HOMEBUILDER: WHAT IS IT AND HOW DO YOU ACCESS IT?

The Government has announced grants of $25,000 to encourage people to build a new home or substantially renovate their existing home. 

There are a few complexities to this grant that both home builders/renovators and the building industry need to be across before jumping in and signing a new contract on the expectation that the grant will apply.

The grants will be distributed by the revenue office of the State or Territory where you live or plan to live.

The HomeBuilder scheme targets the residential construction market by providing tax-free grants of $25,000 to eligible owner-occupiers, including first home buyers, to build a new home or substantially renovate their existing home.

Eligibility
Eligibility criteria apply to the individuals applying for the grant and the building project:

Individual eligibility
The HomeBuilder scheme is available to owner occupiers including first home buyers. It is not accessible to owner builders, developers or investors.

To be eligible you need to be:

• An individual (not a company or trust); and
• 18 years of age or older; and
• An Australian citizen.

And, you need to meet the income test. To be eligible, you cannot earn more than:

• Individuals – $125,000 based on your 2018-19 or later tax return
• Couples – $200,000 based on both of your 2018-19 or later tax returns

The building project eligibility
The building contract must be signed between 4 June 2020 and 31 December 2020. And, the construction or renovation must commence within three months of the contract date.

The grants are available if you build a new home or renovate a home to live in (your principal place of residence) where:

* house, apartment, house and land package, off-the-plan, etc.
** renovation works must be to improve the accessibility, safety and liveability of the dwelling. It cannot be for additions to the property (such as swimming pools, tennis courts, outdoor spas and saunas, sheds or garages (unconnected to the property)).

If you own or have purchased land but have not signed a contract to build your home, you may meet the eligibility criteria if you:

• Own a property (house and land), and knock down the house to rebuild – this will be counted as a substantial renovation, and therefore subject to the renovation price range of $150,000 to $750,000 provided the total value (house and land) of the property does not exceed $1.5 million pre-renovation;
• Own vacant land before 4 June 2020, and then build, the total value of the land and new build cannot exceed $750,000; or
• Buy the land after 4 June 2020, and then build, the total value of the land and build cannot exceed $750,000.

Integrity measures and pricing

Building contracts must be at arms-length, that is, the parties cannot be related or connected.

Renovations or building work must be undertaken by a registered or licenced building service ‘contractor’
(depending on the state or territory you live in) and named as a builder on the building licence or permit.

When it comes to price, the terms should be commercially reasonable, and the contract price should not be inflated compared to the fair market price. The rules enable the purchaser to request that the builder demonstrate that the contract price for the new build or substantial renovation is no more than a comparable product (measured by quality, location and size) as at 1 July 2019.

Interaction with first home owner grant schemes

The HomeBuilder grant does not exclude first home buyers from accessing other grants and concessions such as the First Home Owner Grant, stamp duty concessions, the First Home Loan Deposit Scheme, and First Home Super Saver Scheme.

Problem areas

As the building contract is entered into before the grant is approved, it will be important that the grant is not essential to finance the building project, just in case the grant is not approved.

In addition, as the builder needs to commence work within three months of the contract date, it will be important to ensure that the contract recognises the commencement dates.

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.

Please don’t hesitate to contact your client manager on (02) 8543 6800 if you have any questions.

ATO JOBKEEPER AUDIT TARGETS

The JobKeeper subsidy has progressed beyond the rush for eligibility and entered its second phase: compliance. Late last month, the Australian Taxation Office (ATO) released guidance highlighting where the regulator will focus its compliance resources.

The JobKeeper estimates error
Hindsight is a dangerous lens as Treasury discovered last month announcing that the number of employees expected to be covered by the JobKeeper scheme was overstated in the original announcement by approximately 3 million. The overstatement reflects “the level and impact of health restrictions not having been as severe as expected and their imposition not having been maintained for as long as expected at the time,” the Treasury statement says.

At the time of the Treasury estimates, not long after the country went into lockdown, we simply did not know what to expect. The first stimulus measures had been announced and long queues formed in front of Centrelink offices. Supermarket shelves were being stripped of essentials. Alarming daily global updates showed the virus spreading unimpeded in many parts of the world. China demonstrated the need for fast, severe and extended lockdowns to remove the possibility of community transmission. For Australia, there was no appetite to wait and see what might happen as other countries with devastating death rates did. We acted swiftly and we have reaped the benefits of that action with a low death rate, albeit at an economic cost. For many businesses, estimating the potential impact of the pandemic, the expectations were the same – fast, severe and extended. Now, with the JobKeeper scheme entering a compliance phase, we need to go back and point to the facts that supported the estimates declared to the ATO.

The ATO’s JobKeeper targets
The ATO is looking carefully at businesses that appear to have made adjustments to their circumstances to meet the JobKeeper eligibility requirements where, if those adjustments had not been made, the entity would have been ineligible or had lower JobKeeper payments. Or, where adjustments have been made to enable another entity or subcontractor to meet the decline in turnover test.

Industries or businesses that have not experienced adverse trading conditions and those that appear to have increased staff numbers are likely to be looked at closely. In its guidance, the ATO sets out a series of examples that are likely to attract their attention:

• Increase in staff – where the number of staff the business reports have increased beyond levels that were previously required to run the business prior to 1 March 2020.
• Deferring supplies – in industries unlikely to be adversely impacted by the pandemic, the business agrees with its customers to defer making supplies, resulting in the company’s projected GST turnover declining to the level required to meet the turnover test.
• Bringing forward supplies – in industries unlikely to be adversely impacted by the pandemic, the business brought forward supplies to be able to meet the decline in turnover test in a following month or quarter.
• Restructures – the example given by the ATO is a company that leases assets to third parties. The leasing business is generally unaffected by the pandemic. However, the business restructures and transfers the assets of the business to a new company. It then withholds the payment of dividends from the new company to the business resulting in a decline in the turnover of the business.
• Management fee manipulation – where inter-entity management fees are charged, the timing of the fee is changed to meet the decline in turnover test.
• Reduction in payments to subcontractors – where a business has reduced or deferred payments to subcontractors to enable them to meet the decline in turnover test. The ATO has stated that they will review the business and the subcontractors.
• JobKeeper used to reduce cost of supplies to customers – in this scenario, the business and its customers agree to reduce, waive or defer payments to enable the business to meet the decline in turnover test. JobKeeper is then used to fund the reduction in payments. In effect, JobKeeper is paying for the payment reduction.

Low risk scenarios
If your industry or business has been adversely impacted by the pandemic, regardless of your structure or arrangements, it is unlikely the ATO will review your situation unless there has been an obvious attempt to increase JobKeeper payments.

To add certainty, the ATO notes that where a service entity that employs staff for a related entity has reduced management fees, either because the service agreement has been changed to reduce the fee by an amount that is proportional to the reduction in the trading entity’s external turnover,  staff have been stood down, or where the related entities cannot afford to pay the fee, and the industry is adversely impacted by the pandemic, the ATO will not generally seek to apply compliance resources.

What happens if you got it wrong?
If your structure or the way you have accessed JobKeeper is on the ATO target list, this does not mean that there is a problem.

Eligibility to JobKeeper is generally based on an estimate of the negative impact of the pandemic on an individual business’s turnover. Some will experience a greater decline than estimated while others will fall short of the required 30%, 50% or 15%. There is no clawback if you got it wrong as long as you can prove the basis for your eligibility going into the scheme.

For those that, in hindsight, did not meet the decline in turnover test, you need to ensure you have your paperwork ready to prove your position if the ATO requests it. You will need to show how you calculated the decline in turnover test and how you came to your assessment of your expected decline, for example, a trend of cancelled orders or trade conditions at that time.

Manage your JobKeeper compliance
Monthly declarations of your current and projected GST turnover are due within fourteen days of the end of each relevant month.

It’s important to ensure that you have paid eligible JobKeeper staff at least $1,500 during each JobKeeper fortnight. If you pay employees less frequently than fortnightly, the payment can be allocated between fortnights in a reasonable manner. For example, if you pay your employees on a monthly pay cycle, your employees must have received the monthly equivalent of $1,500 per fortnight.

For the first two JobKeeper fortnights (30 March-12 April, 13 April-26 April), employers had an extension until 8 May to make the JobKeeper payments to eligible employees. For the remaining JobKeeper fortnights, employees will need to receive at least $1,500 by the end of each JobKeeper fortnight or the monthly equivalent of $1,500 per fortnight. Depending on your pay cycle, this may require some adjustments each month.

If you have any concerns regarding your circumstances please contact your client manager on (02) 8543 6800 or email them directly.

JOBKEEPER
STEP BY STEP DETAILS FROM ATO ON HOW TO ACCESS IT

The ATO late yesterday released specific detail on exactly how you can access JobKeeper for your business.  Below is the summary of what you need to do or CLICK HERE for the full ATO detail.

Please note that as further information will be released from the ATO, we will amend and make updates as required.

You may have pre-registered for JobKeeper, but you will be able to officially enrol in the JobKeeper scheme from 20 April 2020, using an online form on the ATO website. After you enrol, you will later identify your specific eligible employees and submit the information to the ATO.

If you have pre-registered with the ATO for an update on the JobKeeper Payment, you will soon receive a notification from the ATO when the online enrolment is available.

SUMMARY OF STEPS TO ACCESS JOBKEEPER

SOME COMMON TOPICS/QUESTIONS

1. How toCalculatea Fall in Turnover for the First Fortnight Starting 30 March 2020

To work out your fall in turnover, you can compare either:

• actual GST turnover for March 2020 with actual GST turnover for March 2019
• projected GST turnover for April 2020 with actual GST turnover for April 2019
• projected GST turnover for the quarter starting April 2020 with actual GST turnover for the quarter starting April 2019

Essentially this basic test compares the GST turnover of any single month from March to September 2020, or the quarters that start on 1 April 2020 or 1 July 2020, with the corresponding period in 2019. (Noting that you are only eligible from the date the turnover test is passed, JobKeeper is not backdated).

How you choose to project your fall in turnover is not dependent on whether you report on a quarterly or monthly BAS, though you can do that if it is easier. The turnover calculation is based on GST turnover, but there are some modifications, including disregarding GST grouping (where two or more associated business entities operate as a single GST group). The ATO will provide more information soon about applying the turnover test.

2. JobKeeper Payment –Employee Nomination Notice

   Before you enrol for the JobKeeper Payment, you need to complete the JobKeeper employee nomination noticeto:

• notify your eligible employees that you intend to participate in the scheme, and
• ask them if they agree to be nominated and receive payments from you as part of the scheme.

Next steps:

• Download the JobKeeper employee nomination notice
• Both you and the nominated employee need to complete the form. You do not need to send this notice to the ATO, however you should keep a record to document that your employee has agreed that you claim the JobKeeper Payment for them.

Note: You should not use this JobKeeper employee nomination notice if you are intending to claim JobKeeper payments for an eligible business participant for example a partner in a partnership, an adult beneficiary of a trust or a shareholder or director of a company or a sole trader. A different nomination process will be required.

3. Business Owners Actively Engaged In Their Business

Other businesses in the form of a company, trust or partnership can also qualify for JobKeeper payments where a business owner (a shareholder, adult beneficiary or partner) is actively engaged in the business, or a director is actively engaged in the business.

The ATO will provide more information soon about the eligibility of these businesses for the JobKeeper payment.

4. Employees who have been Terminated

If you terminated an employee after 1 March 2020, you can re-engage them and they will be eligible if they met the eligibility criteria on 1 March 2020.

If you want to claim the JobKeeper payment for employees you have re-engaged, you will need to:

• confirm they want to be re-hired and participate in the JobKeeper scheme with you
• re-engage the employees you want to claim for
• ask them to complete the JobKeeper employee nomination notice and return it to you. You are required to keep this form as part of your record keeping obligations under the law
• start paying them a minimum of $1,500 (before tax) for each fortnight they are employed and you claim for

You will only be paid a JobKeeper payment for employees from the fortnight they were re-engaged. You cannot claim retrospectively for employees you re-engage

5. Confirmation ofEligible Employeesyou 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 Portal

• 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 – The ATO 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 the ATO. 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

6. When toPay Your Employees

• You should pay your employees for each JobKeeper fortnight you plan to claim for. The first fortnight is from 30 March – 12 April and each JobKeeper fortnight follows after that

• For the first two fortnights (30 March – 12 April, 13 April – 26 April), the ATO will accept the minimum $1,500 payment for each fortnight has been paid by you even if it has been paid late, provided it is paid by you by the end of April. This means that you can make two fortnightly payments of at least $1,500 per fortnight before the end of April, or a combined payment of at least $3,000 before the end of April.

• If you usually pay your employees less frequently than fortnightly, the payment can be allocated between fortnights in a reasonable manner. For example, if you pay your employees on a monthly pay cycle, your employees must have received the monthly equivalent of $1,500 per fortnight.

Again, here are the relevant ATO links for you:

• Full ATO detail on JobKeeper – https://www.ato.gov.au/General/JobKeeper-Payment/
• JobKeeper Pre-Registration Form – JobKeeper payment
• Jobkeeper Employee Nomination Form – JobKeeper employee nomination notice
• ATO Business Portal – ATO Business Portal

It’s great to see some detail from the ATO on JobKeeper.  We know you will have questions on this, talk to us for any clarification that you need.

7. Services NSW $10K Grant – Applications Now Open

Applications are now open for the NSW Government’s $10K grant for businesses experiencing a decline in turnover of >75% of revenue in a 2 week period – see link below for full application details.

https://www.service.nsw.gov.au/transaction/apply-small-business-covid-19-support-grant

We understand this is a stressful time. Please contact your manager at HYD Advisory for further information on (02) 8543 6800 or email them directly.

TOP 10 GOVERNMENT STIMULUS INITIATIVES – FOR BUSINESS OWNERS
(AS AT 7 APRIL 2020)

• The Jobkeeper Payment & Cashflow boost for employers are the most significant initiatives for business owners (points 1 & 2).
• There are 8 further measures that may be of benefit to you and are worth being aware of (points 3-10).
• We will discuss these strategies in detail when we speak with you upon preparing/reviewing your March IAS/BAS in coming weeks, with follow-up advice in your April/May tax planning reviews.

1. JOBKEEPER PAYMENT

• FORTNIGHTLY PAYMENT OF $1,500 PER ELIGIBLE EMPLOYEE FOR 6 MONTHS – KEEPS STAFF EMPLOYED

2. CASHFLOW BOOST FOR EMPLOYERS

•  TAX FREE PAYMENTS/CREDITS OF BETWEEN $20K AND $100K

3. ATO PAYMENT DEFERRALS

5. NSW PAYROLL TAX – WAIVER

6. NSW GOVT – $10,000 GRANTS FOR BUSINESSES SEVERELY IMPACTED BY COVID-19

7. APPRENTICES & TRAINEES – WAGE SUBSIDY

8. GOVT BACKED SME LOAN GUARANTEE SCHEME (OF UP TO $250K)

9. EARLY RELEASE OF SUPERANNUATION

10. INSTANT ASSET WRITE OFF & ACCELERATED DEPRECIATION

• FORTNIGHTLY PAYMENT OF $1,500 PER ELIGIBLE EMPLOYEES FOR 6 MONTHS TO KEEP STAFF EMPLOYED

3. ATO PAYMENT DEFERRALS

• Be highly impacted by the Public Health Order 2020 (COVID-19 Restrictions on Gathering & Movement) and experience a decline in turnover of at least 75% compared to the equivalent period (of at least 2 weeks) in 2019.

• have between 1-19 employees and a turnover of more than $75,000 pa.

• have a payroll below the NSW Govt 2019-20 payroll tax threshold of $900,000 (i.e. not pay payroll tax)

7. APPRENTICES & TRAINEES – WAGES SUBSIDY

• Unemployed; or
• After 1 January 2020 made redundant; or
• Your working hours were reduced by 20% or more.