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  • #1222689
    James Millar
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    Henri K, post: 269171, member: 115510 wrote:
    I do trust your advice more than my logic, but please tell me which part of my logic is wrong:

    1. A company is eligible if it has income during a period that ends before 12 March

    2. The period is a quarter for small companies

    3. March 2020 quarter ends on 31 March 2020

    4. 31 March is later than 12 March

    5. The discretionary clause (“unless..”) applies only to notification, not to the actual period

    6. Therefore, a company must have had income during or before December 2019 quarter, i.e. before 31 December 2019, to be eligible.

    The measure applies to any small business entity with an ABN (not just a company).

    The entity must have EARNED income before 12 March 2020

    The entity must REPORT the income to the ATO by 12 March 2020 OR until such further time as the Commissioner allows. We expect the Commissioner will exercise discretion to for those date had not REPORTED income as at 12 March 2020 eventhough they actually EARNED income prior to then.

    And obviously must employ

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1222690
    Henri K
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    JamesMillar, post: 269172, member: 5318 wrote:
    The entity must have EARNED income before 12 March 2020

    We are running in circles.

    The law text does NOT say that.

    The law text says “period that ends before 12 March”, and a period is defined as a quarter.

    #1222691
    James Millar
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    Henri K, post: 269173, member: 115510 wrote:
    We are running in circles.

    The law text does NOT say that.

    The law text says “period that ends before 12 March”, and a period is defined as a quarter.

    I’m not running in circles – have a re read of these subsections which are the two income based tests

    5) For the purposes of paragraph (1)(f), the requirement in this subsection is satisfied if: (a) an amount was included in the entity’s assessable income for the 2018-19 income year in relation to it carrying on a business; and (b) the Commissioner had notice on or before 12 March 2020 (or a later time allowed by the Commissioner) that the amount should be so included.

    (6) For the purposes of paragraph (1)(f), the requirement in this subsection is satisfied if: (a) the entity made a taxable supply in a tax period that applied to it that: (i) started on or after 1 July 2018; and (ii) ended before 12 March 2020; and (b) the Commissioner had notice on or before 12 March 2020 (or a later time allowed by the Commissioner) that the entity had made the taxable supply.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1222692
    James Millar
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    If I understand correctly I think you are concerned about 6(a)(ii) reference to a tax period that “ended before 12 March 2020”. Reading the EM supplement as extracted above we believe their intent is to measure by reference to any income created up to 12 March 2020. There are a handful of sub definitions of “tax period” in the GST ACT that this references indirectly across to via the ITAA1997. I’m not gong to cover them all but the general reference is quarterly which would technically mean this legislation is not consistent with the intent because it could result in a subset of entities missing out. Namely those that produced income after 31 December 2019.

    As mentioned at the very top there are other flaws we have found in the legislation that on strict interpretation could go against the taxpayer. For reference the other big one says there must have been a requirement for an amount to be withheld to be eligible even though there is supposed to be a $10,000 entitlement for those with nil withholding. A technical flaw.

    I can only put this down to rushed drafting and oversight because of time pressure. Not comforting. Might try and speak to someone in treasury and see if we can prompt an amendment.

    We are also seeking some clarification from people involved in the drafting so see what the position is because the law as written is not consistent with other Govt material

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1222693
    bb1
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    JamesMillar, post: 269176, member: 5318 wrote:
    Might try and speak to someone in treasury and see if we can prompt an amendment.

    No point ScoMo has jumped ship and closed down parliament for the next 4 or 5 months, of all times to shut down. Pathetic really.

    #1222694
    Henri K
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    JamesMillar, post: 269176, member: 5318 wrote:
    because it could result in a subset of entities missing out. Namely those that produced income after 31 December 2019.

    Yes James, that has been exactly my point and concern all along; the intent of the law may be different, but the letter of the law is 31 December 2019 cut off, instead of 12 March 2020.

    Also, many regular companies take couple of months, and high-tech companies even several years, before starting to earn any income. We are looking at much higher proportion of companies missing out on the stimulus than just the ones founded last couple of months.

    E.g. Our product has been free to use for almost two years, and on a good day before apocalypse we had more users than MyGov or Centrelink, from 60+ countries… So it is a legit company, but because our product was free to use we are ineligible for this part of the stimulus, and will be most likely unable to get the 250k loan guarantee stimulus, and it even makes me personally ineligible for “self-employed” JobSeeker stimulus, and therefore also ineligible to access-to-super stimulus. Total stimulus = $0.00.

    #1222695
    James Millar
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    Henri K, post: 269181, member: 115510 wrote:
    Yes James, that has been exactly my point and concern all along; the intent of the law may be different, but the letter of the law is 31 December 2019 cut off, instead of 12 March 2020.

    Also, many regular companies take couple of months, and high-tech companies even several years, before starting to earn any income. We are looking at much higher proportion of companies missing out on the stimulus than just the ones founded last couple of months.

    E.g. Our product has been free to use for almost two years, and on a good day before apocalypse we had more users than MyGov or Centrelink, from 60+ countries… So it is a legit company, but because our product was free to use we are ineligible for this part of the stimulus, and will be most likely unable to get the 250k loan guarantee stimulus, and it even makes me personally ineligible for “self-employed” JobSeeker stimulus, and therefore also ineligible to access-to-super stimulus. Total stimulus = $0.00.

    We are seeking confirmation on the position on this and another potential technical flaw

    For reference its in the eligibility criteria

    (b) the entity must withhold an amount from the payment under Subdivision 12-B, 12-C or 12-D in Schedule 1 to the Taxation Administration Act 1953 (regardless of whether the 32 entity actually withholds the amount).

    That could easily be interpreted as if you pay someone $100 with no withholding amount (because there is none) then you are ineligible for the entire scheme. Remember you are supposed to get $10,000 pre 30 June and possibly $10,000 after 30 June even if you pay someone $100 with no withholding

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1222696
    Henri K
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    Awesome that you are taking action, James. Keep us posted.

    Thinking this further, there are two additional failures in how the stimulus is structured:

    1. We don’t get any stimulus. Fine, but some of our older competitors do, and they can offer higher salaries. All new companies were put to disadvantage when hiring. We’d actually be better off if there would not have been any stimulus packages at all.

    2. The way the stimulus packages 1 and 2 were implement — non discretionary cut off date — is likely how packages 3+ will be implemented too. If I hire now, I miss out on packages 1 and 2 because I hired too late. But if package 3 supports new job creation, they may have cut off date in the opposite direction, giving stimulus only for new hires after the date the law was introduced, and we’ll miss that too if we hire in the middle of the packages. => Stimulus is actively discouraging us from hiring, while we wait for further packages.

    #1222697
    Paul – FS Concierge
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    ATO puts a quick end to gaming the system – kinda -by adding people such as Directors not already on PAYG.

    ATO LINK

    #1222698
    James Millar
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    The ATO material still indicates they haven’t quite figured out how to deal with some circumstances. For example an entity started started trading on 1 July 2019 and produced business income after that time but was not registered for GST because under the threshold. So no BAS at all required. Those entities will not be reporting anything to the ATO that would allow the ATO to verify the business income so they would miss out which was not the intent of the law.

    The schemes content is as expected but interesting

    Schemes
    You will not be eligible for cash flow boosts if you (or a representative) have entered into or carried out a scheme for the purpose of:

    • becoming entitled to cash flow boosts when you would otherwise not be entitled, or
    • increasing the amount of the cash flow boosts.

    This may include restructuring your business or the way you usually pay your workers to fall within the eligibility criteria, as well as increasing wages paid in a particular month to maximise the cash flow boost amount.

    Any sudden changes to the characterisation of payments made may cause us to investigate whether the payments are in fact wages. If the payments are wages, we may consider the characterisation of past payments, including whether they should have been subject to PAYGW and whether super guarantee contributions should have been made. You may also have FBT obligations that have not yet been met.

    So I think they acknowledge that some could genuinely pay themselves a wage when they have never previously but they will pursue those people for previous and later periods for not taking wages and paying super

    They are going to be very busy chasing people for this. We are now going to take a very conservative approach based on this.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1222699
    Henri K
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    They really created an abuse honey-pot with the $20k minimum.

    But there are also tons of gray-area borderline cases.

    A: I hire a new graduate software developer for a $40k a year and get $20k from ATO. I would not have hired otherwise. Am I scheming?

    B: I’ve worked for several years, full time, burning my savings, without taking any salary, dividends, loans or benefits whatsoever from the company. I start taking a small salary now, during the same month that our company starts finally earning small revenue, and co-incidentally during the same month when I become eligible for receiving $20k. Am I scheming?

    The Scenario B would most likely attract ATO’s attention, but is it really scheming? Perhaps more interestingly, is it morally wrong?

    #1222700
    James Millar
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    Henri K, post: 269186, member: 115510 wrote:
    They really created an abuse honey-pot with the $20k minimum.

    But there are also tons of gray-area borderline cases.

    A: I hire a new graduate software developer for a $40k a year and get $20k from ATO. I would not have hired otherwise. Am I scheming?

    B: I’ve worked for several years, full time, burning my savings, without taking any salary, dividends, loans or benefits whatsoever from the company. I start taking a small salary now, during the same month that our company starts finally earning small revenue, and co-incidentally during the same month when I become eligible for receiving $20k. Am I scheming?

    The Scenario B would most likely attract ATO’s attention, but is it really scheming? Perhaps more interestingly, is it morally wrong?

    A is definitely a scheme because the sole or dominant purpose was the make a claim.

    B is definitely not a scheme because of all the commercial reasons you mention as being the primary purpose. People are allowed to contribute sweat equity to reduce pressure on a business. Substituting dividends or trust distributions for wages for the first time is likely to be a flag for sure.

    However both may be audited and if the entity has any other skeletons they will be analysed as well.

    It puts advisers like us in a difficult position as we have an obligation to assist our clients maximise entitlements within the bounds of the law. However what is considered legitimate and what is not? And then of course if we do it a few times we might be “promoters” and subject to more penalty. The flip side is that if we are too conservative our clients miss out and its the small businesses like this that need it most and are often legitimately entitled.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1222701
    Tradesman
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    Lot’s of great info here, if not a little confusing to a mere mortal!

    As a sole trader, with no employees, my reading is that I’m really only entitled to the instant asset write off or dipping into my own super?

    #1222702
    Paul – FS Concierge
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    Tradesman, post: 269192, member: 99023 wrote:
    Lot’s of great info here, if not a little confusing to a mere mortal!

    As a sole trader, with no employees, my reading is that I’m really only entitled to the instant asset write off or dipping into my own super?
    Not necessarily so – keep reading or consult an Accountant.

    ATO Portal for Small Business Stimulus Assistance

    #1222703
    Tradesman
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    Thanks for the link Paul…..found the Sole Trader info page, which in addition to what I mentioned says there are SME loans & access to Jobseeker payment (in certain circumstances)……still nowhere the support being offered to businesses with employees.

    Would seem we’re classed as some kind of second rate business.

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