Does Your Business Have a CRM Tool?








 





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Client relationship management (CRM) tools offer a fast and effective way to manage all of this customer information. A CRM solution provides one central hub for recording all your customer data. This data could be the basics of customer name, address and contact details, notes from meetings, records of sales activity or information on the customer's marketing preferences.

Having clean, up-to-date information and data about your customers is a vital part of running your business. But recording, tracking and accessing this customer information can be tricky if you don't have the right tools to get the job done.

So, how does having a CRM tool help you do business? Let's take a look...

A centralised hub for managing your customer relationships

Without a CRM system in the business, your sales and marketing team have to rely on manual, organic processes to manage the company's customer information. It's likely that you'll be relying on multiple spreadsheets, diary reminders and scribbled notes to manage your customer and prospect relationships. And in this day and age, that's just not an efficient or productive way to keep on top of your customer data.

With a CRM system in place, you can:

Record higher-quality customer data – rather than relying on multiple sources of data, a CRM system becomes the heart of your business information. You can ditch the spreadsheets and paperwork and put all your customer contact information, customer interactions and marketing preferences into one centralised source of truth.

Build on your customer relationships – it's much easier to take good care of your existing customers when you have access to their information at the press of a button. Your CRM tool will be able to display a breadcrumb trail that shows every customer interaction, campaign task and comment. So, you can quickly look back to see which products or services they've engaged with, when you last spoke, or what their preferences may be for sales, advertising and marketing purposes.

Improve your client reporting and segmentation – a CRM tool will help you to track, measure and analyse your historical client data. And because of this, it's far easier to run client reports, or to split your entire customer base into meaningful segments. You might track your clients by location, by revenue generated, by industry, or by any meaningful demographic that helps you manage and target each separate audience segment.

Achieve more detailed targeting of prospects – by using the tracking features in your CRM tool, it's possible to enter details of every interaction with a new prospect. This means you can then track the evolution of the relationship from cold to warm prospect, making business development easier and giving greater insights into how well your sales and marketing targeting is working.

Stay in control of your task management – remembering to act on your planned business development and sales tasks can be a challenge for a busy sales team. Your crm tool can show you which tasks are outstanding, which are completed and manage the work-in-progress position of each and every customer. It can also send you automated alerts such as a reminder to follow-up after you've sent a quote.

Meet your data protection requirements – a flexible CRM tool makes it easier to keep your customer data safe and secure (unlike traditional spreadsheets). Cloud-based CRM solutions give fast access to your data, while also having high levels of encryption in place. And you can ensure you're meeting your data protection and compliance needs by managing who you contact, how they can unsubscribe from marketing activity and what information you hold on individuals and companies.

Inform your planning and long-term strategy – a CRM tool will give you access to truly granular client data, and that's invaluable when scenario-planning and coming up with new strategies. Decisions can be made based on clear historical data, and with the right forecasting tools you can also project this data forward in time to help inform your campaign activity, business development and wider company strategy.

A simple CRM tool can make your business more efficient; give you better control over sales and help you to support existing customers.

Forecasting in a Pandemic

      
Now, more than ever, business operators should have a plan in place to manage during uncertain times. Even if your business is not directly impacted, it's likely your customers, your supply chain, and your workforce will be to some extent. 

So, how do you plan for uncertainty when every assumption is subject to change?

Understand where you stand now

Businesses fail (or fail to thrive) for a myriad of reasons, but the precursor is often a failure to understand what is occurring and what to monitor. Strategically, managers need to be on top of their numbers to identify and manage problems before they get out of hand. If you do not know what the key drivers of your business are - the things that make the difference between doing well and going under - then it's time to find out. 

Understanding your cost structure

Do you know what your real cost of doing business is? Your breakeven point is the level of sales activity where your business is neither making a profit or a loss. Calculate your breakeven point by dividing your fixed expenses by your gross profit margin. This figure represents the level of sales income you need to breakeven.  

Understanding your breakeven point is crucial particularly when supply chains are impacted.  

Not only will your breakeven point assist you to monitor business performance, it's critical when deciding whether or not to offer a discount. If your breakeven point is well below your current operating level then you have a good buffer in your profits to manage growth, invest in further capital opportunities, and to protect yourself against further downturns in operating performance. And before you say "I know that," ask yourself how many people actually put this theory into practice. Even some of the largest businesses have been caught out on this one and tie up valuable resources in unprofitable projects and products. 

Putting up your prices during down times is not an act of social betrayal. If your prices have increased you should flow these through unless you are comfortable making less for the same amount of effort, or you are in an industry that is so price sensitive you have no choice but to follow the lead of larger businesses. 

Discounting creates a leverage impact on profits. By discounting you are giving away some or all of your profits. The key is to understand the impact and just how far you can go. For example, a business with a 30% gross profit margin that offers a 25% discount (certainly nothing unusual about that in today's market) needs a 500% increase in sales volume just to maintain the same position – and, in almost all cases, that's just not going to happen. The result generally is that the business trades below its breakeven point and generates a loss. You can only do that for a limited amount of time (and some of your larger competitors might be engaging in a discounting war with you in an attempt to bury you once and for all). 

If your business needs cash and needs it quickly, discounting might be the only way to shift stock but understand the implications.

Plan, review and adjust

Your budget should be your best estimate of what is likely to occur based on current knowledge.  To manage change, you can scenario plan where your budget forms the baseline, but you also forecast best and worst case scenarios based on potential risks and their likelihood (for example, the impact of another lockdown). Or, the simplest method is to use your budget as a baseline and regularly review and adjust depending on current conditions.  

The greatest risk to your profit is unlikely to come from your cost structure. It is more likely to be revenue volatility. Keep your eye on your cost structure and make sensible cuts where appropriate. But, in your search for savings don't remove your essential revenue generating capacity that you need. 

A lack of profit will eventually erode your business, but not enough cash will kill it stone dead. Businesses will fail because they don't manage their cash position. Plan, track and measure your cashflow. This not only means closely monitoring your debtor collections and inventory but also running a rolling three month cashflow position. This should provide an early warning of brewing problems.  

Manage your debt levels carefully (your bank is likely to). While there is nothing wrong with debt, it is likely that the banks will be closely watching customer accounts. Where you have loan facilities in place make sure that you understand the loan terms and any debt covenants that you have entered into. These covenants could include regular reporting to the bank, debtor and working capital ratios, or debt to equity ratios. Where the banks may have been more relaxed about these in the past, this year will be different. If you believe that you need additional funding, talk to your bank early and don't wait until the last minute. You'll need to present your case on why you need it, how much, for how long and when it will be repaid. 

Cash flows, operating budgets, cost control and debt management all need to be part of your business management. The more in control you are the lower your risk position.

Understand the external environment

The COVID-19 pandemic has implications well beyond the economy; it has changed how business operates and how consumers act. While comparisons are made to the 2008 Global Financial Crisis and the recessions of the 1980s and 1990s, the reality is, we have no case study. There is no rule book for the post pandemic road to recovery as this is not an economic event. The pandemic pulls the economy up short curtailing both supply and demand; businesses are not operating at capacity and fewer people are working.  

The Federal Budget is released on 6 October and we're expecting to see the Government invest heavily in job creating projects. Many of these will be focussed on infrastructure. Each of these projects will have a flow through effect to the broader economy. We'll bring you our insights the day after the budget and you should loom to see if there are opportunities your business can capture. 

Understanding your supply chain is important. Risk manage and plan for changing conditions. For example, what is your business's ability to manage a surge in demand, do you have a small supply base and what would happen if your primary supplier went into bankruptcy, do you have a good flow of information across your supply chain or is there a lack of transparency and knowledge, do transport problems risk your ability to supply? Assess it, understand it, and manage the risks. 

When it comes to demand, there is no instant fix. The RBA suggests the decline in GDP in the first half of 2020 is around 7% and the contraction in hours worked around 10%. The economic impact of the restrictions in Melbourne extend well beyond Victoria and are impacting more generally on consumer sentiment. This week we expect Australia to have a formal "recession" label added to our economy, formalising what most business operators already know. 

But it is not all bad news with confidence lifting on early signs that revenue is no longer declining for the majority of Australian businesses. The latest ABS data on the impact of COVID-19 shows fewer businesses reported a decline in revenue in August (41%) compared to July (46%), and fewer still expect a decline in September (28%).   

However, 35% of businesses expect it to be "difficult or very difficult" to meet financial commitments over the next three months, with small and medium businesses almost twice as likely as large businesses to fall into this category. Understandably, the response to this question is heavily weighted towards those operating under Government required restrictions and lockdowns.  

The RBA is working with three scenarios for Australia's economic outlook: a baseline, upside and downside scenario. In the baseline scenario, conditions improve in the second half of 2020 and slowly improve over 2021 and 2022 but fall short of returning to pre COVID forecasts with Victoria's lockdown not materially extended and Australia's international borders remaining closed until mid 2021. The upside scenario saw no extension of the Melbourne lockdown, and further easing of Government restrictions nationally, which in turn bolster consumer confidence, encouraging spending and the reversal of GDP decline over 2020-21. The downside scenario envisages a global resurgence in infections with Australia facing periodic outbreaks and rolling lockdowns. The RBA notes that the downside scenario has a sharper fall than the increase of the upside scenario because of the damage to consumer confidence of further lockdowns. 

Business investment is also expected to be relatively flat with the ABS survey showing that 37% of those surveyed had no actual or planned expenditure. Of those that are spending, IT hardware and software, and equipment and machinery topped the list. The instant asset write-off is helping to stimulate business investment in the small and medium business sector. In general, large businesses are paying down debt rather than spending and small and medium businesses have not sought to extend debt to fund investment. 
Note: The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

 


 

Covid-19 Relief Update

JobKeeper 2.0

The Government has announced further changes to the JobKeeper scheme. The good news is that employees that missed out on JobKeeper because they were not employed on 1 March 2020 might now be eligible. The proposed changes would enable employees employed on 1 July 2020 to receive JobKeeper payments from 3 August if they meet the other eligibility criteria. If you have employees impacted by this change, you will still need to work through the eligibility requirements including providing JobKeeper Payment Employee Nomination, but just remember that these changes are not yet law. 

JobKeeper will also be extended beyond 27 September 2020. To receive JobKeeper from 28 September 2020, employers will need to reassess their eligibility with reference to actual GST turnover for the September 2020 quarter (for JobKeeper payments between 28 September to 3 January 2021), and again for the December 2020 quarter (for payments between 4 January 2021 to 28 March 2021).

For further information on JobKeeper 2.0 see the ATO links

 

COVID-19 and your SMSF



COVID-19 has had an impact on many SMSFs. We look at the key issues.

Early release of superannuation

When a member of your fund wants to access up to $10,000 of their superannuation early under the COVID-19 measures, there are some additional steps that trustees need to take. Trustees will need to ensure their deed allows for early release, the member has met the eligibility criteria for release, and ensure that no funds have been released until the release authority from the ATO has been received. This will be a 2019-20 audit area of focus.

Tenant Rent Relief

Setting rent for a tenant that is less than market value in an SMSF is usually a breach of superannuation laws. If the rental relief is provided to a related party, then the situation can become trickier as the difference between the rent charged and the market value can amount to a loan and potentially put the fund in breach of the in-house asset rules. 

However, to manage COVID-19 rent reductions for SMSF landlords, the ATO has stated that for the 2019-20 and 2020-21 financial years it will not take action where the rental relief is provided on arms-length terms. That is, the relief is in line with the National Cabinet Mandatory Code of Conduct for commercial leasing principles, has a set timeframe to it, and the reason for the relief and the relief provided is documented.

Relief for related party loans

If your SMSF has a limited recourse borrowing arrangement in place with a related party, and that related party provides repayment relief, this would ordinarily be a breach of the superannuation rules. The ATO however will accept the relief if it is provided on reasonable terms similar to commercial banks (see the Australian Banking Association's website for comparison), the relief and the reasons for it is documented, and is for a set period of time.

A fall in asset values

If the assets of your SMSF have fallen in value, you should consider whether the current asset allocation is consistent with the fund's investment strategy, and if the long-term goals of the fund continue to be met. 

If you need to sell assets and make a capital loss, such as a loss on residential real estate, this loss can be offset against any capital gains. If the capital loss exceeds any gains, this loss can be carried forward and applied against future capital gains.

No deductions are available for unrealised gains (a fall in value for assets the fund continues to own).

Minimum pension payments

For funds drawing a pension, minimum draw down rates for the 2019-20 and 2020-21 years has been halved.  

Age

Default min. drawdown rates

2019-20 & 2020-21 reduced rates

Under 65

4%

2%

65-74

5%

2.5%

75-79

6%

3%

80-84

7%

3.5%

85-89

9%

4.5%

90-94

11%

5.5%

95 or more

14%

7%

If you have any questions relating to the above contact us.

JK 2

 

JobKeeper extended until March 2021

The government has announced changes to the JobKeeper payment scheme, which will see it continue until March 2021.

The current system will remain unchanged until 27 September 2020 as planned, providing $1,500 per fortnight for employees and eligible business participants.

However, from 28 September the changes will apply.

There are several amendments that business owners need to be aware of, including different tiers of payment that apply over two separate time frames, as well as further eligibility tests. This means that some businesses currently receiving JobKeeper will no longer be eligible after 28 September, and others will continue to be eligible but will receive less subsidy from the government.

New Rates for 28 September 2020 to 3 January 2021

 New Rates for 3 January 2021 to 28 March 2021 

  • $1,000 per fortnight – this rate applies to eligible employees and business participants who, in the four weeks prior to 1 March 2020, were working 20 hours or more per week.

  • $650 per fortnight – this rate applies to employees and business participants who, in the four weeks prior to 1 March 2020, worked less than 20 hours per week. 

Business eligibility

 To continue to receive JobKeeper payments, businesses will be required to prove an actual reduction in turnover of 30% or more for both the June and September quarters to continue to receive the subsidy from September 2020 to January 2021. 

Businesses will then be required to again satisfy a reduction in turnover test for all three quarters of June, September and December, to receive the subsidy from January 2021 to March 2021. 

The eligibility rules have not changed – check the ATO Eligible Employers webpage for details of proving reduction in turnover. 

Businesses that have not satisfied the reduction in turnover tests in previous months can still enter the system any time upon meeting the eligibility requirements. 

Plan now for the reduced rates 

Although we have another couple of months before the changes apply, now is the time to start planning for the reduced JobKeeper rates, both for employees and business participants. We can help you assess your eligibility for remaining in the system beyond September 2020. 

Talk to us about how the changes will affect your business operations and costs, and to update cash flow plans and budgets. 

Vehicles and the new accelerated depreciation measure



 Introduced last March to aid businesses through the COVID-19 troubled market environment, the stimulus measure Backing business investment includes an incentive for entities in the 2019-20 and 2020-21 income years, with aggregated turnover up to $500 million, to deduct the cost of depreciating assets at an accelerated rate.

For the period 12 March 2020 until 30 June 2021, assets first used or installed ready for use qualify (although the beefed-up instant asset deduction can't be used as well). Other qualifying conditions can be found listed on this ATO web page.

However one area of the accelerated depreciation measure that has initiated a lot of questions from taxpayers centres on vehicles - so much so that the ATO felt compelled to issue a document to answer the more common questions it has been asked (you can download a copy for your clients here).

First of all, and to clear up what could be deemed obvious, but needs to be cleared away from the outset, the following applies:

  • As mentioned, there's no claiming the instant asset write-off and accelerated depreciation for the same vehicle
  • The car must be received (not just ordered and/or paid for) before the end of the relevant income year
  • No second-hand vehicles (but this is okay for the instant asset write-off)
  • Vehicle cost excludes GST if the entity is registered for GST, and includes GST if not registered
  • The vehicle cost does not include trade-in value.

There is a limit to the value that can be depreciated, which is $57,581 for 2019-20 and $59,136 for 2020-21 (unless the vehicle has a load capacity of more than one tonne or nine passengers, which allows a full cost depreciation).

If your client is a small business using the simplified depreciation rules, an eligible new vehicle can be added to the small business pool, deducting an amount equal to 57.5% (rather than 15%) of the business portion of the vehicle in the year it is added to the pool.

If the less than $500 million turnover entity does not use simplified depreciation, they can immediately deduct 50% of the cost of the vehicle (within limit), plus depreciate the balance. Anything over the limit is not covered.

ITRs Home Office Expenses


If you perform some of your work from your home office, you may be able to claim a deduction for the costs you incur in running your home office, even if the room is not set aside solely for work-related purposes

 

COVID-19 IMPACT - NEW ARRANGEMENTS

The Australian Taxation Office (ATO) has announced special arrangements this year due to COVID-19 to make it easier for people to claim deductions for working from home. The new arrangements will allow people to claim a rate of 80 cents per hour for all their running expenses, rather than needing to calculate costs for specific running expenses.

 

Multiple people living in the same house can claim this new rate. For example, a couple living together could each individually claim the 80 cents per hour rate. The requirement to have a dedicated work from home area has also been removed.

 

This new shortcut arrangement does not prohibit people from making a working from home claim under existing arrangements, where you calculate all or part of your running expenses.

 

Claims for working from home expenses prior to 1 March 2020 cannot be calculated using the shortcut method, and must use the pre-existing working from home approach and requirements.

 

The ATO will review the special arrangement for the next financial year as the COVID-19 situation progresses.

 

WORKING FROM HOME CLAIMS FOR 1 MARCH TO 30 JUNE

 

There are three ways that you can choose to calculate your additional running expenses for the 1 March – 30 June period: 

  • claim a rate of 80 cents per work hour for all additional running expenses.
  • claim a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture, plus calculate the work-related portion of your phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device
  • claim the actual work-related portion of all your running expenses, which you need to calculate on a reasonable basis.

The ATO has stated that the three golden rules for deductions still apply. Taxpayers must have spent the money themselves and not have been reimbursed, the claim must be directly related to earning income, and there must be a record to substantiate the claim.


WORKING FROM HOME BEFORE 1 MARCH 2020  

Claims for working from home expenses prior to 1 March 2020 should be calculated using the existing approaches and are subject to the existing requirements.

 

RUNNING EXPENSES

A deduction can be claimed for home office running expenses comprising of electricity, gas and depreciation of office furniture (e.g. desk, tables, chairs, cabinets, shelves, professional library) in the amount of:

·         The actual expenses incurred; or
·         52 cents per hour 

Like making a motor vehicle claim, diary/logbook evidence should be maintained for a 4-week period to establish a pattern of working from home and justify the number of hours you are claiming.

No deduction is allowed where no additional costs are incurred e.g. you work in a room where others are watching TV, or the income producing use of the home is incidental e.g. 52c per hour would not be allowed for a fax machine permanently left on to receive documents. 

You will need receipts for:  

·         home office equipment used for work purposes

·         repairs relating specifically to home office/furniture and equipment used for work purposes

·         cleaning expenses of home office

·         any other day-to-day running expenses for the home office

·         diary entries to record your small expenses ($10 or less) totalling no more than $200 

TELEPHONE (INC. MOBILES) + INTERNET COSTS 

If work or business calls can be identified from an itemised telephone account, then the deduction can be claimed for the work or business-related portion of the telephone account. A representative four-week period will be accepted as establishing a pattern of internet and telephone use for the entire year.

 

Telephone rental expense may be partly deductible if you are "on call" or required to contact your employer or client on a regular basis.

 

DEPRECIATION ON EQUIPMENT

 

Depreciation on home office equipment including office furniture, carpets, computer, printer, photocopier, scanners, modem etc. used only partly for work or business purposes can be apportioned.

 

The claim is based on a diary record of the income related and non-income related use covering a representative four-week period.  The diary needs to show:

  • The nature of each use of the equipment
  • Whether that use was for an income producing or non-income producing purpose
  • The period for which is was used

 

OCCUPANCY EXPENSES

 

Claims for occupancy expenses are allowed only if the home is used as a place of business. Occupancy expenses include rent, mortgage interest, water rates, repairs, house insurance premiums.

 

The claim can be made as an apportionment of total expenses incurred on a floor area basis.

 

Warning: Being able to claim theses expenses may affect your 'main residence exemption' for capital gains tax purposes if you sell your house in the future.

 

WHEN IS A HOME A PLACE OF BUSINESS?

 

The following factors, none of which is necessarily conclusive on its own, may indicate whether, or not, an area set aside has the characteristics of a place of business:

 

  • the area is clearly identifiable as a place of business
  • the area is not readily suitable or adaptable for use for private or domestic purposes in association with the home generally
  • the area is used exclusively, or almost exclusively, for carrying on a business, or
  • the area is used regularly for client or customer visits.  

If you use your home to carry out income producing activities as a matter of convenience, you are not entitled to a deduction for occupancy expenses. It would be rare for an employee to be able to claim occupancy expenses.

 

WHAT NEXT ?

For further information and expert assistance to prepare your tax return and maximise your tax refund, contact our office today!

 

This article is provided as general information only and does not consider your specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances. 

From 1 July 2020, parents accessing the Government's parental leave pay (PPL) scheme will have greater flexibility and options. Targeting the self-employed and small business owners, the changes introduce a new 30 day flexible paid parental leave pay period. Previously, new parents could apply for PPL for a continuous block of up to 18 weeks.

The changes split this time period into two:
• A continuous period of up to 12 weeks, and
• 30 flexible days. Parents can take the 18 weeks in one block or, under the new rules, take the 12 week period and then use the additional 30 days at a period and in a way that suits them but before the child turns 2 years of age.

For example, assume that when Jane, who works five days per week, has a child, she initially claims 12 weeks. Jane returns to work part-time for three days per week. In that case, Jane would apply for paid parental leave pay on the two days per week that she is not working. The administration of the PPL will change in some scenarios.

For Jane's case above, the employer would administer the scheme for the first 12 weeks but then the Government would directly pay Jane for her flexible days. If an employee wishes to access flexible parental leave pay, they will need to negotiate time-off work or a part time return to work with their employer. If the employer is unable to accommodate the request, then the employee may take the 18 weeks as one block.

The changes to the paid parental leave scheme apply to babies born on or after 1 July 2020. The scheme commences from 1 April 2020 to give parents applying for leave the flexibility to use the new arrangements (but only if their child is born on or after 1 July 2020).



The Stimulus Package: What You Need To Know

The Government has announced a $17.6 billion investment package to support the economy as we brace for the impact of the coronavirus.

 

The yet to be legislated four part package focuses on business investment, sustaining employers and driving cash into the economy.

 

For business

  1. Business investment
    • Increase and extension of the instant asset write-off
    • Accelerated depreciation deductions
  1. Cash flow assistance for small and medium sized business 
    • Tax-free payments up to $25,000 for employers
    • Wage subsidy of up to 50% of an apprentice or trainee wage
  1. Targeted support for severely affected sectors, regions and communities

 

For individuals

  1. Household stimulus payments to drive cash into the economy
    • Tax-free $750 payment to social welfare recipients

 

Parliament sits on 23 March. The Prime Minister has stated, "we have no plans to change the parliamentary sitting schedule."

 

Here's what we know so far:

Business investment

Increase and extension of the instant asset write-off

From 12 March 2020, the instant asset write-off threshold will increase from $30,000 to $150,000, and access to the write-off will be expanded to include businesses with aggregated annual turnover of less than $500 million until 30 June 2020.

 

The instant asset write-off is a tax deduction that reduces the tax liability of your business. It enables your business to claim an upfront deduction for depreciating assets in the year the asset was purchased and used (or installed ready to use). For example, if your business is a base rate entity (turnover under $50m) in a company structure you will get back 27.5% in your 2019-20 company return if the company acquires an asset that is used by 30 June 2020. If your business is likely to make a tax loss for the year, then the instant asset write-off is unlikely to provide a short-term benefit to you.

 

This is the fourth increase or extension to the instant asset write-off and businesses will need to be wary of what they are claiming and when: 

 

Instant asset write-off thresholds

Small Business*

Medium business**

Large business***

1 July 2018 - 28 January 2019

$20,000

-

-

29 January - 2 April

$25,000

-

-

2 April - 12 March 2020

$30,000

$30,000

-

12 March - 30 June 2020

$150,000

$150,000

$150,000

* aggregated turnover under $10 million

** aggregated turnover under $50 million

***aggregated turnover under $500 million

 

Assets will need to be used or installed ready for use from when the changes were announced on 12 March 2020 until by 30 June 2020 to qualify for the higher threshold. Anything previously purchased does not qualify for the higher rate but may qualify for one of the other thresholds. Similarly, anything purchased but not installed ready for use by 30 June 2020 will not qualify.

 

The instant asset write-off only applies to certain depreciable assets such as a concrete tank for a builder, a tractor for a farming business, and a truck for a delivery business. You will also need ensure that there is a relationship between the asset purchased by the business and how the business generates income. You can't for example just go and purchase multiple television sets if they have no relevance to your business.

 

There are some assets that don't qualify such as horticultural plants, capital works (building construction costs etc.), assets leased to another party on a depreciating asset lease, etc.

 

What businesses can access the instant asset write-off

To access the instant asset write-off, your business needs to be a trading business (the entity buying the assets needs to carry on a business in its own right). It also needs to have an aggregated turnover under $500 million. Aggregated turnover is the annual turnover of the business plus the annual turnover of any "affiliates" or "connected entities". The aggregation rules are there to prevent businesses splitting their activities to access the concessions.  Another entity is connected with you if:

 

  • You control or are controlled by that entity; or
  • Both you and that entity are controlled by the same third entity.

 

Accelerated depreciation deductions

In addition to the increased instant asset write-off rules, accelerated depreciation deductions will apply from 12 March 2020 until 30 June 2021. This will bring forward deductions that would otherwise be claimed in later years.  

 

Businesses with a turnover of less than $500 million will be able to deduct 50% of the cost of the asset in the year of purchase. They can also claim a further deduction in that year by applying the normal depreciation rules to the balance of the asset's cost. This will presumably only be relevant if the business cannot already claim an immediate deduction for the full cost of the asset. 

 

For example, let's assume that a business purchases a new truck for $250,000 (exclusive of GST) in July 2020. In the 2021 tax return the business would claim an upfront deduction of $125,000. The business would also claim a further deduction for the depreciation that would have arisen on the balance of the cost. If the business is a small business entity and using the simplified depreciation rules, this would mean an additional deduction of $18,750 (i.e., 15% x $125,000). The total deduction in the 2021 tax return would be $143,750. Without the introduction of this investment incentive the business would have claimed a deduction of $37,500 (i.e., 15% x $250,000).

 

This incentive will only be available in relation to new assets that are acquired after 12 March 2020 and are first used or installed ready for use by 30 June 2021. It will not apply to second-hand assets or buildings and other capital works expenditure. 

Cash flow assistance for small and medium sized business 

Tax-free payments up to $25,000 for employers

Tax-free cash flow support between $2,000 and $25,000 will be available to eligible businesses with a turnover of less than $50 million that employ staff between 1 January 2020 and 30 June 2020. 

 

This is not a direct cash payment but a credit equal to 50% of the PAYG amounts withheld from salary and wages paid to employees. The employer will need to lodge an activity statement to trigger the entitlement. If the credit puts the business in a refund position the excess amount will be refunded by the ATO within 14 days.

 

If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $2,000 will still be made.

 

Businesses that lodge activity statements on a quarterly basis will be eligible to receive the credit for the quarters ending March 2020 and June 2020. Business that lodge on a monthly basis will be eligible for the credit for the March 2020, April 2020, May 2020 and June 2020 lodgments. The minimum $2,000 payment will be applied to the first lodgement.

 

Eligibility for the measure will be based on prior year turnover. We will have to wait for the legislation for the finer details.

 

Wage subsidy of up to 50% of an apprentice or trainee wage 

Eligible employers can apply for a wage subsidy of 50% of the apprentice's or trainee's wage for up to 9 months from 1 January 2020 to 30 September 2020. The payments are accessible to businesses with less than 20 employees. Employers will receive up to $21,000 per apprentice ($7,000 per quarter).

 

Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice. 

 

In order to qualify for this payment the apprentice or trainee must have been in training with the business as at 1 March 2020. Employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will also be eligible for the subsidy. 

 

It is expected that employers will be able to register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020.

Targeted support for severely affected sectors, regions and communities

$1 billion has been committed to support sectors, regions and communities disproportionately affected by the economic impact of the coronavirus. Tourism, agriculture and education are specifically mentioned.

 

Initial measures include:

  1. Waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and Commonwealth National Parks
  2. Additional assistance to help businesses identify alternative export markets or supply chains
  3. Measures to promote domestic tourism

 

Further plans and measures will be developed with the affected industries and communities.

 

Administrative relief for certain tax obligations will also be provided, including deferred tax payments up to four months. The ATO will establish a temporary shop front in Cairns within the next few weeks to support the region's small businesses. Other initiatives to bring support to the communities are being considered. 

 

Household stimulus payments to drive cash into the economy

Tax-free $750 payment to social welfare recipients

A one-off, $750 cash payment will be made to pensioners, social security, veteran and other income support recipients and eligible concession card holders. Payments will be from 31 March 2020 on a progressive basis, 90% are expected to be made by mid-April.

 

The payment will be tax-free and will not count as income for Social Security, Farm Household Allowance and Veteran payments. 

 

There will be one payment per eligible recipient even if they qualify in multiple ways.

 

Casual employees able to access the Newstart 'sickness payment'

While not part of the stimulus package, the Prime Minister has stated that casual employees required to self-isolate or who contract the coronavirus will be eligible for a sickness payment (jobseeker payment) through Newstart. The normal waiting period for this payment will be waived. 

 

We'll bring you more details as soon as they become available.

 

More information:

Lifestyle Assets ATO Audit Target




Lifestyle assets continue to be an ATO audit target

The ATO has revealed it will request a further five years' worth of policy information from over 30 insurance companies
about taxpayers who own marine vessels, thoroughbred horses, fine art, high-value motor vehicles and aircraft.

The ATO expects to receive information about assets owned by around 350,000 taxpayers from 2016 to 2020 as part
of its data-matching program.

This information (provided by insurers) is intended to be used by the ATO as part of its compliance profiling activities.

For example, ATO Deputy Commissioner Deborah Jenkins said:

"If a taxpayer is reporting a taxable income of $70,000 to us but we know they own a three million dollar yacht then
this is likely to raise some red flags."

She clarified that the data will not be used to initiate automated compliance activity.

"Taxpayers selected for compliance activities are identified through other methodologies. The data is made available  
to our compliance teams to support their risk profiling of the selected taxpayers. Existence of an insurance policy may or
may not prompt the compliance officer to pursue a particular line of enquiry."

Aside from helping identify taxpayers who may be understating their income, the data from insurers may be used by the
ATO to identify taxpayers who have made capital gains on the disposal of certain assets but who have not declared this
to the ATO.

It will also be used by the ATO to identify incorrect claims for GST input tax credits where taxpayers are incorrectly claiming 
GST credits as if the (private) item was a business asset.

Additionally, SMSFs the ATO suspects may be acquiring lifestyle assets purely for the personal enjoyment of the fund's trustee
or beneficiaries are also likely to be looked at by the ATO.

Insurers are required to provide the ATO with policy information where the value of assets is equal to or exceeds the following
thresholds:

Marine vessels $100,000
Motor vehicles $65,000
Thoroughbred horses $65,000 
- Fine art $100,000 per item
Aircraft $150,000

Editor: If you feel that you may be targeted by this latest ATO data collection activity and are concerned about the implications,
please feel free to contact our office to discuss your individual circumstances.

Ref: ATO website, 18 December 2019