Coronavirus

The ATO’s instant asset write-off is another form of financial relief the ATO and the Federal Government has included and expanded on in the COVID-19 relief schemes. First developed in 2015 as a way of enabling small businesses to claim the depreciation amount of a work-related purchase like a car or a computer in one hit, rather than gradually over a number of years. Recently, the ATO expanded on the criteria needed for this asset write-off. If you are a business owner or sole trader interested in the instant asset write-off, read on to find out how the scheme works. 

What is the ATO Instant Asset Write-Off?

The instant asset write-off scheme was initially introduced in 2015 and was largely aimed at helping small businesses claim the depreciation amount of company assets immediately, rather than over many years. The onset of the COVID-19 pandemic has seen the government and the ATO introduce a number of financial relief schemes aimed at helping businesses survive this troubling time, and recently, they adjusted the criteria for the instant asset write-off scheme to include larger businesses. 

As part of the ATO and the government’s economic stimulus measures, the asset limit for the instant asset write-off scheme has increased from $30,000 to $150,000. The pool of eligible businesses has also been amended from those with an aggregated turnover of less than $50 million, to an aggregated turnover of less than $500 million. These significant changes will see the instant asset write-off scheme benefit many more businesses than before. 

This means that a greater number of businesses can purchase a piece of equipment or a company vehicle and receive an immediate deduction of up to $150,000. However, the relief scheme is not without strict regulations that must be adhered to if businesses are to utilise this financial relief benefit to its maximum, and there is some confusion in particular around how the scheme works for company-owned and bought vehicles. 

What is the ATO Instant Asset Write-Off Limit on Cars?

While the instant asset write-off limit has increased from $30,000 to $150,000, a ‘car cost limit’ has been implemented for businesses wanting to purchase a vehicle at this time. This will define the amount you can actually claim on a newly purchased vehicle. 

Specifically, cars that are “designed to carry a load less than one tonne and fewer than nine passengers,” have a total claim limit of $57,581 and anything beyond that point “cannot be claimed under any other depreciation rules,” the ATO explains. 

However, the full purchase price of a vehicle which can carry more than one tonne/more than nine passengers can be claimed back. 

Cars that cost $150,000 or more, as well as farm trucks and tractors, are ineligible for the instant asset write-off scheme.

Does the Car Threshold Include LCT, On-Road Costs, Insurance and Registration?

All costs but insurance and registration are included in the car threshold amount – this includes stamp duty, any accessories, luxury car tax, on-road costs and delivery. 

Insurance and registration are recurring business costs, which are immediately deductible under the general deduction provision and thus not included in the cost of the car. 

Are Lease and Financed Cars Eligible?

A hire purchase lease will be eligible for the instant asset write-off scheme, but operating and finance leases will not qualify. 

Criteria for the ATO Instant Asset Write-Off: Cars

1. Must be a business asset. Any old asset will not comply. Whether it’s a new or second hand asset, to get the 100% deduction the asset must be 100% employed in your business. Assets that are part business and part private will require a log book to establish a business use percentage.
2. Car limits may still apply. A passenger vehicle designed to carry a load of less than 1 tonne and fewer than 9 passengers is limited to a maximum write-off of $57,581 – even if it 100% used in business. Vehicles that are greater than one tonne or carry 9 passengers or more may be eligible for a higher write-off amount.
3. You must own and be using the asset by 30 June. The asset must be owned by the business and be in use (or able to be used) by the business by 30 June to claim the write-off.
4. Employees are not eligible for the instant asset write-off scheme, but they may be able to claim back some of their own car usage.

Many car dealerships are calling for the extension of the scheme to allow more businesses to take advantage of it. 

Choose Affinitas Accounting

The ATO’s instant asset write-off can provide a major financial aid to many businesses. If you think you are eligible and want to apply, please feel free to contact one of our friendly business accountants for swift, prompt assistance. 

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JobKeeper was introduced in April 2020 and is an effort being made by the Federal Government to support eligible businesses effected by COVID-19 to cover the costs of their employee’s wages, on condition that the business has experienced a loss of a predetermined portion of their turnover. Around $130 billion will be paid to hundreds of thousands of Australian businesses to subsidize employee wages. If you are a business owner who wants to explore JobKeeper and want to know if you can apply, read on to find out how it works and who is eligible.

What is JobKeeper?

The Coronavirus Economic Response Package (Payments and Benefits) Act 2020 came into effect on 9 April 2020 (though the payment scheme was officially backdated to 30 March 2020), which allowed for the implementation of the Federal Government’s $130 billion JobKeeper relief scheme. It forms part of the Government’s $320 billion total economic stimulus and support package for businesses and employees affected by the Coronavirus (COVID–19) crisis. The scheme was aimed at keeping Australians employed even in the event of their employer temporarily closing down due to trading limitations caused by the outbreak.

Businesses who were impacted by COVID-19 and who suffered a loss in turnover of at least 30% can apply for the JobKeeper fund which will give them access to a wage subsidy for their employees. Eligible employers will be able to continue to pay their employees on a fortnightly basis: $1500 per employee from March 30 2020, for a maximum period of 6 months.

For those in non-essential industries, such as accommodation, retail and hospitality, this subsidy payment equates a complete wage replacement – something those working in the hardest-hit industries would need.

The JobKeeper payment scheme will end on 27 September 2020, encompassing 13 fortnights of employee wage payments.

Who is Eligible for JobKeeper?

In an effort to provide support and financial assistance to businesses and employees who need it, the Government has set out a defined list of criteria that businesses need to meet in order to apply for the JobKeeper payment scheme. The eligibility criteria are:

• Businesses that have experienced a loss in turnover of at least 30%, in a month-long period compared to last year 
• Businesses that have experienced a loss in turnover of at least 50% if they usually bring in more than $1 billion annually, in a month-long period compared to last year
• Charities that have lost at least 15% of their turnover in the same period
• Applicants who have casual workers must have employed the casual worker for at least a year
• Sole traders
• Temporary work visa holders may not apply unless they are New Zealanders on the special 444 subclass visas

Sole traders and some other entities (such as partnerships, trusts or companies) may be entitled to the JobKeeper Payment scheme under the business participation entitlement. A limit applies of one $1,500 JobKeeper payment per fortnight for one eligible business participant. Sole traders, one partner in a partnership, one beneficiary of a trust, and one director or shareholder of a company may be regarded as an eligible business participant.

How do the JobKeeper Payments Work?

Eligible employers and companies will be able to claim the subsidy amount of $1500 per eligible employee on a fortnightly basis. However, the Australian Tax Office (ATO), who has partnered with the Government during this crisis, will pay employers in arrears, within 14 days of month end. The employer will continue to receive the subsidy payments for eligible employees while they are eligible for the payments. While the program is expected to run for 6 months, payments will stop if the employee is no longer employed by the business.

Monthly employer payroll reporting is required to trigger the payment by the ATO using Single Touch Payroll (STP).

JobKeeper Obligations and Risks

While the JobKeeper payment scheme is aimed at helping businesses and their employees, the system is not without risks that business owners should be aware of.

If an incorrect claim is made, or if the ATO in the future decides that you were ineligible to receive the JobKeeper payment, the ATO will require you to repay any JobKeeper payments that you have received, plus penalties and interest.

The key risks and responsibilities you, as the employer, must be aware of include:

• The employer certifies the facts provided to the ATO and the JobKeeper claim made
• The employer receives significant JobKeeper payments over a 6 month period. For example, an employer with 5 employees would receive $97,500, and an employer with 10 employees would receive $195 000
• If the employer makes a mistake and is found to be ineligible by the ATO (for example, its turnover was not down by 30%), then they may have to repay all amounts received back to the ATO This is not recoverable from employees (unless they confirmed they were eligible but were not)
• An employee ceases to be eligible if they cease employment during the life of this JobKeeper scheme
• The ATO requires you to keep all records in relation to your JobKeeper claim for a 5 year period.

How to Apply for JobKeeper

The ATO has specific actions that must take place within tight time frames for an employer to receive the JobKeeper payment. If you want to apply for JobKeeper for your business, please contact us or read the below:

1. Employer Eligibility Assessment

• Review ATO requirements for the business
• Review ATO requirements for employees
• Review ATO requirements for Business Participation Entitlement – Sole Trader, Partnership, Company or Trust
• Document the fall in turnover % in case of future ATO audit

2. Identify Eligible Employees

• Prepare list of eligible employees
• Prepare JobKeeper employee nomination notice for all eligible employees and ensure
  all notices are signed

3. Make Correct Wage Payments to Eligible Employees

• Ensure your payroll software is correctly set up to record JobKeeper “top up” payments
• Pay the minimum $1500 before tax to each eligible employee each fortnight (starting with the fortnight 30 March to 12 April) to be able to claim the JobKeeper payment for that fortnight
• Continue to pay the minimum $1500 to employees in every subsequent fortnight until 27 September 2020

4. Enrolment for JobKeeper

• Enrol for JobKeeper using ATO online services from 20 April 2020
• Provide employer bank account details for receipt of JobKeeper payment
• Confirm if applicant is entitled to a “Business Participation Payment”
• Specify the number of employees who will be eligible for one period and the number eligible for two periods
• Get confirmation that all employees the employer plans to nominate are eligible and the employer has notified them and has their agreement

5. Apply for JobKeeper Payments

• Apply to claim the JobKeeper payment using ATO online services between 4 May 2020 and 31 May 2020
• Ensure all eligible employees have been paid $1500 per fortnight
• Identify the eligible employees from a Single Touch Payroll prefill or by manually entering into ATO online services
• Update your accounting system Chart of Accounts to ensure JobKeeper payments are coded correctly

6. Monthly JobKeeper Declaration Report

• Using ATO online services, report to the ATO using their Monthly JobKeeper
• Declaration Report on the following:
  • Reconfirm that your reported eligible employees have not changed
  • Input current GST Turnover for the reporting month
  • Input projected GST Turnover for the following month
  • Notify if any eligible employees have changed or left your employment

Partner with Us

We want to do our part during the pandemic and, as such, are providing support and assistance to businesses who want to apply for the JobKeeper payment scheme. Please be sure to contact us if you or your business require assistance with your application.

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