The Economic Stimulus Package: Instant asset write-off threshold increase explained
A key part of the government’s economic response to the coronavirus is to support business investment and cashflow by increasing the instant asset write off threshold and eligibility rules.
So, what is the instant asset write-off (IAW) and how can it help your business?
Claiming an immediate deduction
Put simply, the IAW provisions allow your business to claim an immediate tax deduction for the full cost of a business asset you buy. Normal depreciation requires you to deduct the cost against your business profits over several tax years.
Under the new rules, you can claim a tax deduction in the same financial year you purchase new or second-hand plant and equipment costing under $150,000.
The IAW is not a cash refund. You don’t get the amount you spend back from the ATO, but instead get the advantage of bringing forward a tax deduction you would normally receive over several tax years.
A simple example is a plumber who buys a new $16,000 trailer for his company. Using the IAW he can claim an immediate tax deduction of $16,000, which in turn reduces his business profit so he pays less tax.
Rules for the IAW
To claim the IAW, the total cost of the asset must be under the relevant threshold. This includes the cost of having the asset installed and ready for use.
Each asset must be under the threshold, but there’s no limit to the total amount your business can claim.
If your business is registered for GST, the IAW threshold excludes GST. Otherwise, the threshold includes GST.
From 12 March 2020, businesses with an aggregate turnover of up to $500 million are eligible for the IAW, up from $50 million previously.
Eligible assets for the IAW
What you can purchase ranges from furniture through to computers and IT equipment, that may be required to enable staff to work remotely.
Industry specific kit such as new tools for tradies, or POS devices and security systems for a retail store also meet the rules.
Although the IAW is generous, assets such as horticultural plants and in-house software are ineligible.
Watch out for the traps
To claim the deduction, your new asset must be fully installed and ready for use before the end of the financial year in which you lodge your claim.
If you are a sole trader, you also need to apportion any private use. For example, if you purchase a new car and use it for business purposes 70 per cent of the time, you can only claim 70 per cent of the cost.
You are not permitted to reduce the asset’s price with a trade-in or personal use apportionment to get under the current $150,000 threshold. For example, if your new equipment costs $210,000 and business use is 70 per cent (leaving a claimable amount of $147,000), you can’t claim the IAW as the original cost is still over the threshold.
If your business is structured as a partnership, it’s important to remember the partnership owns the asset – not the individual partners – so there’s no double-dipping. If a partner buys the asset in their own name and doesn’t qualify as a small business taxpayer personally, they can’t claim the write-off.
Using simple depreciation
If your business buys an asset valued over the IAW threshold, you can’t claim the immediate deduction. You can, however, allocate it to your general small business pool and use the simplified depreciation rules.
The general depreciation rules apply if you are ineligible or choose not to use the simplified rules, or if the ATO classes your business as medium-sized.
Using a general small business pool allows you to combine the business portion of higher cost assets and claim a 15 per cent deduction in the financial year you start using them, then 30 per cent each year after that.
Accelerated depreciation initiative
As part of the government’s coronavirus response, medium businesses with a turnover of less than $500 million can use accelerated depreciation rules to deduct 50 per cent of the cost of an eligible asset on installation. Normal depreciation rules apply to the balance of the asset’s cost.
In these unprecedented times, we are here to assist you. Please don’t hesitate to give us a call.
Making peace with the unknown
Life constantly challenges us with unknowns, yet some of these hit closer to home and harder than others in their impact.
The coronavirus is unprecedented in our lifetimes, so we are charting new territory in the world’s response to this crisis. The uncertainty around its far-reaching impact is creating fear for many around the globe, as governments act to minimise the spread of the virus.
Due to the fast-changing nature of the government response to this momentous challenge, there are significant unknowns. There are short term unknowns around the government’s evolving response to the crisis and you could be concerned about the stability of your work situation. And longer term about how will this impact you into the future? Perhaps you’re wondering when you will be able to retire as your super balance takes a dive? Will the economy and businesses survive the disruption? How will you be supported through this period?
You are not alone in experiencing these fears. As humans we like to deal with ‘knowns’ and plan accordingly, rather than be at the mercy of uncertainty and instability. Whether it’s something as big as the coronavirus or a smaller unknown, there are however ways we can become more comfortable with uncertainty.
Planning for the unknown
Planning for the unknowns sounds like a contradiction. After all, if we don’t know how, when and if we will be impacted, how can we plan for it? Yet planning for potential outcomes can help us feel more in control and be one less worry to deal with.
You don’t need to think of every possible eventuality, but given the challenges society is facing, consider what the implications mean for you and your family. What can you do to minimise the impact?
Then the next, possibly more challenging thing to do, is to accept that you can’t plan for all eventualities and acknowledge that there may be some things out of your control. Focus your attention on what you are able to have some control over and then look at narrowing the list down to what really matters most to you, letting the rest of the ‘noise’ dissipate.
Stay positive and engender connection
The situation is changing rapidly and it’s tempting to constantly monitor news feeds, as it can feel more empowering to feel like you know what is going on. Just be mindful of taking breaks from the updates if they are fuelling feelings of uncertainty. Step outside and enjoy a little fresh air, call a friend or just do something small that gives you a bit of a breather and a little perspective.
The societal impact of the coronavirus is huge and is having a significant impact effect on many of our lives. It’s important to remember that these changes aren’t necessarily permanent and that we are all in this together.
Connection is important in helping us feel grounded and supported during a period of uncertainty. This crisis is first and foremost a health and human crisis, so we need to be respectful of not only our own health, but those of others. We can help those who are more vulnerable. There are many good news stories arising of people assisting and connecting with their neighbours and those in need.
Understanding the impact on the markets
Markets have experienced a significant downward trend as the impact of the coronavirus continues to develop across the globe. This has had a significant impact on investments and more broadly on superannuation account balances.
While it is understandable to feel unsettled, consider your long term financial goals. Avoid making rash decisions based on fear, as this can crystallise your losses and put you on the sidelines for when the market recovers and as history shows, it always does.
Especially during this period of uncertainty, I hope you are keeping well and looking after yourself. We are here for you every step of the way. Don’t hesitate to get in touch if you need assistance.
JobKeeper: Salary relief throws lifeline to businesses
If you’re wondering how you will manage the enormous business challenges presented by the COVID-19 crisis, the Australian Government has announced unprecedented assistance to help businesses of all sizes manage their cashflow and retain their employees.
In a $130 billion assistance package announced on 30 March 2020, the government rolled out a six-month wage subsidy scheme designed to help employers retain or rehire their existing employees.
The new JobKeeper Payment of $1,500 a fortnight per employee will be paid to employers to help them, and their employees, survive the current tough trading conditions.
Eligibility for the JobKeeper Payment
The six-month JobKeeper Payment is made through the tax system and is available to small, medium and large businesses, and not-for-profits affected by the COVID-19 crisis.
The fortnightly payment is available regardless of whether your business is still trading, and your employees are working, or you have ceased trading and your employees have been stood down.
To be eligible, a small or medium-sized business with an annual turnover of less than $1 billion must have lost at least 30 per cent of its revenue since 1 March, over a minimum of a month-long period. For large businesses, the drop in revenue must be at least 50 per cent.
JobKeeper Payments can be used to help pay wages for full-time, part-time and long term casual staff employed for at least 12 months. Eligible employees must be aged at least 16 and be an Australian citizen or permanent, special category or Protected Special Category visa holder. Non protected PSC visa holders must have been in Australia for 10 or more years.
Employees made redundant since 1 March are still eligible for the JobKeeper Payment, provided you’re willing to rehire them.
The self-employed and businesses without employees are also eligible to apply.
Impact on employers and employees
The new JobKeeper Payment means many employers will be able to keep valued people on staff and not need to hire and train new employees when business conditions improve.
For employers, it’s important to note you won’t receive the first JobKeeper Payment until the first week of May, but it will be backdated to 30 March 2020. Subsequent payments will be made to you monthly in arrears by the ATO.
For employees, the new JobKeeper Payment replaces the previously announced JobSeeker Payment. If you have already applied for Centrelink support and your employer wants to rehire you, you will move onto the JobKeeper Payment.
Employees will need to inform Centrelink about their new income. You will only be eligible to receive a JobKeeper Payment from one employer, even if you have several jobs.
It’s also worth noting that it will be up to the employer if they want to pay super on any additional wage paid because of the JobKeeper Payment.
Applying for financial assistance
To receive the JobKeeper Payment, employers need to register and apply on the ATO website with information about their decline in turnover.
You will also need to provide information about your eligible employees. The Single Touch Payroll data held by the ATO can be used to pre populate your employee details.
Employers must ensure each of their eligible employees receives at least $1,500 per fortnight before tax, even if they normally earn less than that amount. Eligible employees must be notified that they are receiving the JobKeeper Payment and you will be required to confirm they remain engaged in order to continue receiving the fortnightly wage subsidy.
Employers must also continue providing information to the ATO on a monthly basis, including the number of eligible employees employed.
Businesses without employees also need to register online with the ATO. You must provide an ABN for the business, nominate an individual to receive the payment and their Tax File Number, and provide a declaration on recent business activity. If you are self-employed, you will need to provide a monthly update to the ATO declaring your continued eligibility. Monthly payments will be credited into your bank account.
Information in this article has been sourced from the Treasury website: https://treasury.gov.au/coronavirus/jobkeeper
5 tips to work productively remotely
In the current climate, many businesses are needing to make changes to accommodate staff working remotely. If you are able to work from home the ensuing changes to your work habits can be challenging to negotiate, however there are things you can do to ensure that you maintain productivity and motivation while you’re not in the office environment.
Here are five tips to help you effectively set up an office and work from home for what is looking like an extended period of time.
Create a clear working space
While it’s tempting to use your couch or bed as your ‘office’, set up your workstation at a table instead. Not only does this help you stay productive and focused on working rather than chilling, it also establishes clearer boundaries as to where work starts and ends. This can also signal to any family members also home that this space is where you go to work.
Whether you have the luxury of a spare room or just a small nook, ensure the space is clutter-free and well lit. Everything you need should be kept in this area so you don’t have to go searching for it.
Consider the ergonomics of your space
Just as working from your couch or bed isn’t great for productivity, it’s bad for your posture. This can lead to back pain, headaches and neck tension. You also want your wrists and hands to be supported.
Think about what your office space looks like and try to recreate this as much as possible. Use a pile of books or magazines to ensure that the top your laptop or monitor is at (or just below) your eye level. You can add a pillow as a backrest to your chair and a rolled up towel for lumbar support.
Create to-do lists and manage expectations
Studies have found remote workers tend to be more productive yet feel greater stress than those working from a traditional office. It can be tempting to up your output to prove to your manager or colleagues that you’re working hard while at home.
If you have a manager, check what the expectations are for the day or week, and be open about your ability to achieve these. As your manager can’t see if you’re struggling, it’s important to communicate. Team check-ins or group chats can help to stay across how everyone is progressing. If you manage a team, set up channels such as these to support your team.
To-do lists (whether through Trello, a similar online system or simply written on a notebook) can help you stay on track and focused.
Keep to set working hours as much as possible
Working from home tends to be more flexible. Without a commute, you can start work earlier in the morning and wrap up sooner. Depending on your role and whether you work in a team, you may need to keep the same hours as your co-workers.
If you set your own hours, avoid the trap of working all hours of the day. In the State of Remote Work 2020 Report, 18% of respondents said they felt unable to ‘unplug’. Having a desk away from your relaxation spaces can better delineate your ‘office’ and ‘home’, while your to-do list can help you allocate tasks to the next day when you need to switch off.
Look after yourself and your mental health
While remote work can improve workers’ mental health in certain situations, feelings of isolation are also common, especially if you’re unused to working alone. Staying connected to your colleagues, friends and family is important.
Make sure you take time away from your screen and give yourself lunch and tea breaks. Weather permitting, sit outside for your break, or call a friend or family member. As you’re less likely to get incidental exercise, go for a walk or run after you clock off or before you start, and stretch throughout the day (set a timer on your phone to keep to this) to relieve any tension.
Moving from a work environment to working from home is one significant change many are needing to make, as we work together in minimising the impact of the Coronavirus. Be gentle with yourself as you make the necessary adjustments to your routine, social life and work habits.
Making time for self-care in quarantine
From watching the news every hour to scrolling social media a little too much, it’s easy to get lost in the noise of what’s going on around us. And you’re not alone in this.
If you’ve found yourself in an extended state of self-quarantine, there are some simple steps you can take to protect your mental health, in addition to your physical health.
What is a quarantine?
Quarantine is a period of time where someone stays at home. It’s the next step in physical distancing to “flatten the curve,” or slow the rate of infection. Isolation – different from quarantine – is when someone who is waiting to be tested for COVID-19, waiting for their test results or has tested positive is secluded to prevent them from spreading the virus to others.
“No matter which situation you find yourself in, remember that taking care of yourself mentally and emotionally plays a big part in your overall health,” says Dr. Laura Maphis, a psychologist at Geisinger Medical Center.
It’s been shown that a period of just two weeks in quarantine can be linked with serious mental health issues, which can include:
- Post-traumatic stress disorder (PTSD) symptoms
Some of these may have long-lasting effects. “That’s why you should check in with yourself regularly,” says Dr. Maphis. “If you have a pre-existing mental health condition, make sure you continue your treatment and check-in with your doctor, letting them know if symptoms change or worsen.”
If your mental health worsens to the point you have thoughts that life isn’t worth living, please call 13 11 14 for Lifeline Australia.
How to practice self-care during a quarantine
It’s common and totally normal to feel afraid and stressed during a pandemic or outbreak. But taking time to step away from the noise and focus on yourself can help ease those feelings.
Make time to unwind
Make time for projects that make you happy. Spend time reading, writing, knitting, decluttering, painting, meditating or doing yoga — whatever you enjoy.
“If you like to cook, plan out your next few days of meals and cook healthy dishes for yourself and everyone in your house using what you have on hand. This will also challenge your creativity and help you fight boredom,” says Dr. Maphis. “But, if you’re sick, leave the cooking to someone else.”
Doing something with your hands can be a great release during a time like this. Just remember to practice good handwashing!
Exercise to promote good health
“If you’re stuck in your house, take time to move around a little,” says Dr. Maphis. There are plenty of free exercise videos you can do right at home and free trials to apps you can download to your phone.
“Ask your doctor first if you have any questions about your ability to exercise safely and consider low impact forms of exercises,” says Dr. Maphis.
Exercise of any kind helps boost and support the immune system. It’s also a great tool for managing anxiety and stress and will help you pass time throughout the day.
Be mindful to support your immune system
Mindfulness, which can be defined as present moment awareness, has been growing in popularity more and more each year, and now is a great time to try it out for yourself. Just five minutes of meditation each day can help you reset your mind and your perspective.
“Meditation and breathing exercises can help to slow your heart rate down and clear your mind. When practised regularly, it can buffer the effects of stress, which helps support your immune system,” says Dr. Maphis.
But you don’t have to be “mindful” in a meditative way if it doesn’t work for you. Taking a bath or reading a book – and staying off social media during these times – helps to clear your mind and relax.
Ways to be mindful include:
- Breathing exercises, focusing on each inhale and exhale
- Eating healthy meals, savouring each bite
- Meditating on a positive word (relaxation, ease or calm) or an image that makes you happy
- Intentionally connecting to an old friend (electronically, of course)
- Taking a bath, noticing the warm temperature and its effects on muscle tension releasing
Take breaks from the news
Taking breaks from the news and social media helps distance yourself, even a little, from what’s going on and avoid getting overwhelmed. When you’re spending time doing another activity, you’re automatically removing yourself from the barrage of news and social media that can be hard to avoid.
And, when you’re practising self-care, consider not posting it to your favourite social media channels to really embrace giving yourself a break from these outlets. It can actually feel empowering.
“Taking these steps to practise self-care will help a great deal to pass the time, and to feel like you’ve done something productive with it. Seeking reliable, up to date, and accurate information can help to avoid feeling overwhelmed by all of the information that’s out there,” says Dr. Maphis. “And by seeking reliable information from trusted sources, you’ll feel well-informed and less anxious.”
Remind yourself why
Remind yourself why you’re practising isolation or quarantine. It’s to keep not only ourselves safe but our older neighbours down the street, our parents and others we care about who may be extra vulnerable.
Thank yourself for doing such an honourable and selfless act, and keep your mind busy as much as possible.
What to do if you’re sick
No matter what you do to practice self-care, remember to avoid touching your face – especially your mouth, nose and eyes. Cover your mouth and nose with a tissue or the inside of our elbow when coughing or sneezing to stop the spread of viruses, like COVID-19, that are spread through droplets.
Keep an eye out for any symptoms in yourself and those around you. If you or someone you care for is feeling sick, experiencing fever, having difficulty breathing, showing signs of respiratory illness or symptoms of coronavirus, call your primary care doctor.