THE Institute of Public Accountants (IPA) is issuing a caution against businesses and individuals jumping in too early with this year’s tax returns.

“There are a lot of new variables such as COVID-19 related payments to be considered in submitting tax returns for the 2019/20 financial year,” IPA chief executive officer, Andrew Conway said.

“We understand that some individuals have been adversely impacted by COVID-19 and want to get their hands on their refund as quickly as possible.

“Loss of employment; reduced earnings; rental property losses due to tenants being unable to pay or have negotiated a lower occupancy rate; deductions for protective COVID-19 measures such as gloves, face masks, sanitisers; and increased working from home expenses, are some of the reasons why individuals are planning on lodging early this year with an expectation of a larger than normal refund on offer," Mr Conway said.

“Those who have lost their employment this year and have received JobSeeker will need to wait for Services Australia to load this information into the pre-fill as this entitlement represents income which is taxable and needs to be added to other income. 

“Services Australia does not normally withhold tax so this may adversely impact on the individual’s overall tax situation which may turn a refund into an amount payable depending on personal circumstances. Similarly, if the employers have not withheld the proper amount of tax from JobKeeper payments this too can have an impact on the refund amount," he said.

“Another reason to hold fire, is that employers with 20 or more employees will have until July 14, 2020, to finalise single touch payroll data. Smaller employers have until July 31, 2020, to finalise. If someone has interest, dividends or trust distributions, then it is even more important not to lodge early until this data has had time to hit the pre-fill records.

“Another COVID-19 related issue this year is where a sole trader is receiving JobKeeper as an active participant. This represents income and needs to be included as part of their business income. Also, the cash flow boost is tax-free and can be excluded from business income," Mr Conway said.

“The ATO will also be continuing to look closely at work related deductions. It has a lot more granular data on what people are claiming so it is reminding everyone of the three golden rules: you must have spent the money and not been reimbursed, it must relate directly to earning your income and you must have a record to prove it.

“Our strong message is to wait for the information to become available before you lodge; otherwise, you may end up with an unexpected tax bill and angst down the track. Discrepancies will create reverse workflow and expose taxpayers to interest and/or penalties.

"The variables this year may be more complex, so we recommend not to rush in too early and seek advice from your public accountant,” Mr Conway said.

www.publicaccountants.org.au

ends

THE Australian Lottery and Newsagents Association (ALNA)  is calling for an extension for vulnerable small businesses to gather sufficient funds to pay their staff applicable JobKeeper top-up payments for April.

This follows the Federal Government’s announcement yesterday that banks would need to speed up “bridging finance” to get businesses through the rest of the month and fund these additional payments from their cash flow before the payments come through from government to reimburse businesses at the start of May. 

ALNA CEO Ben Kearney said, “Many eligible small retailers have minimal cash flow coming in due to mandatory social distancing, but have the huge pressure on them to pay employees additional JobKeeper payments which are significant sums to find and which many don’t have, before receiving reimbursement from the government. 

"This means that they need more time, to access competitive bridging finance, not this impractical hard deadline which won’t allow many to compare the conditions of a loan and the interest that small businesses will need to absorb."

Mr Kearney said vulnerable small business owners without the cash reserves to pay their staff these payments needed more time to carefully review and consider their options provided by lenders, in order to not incur more cost and liability.

"We appreciate that this is a program being delivered in record time and the government, the banks and the ATO should be commended for their efforts," Mr Kearney said.

"However, the details of JobKeeper have been evolving and released over time, as you would expect and small businesses who are under immense pressure have been anxious and cautious about not getting it wrong with eligibility and this means many are only just now starting this process of accessing additional funds. Additionally, the dedicated hotlines that the Treasurer has advised small businesses to call to get support from banks are only now becoming accessible at the time of print.

“Without access to time and dedicated support, businesses will be left with few options, and no access to lender competition which is designed to protect them. While we realise this means there will be a delay in getting staff their additional JobKeeper payments, the alternative for some businesses is not going ahead with JobKeeper, which is bad for their staff, bad for their relationship with them and bad for their capacity to rebound with experienced employees when we hopefully come out of this.

“We believe providing a short extension to these vulnerable businesses is a more practical compromise, compared to having small business owners rush lending decisions and create bigger problems for their survival down the road. If this means there is a short extension for them to access finance and make payments, and a short delay in them receiving reimbursements for integrity purposes, then if that’s what it takes so vulnerable businesses and their employees don’t miss out then we should do that," Mr Kearney said.

“We need all parties to come to the table, so we don’t put Australian small businesses - the mums and dads, family enterprises, and first-generation Australians working hard – in even more trouble and further put their livelihoods at risk.

"We welcome that there is now pressure from the government to ensure banks are at the table to support Australian businesses quickly with this. However, the future availability of bridging finance will not help with the hard deadline these small businesses need to meet pay their staff top-up payments between now and May.

“We need a short extension for small businesses to access bridging finance and to pay their staff these additional payments, so they are able to access the help, review their lending options before they commit and so they are able to minimise cost in the long-term that they can simply not afford,” Mr Kearney said.

www.alna.net.au

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THE NEW JobKeeper Payment has passed through Parliament and the Australian Taxation Office (ATO) is now working to assist businesses to access the scheme, helping to retain their employees.

The program will be administered by the ATO and will involve employers checking that they are eligible and then enrolling with the ATO to be paid the JobKeeper payments.

Employers will receive a monthly payment for each eligible employee who was paid by the business during the previous month.

ATO Deputy Commissioner James O’Halloran said employers need to take steps now to be eligible for the first round of JobKeeper payments which will be paid from the first week of May 2020. 

In order to receive JobKeeper payments from the first week of May, employers need to have paid eligible employees a minimum of $1500 per fortnight, before tax, for the period between March 30 and the end of April. The payments for the first two fortnights must be made by the end of April to receive the JobKeeper payment in the first week of May.

Employers also must meet all eligibility requirements, as outlined on the ATO’s website and enrol in the JobKeeper payment program, once the enrolment process is opened on April 20.

"When you submit your enrolment to the ATO, we will provide you with an acknowledgement and acceptance of your enrolment into the JobKeeper program based on the information you have provided," Mr O'Halloran said.

Employers are encouraged to discuss their businesses’ eligibility and participation in JobKeeper with their employees.

The JobKeeper payments will flow from the ATO to employers, rather than directly to employees, he said.

"Employees wanting to know whether their employer will be enrolling in JobKeeper should speak to their employer and fill out the employee nomination form."

Employees can also find out more information about the program on the ATO’s website.

Mr O’Halloran said the ATO was working hard to make it as easy as possible for employers to access the government’s JobKeeper payment.

“At this stage employers should focus on determining their and their employees’ eligibility and desire to participate, and should discuss ongoing work arrangements with their employees,"Mr O'Halloran said.

“The ATO website has all the information employers need to know about how to get ready. Alternatively, contact your tax representative for assistance and advice specific to your circumstances.

“We know this payment is vital for the community, and we want every eligible employer to be ready to receive the JobKeeper Payments to help keep Australians in jobs.

“As you would expect we will have systems in place to ensure that the payment is made to the eligible employers and will monitor any claims over the months that attract our attention,” Mr O’Halloran said.

ato.gov.au/JobKeeper

ato.gov.au/coronavirus

ends

By Leon Gettler >>

THE LOCKDOWN of businesses and social distancing should give Australian businesses the opportunity to reassess where they’re heading, according to Jana Matthews.

Professor Matthews, the ANZ chair in business growth and director of the Australian Centre for Business Growth at the University of South Australia (UniSA), has come up with list of tips for businesses to survive the pandemic.

She said the first thing businesses need to do is communicate with their customers about what’s going on.

“If you’re able to continue on with the project, meet the project, meet the deadlines and deliver, they need to be assured of that,” Prof. Matthews told Talking Business. 

“If you’re having problems because you can’t get parts or there’s been some delay or staff that’s left or for COVID reasons they’re in self-isolation or sick, then you need to have a conversation with your customers and tell them why you’ll be late and what you plan to do about that and work it out with them.”

“If you’re absolutely in freefall, then you need to have a conversation about that as well. Some people have been shut down through no fault of their own and others find the business isn’t viable anymore.”

CHECK FINANCIALS AND STAFF

The second thing to look at is business’s financials. What cash is coming in, who owes the company money, and how long will the company be able to keep paying its bills?

The third is to look at the staff and determine who will be able to take the company to the next level.

Prof. Matthews said the business also needs to look at its products and see which are selling, which are not selling and to let go of the products that no one wants.

The final part is to examine oneself and develop some self-awareness.

“You certainly need to look at yourself and your long-term goals and say ‘Am I up for this? I can cut back now, I can prune back, but is this still what I want to do with my life or is there another opportunity someplace else?”

She said a lot of businesses will end up leaving the sector, but then there are businesses that shut down every year …

“What this does is it’s almost a gift. It forces you to step back and look at the business, instead of going along with business as usual and plateauing and going down slowly,” Prof. Matthews said.

USE THE AID WELL

Prof. Matthews expects businesses will take advantage of the government’s aid package.

She said businesses should also check out the grants that are available and the banks would be more than willing to lend a business money.

She said she hopes many businesses will think laterally and examine what markets might be open for them, as in the case with Australian distilleries now making hand sanitisers.

“This is an opportunity to bring your key staff back and think with them,” she said. “Sit down and say: ‘What are the opportunities, what else can we do with the current products, the current machines and current staff capabilities.  And especially, what is that our customers would value?’” she said.

The key, she said, is for the business owner to be able to function in multiple dimensions. 

“You need to be very empathetic to your customers and your employees and understand what they’re going through,” Prof. Matthews said.

“You have to think hard about the business opportunities going forward and that’s where I am thinking to be more strategic, using your brains, looking at the market research and understanding where those opportunities are. Because in chaos, there is always opportunity.”

www.unisa.edu.au

www.leongettler.com

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness.

By Dan Hadley >>

AS AUSTRALIANS ARGUE AND FIGHT in shopping aisles over packets of toilet paper, other nations have focused on more serious matters in regard to COVID-19.

Loosely referred to as ‘coronavirus’, the pandemic has spread to almost every country according to the World Health Organization (WHO).

Originating in Wuhan, China, it seems the virus will inevitably reach every corner of the world.

At the time of publishing this article, the coronavirus has officially infected nearly 170,000 people globally and killed over 6,500.

In the face of government controls, lockdowns, isolate on and blockades, markets and economies have met a calamity that may have a fallout greater than the 2009 Global Financial Crisis. 

Markets falling…

Shares across all markets have taken a dive in the wake of WHO announcements and ever-growing statistical reports of coronavirus spreading. The Dow Jones has taken a 9.5 percent hit over two months since January 2020 with the Nikkei down 10.6 percdent and the FTSE down 14.6 percent (Bloomberg).

Market confidence continues to fall, and investors are clearly very conservative in the face of mass reductions in economic activity and spending.

Bloomberg indicated last week that the coronavirus may cost the global economy up to $2.7 trillion USD equivalent.

[Editor's note: March 16 saw the largest single day drop in the value of the Australian Stock Market since the crash of 1987: The All Ordinaries dropped 9.5 percent and the ASX 200 dropped 9.7 percent for a day of overall losses in the A$165 billion range. Later in the day in New York, the industrials-heavy Dow Jones index dropped 2,998 points – 12.9 percent – in what has been described as its day of heaviest falls since the 1987 Black Monday crash. The S&P 500 dropped by 12 percent and the tech-stock Nasdaq fell 12.3 percent.

[According to the US CBS News, more than 3,700 people have now tested positive for the new COVID-19 disease in the US and, as of March 16, 74 had died. CBS said globally, the death toll was just over 6,500 on Monday. The previous weekend had seen a spike in fatalities in European nations grappling with aggressive outbreaks. More than 170,000 people had caught the virus around the world, almost half had already recovered, and yet the vast majority of cases remain mild medically.].

Market growth down significantly…

Projections for 2020 market growth are already well down compared with 2019 figures. Expected OECD economic growth forecast sees a reduction from nearly 3 percent in 2019 down to 2.4 percent with some countries seeing a greater projected reduction, particularly Japan, Italy, Germany and the UK.

These countries are looking at a reduction of 50 percent or more in projected year on year growth and this has the capacity to stall those economies.

Not forgetting the lives that have been lost and those deaths that are sure to come, the coronavirus has the potential to be the biggest economic meteor to hit Earth in recorded economic history.

Global travel down, airlines struggling and tourism dropping …

The international and domestic travel sector comes with immense overheads.

Reductions in travel, bought on by the fear factor and travel restrictions, means overall demand is down and tourism has ground to a halt in many tourist hot spots throughout the world.

This is also heightened by the number of travel-bans now in effect globally with more likely to follow.

Not just limited to China or Asia, this reduction is having an effect on both large companies as well as millions of small business providers within this sector.

Many nations rely heavily on tourism to maintain adequate income and GDP and this reduction may equate to billions of dollars for markets.

Factories in China grind to a halt, clearing pollution …

One of the few good things to come out of the coronavirus in China is the massive reduction in pollution.

With factories closed pending coronavirus containment and minimal numbers of cars on streets, the skies have begun to clear.

Unfortunately, this shutdown of production is having a major impact on the Chinese economy as well as the global market.

Importers of Chinese made goods are struggling to source adequate stock in many instances and, as millions go into containment, China itself is not importing foreign made goods. This will have an extensive flow-on effect to other economies and sectors.

The strain on health systems globally …

Hospitals in Wuhan are well known to be full and bursting at the seams. Health professionals work round the clock to help those infected.

Similar scenes are arising in Italy as well as other places and even those countries with minimal infection numbers have begun to mobilize health teams and resources.

This is costly and national budgets will be thrown out of whack, even in the face of the impact we have seen today.

Australia’s response …

Prime Minister Scott Morrison recently addressed the public at the AFR Summit in Sydney with respect to the coronavirus issue.

With a stimulus and support package announced so far and expected to be worth in excess of A$17.6 billion, the Australian Government is proceeding seriously.

There is already talk less than a week after that announcement that the Federal Government is prepared to spend more on resolving this crisis than it did during the GFC: potentially more than A$50 billion.

"When the economy bounces back, our budget will also bounce back. The stronger the recovery, the stronger the economy, the stronger the budget,” Mr Morrison said.

The Prime Minister went further to indicate the importance the Federal Government was placing on the safety and wealthfare of Australians:

“We now have one goal in 2020: to protect the health, wellbeing and livelihoods of Australians through this global crisis, and to ensure that when the recovery comes, and it will, we are well-positioned to bounce back strongly on the other side.

"It is important to remember the problem is only a temporal one, not structural, and learn the lessons of the global financial crisis", Mr Morrison said.

WHO to listen to about the virus…?

The Director-General of the World Health Organization (WHO) released a statement on March 9 that matched sensible strategy with hope against fear.

In the media announcement, Dr Tedros Adhanom Ghebreyesus announced:

“We are not at the mercy of this virus.

“All countries must aim to stop transmission and prevent the spread of COVID-19, whether they face no cases, sporadic cases, clusters or community transmission.

“Let hope be the antidote to fear.

“Let solidarity be the antidote to blame. Let our shared humanity be the antidote to our shared threat."

 The economic prognosis…

COVID-19 has the potential to cause greater financial damage than the 2009 Global Financial Crisis (GFC).

Markets may take such a tumble that we will see massive changes in the economic landscape.

Those companies reliant upon consumer spending, confidence, retail spending or tourism may struggle to survive if trends of the coronavirus continue as they have.

Not forgetting the lives that have been lost and those deaths that are sure to come, the coronavirus has the potential to be the biggest economic meteor to hit Earth in recorded economic history. 

For now, communities must stick together, act with caution but work in earnest to maintain our economies safely while those on the front line fight the virus. 

 

Dan Hadley is a British/Australian economist and business management consultant for JLB based in Adelaide, South Australia. 

CHARTERED ACCOUNTANTS  Australia and New Zealand (CA ANZ) has cautioned businesses thinking they should rush their JobKeeper application.

CA ANZ explained that the Austrlaian Taxation Office (ATO) would soon publish extensive guidance on many aspects of JobKeeper, such as the eligibility criteria, how to apply, how it is paid (instalments or as a lump sum), the payment timetable and applicable conditions.

“The JobKeeper package has vested important and extensive powers in the Commissioner of Taxation, effectively turning the ATO into a giver, rather than a taker,” CA ANZ’s Australian tax leader Michael Croker said.

“The legislation has claw-back rules empowering the ATO to recover overpaid amounts and target those who weren’t entitled to payments received, plus interest.” 

The legislation says pre-payment record keeping requirements must be kept by applicants for five years unless excused by the Commissioner and outlines ongoing record-keeping obligations after the JobKeeper payment has been received.

“It’s so important not to blindly go after the money without some evidence of the economic impact of COVID-19 on business turnover,” Mr Croker said.

“Employers should get ready and get set before they go. 

"Business cashflow planning is also essential. Cash goes out the door before JobKeeper payments come in. The sad reality is JobKeeper will not be enough to save every business.”

Mr Croker also said employers need to wary about who they get their advice from.

“Inevitably there’ll be shonks touting contrived schemes designed to exploit JobKeeper. However the legislation empowers the Commissioner to call out ‘any change in the financial position of any entity’ as part of a scheme designed to improperly pocket JobKeeper cash and the ATO has extensive payback powers.

“Employees will be the ATO’s eyes and ears. Changes to the Fair Work Act impose a ‘flow-through’ obligation so that JobKeeper money flows from employer to employee. The ATO dob-in hotline will be busy where employers do the wrong thing.”

Mr Croker said employers need to quickly develop a JobKeeper employee response plan.

“Employees will have so many questions for the boss, ranging far beyond the simple ‘how much do I get and when do I get it’?

“In some situations, employers will need to deliver bad news to those excluded from JobKeeper. Employees who’ve already been stood down may now ask their former boss about the possibility of re-hiring arrangements," Mr Croker said.

“Eligible employees will want to know how their employment arrangements will be changed: their hours, adjusted salary and entitlements.

“Depending on the business’ circumstances, ‘JobKeeper enabling stand down’ arrangements and ‘JobKeeper enabling directions’ may need to be designed and communicated to employees.

“To cope with all these questions, accountants and employers will need to develop a working understanding of the temporary changes which the legislation makes to the Fair Work Act.” 

Mr Croker also urged employees to be careful and not get caught out by scammers promising cash and seeking bank account details.

“Look for official JobKeeper communications from your employer and the ATO via trusted channels. Always call and check if in doubt," Mr Croker said.

“Our members are already flat out helping businesses across the nation get through COVID-19 and JobKeeper means they’ll really be burning the midnight oil now.”

Mr Croker said the CA ANZ Tax Team would also be working hard over coming weeks clarifying aspects of the JobKeeper program with the ATO.

CA ANZ has established a COVID-19 resources hub where CAs and their clients can access information about a range of COVID-19 measures, including the JobKeeper package.

 www.charteredaccountantsanz.com/news-and-analysis/news/covid19-updates

ends

By Dan Hadley >>

SOME EVENTS cannot be quantified completely in just economic terms or numbers. The Australian bushfire crisis that has impacted the country since September 2019 is a prime example.

Milton Friedman, the Nobel Prize-winning Economist, advocated the idea that almost anything can indeed have an assigned cost – even pollution or devastation en masse.

That seems a tough pill to swallow in the face of thousands of razed homes, lost human lives, millions of perished beautiful animals and over 10 million hectares of land, including national protected parklands, lost. 

As an economist with close friends in the Adelaide Hills who lost everything but the clothes on their back, it becomes a difficult task to even broadly quantify the ‘economic’ impacts of this crisis, let alone the emotional fallout.

With smoke from these fires reaching as far as South America and help from other countries pouring in by way of donations and firefighting volunteers, it could easily be argued that the economic impact of these fires is global.

In the face of such an overwhelming blow of devastation, this economist has focused on what it means here at home.

 

REDUCTION IN GROSS GDP

The bushfires will undoubtedly have an impact on the Gross Domestic Product (GDP) of Australia, that is, the business activity we produce this year.

When natural disasters occur, this can be somewhat offset in the following months by rebuilding efforts. Out of destruction, comes the need to rebuild when the devastation is over.

This means activity for building and civil construction companies as well as clean up crews and all of the industries that supply down the line to these projects. Overall there has already been, and will continue to be, a reduction in national GDP for some time. That levels out over the long term.

 

REDUCTION IN TOURISM ACTIVITY

Many of the affected areas rely heavily on tourism as part of their local economies.

There are two types of tourism – domestic and foreign. Overall, foreign tourism levels in Australia may be reduced as people decide to go elsewhere, scared of the nationwide fires we are suffering.

The land size lost in fires is the equivalent to the entire nation of Burma or Ethiopia and almost as large as Germany. It is no surprise that travellers may look towards other places that appear safer.

Domestic tourism makes up much of the tourist numbers into regional Australia. With some areas completely devasted and razed by fires, there is little to no aesthetic appeal for tourists to attend such sites for some time.

Indeed, some sites may be unsafe with charred and smokey remains as well as crumbling infrastructure for quite a while.

Here in South Australia, with half of Kangaroo Island burned, much tourist infrastructure is lost and this will cause a devastating blow to the number of visitors coming to the island each month spending their money.

 

INCREASING FOOD PRICES

Food prices have already been affected in the wake of these fires.

Many parts of regional Australia contain agricultural farmland. Crops have been lost and livestock has died.

This leads to a lower supply of food and, in turn, raises the price for the consumer. Much of regional New South Wales and South Australia has seen the loss of entire wine vineyards, leaving ageing stock in storage and this year’s vine yield lost forever.

Both of these states are proud wine providers and economically rely on wine sales and export as part of state GDP.

 

DECLINE IN RETAIL SPENDING, CONSUMER CONFIDENCE

Though not significant compared with other economic sector losses, these events do bring with them a decline in retail spending.

This was seen in the wake of the 2011 Queensland floods and the 1983 Victorian and South Australian Ash Wednesday fires.

With this comes the decline in consumer confidence, now hitting a four-year low, spurred on by the fires.

This reduction gradually returns to its normal pattern, however, as infrastructure is rebuilt and lives begin returning to normal.

 

INSURANCE PREMIUMS UP

It will come as no surprise to Australians, when insurance renewal notices come out this year, that premiums have increased.

There will be millions of dollars of payments on policies across Australia and insurance companies will seek to mitigate the possibility of fires in the future and recoup losses from the 2019/2020 devastation.

This represents an immediate economic loss to Insurance companies and an ongoing expense to Australians.

 

MEDICAL, EMERGENCY SERVICES COSTS

With an increased use of emergency services comes a significant cost increase.

The Australian Government has called in the military and this costs millions of dollars per day to provide manpower, equipment and transport to complete key rescue and clean up objectives.

Although this cost may come out of a Federal Emergency budget pool, it represents a major economic spend on the part of the government to rapidly curtail the crisis.

The increased use of police, fire fighters, ambulance and hospital staff also represents a strain on State economies as they grapple with the situation.

 

EMPLOYMENT LOWS AND HIGHS

Loss of infrastructure, businesses and roads means a loss of jobs in the short term. Put simply, some workplaces no longer exist for people to go to and continue their jobs.

It may take months, if not years to rebuild some businesses, even with government assistance and insurance payouts.

This reduction has been shown on the face of it – against some other types of natural disaster – to be relatively short lived, however, as employment levels begin to rise in the face of rebuilding and reconstruction efforts.

Although this doesn’t mean those who have directly lost their jobs immediately find another, it represents the overall employment rate.

From devastation comes opportunity for others to work and toil, rebuilding what was once lost.

 

ON A PERSONAL NOTE …

I cannot help but be reminded of Dorothy Mackellar’s second stanza in her 1908 poem, My Country:

I love a sunburnt country,
A land of sweeping plains,
Of ragged mountain ranges,
Of drought and flooding rains.
I love her far horizons,
I love her jewel-sea,
Her beauty and her terror –
The wide brown land for me!

Our country indeed possesses all that Dorothy described. The end of 2019 and the beginning of 2020 have shown us her beauty, her terror and luckily – in very recent days – her flooding rains.

Now a land charred and razed, sweeping and smoky, we begin repairing that which was damaged and lost.

The cost truly immeasurable. We, the people of Australia, will grow stronger, build our towns more resilient, and restore our regional economies once again.

I love a sunburnt country through all of the good times and through the hard. 

 

Dan Hadley is a British/Australian economist and business management consultant for JLB based in Adelaide, South Australia.  

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