Need to know

Stuart Sheary, Senior Technical Services Manager

Outlined below is all the latest news you 'need to know'.

IssueWhat it meansWhat do you need to be thinking about?
Australian Government - Treasury

Government fact sheets – Economic response to the Coronavirus

The Federal Government has passed legislation containing stimulus measures in response to the economic impact of the Coronavirus.

The stimulus measures include several changes, such as:

  • Temporary early access to super
  • JobKeeper Payment
  • $750 Support Payments
  • Time limited Coronavirus Supplement
  • Economic support payment
  • Reduction in minimum pension drawdown
  • Reduction in Social Security deeming rates
  • Increase in the instant asset write off
  • Cash flow boost to eligible business
  • Accelerated depreciation deductions
  • Subsidies for retention of apprentices and trainees

The changes present many opportunities to assist clients.

Clients who were not eligible for JobSeeker Payment may now be eligible for the benefit as a result of the temporary relaxation of means testing, wait periods and job search requirements.

Clients with super pensions and enough income may want to consider reducing their pension drawdowns.

Further details and considerations of other measures can be found in the updates below.

Australian Taxation Office  

Australian Taxation Office (ATO) Warning - Working together in response to the impacts of COVID-19

The ATO and the Tax Practitioner Board have released a joint message warning tax professionals to avoid exploiting the COVID-19 measures.

In the joint statement it is noted that: ‘it is not acceptable to backdate or artificially change a business structure or employment arrangements, including changing the characterisation of payments, in order to obtain a benefit or payment that would not otherwise have been paid.’

In addition to avoiding arrangements that contravene Part IVA anti avoidance provisions, advice should adhere to FASEA’s Code of Ethics.

Compliance with the Code of Ethics Standards is a requirement for all financial advisers from 1 January 2020.

COVID-19 economic response package – early release of super

Eligible clients may access up to $10,000 of their super before 1 July 2020 by applying to the ATO. A further $10,000 can be accessed from 1 July 2020 until 24 September 2020.

These payments are tax-free and not treated as income under the Centrelink income test.

The ATO has provided information to super funds on the design and implementation for the COVID-19 early release of superannuation package. The page provides this information in a question and answer type format and covers practical aspects of the application process, examples of paper forms, as well as technical quirks such as the inability to draw a lump sum from a transition to retirement pension.

Advisers should model the projected impact a withdrawal will have on retirement savings. A calculator is available on Moneysmart.

It will also be necessary to ensure there are funds available to meet the withdrawal and any upcoming insurance premiums.

The ATO has issued a warning via LinkedIn not to misuse the early access scheme for the purpose of obtaining a tax benefit. This might include implementing a recontribution strategy.

Working from home during COVID-19

The ATO has released guidance on deductions for expenses incurred directly relating to earning income when working from home which are not reimbursed by the employer. Clients must keep proof of their working from home hours and these expenses. There are three ways a person can choose to calculate additional running expenses:

Shortcut method – A deduction of $0.80 for each hour worked from home due to the Coronavirus is allowed if the person incurs additional deductible running expenses as a result of working from home.

Fixed rate method – allows:

  • a rate of $0.52 per hour for the cost of utilities, cleaning and depreciation of office furniture
  • work-related phone and internet expenses, computer consumables, stationary
  • work-related depreciation of a computer, laptop or similar device.

Actual cost method – claim the actual work-related portion of all running expenses, calculated on a reasonable basis.

The shortcut deduction method will make it easier for many Australians who are working from home for the first time due to the Coronavirus to accurately complete their tax return.

These arrangements apply to expenses incurred between 1 March 2020 until at least 30 June 2020.

JobKeeper enrolments are open

JobKeeper Payments are subsidies paid to the employer at the rate of $1,500 per fortnight (pf) for each eligible employee. They may be paid up to 27 September 2020 if the employer meets eligibility requirements.

JobKeeper Payments commence from 30 March 2020, with the first payment to be paid in arrears from the first week of May 2020.

Clients who are employers must enrol in the program- not clients who are employees. Employers will need to notify their employees that they will be claiming JobKeeper on their behalf.

Clients who are currently in receipt of JobSeeker and who start to receive JobKeeper Payments will need to notify Centrelink of the payment. As JobKeeper Payments will count towards the income test, in most circumstances, clients will lose their eligibility for the JobSeeker Payment.

Boosting cash flow for employers

The ATO has provided further guidance on the cash flow payments to eligible employers, as well as eligibility criteria, timing and delivery of payments and tax consequences.

Under the scheme Government will pay between $20,000 to $100,000 to eligible small and medium businesses, not-for-profits and charities, to help with cash flow to keep operating, pay their bills and retain employees.

Unlike the JobKeeper Payment, it is not a requirement for the business to have suffered a reduction in turnover.

The ATO have warned against artificial arrangements to increase entitlements to the cash flow boost.

The Australian Taxation Office releases new 2020/21 super thresholds

The ATO has released several important superannuation rates and thresholds for the 2020/21 financial year.

The concessional contribution cap and non-concessional contribution caps remain unchanged at $25,000 and $100,000. Please note, clients with catch-up concessional contributions may have a higher concessional contribution cap. The non-concessional contribution cap may also be affected by the client’s total super balance and the availability of the bring-forward rule.

In relation to affected thresholds, it may be necessary to review super recommendations for the new financial year.

In addition, it may be necessary to update affected assumptions in any financial modelling tools.

Department of Social Security  

New aged care rates, thresholds and subsidies have been released.

Many aged care fees, charges, subsidies and supplements were indexed on 20 March 2020.

It will be necessary to apply these new rates when calculating residential aged care and home care fees and charges. Deeming rates will change from 1 May 2020.

New Centrelink benefit and payment rates

Many Centrelink benefit and payment rates increased on 20 March 2020.

It will be necessary to apply these new benefit and payment rates when estimating Centrelink entitlements.

Clients who were previously not entitled to a benefit and were marginally above the upper income and/or asset test threshold may now be entitled to a small benefit.

Deeming rates reduced

The Government have announced a reduction in deeming rates as part of its response to the Coronavirus (COVID-19).

The new deeming rates are as follows:

  • Singles – the first $51,800 is deemed at 0.25%.
  • Couples – the first $86,200 (combined) is deemed at 0.25%.

Amounts above these thresholds are deemed at the higher rate of 2.25%.

The change may increase the entitlements of income tested part age pensioners and JobSeeker recipients with deemable financial investments.

More information

If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.

The information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.