The Homebuilder Program
The Government has announced the new HomeBuilder program to support jobs and boost demand in the residential construction sector at a time when the construction industry is facing extreme uncertainty.
Prime Minister Scott Morrison says this will drive a “tradie-led recovery” of the economy.
HomeBuilder will provide all eligible owner-occupiers with a grant of $25,000 to build a new home or substantially renovate an existing home.
The grants are open to singles earning less than $125,00 a year, or $200,000 per couple. They can be used for new homes valued up to $750,000 including land, or renovations worth between $150,000 and $750,000 for renovating an existing home with a current value of no more than $1.5 million.
The money can’t be used on investment properties or to build things outside the house such as pools, spas, tennis courts, sheds or garages and the works are to be undertaken via a licensed builder.
The program is expected to provide around 27,000 grants at a total cost of approximately $680 million.
The government anticipates the program will support the 140,000 direct jobs and another million related jobs in the residential building sector.
The grants are available from 4th June and will run until the end of 2020. Construction must be contracted to commence within three months of the contract date.
Travelling after the Covid-19 crisis
It might feel a little bit early to be thinking about where to travel as we are emerging out of the Covid-19 crisis. The truth is, however, that after such a climactic first half of the year, it doesn’t hurt to think about getting some well-deserved time away from home. And of course, it never hurts to plan well ahead, so when the green light comes on, you’re ready to make the most of a Covid-normal world.
So, while it’s not quite yet time to pack your bags and set off on the trip of a lifetime, here are some potential destinations to think about when we finally tackle the Covid-19 crisis!
Over in the Southern Hemisphere, an escape to New Zealand is looking as good as ever. Countries are starting to discuss the idea of “travel bubbles”, so as an Aussie, it might soon be a great time to finally explore your neighbour. Later in 2021 when country borders open up for all, New Zealand holds plenty of appeal for its isolated escapes where crowds aren’t an issue.
Botswana is one of the African nations that have been least affected by Covid-19, thanks to a rapid response to close borders and enforce a nation-wide lockdown. Countries who have limited the spread and acted efficiently will be the popular first choice for travellers who are nervous crossing borders, but desperate for an escape. There are many great lodges in the Okavango Delta and the Kalahari Desert that are isolated and offer full-board for travellers.
If you have long wanted to experience a safari, South Africa is still one of the best places to do so. There are plenty of great safari camps to choose from across the country, with most of the high-end camps located in the Kruger National Park and nearby Sabi Sands. Gathering some friends and renting out an entire villa looks more enticing than ever!
If you plan to visit Europe and explore off the beaten path, now is as good a time as ever to plan for a trip to central Europe. Some of the most popular cities and towns like Hallstatt and Salzburg were once overcrowded by tourists, but are now enjoying a quiet oasis from all the tourist traffic. The immediate time after Covid-19 when it is safe to travel again will be a great time to discover these once-crowded destinations all to yourself.
Another great destination in Africa for guaranteed isolation is an escape to Namibia. The sand dunes of Sossusvlei are incredibly calming, especially from the suites at AndBeyond Sossusveli. These kinds of isolated escapes are sure to see a rise in popularity with many travellers opting for outdoor adventures instead of busy cities.
One of Australia’s best-kept secrets lies a two-hour flight off the Eastern coast of Sydney and it is named Norfolk Island. This quiet oasis would make the perfect escape in 2021, especially for Aussies who are looking to get a sense of Australia without travelling too far from home. There are flights on certain days of the week and limited accommodation on the island, so be sure to plan in advance.
So, plenty of places to think about travelling to after we come out of this crisis. Remember, while it’s great to think about the potentials here, it’s also vital that you think about safety for yourself and others. So, while planning can start now, make sure to keep updated about the crisis before you pack your bags.
Article by Brooke Seward at World of Wanderlust
How Covid-19 changes tax time
As this financial year draws to a close, it will be viewed as a year like no other. COVID-19 (coronavirus) has impacted everybody’s life, albeit in different ways for different people.
For some, staying at home has meant you have greater savings; for others, the virus has meant lower wages or even the prospect of unemployment for one or more members of the family.
Whichever side of the equation you fall, end of financial year planning has never been more important. Traditionally it marks a time when you can stop and assess your current situation and make plans for the future. That hasn’t changed but your circumstances may well have.
If you are in the fortunate position of having saved more money, you could consider making extra contributions to your super. This could take the form of voluntary contributions, spouse contributions, co-contributions or carrying forward any unused contributions from last year.
As superannuation is concessionally taxed, it makes sense to make the most of this environment.
Using the unused contributions rule, say you only made $20,000 in concessional contributions in the 2018-19 financial year, then you have $5000 in unused contributions you could make this current year. This means you could contribute a total of $30,000 in this current year ($5000 unused contributions plus the annual contributions limit of $25,000) as long as your super balance is less than $500,000.
Or you might consider making a co-contribution to your fund. If you earned $38,564 or less this financial year, then you could contribute up to $1000 to your super as a non-concessional payment and the government will match it with a contribution of up to $500. That’s a handsome return on your investment of 50 per cent. The government’s co-contribution gradually phases out once your income reaches $53,564.
If on the other hand you have lost some or all of your income and have fallen on financial hard times, you may be eligible to withdraw $10,000 from your superannuation before the end of this financial year and then a further $10,000 in the first quarter of the 2020-21 financial year.
This will have an impact on your final retirement balance, but it may be of considerable help in your current situation. It’s important to weigh up carefully the pros and cons of such a move.
Of course, reduced income will mean you may well benefit from a tax refund as you may not have worked the full year or not at the rate you began the year.
When you are calculating your expenses for this current financial year, also remember that there are expenses associated with working from home such as mobile and internet costs, electronic device purchases and stationery costs.
The Australian Taxation Office has a quick formula which will allow you to claim 80c for every hour worked at home or else you can choose to calculate the actual amount yourself. This may end up giving a better result but could be more time consuming. The volatile share-market may also mean that you have some capital gains or losses that you can offset against your taxable income.
For retirees, the coronavirus may also have put a dent in your income due to share-market losses or reduced rental income from investment properties.
To ease the pressure, the Government has moved to cut the minimum drawdown requirement on superannuation pensions by 50 per cent for both this current financial year and next year. If you are in a position to take advantage of this drawdown reduction, then it may go some way to maintaining your retirement savings.
Of course, the rule of bringing forward expenses into the current year and deferring receipts into the following year still holds. For instance, if you have insurance premiums to pay and can afford it, consider making them up to 13 months in advance in the current year.
Donating to charity is also something to consider, particularly when there is so much need for financial assistance in the community this year. All donations to registered charities are tax-deductible.
If you want to know how to make the most of your end of financial year planning this year, please contact us to discuss.
Timing the economic reboot
After successfully navigating our initial response to the COVID-19 (coronavirus) health crisis, backed up with $285 billion in government support to individuals and businesses to keep the economy ticking over, thoughts are turning to how to get the economy back on its feet.
It’s a huge task, but Australia is better placed than most countries. Pre-pandemic, our Federal Budget was close to balanced and on track to be in surplus this financial year. Economic growth was chugging along at around 2 per cent.
In his Statement on the Economy on May 12, Treasurer Josh Frydenberg gave an insight into the extent of the challenge ahead. He announced that the underlying cash deficit was $22 billion to the end of March, almost $10 billion higher than forecast just six months ago. And that was before the $282 billion in support payments began to flow into the economy.
Economic forecasts are difficult at the best of times, but especially now when so much hinges on how quickly and safely we and the rest of the world can kick start our economies.
The International Monetary Fund (IMF) is forecasting the world economy to shrink by 3 per cent this year. To put this in perspective, even during the GFC the contraction was only 0.1 per cent in 2009.
In Australia, the government forecasts growth will fall by 10 per cent in the June quarter, our biggest fall on record. If we manage a gradual economic reboot, with most activity back to normal by the September quarter, the Reserve Bank forecasts a fall in growth of 6 per cent this year before rebounding by 7 per cent in the year to June 2021.
Even if we pull off this relatively fast return to growth, it will take much longer to repair the budget.
Economists have recently reduced their forecasts for the budget deficit after the JobKeeper wage subsidy program came in $60 billion under budget. However, they are still predicting our debt and deficits will reach levels not seen since World War II.
For example, Westpac chief economist, Bill Evans forecasts a budget deficit of $80 billion this year and $170 billion next year. AMP’s Dr Shane Oliver also expects the deficit to peak at $170 billion next financial year.
While polling shows most Australians approve of the way the federal and state governments have handled the crisis, many are beginning to wonder how we as a nation are going to pay for it.
The key to recovery will be getting Australians back to work; for those who have had their hours cut to return to full-time work, and those who have lost jobs to find work.
It’s all about jobs
The unemployment rate is forecast to double to 10 per cent, or 1.4 million people, in the June quarter with total hours worked falling 20 per cent. After the June 2020 peak, the Reserve Bank expects a gradual fall in the annual unemployment rate to around 6.5 per cent by June 2022.
With the government announcing the easing of restrictions on movement in three stages by July, Treasury estimates 850,000 people would be able to return to work.
Treasury also estimates that this easing of restrictions will increase economic growth by $9.4 billion a month. However, this outcome depends on us following the health advice. The cost of re-imposing restrictions could come at a loss of more than $4 billion a week to the economy.
The growth strategy
Looking ahead, Treasurer Frydenberg made it clear he expects the private sector to lead job creation, not government. If the past few months are anything to go by, Australians have risen to the challenge.
From working from home and staying connected via Zoom, to restaurants pivoting from dine-in to takeaway and manufacturers switching to production of ventilators and hand sanitiser, individuals and businesses have been quick to adapt and innovate.
This is likely to be one of the positive legacies of the pandemic and should help our economic recovery in the years to come.
If you would like to discuss your finances and how to make the most of the recovery, give us a call.
Unless otherwise stated, figures have been sourced from Treasurer Josh Frydenberg’s “The economic impact of the crisis” statement https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/speeches/ministerial-statement-economy-parliament-house-canberra
Tax Alert June 2020
With COVID-19 dominating everyone’s thoughts, employers are being offered a brief window of opportunity to get their tax affairs in order with the new Superannuation Guarantee (SG) amnesty. There is also a range of virus-related assistance on offer to help affected business and individual taxpayers.
Here’s a roundup of some of the latest tax developments and support measures.
New amnesty for unpaid SG contributions
Employers are being offered a one-off opportunity to disclose and pay any unpaid Superannuation Guarantee (SG) amounts stretching back to the beginning of compulsory super, with legislation for the long-awaited SG amnesty finally in place.
The amnesty (which runs until 7 September 2020), allows employers to lodge an SG amnesty form to disclose super contribution shortfalls for their employees for any quarter from 1 July 1992 to 31 March 2018.
To encourage employers to take advantage of the amnesty, it will not incur the normal interest, administration charges and non-payment penalties of up to 200 per cent. Employers can also claim a tax deduction for any SG payments, provided they are made by the September 7 cut-off date.
As legislation for the amnesty doesn’t allow any deadline extensions, the ATO has announced it will offer deferred payment plans to eligible businesses affected by COVID-19.
This brief amnesty also comes with a warning. The regulator has reminded businesses that the new Single Touch Payroll (STP) reporting system gives it more information on payment of employee entitlements and this will increasingly be used to identify non-compliant employers in future.
Assistance for taxpayers affected by COVID-19
In light of the challenging business conditions created by the coronavirus lockdown, the ATO is offering measures to assist taxpayers experiencing financial difficulties.
Unlike the bushfire tax relief, COVID-19 assistance measures will not be automatic. If you are affected, the ATO is encouraging you to get in touch to discuss relief options and a tailored support plan.
Support may include deferring payment of your PAYG instalments, business activity statement (BAS) liabilities and assessment amounts for income tax and excise, by up to four months.
If your business is on a quarterly reporting cycle, you may also opt into monthly GST reporting to get quicker access to your GST refunds. You may also be permitted to vary your PAYG instalment amounts to zero for the March 2020 quarter and claim refunds for instalments you paid for the September and December 2019 quarters.
However, employers still need to meet ongoing SG obligations for their employees.
The ATO will also work with individuals experiencing financial hardship and may offer tax relief if you are in serious and exceptional circumstances, such as being unable to pay for food or accommodation.
Fringe benefits tax-deferred
Due to the challenges created by the COVID-19 lockdown, the ATO has also deferred lodgment of all 2019–20 fringe benefits tax (FBT) annual returns.
This means your business is not required to lodge your annual return or pay your FBT liability until 25 June 2020.
Directors liable for unpaid tax
Company directors need to remember that from 1 April 2020 they are personally liable for their company’s unpaid GST, luxury car tax or wine equalisation tax liabilities.
The new Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2019 has extended the existing director penalty notice (DPN) regime, which is designed to protect employee entitlements such as PAYG withholding and SG contributions.
If you are a company director on the final day of a tax period or GST instalment quarter, you become personally liable for any GST remaining unpaid by the due date. If your company does not lodge a return, the ATO can estimate the amount of unpaid tax.
Claims for residential rental properties
The ATO has provided landlords with new guidance on tax deductions if they have tenants who are temporarily not paying rent, or paying reduced rent, due to COVID-19.
If landlords are still incurring normal expenses on the property, they can continue to claim these expenses in their tax return.
End of financial year checklist
It always takes some planning to get your finances in order for the end of financial year, and this year may look a little different, come June 30. The COVID-19 pandemic may have impacted your circumstances and therefore your situation could be looking different to normal.
Perhaps you have been working from home, your wages may have reduced or been boosted by government payment support, or you have had to make major financial decisions as a result.
Here are things to consider to ensure you’re on the front foot come June 30.
Working from home deductions
Whether you’re used to working from a home office or have been forced to due to COVID-19, it’s good to be across what you can claim on tax.
Given that working from home is a new situation for many, the Australian Taxation Office has made it easier to claim deductions. You won’t have to submit a detailed logbook, as you can now claim a deduction of 80 cents for each hour you work from home due to COVID-19. Therefore, you only need to keep track of the hours you work from home, along with proof of your expenses.
There are a couple of provisos with this ‘shortcut method’: the work needs to be fulfilling your employment duties (not simply checking your email every now and then) and you must have incurred additional deductible running expenses as a result of working from home. These home deductions must be directly related to earning your income – as tempting as it is to claim Netflix as a research tool, unless you’re a television critic this is unlikely to fly!
You need to keep records of your expenses and be able to show that you, not your employer, has paid for them. You must also include any allowance you receive from your employer as income on your tax return. Be mindful that the ‘shortcut’ method may not be the best for your circumstances and it may be worthwhile, if a little more laborious, sticking to the old method. For more information on working from home deductions, visit the ATO’s website.
Boosting your super
While the COVID-19 situation has seen some dipping into their superannuation, if you’re able to, it’s always a smart idea to use the end of financial year to give your super a bit of a boost as even the smallest amount can really add up over time.
There are many ways of growing your super to think about, including;
- Making tax deductible contributions,
- Salary sacrificing up to your $25,000 annual cap
- The low-income super tax offset is available to those who earn $37,000 or less a year, and means that if you or your employer contribute to your super, you may be eligible for a tax offset of up to $500 per year,
- The spouse contributions tax offset means you may be able to claim an 18% offset (maximum of $540 offset) on contributions up to $3000, that you make on behalf of your non-working or low-income-earning partner.
Bring forward expenses
If you are in a position to do so, bring forward any expenses and delay income. This may not be possible for many businesses and individuals in the current climate, but it’s worth keeping in mind if this is an option for you.
Working from home may have made you realise you need to upgrade your home computer or invest in better office furniture. Making your purchases before the end of the tax year will not only impact your return sooner rather than later, but you can take advantage of EOFY sales.
Clear the decks
With some tough times ahead on the economic front, it’s is a good time to evaluate your income and expenditure. Now is the perfect time to look at your insurances, utilities and seek out any no longer relevant expenses to see what you can cut back on.
It’s a bit of a different environment for the end of financial year this year if we can do anything to make things easier for you please get in touch.