JobKeeper: The Distinction Between Business Participants & Employees

FAQ – “Can you please clarify, the employee versus business participant? I do collect a wage and exclude myself as an employee and have added myself as a business participant. Is this correct or incorrect?”

An employee has to be on your payroll before the 1st of March. This applies to the same eligibility criteria as any other employees.

As a business participant, the business had an ABN from the 12th of March. You run the business, you’re actively in the business, doing things for the business. You’re either a partner, a direct shareholder, a beneficiary of a trust or a sole trader.

The important distinction between employee and a business participant is that they can’t claim for both; It’s only one or the other. If you are already on the payroll and you are already paying yourself a wage, you have to keep paying yourself that $1500 per fortnight minimum to be eligible for reimbursement. If you’re a business participant, that’s not the case.

If you need help with JobKeeper or need to speak to an Accountant, book a strategy call with one of our accountants: https://inspire.business/chat

Critical Reasons to Stay On Top Of Your Bookkeeping

JobKeeper Reporting

By the 14th of each month (no longer the 7th), you’ll need to report your JobKeeper-related GST turnover, as well as making sure your payroll information is correct as you’ll be reporting that to the ATO.

Preparing BAS

When it’s BAS time, either monthly or quarterly depending on the lodgement cycle, your accountant will start nagging you a couple of days after the month. There’s some people who have already done it by the first or second of the month and there’s some who don’t get it done by the due date of the BAS.

Getting your Tax done annually

The worst thing when you do your bookkeeping is rushing it to meet deadlines. Because often, you get things wrong especially if you do it yourself. Do what you do well and outsource this sort of stuff. I’ve finally done that myself, even though I can do bookkeeping, but it’s so nice not having to worry about it and getting someone else to do it on a regular schedule.

There’s reasons why people are going to chase these numbers so it’s super important to have this done correctly and on time.

If you need help with JobKeeper or need to speak to an Accountant, book a strategy call with one of our accountants: https://inspire.business/chat

Buying a car with the $150,000 instant asset write off

We’ve had a lot of clients ask us, “how does the increased instant asset write-off of $150,000 apply to a purchase of a car?”
Here are a few things to consider:

When you’re purchasing a car, you have to keep in mind that there are separate rules and limits around how much you can depreciate for a motor vehicle. The maximum you can depreciate is actually a lot lower than the instant asset write-off.

The instant asset write-off is $150,000 (recently extended until the end of this calendar year), but the car depreciation limit is $57,581, plus GST if your business is registered for GST. Keep in mind, there’s also a limit that you can claim for the GST which is actually one-tenth of the original figure ($57,781), so the maximum GST is $5,758 for the GST claim. (This is also before adjusting for any private use.)

If you’re looking upwards of a 60K car, you may want to double check your tax expectations because you can’t just write-off the whole thing. This applies to what the ATO calls “motor vehicles”, but not quite what they call “commercial vehicles”.

Vehicles such as Utes could be single cab, dual cab, or trucks as well. They are not limited by that $57,581 depreciation limit. What you look for is, has it got a payload of more than 1 ton, or is it designed to carry more in payload kilos than it is to passenger kilos? You can get the specs of the vehicle and have it assessed.

If you’re ever unsure, please get in touch with your accountant, and make sure you know what the tax implications of purchasing a car is.

Don’t think that just because the instant asset write-off was $150,000, you can go and buy a Range Rover, and expect to claim the whole lot on tax.

Can you appeal a knock back for Cashflow Boost if you believe you’re eligible?

Yes. Reading the legislation as it applies, if you fail, then there is an appeals process for special circumstances that you can go through.

They are structuring the process a little bit more, but at the moment, you can send your information to an email address and state your reasons why: cashflowboostreview@ato.gov.au

You can say, “Hey, look, I failed because of this, this and this, but here’s the circumstances why I believe, ordinarily, I should be eligible”

Listen to the full episode with Natasha Hawker on the HR Heroes Podcast – https://player.whooshkaa.com/episode?id=642364

Pass One of These Alternative Tests To Qualify For JobKeeper

There are rules and tests around the following – the name of each test is;

Started the business recently
Business disposals, purchases or restructures
Fast-growth business – where you’ve had a substantial increase in turnover over the last 12 months
Entities affected by drought or other natural disasters, like the fires that Australia had late last year, early this year.
Businesses with irregular turnover (seasonal)
Sole traders or small partnerships with sickness, injury, or leave.

These alternate tests actually include a lot more businesses which I think is great. We might have a client who passes two or three of these alternate tests, but you only need to pass one.

For further details, please read the rules around each test, or reach out to us.

Listen to the full episode on the HR Heroes Podcast – https://player.whooshkaa.com/episode?id=642364

What Happens If You Get Bookkeeping Wrong

If you or the bookkeeper gets it wrong, it’s going to cost you money in some way, whether that may be missing out on GST, claiming GST where you’re not meant to or it might cost more in tax or accounting fees.

Here’s some common bookkeeping errors we see:

Using the wrong GST code

If you don’t code your GST right on transactions, you’re either; over claiming GST – which is essentially illegal, or you’re under claiming it – you’re not getting the tax back owed to you.

It’s either business owners who DIY their bookkeeping or they’re not having the best bookkeepers who aren’t really going through the numbers properly.

Lodgement delays and penalties

We’ve seen clients who basically need to redo their whole bookkeeping because it was done so poorly resulting in lodgement delays, penalties or nagging from the accountants.

Transactions coded to the wrong account

This could hurt you when you’re trying to make business decisions and you’re not getting accurate information.

Balance sheet transactions coded to the profit and loss statement

It’s very common to overstate or understate your profit with this easy mistake.

We often see people when processing payroll through Xero and it puts it on the profit and loss, then they allocate payments of payroll to the wages account – basically, you’re doubling what your payroll expense looks like and your profit is going to look shocking.

Double paying suppliers

This is double paying suppliers if the payments aren’t getting reconciled correctly. People pay them and also enter them through the bills section, so that ends up being a double payment there.

Following up clients who have already paid (or the reverse is having huge debtors)

You’re following up clients who have actually paid their bill, because of your lag in reconciling your money received or having a huge debt balance because you’re not following up your debtors at all.

Stock is out of whack – can affect your tax bill

This is probably more towards the manufacturers or businesses who sell actual physical products, where your stock is all out of whack.

The problem with having your stock out of whack is if you’re making large purchases of materials, like raw materials, and then you’re leaving them on your profit and loss rather than on your balance sheet on your stock – you’re not reading your financials right either.

In conclusion

So if you need help with bookkeeping, I highly recommend Efficiency Partners. We’ve referred multiple clients over to Allison and her team and they do what is called a “cleanse” – where they basically clean up your books, then maintain them from that point onwards.

During that process, they’ve actually found thousands and thousands of dollars for clients who have missed claiming things. Specifically, when they buy assets, a lot of the time, they forget to put the asset actually in the system. So there’s thousands of thousands of dollars there that have been starved of GST. So, it is very important that you get it right.

For bookkeeping enquiries, get in touch with Allison Joyce at allison@efficiencypartners.com.au or efficiencypartners.com.au

Penalties For Illegally Claiming JobKeeper Benefits

This is very real and as a reminder, the ATO and the Tax Practitioners Board, who licence tax agents have fired shots across the bow to accountants. They’ve sent out newsletters and emails to us basically saying, “If you do the wrong thing, you’re risking your registration and obviously fines and penalties.”

Another thing I’ve seen in the accounting community is that accountants are going to be dobbing in other accountants if they see the wrong thing happening.

If the ATO has caught you trying to milk the stimulus measures, you risk not only losing your tax agent registration, they’ll ask you to pay it back and you’ll probably lose all access to any other stimulus measures you are otherwise eligible for.

So not just the JobKeeper if you fudge those numbers but cash flow boosts or others as well. You just don’t want to risk it! The reporting now with the ATO has access to cross-check information that you give them. I think you need to be very careful if you get caught and you say, “Oh, well I didn’t know.” Well, you really need to make sure if you’re going to claim it that you’re eligible.

Another thing I’ve seen in the accounting community is that accountants are going to be dobbing in other accountants if they see the wrong thing happening.

JobKeeper Monthly Reporting Requirements

Now that May has finished, and if you are eligible – my recommendation is to lodge your monthly reporting for JobKeeper as soon as you can.

Each month, to receive the cash from JobKeeper, you need to process a claim for the JobKeeper payment from the ATO business portal and report some key numbers.

You will need to go to https://bp.ato.gov.au/ (Business Portal ATO) or your accountant can do it on your behalf via their Tax Agent Portal and each month, report a couple of things:

Your GST turnover for the previous month
Now that May has finished, you need to work out what your GST turnover is. You can usually find this in Xero or your bookkeeping software.

Your estimated GST for the current month
The ATO is also asking you for the estimate of the following month, or as an example if you’re claiming for May, what is the month of June going to look like for your business.

At the moment, we’re looking for the best guess of what June’s turnover will be. It doesn’t have to be exact and there’s no penalties if it’s way under or over as things are super unpredictable now.

Consider are your employees still eligible
You’ll need to check that all your employees you are claiming for are still eligible. This is still relevant if you have any employees who leave employment (quit or terminate) – also making sure you’ve paid them the minimum $1,500 per fortnight.

So each month confirm the employees that you are claiming for and also confirm each fortnight you are claiming the payment for.

Lodge as soon as you can

My recommendation is to lodge the monthly report as soon as you can.

We’ve already seen money starting to hit bank accounts for our clients for April claims (paid in May). So as soon as the month finishes, in the first couple of days of the new month, make sure you get the reporting done.

You will only receive the JobKeeper payments once these reports have been submitted.

If you need help with JobKeeper, book a strategy call with one of our accountants: https://inspire.business/chat/

Legal Options That Can Save Your Business

We spoke with @Danny King from Danny King Legal on our webinar last week about legal options when it comes to dealing with a team during COVID-19.

1 JobKeeper enabled stand down

What we can do is a partial stand down where we shave off the excess wages on top of JobKeeper. For example, if the person is earning $100 an hour, JobKeeper is going to pay them for 7.5 hours in a week ($750 a week). Once you’ve paid that $750, if they’re not doing any work anyway, we can shave off the excess wages if we’re very careful and jump through the right hoops. There’s documentation, consultation and I recommend extreme caution. However, it is possible to save yourself a lot of money on that extra payment over the JobKeeper minimum.

2 JobKeeper regarding directions of location of work

We’ve all probably jumped the gun on giving directions about location of work, without having gone through all of the steps that we need to. If you’ve got someone in your team that is jumping up and down because they are not comfortable in their home office or think that going to an alternative location is too far or whatever the problem is, then you should be focusing on dealing with that particular problem. Otherwise, having a consultative approach about where you’re going to have the location of work is probably going to get you over the line.

As an example, our firm moved on the 1st of April. We’ve had a lot of people who are working from home that are starting to dribble back in. I have actually let all of my people make that decision for themselves. Other businesses are having to be a bit more prescriptive about who’s going to work where, and if you are covered by the JobKeeper directions, there’s a special method that makes it a bit easier to do. If you’re not covered by the JobKeeper directions, such as our business, we need to do it under the traditional method of renegotiation of contract, or it might be sitting in this bubble of a reasonable and lawful direction. So, just because there are extra bits that we get for the JobKeeper, doesn’t mean that that’s the only way.

3 JobKeeper regarding direction on duties

The direction of duties is about saying, “I don’t have work in what you normally do, but I do have some filing. And so it’d be really useful if the business could have the benefit of your filing skill.” This is directing the person to do alternative duties. Again, you can do that in normal employment law there are quite a few risks involved in that.

What the JobKeeper direction has done is just de-escalated some of the menace that you would otherwise feel in having this kind of imposition on an employee who might otherwise think, “Hey, you’ve just demoted me. You’re punishing me. Why are you doing this to me?” So, it’s just helping people get perspective.

4. JobKeeper Agreement

We can also have agreement, and this isn’t a normal agreement. A JobKeeper agreement requires the other party to act reasonably. Without the JobKeeper, we can still come to an agreement. You can come to an agreement about almost anything. But, it’s in situations where you’ve got a recalcitrant employee on the other side. He or she is digging their heels in. They’ve got a bit of an entitlement complex. They’re not in it for the team. They really don’t care that you’re the entrepreneur with the blood, sweat and tears that have been put into the business. Then they are the ones that the JobKeeper provisions are really going to be useful for because you can make an application to the commissioner to help clear that person as a roadblock.

So, all in all, I think that the options that have come out of the JobKeeper, for those of you in receipt of JobKeeper, are really brilliant and there’s so many opportunities here to leverage this very special situation that we’re in.

Webinar Replay

You can watch the full webinar replay here: https://businessreliefpackage.com/

Should You Break Out Of Your Fixed Interest Rate?

“Variable rates are significantly lower than they were a year or two ago, which means that if I’m on a fixed rate of 4%, and I see variable rates in the 2s now, I’ve got this feeling I want to cancel my fixed rate and switch to a variable rate to pay much less interest. Is it a good idea to break our fixed rate and go on a variable rate?”

On a recent webinar, here’s what Inspire’s mortgage broker, @ColinO’Loughlin said –

Generally, to get your fixed rate break costs, you’ll need to talk to your existing lender. You can sometimes provide us with an authority to find out what those break costs are for you. However, with these rebates at the moment to move to another bank, it can soak up a majority of those costs. It will also vary on how much you’ve borrowed and the rate you’ve locked in at that point of time.

So, if you’ve locked your fixed rate for three years, and you’ve only been there for six months, we work out the interest of what you would earn with today’s market, multiply that over a two and half year period and compare it to what you’re earning now. That ultimately will give us what your savings will be versus the costs to break your fixed rate.

This is a case-by-case basis, but more times than not, you’re going to see massive savings on the interest and rebate front and will make sense to potentially cancel your fixed rate at this point in time.

It also varies from bank to bank. It’s just a phone call away saying, “Hey, look, I’m interested in knowing if I was to break my fixed rate today, what would that cost be?” And they will provide you with a figure over the phone. Send that figure to us, we’ll do the math for you and let you know whether it’s beneficial. We’ll weigh everything up and what that looks like from a cash flow point of view moving forward.

If you need help with JobKeeper or need to speak to an Accountant, book a strategy call with one of our accountants: https://calendly.com/inspireca/strategycall