The reality of owning a rental property

Transcript:

Hi guys, it’s Michelle Knight from Little Miss Bookkeeping. And today I wanted to run through the reality of owning an investment property. Recently I’ve seen a lot of discussion on social media platforms like Facebook groups around property – either questions from people who currently have an investment property or rental property, or people looking to purchase an investment property as a part of their overall investment strategy. Now there was a lot of discussion around cost and benefits and that sort of thing and I suppose I wanted to share what the reality is with myself owning an investment property and seeing a lot of other millennials potentially moving into that space.

 

Now, there were myths around landlords, that they’re these wealthy people who price gouge/put their prices up for no other reason than to make a profit. And they are these bad people that shouldn’t be trying to buy all these properties when there’s not enough places for people to live. That was what got me triggered a little bit. And the point of this video is to educate you guys around what the reality of owning an investment property is, from a cash flow point of view. This video isn’t going to be specifically around the tax advantages, deductions or how negative gearing works. But I am exposing myself a little bit, just to show you how much it costs me on average per week to hold the property.

Myself and my partner, we reside together in my partner’s residence. There’s no reason for me to continue living in my place, which is just a little two-bedroom townhouse that I’ve purchased as my very first place. That’s been rented for a couple years now. And what I’ve done is I’ve put together a little Excel workpaper. I’m a very visual person, so I thought others might enjoy me going through what these costs are. And remembering that this is based on my situation. Everyone’s completely different. It’s based on where the property is. And we know that across Australia, there’s different situations, different locations, different prices, x y z. But I thought it would kind of give a good overall overview and baseline for people who are potentially looking into property, and really be ready for those costs, especially if, for example, you’ve never owned property before. And when you become an adult, you’ve got to start thinking about things like rights and body corp and water and all these other things that we do take for granted when we are adolescents.

So what I’ll do now is I’m currently screen recording my iPhone. And I’ve got here a breakdown of the property itself. I’ve put on here that it’s just a two-bedroom townhouse, I live on the Sunshine Coast, that’s where the property is located. Now per week, I rent that $420. That’s pretty much market value as is. Now if we go through all the costs, I’ve broken them down per week, based on what I paid last financial year, so I pulled out my tax return and I sort of had a quick overview of what that was last year because it’s probably going to be about the same or maybe a slight increase with inflation.

My property manager fees are about $2,000 a year. I’ve done the whole self-manage and use the property manager and for me time benefit cost property manager – highly recommend. So that’s why we’ve got someone looking after that. I pay about $1,000 every six months for my council rates, my body corps again about $1,500 every six months, so $3,000 a year. I pay a landlord insurance which is at $300 a year. Water, so in my lease the tenant pays the water usage cost and I pay the fixed fee/ fixed cost which is the cost of the pipes as opposed to the use of water. So that’s kind of like a 50/50 split depending on. But I’ve put in there a provision for the fixed costs that I pay for, which is about $1,000 a year. And my repair maintenance is pretty low. When I purchased the property, it was brand new, so it’s not a lot of ongoing repairs and maintenance. But you do have to do your smoke alarm compliance and that sort of thing. So I put $200 per year and it would probably go up a little bit. If you have a look at this spreadsheet, my rental incomes $420 a week. Now out of that if we deduct every cost that I currently pay, and that’s not considering any capital investment where I might have to replace a kitchen or a dishwasher or something like that, the ongoing cost of the property is about $163. So, in reality, my net income is about $257.

If we keep reading down, my current mortgage repayment on that is about $1,700 per month, or $418. When we think about it, my weekly rental income of $420 just covers my average mortgage payment of $418, not including all my ongoing costs. If we keep reading further down, this puts me in a deficit of $161 per week, or rather, per year, it’s about $8,000 odd a year, I have to cash flow myself. So in reality, from a cash flow point of view, what I do each week, is I put away a set amount into a bank account for me to cover costs. So according to the spreadsheet, I need to be putting aside $163 per week. So when my next bill comes up, when my council rate comes up, when my body corp comes up, my insurance renewal comes up, I have that cash sitting there. Now, it’s quite clear that even though I am getting $420 income, that only covers my mortgage payment, and I’ve got to cashflow all those costs. This is me, this is my situation, this is my scenario. And I really wanted to show you that so you guys understand that it’s not all cash money, you know, raining from the sky here.

You might be asking “Michelle, why would you forecast $163 per week, or rather $8,000 a year just to hold this rental property?” . Now, in summary, this is in line with my overall investment strategy around my tax planning, around capital gains, growth in property. It’s not something I want to go through in detail now. But just because my property income, doesn’t quite cover the costs of my property. To me, I’m totally comfortable with that. To me, I have $163 extra weight to set aside now account to make ongoing payments when they’re due, knowing that the rental property situation is beneficial in regards to how it gets applied to my individual income tax. I’m banking on capital and growth, where one day I eventually might sell that property.

So what I’m going to show you is if we change the rental income. Now, let’s say years down the track, the costs were about the same, and I could rent this property for a lot more. Let’s show that situation. This is going to be a pretty high jump, but let’s make that $550. Let’s assume, and it’s probably not gonna be the case, but assume everything remained relevant. Everything remained the same where I only have to cash flow $30 a week as opposed to another $100 or more, or rather about $1.6K a year. Let’s pretend that I had a significantly lower mortgage on my property. When I purchased my property, a few years ago, I had quite a high LVR. I just wanted to get into the property. I was totally comfortable with that. Let’s pretend I had a slightly bigger deposit. And let’s say my mortgage repayments were about $200 a week.

If we have a look now, we can see that with everything remaining the same $420 a week, I have cost of $163 a week, and my mortgage repayments were only $200. I am actually cashflow positive, a whole $57 so that is my raining money cashola figure there and per year, that’s about almost $3,000 a year, which is flowing through to me. That’s obviously the point that as an investor you want to get to. That’s really a summary or the reality of owning an investment property.

So that is really a quick short and sharp breakdown of how much it costs me to hold my investment properties. An example of where if you had a significantly reduced mortgage, the cashflow benefit of that would be. I haven’t run through a tax deductibility, tax planning, tax advantage point of view on this or the application of what is negative gearing and how it all works. But I hope this was helpful if you really enjoyed this video, please subscribe to my channel and give it a like, it really does help me to provide more valuable content to you.

As always, if you have any specific questions of around you and your scenario, please do speak to a trusted tax professional to get the right advice. Thanks for watching and I will see you in the next video. Bye!

What is Tax Planning?

Transcript:

Tax Planning is where you will review your financial situation and apply strategies to minimise or reduce the potential tax liability at the end of the financial year. This is around applying strategies within our law, within our legislation legally, to potentially minimise any tax debt that our clients might have coming to the end of the 2021 financial year.

How is tax planning done?

 

 

So myself as a tax agent, I will have clients engage me for tax planning services. And I’ve actually written down five steps that I will quickly run through to give you a broad overview of how we complete tax planning.

The first step is we’ll be reviewing the clients accounting file where say they’re in Xero, ensure all the data is correct and up to date, which will lead us on to completing step two, which is determining their year-to-date profit. For example, we might look at the period 1st of July to the very end of March or the 1st of July to 30th of April and look at how the business has been trading for say those 9, 10, 11 months depending on when we determine that cut off. The third step of this process is we’ll be extrapolating out a full financial year. If I’m reviewing July to April, and we don’t know what May or June is gonna be, we can make some informed decisions based on our understanding of the business, maybe discussions with the client as to what the full 2021 financial year will look like. And based on that review, step number four be estimating any tax payable amounts for the 2021 financial year. It’s kind of using our informed crystal ball to see what will the 2021 financial year potentially look like? What will the tax payable for the client look like? And then step number five is considering any tax planning strategies for the client that we can suggest to reduce that potential tax liability.

 

 

What are some tax strategies?

 

 

Now, this is really going to be dependent on your situation. And this is why you really need to speak to a tax professional around the appropriate strategies for you. And there are so many, and I’m not going to list them all here. It’s going to be really dependent on what’s going to be the best strategy for you. But I will run through a couple of the most common strategies that might be implemented, whether that’s applicable in your situation or not. That might be making additional super contributions, pre-pay expenses, new asset purchases, and depending on the entity structure, reviewing how the distribution of profit is flowed through a family group.

 

 

What will tax planning cost me?

 

 

You’re probably wondering, “Michelle, how much is this all going to cost me?”, And I always say – it depends. You know, how long is a piece of string? Everyone’s circumstances are different. It could be a couple hundred dollars to a couple of thousand. It really depends on the individuals situation. What I would like to say is Tax Planning is definitely an investment. I’ll give you an example. Just for arguments sake, it costs you a couple of thousand dollars to get tax planning done by your tax agent. But the reality is by engaging them to complete their review, complete recommendations, tax strategies that might potentially save you tens of thousands of dollars in tax. So a $2,000 investment, resulting in $10,000 worth of tax savings is definitely a no brainer. I mean, you’re going to pay the two to reduce your tax by a significantly more amount. Not to say that that’s always going to happen but it’s one of those things where as a business owner, you’ve got to be making the right decisions and engaging those professionals who are going to help you long term in the overall picture. So it’s going to be totally up to you as a business owner as to whether you will get someone to do tax planning, but it is something that I highly recommend with my clients to look at coming into the tax planning season.

 

 

Next steps? 

So if you’re all about reducing your tax liability for the 2021 financial year, go speak with your trusted tax agent and engage them for tax planning services. They will totally love you for it. I’m about to start that rollout with my clients. To be honest, tax planning is really fun work for us. It is one of the more exciting type of accounting work we do, coming from a tax accounting nerd.

Anyway, if you’ve liked this video, please do give it a thumbs up and subscribe to my channel. It does help me to provide more valuable content to you. Thanks for watching and I will see you in the next video. Bye!

How to complete a Super Form

TRANSCRIPT:

Hi guys, it’s Michelle Knight from Little Miss Bookkeeping.

Today I wanted to run through a form you might already be familiar with, and that is how to complete your super form or a superannuation standard choice form which you’ll complete when you start a new job.

As an accountant, I do see these get completed incorrectly. So I thought it would be a good idea to just quickly run through some of the details. If you’re interested in learning more, please keep watching!

So typically you will complete your super form when you commence a new job and you will generally be given this at the same time as your TFN Declaration. I’ve created another video going through this little baby. Your new employer will give you these forms together. So you’ll complete these both at the same time.

The reason why you would these forms is so employer can pay super into the right super fund. Now there are all different types of super funds, industry funds, self-managed super funds. And it’s essentially directing your employer to put your super in the right account. So, what I’m going to do is quickly run through this pack, and then specifically the three pages that you will complete and send back to your employer.

Okay, so what I’ve got in front of me is the super form which is about seven pages long, I believe, the first few pages, again, like the TFN declaration, is just some information about how to complete the form and information to direct you where to find out some more info. So, I’m just going to quickly go through these just as an FYI and then we’ll get to the nitty gritty part of the superannuation standard choice form or in short, your super form.

 

The form itself is typically three pages long. So you will complete all three pages and I just wanted to run through each section of the page and what that sort of means in layman’s terms, because again, ATO forms can be a little bit confusing. The terminology you might know as another term, so, let’s just break that down right here, right now.

When you get your super form, you’ll tick one of these three boxes. The first one in layman’s terms is you’re going to nominate a super fund. I remember years and years ago, when I first completed this form as a 14/15 year old, I’m thinking “What’s an AFRA fund retirement savings account? Okay, I’m not sure if I have one of them. Self managed super fund, I definitely don’t have one of them”. Or you can get your employer to put it in a default fund of their choosing. So long story short, if you have any sort of industry fund already set up, you can go ahead and tick this box and then complete sections two, three, and five.

If you have a self managed super fund, you can go ahead and tick this box and complete sections two, four, and five. Now, just be aware that some industry funds have this terminology code called “part self-managed”. I’ve had conversations or heard of conversations with people saying, “Oh no, Michelle, my super is self-managed. It’s with Sunsuper and they let me part self-manage my superfund”. So I know some industry funds allow you to do that or retail funds, but at the end of the day, that is not a self managed super fund by default, according to this form. So just be aware that even though your fund may allow you to select different investments or select different portfolios, it’s actually not a full self-managed super fund. And you will know if you have a self managed super fund, they’re not cheap, they’re not easy to set up, you’ve got a lot of compliance during the year and typically you should have a lot of super to roll into a self-managed super fund. So you will know if you have one of these. More often than not, if you’re not sure, you probably don’t have one.

And then lastly, if you don’t have a super fund already and you just want to get your employer to choose a default fund, you can tick this. This would be most common in situations where you might be a teenager, young adult and it’s your first employer ever, you might just go “can you just set up a super for me?” and that’s all cool. So that’s the third option there.

 

If we go down to section two, you’ll have to complete this. Name and TFN, if you have some sort of employee identification number, typically a lot of people don’t fill this out because they don’t have one, but in the case that you might, you can complete that.

So let’s get to section three. Now, retail industry funds, we’re talking the guys like Sunsuper, Rest, BUSSQ, all those really common funds that you have heard of, you’re already apart of it, your friends are apart of it. This is where you’ll complete the details. So, you’ll have to find the ABN, the name, and then all these other details. Now, the most important ones as an accountant that we’ll need to align is the fund ABN, the name, the USI and member number. And this is really important because, some super funds have lots and lots and lots of different, I don’t know if the right term is portfolios, but different types of super options with different USI numbers. For example, Sunsuper, I think only has one where they have just one USI. There are big super funds that have lots and lots of different USI’s. I think maybe Rest I was setting up a payroll for a new client and setting up the super settings for the employees and if this section is completed incorrectly, it gets really frustrating and confusing as the payroll person.

 

And then the member number is equally as important. So, for example, back in the day, I used to be apart of Sunsuper. I would find the ABN online. You can usually do a Google search for them. It’s typically quite easy to find on their website. And if not, if you have online access to your super, you should be able to find those details pretty easily. So if you’re really unsure, I would suggest getting in contact with your Superfund directly.

So for example, if you Google “Sunsuper” it would actually give you your ABN, write in Sunsuper, they’ll have some standard address and the USI connected to your super fund and the member number. I’ll make a really important point as to why the member number is so important for the payroll person.

If this number is wrong and it comes to paying your super, what sometimes happens, and this really varies based on the fund, and if this number is not correct and doesn’t quite match the person who’s listed on the top of the form, it can sometimes bounce, so it’s sometimes rejected by the fund. And it gets really frustrating for business owners, bookkeepers, accountants because we don’t like to see super bounce cause then the business owner is going to have to repay it. Then we fall into issues of super not being paid on time and penalties and interest and that sort of thing. So, this is why I stress to you getting this information right, and if you’re not sure, finding out. Don’t just leave it blank or write in “Rest Super” and leave everything else blank, that’s just not going to help anyone. And it’s going to make the bookkeeper or payroll person pull the hair out, trust me. Cause that’s what I have to do sometimes.

 

Let’s go to the next page. So, if you have a self-managed super fund, you will complete this form. And I always get whoever’s claiming this form just to provide some additional info, confirm that these details are correct. Because, you’ve got to ensure that the super is being paid into the right super fund.

And because self managed super funds are set up personally, and they’re all sort of like private funds. We don’t want it not getting into the right bank account, if that makes sense. And I’ll just point out one of the things that people don’t complete, don’t understand or don’t get right, which makes it again really frustrating for the payroll person when they’re setting up super funds in the backend of an accounting software. If they don’t have all the data, they’re gonna pull their hair out. And it’s just not a fun time. The biggest mistake that I see when people are completing this section of the form when they have a self-managed super fund, is that they don’t know their ESA or their electronic service address. The best place to check this is to ask your accountant or ask the person who set up your self managed super fund, because this is really important.

For example, when you set up a self managed super fund up in the backend of Xero, if you don’t have any ESA, it kind of doesn’t let you set it up. This all comes back to the compliance and making sure any super contributions go through a clearing house, and this is important, so please put the right details in there, from me and all the bookkeepers and accountants and payroll people, get that right!

 

And then the last bit is you will sign the form, date it and that’s pretty much it. Let’s quickly jump onto the last page and that will be for your employer to complete. So no problems there. As you’ve probably noticed, if you’ve completed this section there is no where for you to complete anything else because your employer is just going to pick a default fund and you’ll have super set up. And I’m sure once the first round of super has been paid into your account, you’ll probably get a nice little letter from whatever superfund that is, saying “Hi, welcome to X super fund, here’s your member number and details and how to contact us” and maybe set up your online account.

So, that’s pretty much how to complete your superannuation standard choice form in a nutshell, if you have any specific questions around this, I do suggest you speak to a tax professional because everyones circumstances are different.

I hope this video was helpful. If you did enjoy it, do please give it a thumbs up and subscribe to my channel. It does help me provide valuable content to you. Thanks for watching and I’ll see you in the next video.

Reasons why I LOVE Xero!

TRANSCRIPT:

Hi guys, it’s Michelle Knight from Little Miss Bookkeeping.

Today I wanted to run through the reasons why I love Xero. Now, for those of you who don’t know, Xero is a cloud-based accounting software, a software that I use on a daily basis and software that my clients use. So I wanted to run through the five main reasons why I love it.

So if you’re interested in learning more about that, please keep watching!

This is my opinion and sort of some little tidbits that I thought I’d share. This is not in any way a sponsored post or anything like that, I just wanted to share my thoughts around it and I suppose inform those who might be sitting on the fence as to whether to choose Xero or not.

There are many different types of software providers on the market. There’s Xero, QuickBooks, MYOB, Reckon, a whole range of different software providers. Xero being probably one of the biggest players in the market.

So we saw Xero come into the marketplace and we saw how great and amazing it was. The transition from desktop accounting software like MYOB to Xero. Software like Xero’s competitors do have comparative cloud-based options. But in my opinion, they’re probably not as user friendly in some circumstances and they’ll probably not as good. Not to say that Xero is going to dominate the market forever and ever, and ever, but right here right now, it’s a program that I recommend for a lot of my clients based on their needs, remembering that everyone’s businesses and circumstances are different. Xero might not fit that criteria for a client. But a lot of clients that I deal with, it’s gonna tick the boxes for them.

You might’ve seen ads pop up online or on TV, that sort of thing. Now, when I first started accounting years and years ago, MYOB was the biggest player back then. MYOB was probably the most common accounting software I used back just after I’d finished Uni. And then everything moved to the cloud.

Let’s jump into it. The first reason why I love Xero.

1) It’s easy to use

You log in via your internet browser, it has beautiful interface from both a frontend and backend. So for business owners who are trained up to do their own bookkeeping or internal bookkeepers, the software is quite user-friendly.

From a backend, it generates really good reporting for accountants to take away certain information they need to complete compliance, such as your BAS or tax returns, that type of thing.

A lot of people kind of get a little bit scared about using an accounting software, and I say, let’s do some training. It is no where near as scary as you first think!

2) It has a lot of integrations

The second reason I like Xero is that it has lots of integrations. I’m noticing with a lot of e-commerce clients that I pick up, one of the first things I’ll do is make sure that any of those integrations are linked. In addition to your normal bank feeds that are in most cloud accounting software, we’ll link PayPal fees, we’ll link E-way, Stripe, Square, Timely, depending on obviously if that’s gonna work for their business processes and it works for their bookkeeping.

I love the fact that Xero has a whole marketplace where there’s additional add-ons, you can select and really make that bookkeeping and accounting processing a lot more streamlined, a lot quicker, really cut down the every day menial tasks. Once upon a time we had to do a lot of manual filing, scanning documents and nowadays, we have our iPhone, we take a photo, we upload it via an add-on such as receipt bank, push it through to Xero and it’s in the cloud forever and ever, and ever.

3) Value for money

Now, the third reason why I love Xero is value for money.

Now I’m always a cost-benefit type of gal. So, let’s put it this way, it’s not the cheapest on the market. And when you’re comparing “cheapest” it’s hard because the accounting software available, is like comparing apples to oranges. I’ve had clients come to me and say “QuickBooks is cheaper than Xero” or “MYOB is way cheaper” or “This more expensive”, and I say, you’re really comparing apples and oranges.

So don’t think, “Oh, I’m starting a new business, I need to go with the cheapest option”. You will shoot yourself in the foot. I’ve had clients go to cheaper options, and as they grow, or they’ve noticed that it just doesn’t have quite the functionalities that they need for their business.

So, they start off with an invoicing system that kind of fits 50% of their needs. They grow, they realise 12 months down the track, “oh crap, it’s not doing what I need it to do”, and then we have to go through the process of converting them over to something like Xero. It’s not a big deal, but it’s that time and investment where if you choose the right solution for you, based on benefits to you, as opposed to that cost figure.

I definitely recommend making sure you pick the right solution for you because if we go ahead and pick a different software based on price, we get it all set up and that’s a time cost, whether you get assistance with that or you do it yourself, and convert it six months later, why didn’t we just pick the right option?

And that’s why I say Xero is value for money. It’s definitely not the cheapest people come up with. There are free options, but don’t get stuck into that trap.

4) It’s 100% cloud based!

The fourth reason is pretty obvious – It’s a hundred percent cloud based!

So I can jump on my computer, at the same time I can be in the phone call with the client, and they can jump on their computer. If I’m out and about, and I really need to pull some data I can do so on my phone (although it’s not my preferred way to pull any Xero data).

Xero does have apps for you to do certain things, but being in the cloud, you can give access to different members in your team, give access to your bookkeeper, your accountant, and it’s all in there. You can upload and scan documents instantly and seamlessly. Amazing! I love the cloud, it is great.

Another thing you can do is link to the ATO. So it obviously ticks the boxes around STP filing, you can do BAS lodgements through there as an option.

Now, fifth and final reason why Xero is amazing…

5) Xero is always improving

So I’ve noticed comparative to other competitors out there, they really invest the time into product development. You’ll see a little forums in the past where people ask “can I have this specific function?”, and more often than not Xero say, “Okay, we’re working on it. Thank you for the feedback”, and if there are enough people in the Xero community or enough Xero’s out there requesting for the same type of functionality, Xero will at least look into making that option available.

So I really love that they’re making it better for the users.

That is pretty much the five reasons why I love Xero!

Again, if you have any specific questions around your accounting software, your accounting needs, please definitely speak to a trusted tax professional. Again, everyone’s circumstances are different and you do need specific advice for your specific situation.

If you have liked my video, please do give it a thumbs up and subscribe to my channel, it helps me to provide more valuable content for you. Thanks for watching and I will see you in the next video. Bye.

How to complete a TFN Declaration

TRANSCRIPT:

Hi guys, it’s Michelle Knight from Little Miss Bookkeeping.

Today I wanted to run through how to complete your Tax File Number declaration or TFN Declaration. More often than not I do see TFN Declarations get completed incorrectly, whether they’re by people who are starting jobs for the first time or they’ve been in the workforce for a number of years. I thought it would be a good idea to run through the form and make a few little pointers around why it’s important to get this right and hopefully help some people out who aren’t quite sure how to complete it correctly and where to find additional information. So, if you’re interested in learning more, please keep watching!

I have my lovely little TFN declaration here in front of me, which I printed off from the ATO website and we’re going to run through some really basic “What you need to knows”.

When do you complete a TFN Declaration?

Typically when you’re starting a new job, your employer will issue you with this form. Alternatively, they might send you a link to the ATO website where you can download the form and complete it yourself that way.  Generally, before you commence employment you will hand the completed form back to your employer or their accounts person/bookkeeper so that they can input that information into their payroll system, lodge that information with the ATO and then withhold the correct amount of tax connected to your wage/salary.

We’re going to run through the form, in particular the second last page which is the Tax File Declaration itself and go through some common mistakes that I typically see as an accountant.

Your TFN form looks like this, it’s about 6 pages long, and the first few pages are just some information about the form and some direction if you need some more information for a specific section of the form. If I flick through the first few pages this is what you’ll see before getting to the actual TFN form. And then there’s also some more additional information behind that one.

If you’ve been in the workforce for some time, you’ll be very familiar with this form however if you’re a young adult/teenager this may be the first time you’re filling this out. But this is the important one-pager that goes back to your employer.

The form is typically in two sections. The first section is going to be the information that you’ll complete as the employee. The second section is for your employer to complete, so you can ignore that section downwards under “To be completed by PAYER”.

Let’s get into the nuts and bolts of this form. Everything on the left-hand side is pretty much your personal details. If we have a quick read it will be asking you to complete your TFN number. I’m not going to go through in this video how to get your TFN number, that’s another conversation for another video, but typically you’ll already have this.

It’ll then ask for your name, your address, if you’ve had any other names, your email address and your date of birth. This next section is where I see people trip up or not quite understand what some of these questions mean. Let me run through items 7, 8, 9, and 10 in a little bit more detail just so you understand the questions that they’re asking and the information that you should be providing.

On what basis are you paid?

Full-time, part-time or casual employment. You might have an employment contract that specifies one of these options, if not check with your employer the basis that you’re hired on as it’s important that you get this part right.

Item number eight. It’s asking if you’re an Australian resident for tax purposes, foreign resident or working holiday maker. Now, again, it’s really important to select the appropriate box. Typically a lot of people are going to fall into the criteria of Australian Resident. You’ll know, or you should know, if you’re either going to be a foreign resident or a working holiday maker. Again, if you’re not sure, check! But I’m sure that you’re probably aware of which one you fall into.

Nine and ten. Now these ones are the most common questions that people get confused with. So I’ll quickly run through them in a little bit more detail.

Do you want to claim the tax-free threshold?

So what is the tax-free threshold? Right now, as I’m filming this in February 2021, the taxpayer threshold in Australia is, $18,200. So essentially if your taxable income is up to or under that amount, you won’t have to pay any tax. It’s important that we get this part of the form right, So if you have one job and you’re only going to be working one job, then you’ll be wanting to claim the tax free threshold because what happens is your employer, as part of their pay run, will tax you on the right amount of tax with your wages if you’re completing this form correctly.

There are instances where people have more than one job, they might have a few casual jobs or they might be doing a few different jobs. It’s going to be up to you to determine which job you want to claim your tax-free threshold on.

The issue that some people get into is they might have a couple of jobs and they’ll tick “Yes” to multiple employers. What then happens is those employers are not withholding enough tax for you. It then comes to end of financial year, and you’ll lodge a tax return and get a tax bill just because you haven’t completed this form correctly. So just be wary as it’s important to get to understand what this means. And it’s particularly important if you have more than one job you’re working at the same time.

Some people say “Oh, just don’t claim the tax-free threshold at all cause then you’re just going to get a big tax refund at the end of the year”. Technically yes in theory, that would happen. But do you want to be having more tax taken out in your net wage each week or each fortnight when you don’t need to? That’s what this means so just make sure you’re ticking the right box, especially if you’re working more than one job.

Do you have a Higher Education Loan Program (HELP), VET Student Loan (VSL), Financial Supplement (FS), Student Start Up Loan (SSL) or Trade Support Loan (TSL) debt?

For item 10, long story short – Do you have a government funded student loan?

For example, when I went to uni, I did HECS, which is now called HELP. So when I started my first job as an accountant, I had my HECS debt sitting there. And for this section I had to tick “Yes”. What happens is during the year, if you earn enough over the threshold you have to start repaying back you HELP debt through the tax system (Income threshold over $46,620, as of February 2021).

The problem is if you don’t complete this correctly, don’t quite understand what this means, and tick “No”, your employer is not going to be withholding enough tax in the year to meet your student loan requirement. And what I then see happen when someone lodges their tax return is, they come back with a tax debt because they didn’t complete this form correctly, their employer didn’t withhold enough tax and they have to have a bit of that tax payable for that financial year. So it’s important to understand what this question means. If you want to double check your HECS/HELP debts or student vet fees, you should be able to retrieve that data from your MyGov account online.

So I still currently have my HECS debt. If I want to see what that balance is currently, I can jump on my MyGov, login, my ATO is linked, and I can see what the current balance is.

Last but not least, you’ll sign the declaration, date it and hand it back to your employer.

That is pretty much the nuts and bolts of completing your TFN declaration. Again, if you have any questions, do seek the advice of a tax professional. This video is quite broad, so if you have any specific questions, please do seek the right advice.

I hope this video was helpful. If you did enjoy it, do please give it a thumbs up and subscribe to my channel. It does help me provide valuable content to you. Thanks for watching and I’ll see you in the next video.

Breaking down the 2020 federal budget for small business owners

TRANSCRIPT:

Hi guys, it’s Michelle Knight from Little Miss Bookkeeping. Today I’ll be talking about the 2020 federal budget that recently got released and breakdown what it means specifically for small business owners in Australia. If you’re interested in finding out more, please keep watching!

Unless you’ve been hiding under a rock, information has been circulating around the 2020 federal budget following its release by our treasurer on Tuesday 6th October. What I’ll be doing is explaining the budget measures and focus on initiatives more specific to small business.

This won’t be a video about my opinion on the budget and if I think it’s good or bad or who missed out. I’ll be discussing what this means for small business owners so they can make informed business decisions for the future, with the impact of the 2020 budget in mind.

What is the federal budget?

Before I dive in, let’s quickly go through what the federal budget is. It’s essentially a document that sets out how our government’s estimated revenue and spending for the year. Normally it gets released in May of each year, however, due to COVID we only got the budget finalised this October. As a small business owner, it’s important to know what’s in the budget as some the incentives or tax changes can significantly impact your business.

What’s in the 2020-21 budget?

Next question, what’s in the 2020-21 budget? Instead of reinventing the wheel, I’m using the infographic created by Chartered Accountants Australia and New Zealand. I’ll use this to breakdown each of the budget measures, more specifically:

  1. Accelerated personal tax cuts
  2. Extended instant asset write off
  3. Incorporated small business loss carry back
  4. Super: employers to effectively stop offering a default fund
  5. JobMaker

As expected, this budget will put Australia into a massive deficit! $213.7 billion deficit to be exact. In an effort to kickstart the economy, we as a nation are going into a hell of a lot of debt whilst we battle a slowing, COVID-affected environment. I make note of this deficit as unfortunately the money has to come from somewhere – no, the government does not grow money on trees. No doubt we will be paying this back via our tax system, but will this be over a number of years or generations? Only time will tell.

Just to note, the budget is quite an extensive document. I’ll insert a second infographic by CAANZ outlining some additional budget measures, but the majority of these I won’t touch in detail as there aren’t necessarily small business specific.

Accelerated Personal Tax Cuts

Whilst I could go through each of the numbers, a lot of you won’t really understand them if I just throw up some digits on the screen. So, I’ll explain what practically the tax cuts mean.

With changes to individual income tax brackets, employees are going to get more net pay in their hand, generally speaking. For business owners paying wages, your payroll software (like Xero, MYOB, Quickbooks etc.) will be able to account for these changes once the ATO have updated their PAYG withholding schedules – which at the time of filming this video has not yet been done. Stay tuned on how our software providers will deal with the payroll changes, but it’s important to note that it’s coming.

Now, I saw this very helpful post by Glen James and his team at My Millennial Money (p.s. love your work!) and want to expand on this and give my two cents as a tax accountant.

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Now this is not one of those cashback schemes we have seen in the past, where the government shells out money via the Centrelink system. It’s more money in the hand through the payroll system for employees. Now this is an employee example, not a self-employed/sole trader example.

For business owners, if employees ask you questions about the budget tax cuts and how it applies to them, they typically get the benefit in 2 ways – pending their individual situation:

  1. For wages from the budget date onwards, there will less tax withheld on wages, hence more money in the employees’ hand (aka their net pay)

and

  1. For wages between 1 July 2020 to budget night (approx. 3 months) benefit to be applied when they lodge their 2021 tax return

If you are a business owner that processes your own payroll and see an employee’s net wage go up, but their gross wage unchanged, this is the effect of the tax cuts. More on this to come.

Extended instant asset write off

The extended instant asset write off is hot topic amongst accountants. The reality is, every time the instant asset write off gets increased (or decreased), we get the flood of phone calls from clients asking if they can purchase that new Dodge RAM/Toyota Landcruiser they’ve been eying off or an expensive piece of manufacturing equipment that will improve productivity by tenfold. And the answer generally is, IT DEPENDS!

The government has increased the instant asset write off to encourage businesses to spend money – where it is up to you as a business owner to make an informed decision as to if a new asset purchase is the right one.

As a small business owner, I suggest you ask yourself these key questions:

  1. Am I in a financial position to purchase a new asset? Unless you’ve got the cash and it makes financial sense, don’t got spending money you don’t have. Have you done your cashflow forecast for when things get really tough?
  1. What asset are you purchasing? Does it even fall in line with the ‘eligible assets’ definition? ‘Assets’ is a general term and ‘eligible assets’ in line with tax legislation can sometimes mean something different. For example, historically capital works purchase like installing a new floor or getting new air conditioning system did not come under instant asset write off rules in the past, but rather depreciated at a set rate.

Before making any significant asset purchases, speak with your tax professional first to avoid unnecessary heartache! Remember, a $100k new asset purchase does not mean a $100k tax refund and your accountant WILL NOT claim a tax deduction for that new ski boat just because it has your business logo on it!

Incorporated small business loss carry back

I won’t go detail about this, but just wanted to make a point that if you are small business trading as a company and have tax losses in income years 2020 to 2022, you may be eligible to carry back tax losses from the 2019 income year onwards. Long story short, your tax agent will deal with this and if you have any specific questions about the loss carry back rules do speak with them.

Super: employers to effectively stop offering default fund

Changes to superannuation means that employers will not have to pay superannuation into a default account. Employers will be able to obtain information about an employee’s existing super fund from the ATO. Some other changes include the review of underperformance of super funds, which I won’t go into detail about.

The issue, as business owners, is that sometimes employees are slack to get the super information to us. It is particularly prevalent for industries with a high turnover of staff, for example hospitality. In my role as an accountant, I help clients set up the payroll for a new staff member. In some circumstances it might take weeks or months to get the right super info from said staff member and before long the stop working for the employer and potentially not contactable.

Historically, as an alternative, the business owner pays the employees super into a default super fund. Unfortunately, what happens is that the employee ends up with a number of super funds spread all over the place. More often than not, these getting eaten up by fees and are typically underperforming. This initiative will mean that the business owners are be able retrieve any missing super info and pay it to the right account. A win for the business owner and a win for the employee.

JobMaker hiring credit for 16-35 year olds

The government has introduced measures aka JobMaker, to get businesses to hire young job seekers. From 7 October, eligible employers will be able to claim:

  1. $200 per week for each additional eligible employee hired between ages 16 to 29 years
  1. $100 per week for each additional eligible employee hired between ages 30 to 35 years

Similar to my instant asset write off example, it’s important as a business owner to ask yourself these key questions:

  1. Am I in a financial position to hire a new employee? Can I comfortably support my current wage obligations along with additional staff? Have you done your cashflow forecast for when things get tough?
  1. Can I continue to support a new employee long term? The decision to hire a new employee should not be taken lightly. It’s important to hire right the first time and abide by all Fair Work rules. Don’t hire for the sake of getting the JobMaker credit only to dump them after the money stops flowing from the government.

The JobMaker credit is capped at $10,400 for each new position created, so it’s not a bottomless bucket of money and does have an end date depending on when the new position was created.

I hope this video was helpful and provides some valuable insight into the 2020 Australian Federal Budget, specifically to all those small business owners out there.

As always, if you have any specific questions about your tax situation, please do speak with your trusted tax professional. Everyone’s situations are different, so it’s really important to get the right advice tailored to you.

If you’ve liked this video, please like and subscribe to my channel. It helps me bring more valuable content to you. Thanks for watching and I’ll see you in the next video.

How to renew your business name and not get scammed!

TRANSCRIPT:

Hi guys! Here is a video on how to renew your business name and not get scammed. So, I went to my PO Box this morning to pick up my normal business mail and I received something that I hadn’t seen before. I thought, OK, I think I need to bring this to every other business owners’ attention because there is a new ‘scam artist’ on the block. I’ll run you through what exactly this is.

So, I’ve got business names coming up for renewal and I saw this bill saying I can renew this business name or these business names with this company for these costs. Now having been an accountant for a number of years and seeing a lot of letters come through like this, I wanted to share exactly what these are, what to do with them, what they mean and essentially how to renew your business name correctly and at the minimum cost. So, let me run through that.

I have in front of me a printout of the ASIC website running through the exact fees for renewing a business name here in Australia. Just note that I printed it out today, 24th September 2020, so if you’re watching this video sometime in the future the fees potentially might have changed as they do slowly increase. Now, if you’re a business owner, have a business name, you would of at one point registered your business name – whether that’s one year ago, whether that’s three years ago – and you’ve got renew the business name periodically. So, for example, if I registered a business name a year ago it’d be coming up to renewal and I can do another renewal for another year for $37. Now, you can decide to do the business name renewal for $87 so you don’t have to worry about renewing for a longer period.

Now, what I see a lot of is what they call these ‘scam letters’ or ‘scam emails’ and it’s very interesting because ASIC is obviously aware of this and I wanted to show you the letters that I have on hand. So, if you’re a business owner and you see these – just don’t pay them. Just throw them in the bin and what for your ASIC renewal invoice to come through.

ASIC is the government body is that will issue you when your business name is ready to renew. So, if I take this away, this is just straight off the ASIC website this is typically what you will get via email. Sometimes I think it might be issued in the post, but I always see business renewal notifications come through email. When it’s time to renew or coming up to renewal, you’ll get a lovely, little email from ASIC and I don’t have a colour printer so this will be this light blue that their branding is. It will say the business name, it will say when it is ready for renewal by and then it will have some links in here to pay your renewal.

You want to pay your either $37 or $87. What you’ll do is click on your renewal notice and it will look something like this. I’ve clicked on it, I’ve blanked out business information for privacy reasons and it will have the name, some other details. This is just the notice – it’s not actually the invoice. You can go ahead and click on the link which will take you over to the ASIC website where you will pay either one of these two amounts.

I’ll go through the three organisations that I have here in front of me that are issuing these business renewal notices that aren’t connected with ASIC at all. I’ve mentioned earlier that I’ve never seen this green company. Let’s just read through it. We have ‘Registration Pty Ltd’. They are saying this business name is ready for renewal. They’re saying I can pay either $99 to renew for one year or three lots of $63 (so $189) to renew for three years. Remembering that the cost of renewal directly with ASIC is only $37 or $87, right? They are offering to renew your business name via them – the difference would be their fee to do this. Note some of the wording on this letter. It’s saying they’re a third party and they are a business renewal service provider. This isn’t a bill; you don’t have to pay them money and they’re not with ASIC. That’s what this mob’s letters look like.

I will also show you another lot of notices that I’ve seen been circulating for a number of years. These guys are ‘Registry Australia Pty Ltd. Again, they’re saying if you go through us, we will charge you these amounts. Again, this is not a renewal issued by ASIC. They are a third-party provider. We don’t want that; we are just going to ignore that and throw it in the bin. Same with this one.

And the third lot of business renewal notices I have. These ones have been in circulation for a number of years now. I always see these come through, either my own business name registration or what really bugs me is I see these notices in my clients bookkeeping, where they’ve just paid it not really understanding what this is and they’ve be over charged significantly for something they can do themselves. Again, these guys are called ‘Online Business Registration Pty Ltd’. They’ve put the business name, the ABN, you can pay here and, again, they’re not connected with ASIC. I don’t know who you are Victoria, but it’s a very interesting business model. Not sure I like it, because I see a lot of clients paying more money than they should for something they can do themselves. You can see by my stack I have a whole pile I’ve been hoarding these so I can share these with everyone.

If you’re a business owner keep an eye out for anything like this that comes through. Just literally throw it in the bin, don’t even worry about it. What you should be looking out for is an email from ASIC that looks like this and it will direct you to a notice that looks like this. You’ll pay this online directly to ASIC. What I’ll do, these are my business names that have come through. I noticed that I haven’t got one from ASIC yet. They’ve tried to sneak in before ASIC has sent me their renewal to try and get me to pay them, when I’ll literally throw these in the bin, and I’ll wait for my ASIC email to come through. Only pay either my $37 or $87. If you have any business owner friends, please share this video because I think it’s really important to understand what exactly you’re paying for.

Before I let you go, just be mindful of any ASIC emails that do come through. I know a lot of business owners do get a bazillion emails come through their mailbox every day. They might go ‘I’ve already paid for my renewal last year’ and they forget they’ve got to pay it yearly or they might have accidentally paid on of these mob. It is was it is, you’ve paid it, you shouldn’t get an email following this. If you see this email and said ‘I’ve already paid it’ or you’ve forgotten about it or it’s sitting in your to-do list, there is a cut-off date. Just remember if you see an ASIC invoice come through you do have time to pay it. But on the flip side I’ve seen business owners where their business name has lapsed, they’re forgotten to pay, and they no longer hold their business name. Whether it’s sitting there to reregister or someone else has picked it up. Don’t ignore this email, don’t ignore this notice. If you’ve got any other questions, feel free to drop me a comment or reach out. I’m happy to have a chat – thanks for watching!

Why you shouldn’t lodge your 2020 tax return early!

TRANSCRIPT

This is Dan. He represents taxpayers in Australia. Now Dan wants to lodge his 2020 tax return because it is after the 1st of July.

This is Michelle. Now Michelle represents bookkeepers/BAS agents, accountants/tax agents and business owners in Australia.

Dan is really eager to get his 2020 tax return lodged via the ATO. Dan needs to realise is that Michelle, who represents business owners, accountants and bookkeepers, has the following things on her list to do from the 1st of July being:

+ JobKeeper reporting

+ STP filing *very important*

+ June BAS

+ June super

+ 2020 year end

+ 2020 tax return

Now the priority for Michelle at the very start of July will be JobKeeper reporting because that is due on the 14th, as well as STP filing which is due on either the 14th or the 31st of July depending on how big the business is.

What happens is you have Dan wanting to lodge his 2020 tax return and this means that Michelle, who is representative of three different groups, needs STP filing to be done. Now until that is done and remembering that she has a little bit of time to get it done and understanding that there’s lots of clients businesses etcetera that she has to get through.

Dan will potentially have to wait for this to happen, because STP filing gets reported to the ATO by the due date and then Dan can get his tax return lodged and it should be all done. Now this is just an example based on STP filing. There are other situations that we have to wait for other reporting to get through to the ATO. But in the case that Dan lodges his tax return prior to STP filing being completed, there’s a risk that this tax return is completely wrong.

What we saw happen on the 1st of July…Michelle’s plugging away, getting a whole lot of stuff done, trying to lodge to the ATO and what happened is the ATO portal crashes! Due to an overload of the system and the traffic sometimes you run into some problems *yay*.

So the moral of this story is…dear taxpayers please be patient with us because the start of the financial year is pretty crazy. Sometimes systems crash and we want you to lodge your tax return right the first time and not have to make any changes or get the wrong refund or tax payable because we are still finalising things at our end.

In theory, your MyGov should be able to confirm or let you know when your STP filing has been lodged by the appropriate person, so then you can start looking at preparing your 2020 tax return. If you’re unsure, the best thing to do is ask the right person in your business (where you work at) if it’s been done. If not, just wait. Just wait until the end of the month. Wait until August because you don’t want to get that tax return wrong. And when things go wrong, like a total portal meltdown…there is wine!

If ‘JobKeeper’ was an assignment…

TRANSCRIPT:

Teacher (ATO): [Monday 20th April] Here’s your assignment (JobKeeper). You will have VERY LIMITED TIME to complete it. I haven’t given you all the details just yet, but have a go. I will give you updates over the coming days. It will take twice as long as you think and your classmates (clients) will have lots of questions and be relying on you to get it done. If you plagiarise (do dodgy shit) you will be subject to heavy penalties, maybe even imprisonment. It is due by 30 April (wage payments to be made). How does that sound?

Student (Accountant): [Monday 27th to Wednesday 22nd April] 😟

*works crazy, long ass days on assignment (JobKeeper)*

*Still confused due to missing/inadequate assignment information*

*works on other assignments (super deadlines)*

Teacher (ATO): [Thursday 23rd April] Here’s that information you’ve been waiting on (alternative test). Hope that helps.

Student (Accountant): [Monday 23rd April] 🤯

*reads furiously*

Teacher (ATO): [Friday 24th April 9pm] Here is some more information (One in, all in rule). Oh, and I changed some things that you and your classmates (clients) will need to review and apply correctly (full time students aged 16 & 17 year olds eligibility). But don’t worry, just keep the work you’ve done the same, but change everything else from now on.

Student (Accountant): 😖

*spends entire weekend on assignment (Jobkeeper) with very little break, rest or recovery*

*calls classmates (clients) to discuss changes*

Teacher (ATO): [Monday 27th April] I change my mind. Even though you’ve worked so over last week and weekend, I’m changing the due date from 30 April to 8 May…

Student (Accountant): [Monday 27th April] 🤬

*throws paper in the air and storms out*

Am I eligible for the JobKeeper payment?

A shout out to all my accounting brother and sisters out there, the last week or so have been INSANE! For those who aren’t aware, your tax professionals have been working incredibly hard to get their heads around the new JobKeeper payment rules, whilst being smashed by a mountain of client questions. It’s really a learning curve for everyone!

I thought I’d put this blog together as a quick rundown of the JobKeeper rules as I know some people are finding it difficult to understand or they don’t want to read pages and pages of information that just makes them more confused!

The ATO and Treasury websites are the most reliable sources to find details of this stimulus package. As things change, they update their website so it’s really important to check these regularly, so I’ll think them below.

As mentioned I’ll be running through the very basics of this stimulus package. So if you have any specific questions, check out the ATO and Treasury websites. Their real-life examples and most frequently asked questions fact sheets help to get your head around different scenarios. If you are still confused, speak to your BAS or tax agent. Every business is different, so the determination of eligibility for JobKeeper will be different.

This blog will be discussed from the employer’s point of view and be specific to the application as a small business.

What is the JobKeeper payment?

You’ve probably seen the government TV ads mentioning the JobKeeper payment being $1,500 per fortnight gross wages for ‘eligible employees’. It will commence for a period of 6 months, 30 March 2020 to 27 September 2020. You, as a business owner, need to determine if you are in fact an ‘eligible business’ and if you have eligible employees’.

Is my business eligible?

Basically, your will qualify as an eligible business if:

  1. You’ve carried on a business on 1 March 2020
  1. You had an ‘eligible employee’ (more details on this)
  1. You still currently employ these ‘eligible employees’ (more details on this)
  1. You can prove a turnover reduction of 30% or more due to impacts of COVID-19

Now, you might be savvy enough to work out your own turnover figures or you might need some professional help. I won’t run through this in detail as I could be talking for hours, but if you are unsure please do speak with a BAS or tax agent.

For some business this turnover test is going to be very simple to apply. For example, the businesses who have been forced to closed and currently aren’t trading like gyms and beauty salons, they go from X turnover in one period to nil. For other businesses, they might see a drop in income, but it might not be enough to meet the eligibility criteria. It’s really important to get this step right.

Are my employees eligible?

As mentioned, you need to have ‘eligible employees’. Eligible employees briefing speaking are:

  1. Currently employed (including stood down or re-hired)
  1. Part-time and full-time employees at 1 March 2020
  1. Long term casuals, which by definition means have been working with the business for at least 12 months on a regular and systematic basis
  1. 16 years or older

There is a ‘one in, all in’ rule. This means that if you, as a business, are eligible for JobKeeper, ALL employees have to be applied and you can’t pick and choose. Again, I could be speaking about this for hours, so it’s important to review each employee individually and consider if they fit in this category. It may also be appropriate to speak with Fair Work or a HR professional where there are HR specific questions your tax professional can’t answer. For example, employees who are stood down or questions regarding formal termination.

What if I don’t pay myself a wage, but am a business owner?

The ATO has confirmed the following individuals will be eligible for JobKeeper where you:

  1. Aren’t currently ‘employed’ by the business
  1. Are actively engaged in the business
  1. Are a sole trader, partner in a partnership, beneficiary in a trust, shareholder or director of a company

Unfortunately, the ATO has applied a limit to partnerships, trusts and companies being that only 1 eligible business participant may qualify. For example, only 1 partner of a 2 person partnership will be eligible.

At the time of writing this blog the ATO is still yet to provide details on the application process for business owners who fit into this category. So please check the ATO website in the link below to see if they update these details after you’ve finished reading this blog.

When will the first JobKeeper payment be made & how often?

In relation to eligible employees, the first JobKeeper payment is due to be made in the first week of May. It is a payment to be in arrears, so businesses are going to have to cashflow employees for the month of April to be able to get this reimbursed after the month end.

This is a constant conversation I am having with my clients where it can be very difficult when they are not trading or have the cash available to pay their employees upfront. Essentially you have to pay the minimum wage to get the JobKeeper payment reimbursed. For some employees that are earning more than the $1,500 gross, the payment will help subsidise this wage cost. For employees earning less than this, there will be a top up payment (which is somewhat viewed as a pay rise).

As the payment is via wages, tax will be applied as normal on the $1,500 per fortnight. So employees will the net wage in their hand after tax. For example, a weekly gross wage of $750 will result in net wage of $654 with $96 tax withheld by the employer.

Superannuation also needs to be considered as super on the top up portion of the JobKeeper payment is discretionary. Please speak to a tax professional around this. Other things to consider include changes in your payroll system to ensure super and leave entitlements are being applied correctly.

Steps (as outlined on the ATO website)

The ATO has outlined the step by step process in applying for the JobKeeper payment. Basically it’s:

  1. Register your interest on the ATO website
  1. Check you and your employees meet the eligibility requirements
  1. Continue to pay eligible employees at minimum $1,500 gross wage per fortnight for through April 2020
  1. Speak with your eligible employees around your intent to claim the JobKeeper payment and ensure they can’t claiming through another business
  1. Provide them with an employee nomination notice to complete
  1. From 20 April 2020, enrol for the JobKeeper payment which you as a business owner can do through the Business Portal or work with your BAS or tax agent to complete

The ATO website also runs through the process of confirming the actual JobKeeper payment after 4 May 2020, but I won’t run through this now as this blog focuses on eligibility requirements. Just check out the ATO website for those specific steps if you want to know more.

Enrol for the JobKeeper payment (from 20 April onwards)

You or a registered tax professional can enrol for the JobKeeper payment:

  • Step 1 – Register your interest and subscribe for JobKeeper payment updates.
  • Step 2 – Check you and your employees meet the eligibility requirements.
  • Step 3 – Continue to pay at least $1,500 to each eligible employee per JobKeeper fortnight (the first JobKeeper fortnight is the period from 30 March to 12 April).
  • Step 4 – Notify your eligible employees that you are intending to claim the JobKeeper payment on their behalf and check they aren’t claiming JobKeeper payment through another employer or have nominated through another business.
  • Step 5 – Send the JobKeeper employee nomination notice to your nominated employees to complete and return to you by the end of April if you plan to claim JobKeeper payment for April. Keep it on file and provide a copy to your registered tax agent if you are using one.
  • Step 6 – From 20 April 2020, you can enrol with us for the JobKeeper payment using the Business Portal and authenticate with myGovID. You must do this by the end of April to claim JobKeeper payments for April.
  • Step 7 – In the online form, provide your bank details and indicate if you are claiming an entitlement based on business participation, for example if you are a sole trader.
  • Step 8 – Specify the estimated number of employees who will be eligible for the first JobKeeper fortnight (30 March – 12 April) and the second JobKeeper fortnight (13 April – 26 April).

Confirmation of eligible employees you will claim JobKeeper Payment for (available from 4 May 2020 onwards)

You or a registered tax agent can apply for the JobKeeper payment for your eligible employees:

  • Step 1 – Apply to claim the JobKeeper payment by logging in to the ATO Business PortalExternal Link
  • Step 2 – Ensure you have paid each eligible employee a minimum of $1,500 per JobKeeper fortnight before tax.
  • Step 3 – Identify your eligible employees in the application form by
  • selecting employee details that are prefilled from your STP pay reports if you report payroll information through an STP enabled payroll solution, or
  • manually entering employee details in ATO online services or the Business Portal if you do not use an STP enabled payroll solution, or
  • using a registered tax agent who will submit a report on your behalf through Online services for agents.
  • Step 4 – Submit the confirmation of your eligible employees online and wait for your confirmation email or SMS showing it has been received.
  • Step 5 – Notify your eligible employees you have nominated them.
  • Step 6 – We will pay you the JobKeeper payment for all eligible employees after receiving your application.
  • Step 7 – Each month, you will need to reconfirm that your reported eligible employees have not changed through ATO online services, the Business Portal or via your registered tax agent. This will ensure you will continue to receive the JobKeeper payments from us. You do not need to retest your reported fall in turnover, but you will need to provide some information as to your current and projected turnover. This will be done in your monthly JobKeeper Declaration report.
  • Step 8 – If your eligible employees change or leave your employment, you will need to notify us through your monthly JobKeeper Declaration report.

What NOT to do!

Don’t be DODGY! That’s it. Don’t cook up schemes. Don’t change employee employment status. Don’t change turnover figures. Don’t make false statements or anything else that makes it ‘look’ like you are eligible when in fact you are NOT! Just don’t do it.

There is a special taskforce set up to ensure that business owners are doing the right thing and catch out the crooks. There are severe penalties that could be faced for claiming the JobKeeper payment when you are NOT entitled to it.

Things like Single Touch Payroll (STP) reporting and the like are going to make it very easy for the ATO to data match information. So if something flags in their system it’s more like an issue of guilty until you can prove yourself innocent.

Good luck!

Unfortunately, I wasn’t able to cover all the details off about the JobKeeper payment in this blog as it’s quite a long and complicated piece of legislation. But hope this information did help you to understand it a bit better.

ATO website

https://www.ato.gov.au/General/JobKeeper-Payment/

Treasury website 

https://treasury.gov.au/coronavirus/jobkeeper

Employee nomination notice 

https://www.ato.gov.au/assets/0/104/300/387/d1aab7f2-fbe8-44b8-9ec1-4885ded1088e.pdf

Treasury integrity rules

https://treasury.gov.au/sites/default/files/2020-04/Fact_sheet_Protecting_integrity.pdf