Tracey Dunn, associate director at RSM Australia, pointed out that while fear and uncertainty are at an all-time high, there are a number of immediate issues that need government clarification.
Among them, she said, are the rules governing the government’s latest cash boost to small businesses designed to keep people in jobs.
While integrity measures are applauded, Ms Dunn opined that determining eligibility for the cash boost has been complicated by requirements surrounding having an “active” ABN.
In order to satisfy the “active” ABN requirement, a business must satisfy one of two tests:
- An amount was included in the entity’s assessable income for the 2018–19 income year in relation to it carrying on a business and the 2019 income tax return was lodged before 12 March 2019 (or a later time allowed by the commissioner).
- The entity made a taxable supply in a tax period between 1 July 2018 and 12 March 2020, and notice was provided to the commissioner on or before 12 March 2020. In effect, this means the entity was registered for GST, or was required to be registered for GST, the entity made a taxable supply and details of the supply were reported in the relevant BAS lodged with the ATO.
While most businesses who employ staff will be able to satisfy the above criteria, Ms Dunn has identified potential issues with accessing the cash boost for entities that have not lodged their 2019 income tax return; those that are not required to be registered for GST; and those that are registered to GST, but due to the nature of the business, have not made a taxable supply during the 2019 year.
“This may have potential application to small-business owners who are not registered for GST and businesses such as junior exploration companies or the forestry industry, where the entity is registered for GST and carrying on a business but have not made taxable supplies because of the cyclical nature of the business,” Ms Dunn explained.
In these scenarios, Ms Dunn said, while the business may have employees, they do not technically meet the eligibility criteria to receive the cash boost.
“The issue may be overcome by requesting an extension of time from the commissioner. However, urgent clarification is required on the process required in order to do this, and whether entities such as those described above will slip through the cracks and not be eligible for the cash boost for business to support their employees,” she opined.
Other issues identified by Ms Dunn and complicated by the coronavirus pandemic include the start date for changes to Division 7A.
In the 2019–20 budget, the government announced the start date for changes to Division 7A would be delayed by 12 months, making it 1 July 2020, to “allow additional time to further consult with stakeholders on these issues [and] to ensure appropriate transitional arrangements so taxpayers are not unfairly prejudiced”.
It is now the start of April and we are yet to see signs of further consultation.
“With 1 July 2020 a proposed start date for the Division 7A changes, taxpayers are now in the situation where they are unable to prepare or plan for any proposed changes,” Ms Dunn warned.
Also on her radar is the compulsory superannuation guarantee emergency exemption.
Compulsory superannuation guarantee
Earlier this year, RSM wrote to the Treasurer asking the government to consider introducing legislation to provide a special “disaster” exemption for non-compliance with payment of compulsory employee superannuation contributions where the employer is physically unable to meet their obligations due to an unprecedented natural disaster.
“The response at the time was the government was not considering any change to superannuation policy,” Ms Dunn said.
However, given that the world is currently facing a one-in-a-hundred-year event, she implored the government to reconsider superannuation policy and provide an exemption or temporary concession to allow employers more time to pay compulsory superannuation contributions where they are directly impacted by COVID-19.
She said: “We are now faced with another unique event which may impact on the ability of employers to meet compulsory employee superannuation obligations.
“While in no way condoning the behaviour of recalcitrant employers, many business owners have been forced to close and others will be facing significant loss of revenue due to COVID-19, and as a result may not have the cash resources to meet compulsory superannuation obligations.”
While the Tax Office has said it cannot change the deadline for the superannuation guarantee amnesty, Ms Dunn opined that access to cash flow to make good on historical non-compliance may become increasingly difficult if not impossible.
“We recommend the government consider extending the deadline for a further six to 12 months to allow for the unanticipated downturn in the economy,” Ms Dunn said.
“This would also provide an opportunity to employers trying to make good as the economy improves rather than placing significant additional cash -low pressure on them in the immediate future.”
Acknowledging the efforts of the government in addressing the economic impact of COVID-19, Ms Dunn said that allowing additional time in this environment can only have a positive outcome.
Overall, Ms Dunn said that in the interests of providing comfort and certainty for taxpayers, “we implore the government to turn their attention to the outstanding issues outlined above and welcome any announcements relating to government policy”.