As the COVID-19 pandemic continues the Government and ATO have provided amended updates and targets, as outlined below.

On 23 July 2020, the Federal Government released its Economic and Fiscal Update which was basically a ‘curtain raiser’ for the full 2020-21 budget, which will be delivered on 6 October 2020. Whilst the update did not shy away from the severe contractions in economic activity due to the pandemic, there was a ‘silver lining’ highlighting that Australia had out-performed most advanced economies globally. This is likely to be little comfort for those businesses and people who have experienced significant financial impacts due to the economic downturn, particularly people who live and work in Victoria. Due to the Australian economy being expected to endure its largest annual fall in economic activity on official record and with unemployment nationally forecast to peak at 9.25% in the December 2020 quarter, the government has released a number of key policy measures designed to support ‘the re-opening of the economy and getting people back into jobs’.

These key measures include:

  • The introduction of a time- limited Coronavirus Supplement payment and expanded access to JobSeeker payments for people who are stood down or have lost their employment due to COVID-19.
  • Waiving the Ordinary Waiting Periods for certain new income support recipients.
  • The introduction of two separate $750 Economic Support Payments to social security, veteran and other income support recipients and eligible concession card holders.
  • Extending the application period for people impacted financially by COVID-19 to apply for the early release of up to $10,000 of superannuation from 24 September 2020 to 31 December 2020.
  • Continuing with the temporary halving of superannuation minimum drawdowns for the 2020/21 income years.
  • Extension of JobKeeper for an additional six months from 28 September 2020 until 28 March 2021.
  • Provision of a temporary exemption from the responsible lending obligations for a period of six months in relation to the credit that banks and other lenders extend to their existing small business customers.
  • A number of industry-specific, targeted measures supporting those most heavily affected by COVID-19 including:
    • Childcare and higher education
    • Aviation
    • Aged care
    • Arts and entertainment
    • Housing.

Further details regarding the specifics of each of these measures are expected to be announced when the government’s 2020/21 budget is released in early October 2020.

ATO audit targets

With the government handing out what appears to be limitless amounts of cash as part of their various COVID-19 stimulus measures, it may come as no surprise that once the cash has been distributed, the ATO’s focus eventually turns to review and audit activity. The ATO has refrained from undertaking any audits since the pandemic hit Australia however, they have flagged that audit activity will recommence between September and October 2020.

JobKeeper

Top of the list is JobKeeper. It has been well publicised that JobKeeper is one of the biggest government support and stimulus measures in the history of Australia. The ATO has already sent out over 8,000 questionnaires to employers and sole traders across the country which ask questions about eligibility criteria, details of employees or eligible business participants and other administrative questions. The ATO will review the responses to these questionnaires and decide whether targeted audit activity will be required on a case by case or whole of industry basis. They have publicly stated that where honest mistakes have been made, they will not seek to claw back JobKeeper payments, they will instead ‘turn-off’ any future JobKeeper payments to the recipient. The ATO has flagged that there will be more eligibility checks imbedded into the application process for JobKeeper 2.0 to reduce the extent of similar letters being issued in future.

Home office expenses

With a lot of people keen to get their income tax returns lodged for 2019/20 as soon as possible, anticipating a higher refund because they can claim home office expense this year due to working from home for extended periods of time since March 2020, it is a timely reminder that the temporary increase to $0.80 per hour for home office expenses (i.e. the ‘shortcut method’) has some traps.

  • The traditional fixed rate method ($0.52 cents per hour) covers all home office expenses including:
  • The decline in value of home office furniture and furnishings (e.g. a desk).
  • Electricity and gas for heating, cooling and lighting.
  • The cost of repairs to your home office equipment, furniture and furnishings.

However, this method does not include:

  • Phone expenses.
  • Internet expenses.
  • Computer consumables and stationery.
  • Decline in value of equipment (e.g. phones, computers and laptops).

The ATO has indicated via a recently released Practical Compliance Guideline (PCG 2020/3 – Claiming deductions for additional running expenses incurred whilst working from home due to COVID-19) that their view is that if people choose to use the $0.80 shortcut method, costs that are not traditionally captured by the fixed rate method are deemed to be included. Basically, their view is ‘if you use this method, you can’t claim any other expenses for working from home’. Care should be taken when making claims for home office expenses to ensure no ‘double dipping’ occurs. A comparison of the available methods may need to be undertaken to ensure you legitimately maximise your home office expense claims.

This article first appeared in the Spring 2020 issue of Client Alert, which can be downloaded here.