BUSINESS BULLETIN | SUMMER EDITION 2021

FEATURE – Receive Money for Hiring New Young Workers

Employers now have more incentive to employ workers under 35! The JobMaker Hiring credit legislation has now been passed into law!

This credit was part of the 2020-21 Budget, which will operate until 6 October 2022. It is designed to improve the prospects of young individuals getting employment following

the devastating impact of COVID-19 on the labour market.

 

Commencement

The scheme will be backdated to commence on 7 October 2020 and provide eligible employers with the following payments for up to 12 months for new jobs created for which they hire the following young workers:

  • $200 a week for hiring a worker aged 16 to 29 for at least 20 hours a week and
  • $100 a week for those aged 30 to

Although the scheme is slated to run for just 12 months, that period is the hiring period – not the payment period.

 

KEY DATES

21 DECEMBER

Due date for November monthly Activity Statements

28 JANUARY

Due date for Superannuation Gaurantee contributions

21 FEBRUARY

Due date for January monthly Activity Statements

28 FEBRUARY

Due date for quartley (Oct-Dec) Activiity Statements

Eligible employers who hire an eligible employee as late as the last day of the scheme (6 October 2021), may be eligible for hiring credits for the subsequent 12 months until 6 October 2022.

 

Employer Eligibility

The criteria are broad (e.g. having an ABN, being registered for PAYG withholding, being up-to-date with lodgement obligations, reporting through STP), however some employers are specifically excluded:

  • employers who are claiming JobKeeper
  • entities in liquidation or who have entered bankruptcy
  • commonwealth, state, and local government agencies (and entities wholly owned by these agencies)
  • employers subject to the major bank levy
  • sovereign entities (except those who are resident Australian entities owned by a sovereign

‘Additionally’ criteria

Key to the scheme is that employers must have hired additional eligible employees.

The additionality criteria for the first six months of JobMaker requires that there is an increase in:

  • the business’ total employee headcount (minimum of one additional employee) from the reference date of 30 September 2020; and
  • the payroll of the business for the reporting period, as compared to the three-months to 30 September

Treasury example – increase in headcount:

Lisa employs two new staff, Emma aged 28 and Jessica aged 32, who both start on 7 January 2021 and meet the employee eligibility requirements.

Angus resigns from his job at Lisa’s business, effective as at 7 January 2021. When claiming for the March quarter reporting period

(7 January 2021 to 6 April 2021), Lisa again compares her current situation to her baseline:

  • On 30 September 2020, her baseline headcount was 2 and her quarterly payroll

was $30,000.

  • On 6 April 2021, her headcount was 4 and her payroll for the reporting period was

$52,000.

For the March quarter reporting period, as her headcount is 2 above her baseline, Lisa can claim for the 2 additional positions.

Lisa notifies the ATO through STP of the commencement of Emma and Jessica on 7 January 2021, and that Angus was no longer employed as at 7 January 2021.

Eligible employees

These are those who commenced employment between 7 October 2020 and

6 October 2021; were aged between 16 and 35 years at the time they commenced employment; have worked an average of 20-hours a week for each whole week the individual was employed by the qualifying entity during the JobMaker period.

Additionally, the worker must have met the pre-employment condition which requires that for at least 28 of the 84 days (i.e. for

4 out of 12 weeks) immediately before the commencement of employment of the individual, the individual was receiving one of the following payments:

  • parenting payment
  • youth allowance (except if the individual was receiving thus payment on the basis that they were undertaking full time study or was a new apprentice) or
  • JobSeeker

We note that the new worker must be in a genuine employment relationship. For

example, ‘non-arms length’ employees will not be considered eligible employees. This

 

includes family members of a family business, directors of a company and shareholders of a company.

If you have hired new employees from October 2020 or are planning to do so in the next 12 months, ask your bookkeeper or accountant about how to apply for JobMaker.

 

FINANCIAL FUTURE – Estate Planning

There are few things more important than having your affairs in order.

Death can strike at any time. We all know this, right? Why is it then that so few of us have this stuff sorted? Maybe it’s because the subject matter doesn’t bear thinking about.

Take a different view. Peace of mind comes from knowing that your estate planning is in proper order and that your wealth will be passed on and protected as you intend. So rather than putting this off, “Be the Glow” and make it a priority.

The Big Questions

Here are a few questions to help you decide whether you might have some gaps that need filling in your estate planning:

  • Do you have a Will?
  • If you do, when was it last updated?
  • Could you (or your spouse) locate your Will if you had to?
  • Do you have a Power Of Attorney in place in case you were unable to make your own decisions?
  • If you and your spouse leave everything to one another in your Wills, have you considered what would happen in the event of your simultaneous death?
  • Do you realise that superannuation and family trusts don’t form part of your Estate and thus other strategies (besides a Will) are needed to properly deal with these?
  • Do you know that special, tax-effective structures known as Testamentary Trusts can be used to pass wealth securely to family members, but they are most effective when documented in your Will?
  • Have you properly considered who should be the Executor of your Will (sometimes the people closest to you, such as a spouse, may be in no fit state to play the role)?

If your affairs are not in order, talk to your financial advisor, who should at least be able to make a referral to see a specialist in this area.

CHRISTMAS PARTIES & GIFTS – The Tax

Truths

Christmas is traditionally a time of giving – including employers showing gratitude towards staff and clients/suppliers for their loyalty throughout the year. With the right approach, it is possible to enjoy some tax benefits out of your generosity, and also avoid Fringe Benefits Tax (FBT). But as always with tax, the landscape is layered with complexity. The following is a general summary of the tax treatment of Christmas giving.

Gifts to Staff

Non-entertainment gifts to staff (such as Christmas hampers, bottles of alcohol, gift vouchers, pen sets etc.), are tax deductible and you can claim GST credits, irrespective of cost. Note however that you can generally avoid paying FBT if you keep the gift under

$300. If this threshold is exceeded, FBT will apply. Therefore, be conscious of this

threshold when providing such gifts to staff this Christmas.

Entertainment gifts to staff (such as tickets to movies/theatre/amusement park/sporting events, holiday airline tickets etc.) which

are under $300 will not attract FBT, but are not income tax deductible, and you can not claim GST credits. If over $300, FBT will apply, but a tax deduction and GST credits

can be claimed. With FBT rate sitting at 47%, the tax deduction and GST credits available is unlikely to provide a better tax outcome than avoiding FBT by keeping the gift under

$300.

Gifts to Clients/Customers/Contractors/ Suppliers

No FBT is payable, irrespective of the type of gift and irrespective of cost. However, where a gift constitutes entertainment, no GST or tax deduction can be claimed. Thus, at least from a tax standpoint, it’s better to provide non-entertainment gifts to clients (Christmas hampers, bottles of alcohol, gift vouchers, pen sets) and, in doing so, enjoy a tax deduction and GST credits.

Christmas Parties

Instead of (or as well as) gifts, it’s quite common for employers to host a Christmas Party for their staff (often including spouses) at a restaurant.

Where this is the case, the total cost will generally be exempt from FBT provided the per-head cost (dinner and drinks) is kept to under $300 per person. This is known as the Minor Benefits Exemption. To enjoy this exemption the employer must

use the Actual Method for valuing FBT meal entertainment. The Actual Method is the default method for valuing meal

entertainment, and no formal ATO election is required to use this method. Under the Actual Method, an employer pays FBT (in the absence of an exemption) on all taxable meal entertainment provided to employees and their associates such as spouses.

The downside of using the Minor Benefit Exemption is that the meal entertainment is not tax deductible, and nor can you claim a GST credit.

This Minor Benefit Exemption is not available if you elect to value your meal entertainment under the alternative 50/50 Method. Under this method, you pay FBT on only 50% of

all taxable meal entertainment provided to employees, spouses AND clients, contractors, customers etc. irrespective of

the cost. Likewise, you can only claim a 50% income tax deduction and 50% GST credits on such meal entertainment. However as stated earlier, with the FBT rate now at 47%, the 50% tax deduction and 50% GST credits available under the 50/50 Method is unlikely to provide a better after-tax result than the Actual Method where no FBT is payable.

The “take-home message” is that if like many employers the only social functions you host for employees during the year are a

Christmas Party (and perhaps the Melbourne Cup), be conscious of keeping the per-head cost under $300. By doing so, you may be able to exempt the entire cost of the party.

 

 

 

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