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Australian Capital Territory Budget 2020–21 Summary

Source: ACT Government - Budget 2020-21

The budget outlook highlights:

  • The 2020-21 Budget has been framed in the context of the evolving challenges posed by the COVID-19 pandemic.
  • The ACT has positive net worth in 2020-21 equivalent to 38.7 per cent of Gross State Product.
  • Job vacancies have also grown strongly, supporting the expected 4 per cent increase in employment in 2020-21.
  • For 2020-21, the Headline Net Operating Balance deficit will be $603 million, while net debt will be $4.665 billion. The Headline Net Operating Balance deficit is $432.5 million higher, and net debt is $884.5 million higher, than forecast at the time of the 2019-20 Budget Review, which was released prior to the pandemic.

The ACT economy:

  • More than 10,000 jobs were lost in the ACT when necessary health restrictions in response to the pandemic were first put in place, with the services sector most affected. As restrictions have eased and private sector economic activity has picked up, employment has now recovered to around pre-COVID levels, although the recovery has been uneven across industries.
  • The ACT’s unemployment rate of 3.7 per cent and our underemployment rate of 6.0 per cent in December 2020 are the lowest in the country, while our participation rate of 72.2 per cent is the second highest. Job vacancies have also grown strongly, supporting the expected 4 per cent increase in employment in 2020-21.
  • While the ACT’s population grew by 4,800 people, or 1.1 per cent, in 2019-20, restrictions and disruption to international travel are expected to have significant implications for net overseas migration in the short and medium term, slowing our population growth to an average of fewer than 3,000 people per year over the next four years.

The 2020-21 Business recovery efforts:

  • The cost of supporting the ACT to continue to recover from the impacts of the COVID-19 pandemic is anticipated to be $603 million in 2020-21, reducing to deficits of $475 million in 2021-22, $406 million in 2022-23, and $369 million in 2023-24.
  • Businesses are supported with payroll tax waivers and deferrals, waivers of licence fees, residential and commercial rates rebates, and utilities bill rebates.
  • 15 month waiver for food business registration and outdoor dining fees; and reducing liquor licensing fees by 50 per cent for an additional 12 months
  • Recovery programs including $150 million for the Sustainable Household Scheme, $100 million for the Big Canberra Battery and $50 million for the Vulnerable Household Energy Support scheme to encourage the shift to zero-emissions vehicles, and increased funding to strengthen housing and homelessness services.
  • The Government will extend the food business registration fee waiver provided as part of the COVID-19 Economic Survival Package for a further year until 31 March 2022. The outdoor dining permit fee waiver will also be extended for a further year until 30 June 2022.
  • Commercial property owners who operate businesses from premises they own will also be eligible for assistance if they have been negatively affected by COVID-19, until 31 January 2021.
  • The Government will establish a Better Regulation Taskforce to review the current business environment in the ACT and begin pursuing reforms to support Canberra’s recovery from the COVID-19 pandemic and long-term economic growth. The Taskforce will also lead the ACT’s contribution to nation-wide regulatory reforms.
  • The Government will provide direct finance to businesses to help develop COVID-safe tourism in the ACT. Matched funding will be provided to applicants who can demonstrate they will undertake new investments that will result in a positive return to the Territory.

Continue reading the full Budget 2020-21

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Five Ways to Effectively Manage a Business Grant

Author: Harry Hoang

During the pandemic, after putting in efforts and time to prepare for your JobKeeper or Cashflow Boost grant application, there is nothing better than receiving the news that your work has paid off; your business got the grant!

Before you can celebrate the great news, you need to make sure you are prepared to use the money well. Government grant is an essential part of every small and medium sized businesses, but effective grant management is a skill that takes time to develop. Economic support packages are managed and audited by ATO. However, there are millions of dollars were provided to businesses without any check & balancing process in place from both Government and business sides. In some cases, acquittals of government funding are relying on manual process or external audit parties.

In this article, we share some tips to manage the grant money efficiently and discuss why businesses owners need to understand the importance of an efficient and transparent grant management solution.

Understand your responsibilities

  • Do not assume that the Government is giving away money means that you can do whatever you like with the cash. You should check the grant funding terms & conditions that you have agreed to make sure you have a sufficient level of diligent financial record-keeping process to comply with the terms & conditions, when it comes to audit time.
  • Do not confuse purposes & objectives of one relief program with those of another grant. Each of the economic support programs has its distinctive purpose to aid your business. Make sure that you don’t try to be too creative with free money.

Treat your grant as a project

We strongly suggest that you treat each government funded programs you receive as a project. You should do a budget scoping before submitting your plan and budget projection to request for funding. It is important that you implement the proposed scope & budget to your financial system to monitor the progress closely during the grant period.

You should not wait to start working on acquittal until the deadline is approaching. Planning weeks earlier and collecting data as you go with a financial system that can provides your acquittal data in one click.

Engage with your stakeholders

You should communicate with your staff and suppliers who are working under grant-related projects so they are aware of their own budget limits and obligations. This to avoid overspending and human-made errors in your accounts. The most common mistakes that we have encountered in managing Government funding are caused unintentionally, however in the time of difficult economic conditions, it is in your best interest to prevent such mistakes to occur.

Pay attention to the advice from your auditor

Some of the current Government funding programs do not require financial statement audits so most organisations can get their accounts reviewed by a CPA/CA practitioner. However, we strongly believe that the value of auditing/accounts review is beyond compliance. Business owners should pay attention to the recommendations from auditors. You can improve your accounting practice, enabling a good business profile with the ATO in the future.

Implement an automated financial system

Financial data automation and security should be the top priorities for funding recipients. Implementing a more automated accounting process with higher security is the best preventive way to avoid frauds. Businesses are using automated system such as:

  • Receipt Bank for bills management;
  • Xero for bookkeeping, bank feeds, reconciliations and batch payments;
  • ApprovalMax for approval automation of accounts payable and accounts receivable;
  • LastTick - Our own banking audit tool to match financial data (BSB, account number, account name) before seeking online banking authorisation from our clients when processing payments on their behalf.

If you are interested in a business grant management solution such as R&D, EMDG or other business relief grants, please contact Tailored Accounts for a chat with our experts.

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How to avoid common Cashflow Boost Grant Application mistakes?

Up-to-date financial information and bookkeeping are vital if you wish to receive any Government support. Without a set of reconciled and tidy books, your compliance is not ready and, as a result, your business is unlikely to become eligible for any government support.

Running a business is already a challenging talk, running a business during COVID-19 is like riding a bicycle up a hill! Fortunately,  we are in Australia where the Government is very efficient in terms of providing lifesavers packages like Cashflow Boost or Jobkeeper. We have spoken to our friends who work in other parts of the world where there is almost no financial support provided to them, other than a small amount of tax savings! However, even here in Australia, we continue to see businesses who have missed out on all of the financial support from the Government due to a lack of compliance with the Tax Office. 

This article shares real mistakes we have seen over the past six months:

  • Missed the active ABN test for Cashflow Boost. We have seen at least five businesses who came to us who were not entitled to Cashflow Boost due to their late lodgements of either their tax return in 2018-2019 or BAS during 2019-2020 financial years. Lodging tax returns and BASs late are the most frequent mistakes we have seen in Australia. However, on a normal day, the worst aspect is that you will receive a penalty and interest from the ATO. In this case, missing $100k support from Cashflow Boost really hurts. The $100k cash support is tax-free, so it is worth at least $130k gross earning! There are some circumstances in which we can argue with the Tax Office to prove that our client has an active ABN but 9/10 times the ATO is not in favour of businesses who don't meet these basic compliance requirements! 
  • No STP compliance, no Jobkeeper. In some industries like retail and hospitality, small businesses still pay their staff in cash and get accountants to worry about super and payroll later. The ATO strictly states no to many Jobkeeper applications who do not have good payroll record keeping. There are a number of Jobkeeper tests to prove that you began recording your employees in your books before the cut-off date 12th March or 1st July, if you cannot provide evidence like payslips or EFT transfers then your employees are not eligible!
  • Incomplete turnover books that make it impossible to test. These days, there are still businesses who don't have any form of record-keeping for their sales. We see businesses who are selling goods in the open market, who mostly use cash and keep no record of their sales. Most of them are not registered for GST but do not forget you still need to keep records for tax return purposes. The turnover test requires us to go back 12 months so even if we try to help reconstruct turnover for the current testing period, it is almost impossible to go back 12 months without any evidence!
  • DIY Jobkeeper testing can lead to failed results without seeking a second opinion from experts. I have written an article (Part 1 & Part 2) on this, however, it is still a very common practice! Jobkeeper testing is complex, self-assessment tests will never get you the exact results.

Compliance is probably the least important in your daily priority tasks. Businesses manage to get their compliance up to date to keep them out of trouble. However, during this pandemic, compliance is a lifesaver! It is always worth it to pay someone with experience to take care of all your problems and concerns during good times, but also to help keep you navigate the difficult times!

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Common mistakes that made businesses think they failed the JobKeeper 2.0 test (Part 1)

JobKeeper (JK) 1.0 was a big challenge for us as it involved a new set of complex laws that required tedious documentation and reconciliation to ensure everything was executed smoothly! JobKeeper 2.0 is even more challenging because many businesses have to complete both JK 1.0 and 2.0 tests.

Since the release of JK 2.0 rules by the Australian Tax Office (ATO) and the alternative tests, our team has been working tirelessly to make sure our clients are entirely confident of whether or not they are going to receive JK payments for the next three months. The good news is that over 80% of our clients who were eligible for JK 1.0 also qualified for JK 2.0, however over 50% of the JK 1.0 participants that were qualified via alternative tests.

The reason for sharing this article is that we continue to hear business owners say they won’t qualify for JK 2.0 after doing the test themselves. As mentioned above, the tests involve complex sets of rules that require substantial accounting knowledge and experience to understand. In my opinion, it takes between one and four hours to determine if a business is qualified or not. There are fewer hours required for businesses who passed the basic test, while far more hours are required for those that have to go through all 26 sets of tests. So if you doubt your DIY test result, you should speak to one of our accounting staff, we often do the test for no cost!

Here are common misunderstandings that cause false test results:

  • I can use the test kit provided by XERO to work out if I am qualified or not. 

This is very wrong! XERO provides a quick test kit, but I would not recommend anyone use it unless you are simply after a quick result and plan on going through the rest of the test later. The XERO test kit does not take into account various factors that could give you the wrong result. For example, if you posted a journal to an income account and ticked the box that includes this journal into a cash report, it is reported as GST turnover in a XERO report. This result could give you the wrong figure for JK GST turnover testing purposes. Further, there is no alternative test provided.

  • As long as my books are completed up to 30th September, I am ready to do the test.

This is only partly right, there are a series of checks to make sure your books are ready for JK tests. Here are some tips:

  • First, you need to determine if your BAS is on a cash or accrual basis. If you are on cash (as are most small businesses) then you have to make sure your bank reconciliations are done with no outstanding or unreconciled transactions for the periods that you are testing and for the reference period (e.g. July - September 2019). 
  • Re-do your BAS for the reference periods to make sure that your current data matches with the BAS that was lodged with the ATO (access via the ATO portal). Periods that you need to check: July - September 2019, April - June 2010 and December - February 2020. For some other tests, you also have to check from March 2019 until June 2020.
  • When going through the GST audit reports for all the BASs above, ensure you check all transactions coded with the following GST code: GST Free Income & BAS excluded. Keep in mind that some of these transactions could be fine for BAS purposes but will need to be checked for JK turnover purposes.
  • Go through the GST turnover definition and remove any income that shouldn’t be accounted for as GST turnover. Keep in mind that some of these income streams could be reportable in G1 as your BAS turnover, but should be excluded for JK 2.0 GST turnover. For example, an ACNC registered organisation who receives Government funding that is considered G1 should be manually taken out for the purpose of this test. Another example could be client reimbursements, some of these transactions could be coded as GST free income and hence reported in G1, however, they should be excluded from the JK turnover test. 
  • Donations are another ledger that needs to be checked carefully. Finally, if your business is exporting, you have to include all export sales to your JK turnover test. Whereas they could be reported differently in your BAS turnover.
  • Check all manual journal transactions when going through GST audit reports for all BASs above. Some of these transactions could be excluded from JK turnover testing purposes.
  • If you are doing the books but not doing Accounts Receivable, you need to double-check with the Accounts Receivable team to make sure they have finished all invoices/credit notes for testing for the reference periods mentioned above.
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End of Financial Year Tax Tips For Individuals 2019-2020

The following tax planning measures should be considered in respect to your own individual circumstances. For specific guidance please refer to the ATO website or consult your Tailored Accounts accountants.

End-Of-Financial-Year Tax preparation often seems a bit daunting for many people. The COVID-19 outbreak this year has generated a range of impacts on the community and individual well-being. Tailored Accounts will help you overcome the burden of individual tax return complexities. The following tips provide a comprehensive list of important items for your coming tax return.

  • Salary Sacrifice Arrangements

If employed, you may wish to review your remuneration arrangements with your employer and forego future gross salary in return for receiving exempt or concessionally taxed fringe benefits and/or making additional superannuation contributions under a valid salary sacrifice arrangement.

Please review your contributions including Superannuation Guarantee (SG) and Salary Sacrifice to assess whether you have over/under contributed. It is now a good time to adjust your contributions.

  • Additional Superannuation Contributions

Voluntary superannuation contributions would help grow your super balance quicker and reduce your personal tax liabilities.

  • Work-Related Deductions

For employees who are working from home during the period 1 March to 30 June 2020, the ATO is allowing a temporary simplified method of calculating deductions for additional running expenses. There are 3 alternatives including:

  1. 80 cents per hour for all additional running expenses incurred after 1 March 2020 until 30 June 2020; or
  2. 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture, plus the work-related portion of phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device; or
  3. The actual work-related portion of all running expenses, which will need to be calculated on a reasonable basis.
  • First Home Super Saver (FHSS) Scheme

The FHSS scheme essentially allows an individual to make additional voluntary salary sacrificed superannuation contributions or after-tax contributions to a complying superannuation fund from 1 July 2017 up to a maximum amount of up to $15,000 per year (and $30,000 in total) which can be withdrawn to help finance a first home deposit from 1 July 2018. In addition, where the buyer’s partner also has never owned real property, the couple can effectively withdraw an amount of up to $60,000 to jointly fund a home deposit.

  • Early Access To Your Superannuation

You may be able to withdraw up to $10,000 from your superannuation balance in Financial Year 2019/20 and a further $10,000 in 2020/21. You do not need to declare those amounts in your tax return, in other words, they are tax-free. In order to be eligible, you must pass one of the following tests:

  1. You are unemployed; or
  2. You are eligible to receive a JobSeeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
  3. On or after 1 January 2020:
  • You were made redundant; or
  • Your working hours were reduced by 20 per cent or more; or
  • If you are a sole trader and your business you suspended or there was a reduction in your turnover of 20 per cent or more. 

If you are unsure of your current tax status or need assistance and advice for your EOFY preparation, please contact Tailored Accounts for a 20-minute of free consultation. Alternatively, you can access the Tailored Accounts - Sharing Is Caring Page for a free download of an individual cashflow assessment plan. 

Tailored Accounts - Sharing Is Caring Page

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End of Financial Year Tax Tips For Business Owners 2019-2020

This information is intended as general guidance only.  For specific guidance please refer to the ATO website or consult your Tailored Accounts accountants.

Uncertainty about the continuing spread of the noble coronavirus makes people fear for their health and their lives. If you are doing business in one of the industries, which are most susceptible to health and economic problems, such as tourism, food services, retail, or healthcare, the pandemic has struck your disproportionately hard. Under high uncertainty, funding and immediate government grants have been made available for eligible businesses to navigate the road to recovery. This End-Of-Financial Year Tax Tips will help you reach out and effectively leverage a range of existing support measures for business survival and growth.

Covid-19 Stimulus Measures

The government released a number of economic measures in response to COVID-19. Some of them may impact your FY 2020 tax return. 

  • Enhancing the instant asset write-off

The cost threshold for which entities can access an immediate deduction for depreciating assets and certain related expenditure has been increased from $30,000 to $150,000 for the period 12 March 2020 to 31 December 2020. The turnover threshold of businesses eligible for the instant asset write-off during this period has also been increased to include businesses with an annual turnover of less than $500 million (up from the existing cap of $50 million).

  • Backing business investment

Entities with an aggregated turnover of less than $500 million in an income year who do not use the simplified depreciation rules for small business may be eligible for accelerated depreciation if the entity starts to hold the asset and the asset was first used or installed ready for use for taxable purposes between 12 March 2020 and 30 June 2021.

The tax implication on received stimulus payments:

  • The Cashflow boost you have received will be treated as non-assessable, non-exempt income and is therefore not taxable to the entity. However, JobKeeper payments received are assessable income of the entity. Deductions for payments to employees are available provided the general requirements for deductibility are satisfied.

Other tax-saving tips

  • Super Contribution

All contributions which are required to be received by the superfunds by 30 June 2020 need to be scheduled for payment within ClickSuper by 4 PM AEST on Monday, 24 June 2020.  Superannuation contributions paid after this date may or may not be received by the superannuation fund by 30 June 2020. 

  • Review your Debtors

Review your aged receivables and write off any recoverable debts before 30 June 2020. The bad debt written off can be claimed as a tax deduction for the 2020 financial year. 

  • Pre-pay your expenses

Small business entities may be able to prepay expenses and claim an immediate deduction in the financial year in which they are paid. 

  • Trust resolution

Document and sign the trust distribution resolutions before 30 June 2020.

JobKeeper tips

If your business was not eligible for the JobKeeper grant during the March-May period, it is recommended to re-assess your JobKeeper eligibility for the period of June-August. 

Tailored Accounts is committed to supporting businesses during this critical time. Please contact us for JobKeeper, EOFY, Tax and Advice supports. Our expertise and experience will put your business in the best possible position for sustainable success. 

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