuity test, or BCT. Whether a company can utilise carried-forward losses requires a consideration of its facts and circumstances. Generally, a company that has completely closed its business with no intention to resume will fail the BCT. However, a company that has temporarily closed its business may still be able to satisfy the BCT. Qualifying for and receiving JobKeeper payments will not cause a company to fail the BCT.

UPCOMING KEY DATES

December

1 December
Pay income tax for taxable large/medium taxpayers, companies and super funds. Lodgment of return is due 15 January 2021.

Pay income tax for the taxable head company of a consolidated group with a member deemed to be a large/medium taxpayer in the latest year lodged. Lodgment of return is due 15 January 2021.

Pay income tax for companies and super funds when lodgment of the tax return was due 31 October 2020.

21 December
Lodge and pay November 2020 monthly business activity statement.

January

15 January
Lodge tax return for taxable large/medium entities as per the latest year lodged (all entities other than individuals), unless required earlier.

Payment for large/medium entities with a 15 January due date is:
1 December 2020 – for companies and super funds
For trusts – as stated on their notice of assessment.

Lodge tax return for the taxable head company of a consolidated group (including a new registrant) that has a member who has been deemed a large/medium entity in the latest year lodged, unless the return was required earlier. Payment was due 1 December 2020.

21 January
Lodge and pay quarter 2, 2020–21 PAYG instalment activity statement for head companies of consolidated groups.

Lodge and pay December 2020 monthly business activity statement except for business clients with up to $10 million turnover who report GST monthly and lodge electronically.

28 January
Make quarter 2, 2020–21 super guarantee contributions to funds by this date.
 
Employers who do not pay minimum super contributions for quarter 2 by this date must pay the super guarantee charge and lodge a Superannuation guarantee charge statement – quarterly (NAT 9599) by 28 February 2021.

31 January
Lodge TFN report for closely held trusts if any beneficiary quoted their TFN to a trustee in quarter 2, 2020–21.

Tax incentive encourages research and development

The Research and Development, or R & D, tax incentive provides targeted offsets designed to encourage more Australian companies to engage in R & D. The incentive has two core components – a 43.5% refundable tax offset for eligible entities with an aggregated turnover of less than $20 million per annum, and a 38.5% non-refundable tax offset for all other eligible entities. Organisations may be able to carry forward unused offset amounts to future income years. Refundable incentives are only available in cash when the current income tax liability is insufficient to utilise the R & D incentive. For example, if the current income tax liability for a company is $50,000 and the refundable incentive is $70,000, $50,000 of the R & D incentive will reduce the current income tax liability to zero, and cash of $20,000 will be received for the remainder of the refundable incentive. Refundable offsets are more akin to government grants than investment tax credits, because the entity has spent money on R & D, and is given the assistance in the form of cash, in return for past compliance.

New ASX rules apply to December statements

New ASX Corporate Governance rules will apply to December 31, 2020 financial statements of all ASX listed entities, including foreign entities. They must include in their annual report either a Corporate Governance Statement, or a URL of the page on its website where a Corporate Governance Statement can be found. The Corporate Governance Statement must disclose the extent to which the entity has followed the recommendations of the ASX Corporate Governance Council during the reporting period on an ‘if not, why not’ basis. The key changes include KPI targets for gender, age, ethnicity, and background diversity; new ethical and value disclosure recommendations; disclosure of environmental and climate change risks; and more. The fourth edition of the ASX Corporate Governance requirements can be found at asx.com.au.

Government introduces FBT exemption for retraining, reskilling 

Employer-provided retraining and reskilling benefits provided to redundant or soon-to-be redundant employees where the benefits may not be related to their current employment will be exempt from Fringe Benefit Tax, or F.B.T. This measure will provide an F.B.T. exemption for a broader range of retraining and reskilling benefits, incentivising employers to retrain redundant employees to prepare them for their next career. The exemption will not extend to retraining acquired by way of a salary packaging arrangement. It will also not be available for Commonwealth-supported places at universities, which already receive a benefit, or extend to repayments towards Commonwealth student loans. The Government will also consult on allowing an individual to deduct education and training expenses they incur themselves where the expense is not related to their current employment. Individuals can currently deduct education or training expenses they incur which are sufficiently related to their current employment. The Government will consult on potential changes to the current arrangements to determine whether deductions should also be targeted to future employment and skills needs.

Contractor or Employee?

The difference between a contractor and an employee is not always clear cut. The courts and tax office take a number of factors into account when determining the actual status, such as hours worked, superannuation, method of payment and leave to name a few. Any written agreement stating the nature of the relationship is certainly relevant, but it’s not conclusive, and should not be relied solely upon. Both employers and contractors need to be fully aware of their situation as serious penalties are involved with sham contracting arrangements. Find out more here.

"Holiday home" included in tax concession test

A taxpayer company has been unsuccessful before the Administrative Appeals Tribunal (AAT) in a claim to secure the capital gains tax (CGT) concessions for small businesses.

In this case, the AAT affirmed the Commissioner's decision that the taxpayer did not satisfy the "maximum net asset value" test for the purposes of qualifying for the concessions. The AAT found that the individual who controlled the company could not exclude from the test his interest in a Queensland property, which he claimed was used for "personal use and enjoyment".

TIP: The small business CGT concessions are intended to offer small business taxpayers a range of unique tax concessions. However, despite being targeted towards taxpayers who typically have less complicated affairs, the rules are riddled with complexities that may not appear obvious at first glance.

Each concession has its own particular rules. However, there are two basic conditions for the relief - either the taxpayer is a small business entity (SBE) or is a partner of a partnership that is an SBE, or the taxpayer satisfies the maximum net asset value test. If you have any questions, please contact our office.

Small business benchmarks catch out florist

The AAT has recently dismissed an appeal by a florist against the Tax Commissioner's decision to issue income tax and GST assessments following an ATO audit of her florist business.

The taxpayer had reported that the cost of goods sold in her business represented 83% of her reported business income. The ATO had selected the taxpayer for audit because this figure was outside what it considered to be the industry benchmark range of between 44% and 54%.

In this case, the taxpayer was unable, due to a lack of evidence, to prove to the AAT that the assessments were excessive.

TIP: The Tax Commissioner has warned that businesses operating outside the relevant benchmarks could be subject to ATO review and/or audit, and where the businesses do not have adequate records to substantiate their performance, the ATO will make a default assessment using the appropriate small business benchmark.

Businesses may want to consider reviewing their record-keeping practices and assess whether they are at risk of an audit. Please contact our office for further information.

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