The ATO has just announced a relaxation to the normal working from home rules and introduced a new 80 cent per hour fixed rate to cover ALL deductions.

There are now three ways you can choose to calculate your additional running expenses:

1. Shortcut method ─ claim a rate of 80 cents per work hour for all additional running expenses.

2. Fixed rate method ─ claim all of these:

  • a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture,
  • the work-related portion of your actual costs of phone and internet expenses, computer consumables, stationery, and
  • the work-related portion of the decline in value of a computer, laptop or similar device.

3.        Actual cost method ─ claim the actual work-related portion of all your running expenses, which you need to calculate on a reasonable basis.

Under the SHORTCUT method, you can claim a deduction of 80 cents for each hour you work from home due to COVID-19 as long as you are:

  • working from home to fulfil your employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls,
  • incurring additional deductible running expenses as a result of working from home.

You do not have to have a separate or dedicated area of your home set aside for working, such as a private study. This allows multiple people in each household to claim the new rate.

The shortcut method rate covers all deductible running expenses, including:

  • electricity for lighting, cooling or heating and running electronic items used for work (for example your computer), and gas heating expenses
  • the decline in value and repair of capital items, such as home office furniture and furnishings  
  • cleaning expenses
  • your phone costs, including the decline in value of the handset
  • your internet costs
  • computer consumables, such as printer ink
  •  stationery
  •  the decline in value of a computer, laptop or similar device.

You do not have to incur all of these expenses, but you must have incurred additional expenses in some of those categories as a result of working from home due to COVID-19.

If you use the shortcut method to claim a deduction for your additional running expenses, you cannot claim a further deduction for any of the expenses listed above.

You must keep a record of the number of hours you have worked from home as a result of COVID-19. Examples are timesheets, diary notes or rosters.

The new method will cover the period starting 1 March 2020 till 30 June 2020, with the ATO open to extending the method depending on when work patters start to return to normal.

Tax agents or self-lodgers must include the note “COVID-hourly rate” in 2019–20 tax returns should they nominate to use the new method.

The new method will be supplementary to the fixed rate method and the actual cost of calculating running expenses, with taxpayers able to choose the appropriate method for their circumstances.

Claims before 1 March 2020 must be under the two standard approaches.

ATO example:

Bianca is an employee who works as a copywriter and editor. Bianca starts working from home on 16 March as a result of COVID-19 and replaces her face-to-face meetings with online video conferencing. 

Bianca has just bought a new laptop, desk, chair and stationery. She also wants to claim some additional gas, electricity, phone and internet costs due to working from home.

Under the shortcut method, Bianca can now claim all her expenses under a rate of 80 cents per hour. All she needs is her timesheets.

Bianca can also decide to claim using existing working-from-home calculations. Under that method, she can claim the desk, chair, gas and electricity under the 52 cents per hour, but she would need to work out the decline in value of the laptop and calculate the work-related portion of the laptop, stationery, phone and internet.

 

Further to the brief introduction to this measure mentioned in this post, here are more details about Australian Government’s Cashflow assistance for businesses.

The key qualifying measure for this one is that organisations must employ people. If your organisation don’t employ anyone, you won’t quality for this measure.

Payments available:

The government will provide tax-free payments up to $1,000,000 for eligible small and medium sized entities (SMEs), and not for profits (including charities, “NFPs”) that employ people, with a minimum payment of $20,000.

The payments will be made in 2 stages. The first payment will be available from 28 April 2020. Employers will receive a payment equal to 100% of their salary and wages withheld, with the maximum payment being $50,000. In addition, the minimum payment will be $10,000. The second cash flow boost payment for employers will be made from 28 July 2020. Eligible entities will receive an additional payment equal to the total of the first cash flow boost payment received.

Eligibility:

  • Small and medium sized business entities and NFPs with aggregated annual turover under $50m and that employ workers.
  • Businesses are deemed to be SME based on turnover for the most recent income year (Y/E 30/06/2019) or if the Commissioner is “reasonably satisfied” that the entity will be a SME in the current income year.
  • The qualifying entity must continue to be active over the next 6 ‘months.
  • The payments will only be available to active eligible employers that held and ABN at 12 March 2020 and derived assessable income from carrying on a business in the 2018/2019 year.

Payment and processing

  • The payments will be automatically calculated by the ATO and will flow automatically through the ATO. There are no new forms required.
  • The payments will be tax free.
  • All payments will be delivered by the ATO as credit to the entity upon lodgement of their activity statements. Where this places the entity in a refund position, the ATO will deliver the refund within 14 days.
  • The first cash flow boost payments will be delivered by the ATO as an automatic credit in the activity statements system from 28 April 2020, upon employers lodging eligible (upcoming ) activity statements.
  • If entities lodge early, the ATO confirms that, they will not receive the fist cash flow boost payment before 28 April 2020.
  • Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100% of the amount withheld, up to a maximum payment payment of $10,000, even if they are not required to withhold tax.
  • Note that the amount of cash boost an employer receives in the second payment period doesn’t relate to the tax withheld in that period. So, if the employer has to let three quaters of staff go on 30 June 2020, the employer still gets the amount based on the original pre COVID-19 employee tax withheld in the second payment period.
  • Payment processing will depend on whether the taxpayer is a monthly or quarterly remitter.
  • Monthly lodgers will get a payment equal to a quarter of their first cash flow boost payment following the lodgement of their June, July August and September BAS’s.
  • Quarterly lodgers, will get a payment equal to half of their total fist cash flow boost payment following the lodgment of their June an September BAS’s (up to a total of $50,000).

Who does not quality for the cashflow assistant package?

  • Any business without employees (eg sole traders)
  • Any business that does not pay wages, eg trusts that pay family members by way of trust distributions, companies that pay dividends, partnerships where partners take drawings.

Consider this:

  • If sole trader A pays a casual employee $5,000 in wages, he/she will receive $20,000 through the cashflow assistance payment
  • If sole trader B pays a contractor $5,000, the payments are not classified as wages and he/she won’t get any cashflow assistant payment.

Note the following ATO comments:

“You will not be eligible for cash flow boosts if you (or a representative) have entered into or carried out a scheme for the purpose of :

  • becoming entitled to cash flow boosts when you would otherwise not be entitled for;
  • increasing the amount o the cash flow boots.

This may include restructuring your business or the way you usually pay your workers to fall withing the eligibility criteria, as well as increasing wages paid in a particular month to maximise the cash flow boost amount.

Any sudden changes to the characterisation of payments made may cause us to investigate whether the payments are in fact wages. If the payments are wages, we may consider the characterisation of past payments, including whether they should have been subject to PAYGW and whether super guarantee contributions should have been made. You may have FBT obligations that have not yet been met.”

As mentioned in the previous post:

Business impacted by the Coronavirus will be able to access a subsidy from the government to continue to pay their employees.

An affected employer will be able to claim $1500 per fortnight per eligible employee from 30 March 2020 for a maxiam period of 6 months.

The subsidy will start from 30 March, with the first payment to be received by the first week of May 2020.

Payments will be made to employers by ATO monthly in arrears.

A person receiving job seeker payment can’t also receive the job keeper payment.

Now, let’s lay out more details about JobKeeper payments.

Which employers are eligible for JobKeeper payments?

Employers will be eligible for the subsidy if:

  • your business turnover is less than $1 billion and your turnover will be reduced by more than 30% relative to a comparable period a year ago (of at least a month); or
  • your business has a turnover of $1 billion or more and your turnover will be reduced by 50% relative to a comparable period a year ago (of at least a month); and
  • your business is not subject to the Major Bank Levy.

Eligible employees must have been employed by the employer as at 1 March 2020. The employer has to confirm that each eligible employee is currently engaged in order to receive JobKeeper payments.

Not for profit entities (including charities) and self employed individuals (business without employees) that meet the turnover tests (turnover less than 1 billion & turnover will be reduced by 30% compared to the same time last year) that apply for businesses are eligible to apply for JobKeeper payments.

Eligible employees are employees who

  • are currently employed by eligible employer including those stood down or rehired;
  • were employed by the employer as at 1 March 2020;
  • are full time, part time or long term casuals (a casual employee employed on a regular basis for longer than 12 months as at 1 March 2020);
  • at least 16 years of age;
  • are an Australian citizen, the holder of a permanent visa, a protected special category visa holder, a non-protected special category visa holder who has been residing continuously in Australia for 10 years or more, or special category (subclass 444) visa holder; and
  • are not in recipient of JobKeeker payments from another employer.

Obligation on employers

To receive the JobKeeper payment, employers must:

  • register an intention to apply on the ATO website and asset that they have or will experience the required turnover decline;
  • provide information to ATO on eligible employees, including the number of eligible employees engaged as at 1st March 2020 and these currently employed by the business, including those stood down or rehired;
  • ensure that each eligible employee receives at least $1500 per fortnight before tax;
  • notify all eligible employees that they are receiving the JobKeeper payments;
  • Continue to provide information to the ATO on a monthly basis, including the number of eligible employees employed by the business.

Obligation on employees

Employees will receive a notification from their employer that they are receiving the JobKeeper payments. Most employees will need to do nothing further.

Employees in the following circumstances will have additional obligations:

  • Employees have multiple employers must notify the employer that is their primary employer as one employee can’t be in recipient of JobKeeper payment from more than one employer.
  • Employees that are not Australian citizen must notify their employer of their visa status, to allow their employer to determine if they are an eligible employee.
  • Employees are currently in recipient of an Income Support payment must notify Service Australia of their new income.

What employees will get

Employees will be able to receive this payment in a number different ways:

  • If your ordinary income is $1500 or more per fortnight before tax, you’ll continue to receive your regular income. The JobKeeper payment will subsidise that first $1500 of your income.
  • If your ordinary income is less than $1500 per fortnight before tax, your employer must pay you a minimum of $1500 per fortnight before tax.
  • If you have been stood down, your employer must pay you $1500, as a minimum per fortnight before tax.
  • If you were employed before 1 March 2020, subsequently ceased employment and then were re-engaged by the same eligible employer, you will receive $1500 as a minimum per fortnight before tax.

Employers must continue to pay the superannuation guarantee on regular wages but it is up to the employer whether they pay superannuation on additional JobSeeker payments.

Businesses without employees

Sole traders, self employed can participate in this scheme and will need to register with ATO.

Business without employees will need to:

  • provide a ABN for their business
  • nominate an individual to receive this payment
  • provide that individual’s tax file number and provide a declaration as to recent business activity

People who are self employed will need to provide a monthly update to the ATO to declare their continued eligibility for the payments.

Payment will be made monthly to the individuals bank account.

Click to read the lastest Jobkeeper information and legislation from Australian Government.