This article focuses on the recent major tax adjustments and issues made by the ATO during COVID-19 pandemic that we need to pay attention to. This includes several related tax types so that you can grasp the current tax affairs and obtain the latest information.
1. Personal taxation (Employee related)
For the calculation of fees, in addition to the existing methods, the ATO has introduced a shortcut (only applicable from March 1 to June 30 2020). This method allows you to request a deduction of 80 cents for every hour you work from home (meeting the premises of “fulfilling job duties” and “incurred additional operating costs”).
The shortcut method covers all other deductible operating expenses (including electricity required for office work, etc.). However, it should be noted that if you use this method, you cannot deduct any other expenses for working from home during this time.
When calculating the hours of work at home, you need to exclude breaks, for example, when you stop to eat lunch or assist your child to go to school at home. At the same time, you must record the number of hours you work from home. The materials can be: timetable/roster/diary/or similar documents listing your working hours.
Capital Gain Tax (CGT)
In most cases, if you work from home as an employee, this will not have a CGT impact on your home.
Marginal Tax Rate
If the employee asks for leave or temporarily leaves, the employer may pay the employee a payment and give the payment a special name, for example: COVID-19 allowance.
In general, regardless of how the employer names these payments or whether the payments are funded by the JobKeeper payment plan, the ATO will treat them the same as the payment you normally get from the employer, which means this will be paid at the employee’s normal marginal tax rate tax.
Fringe Benefit Tax (FBT)
Work from home (WFH) FBT
If the employer provides employees with a laptop computer and a portable printer or other portable electronic devices to enable them to work at home or elsewhere due to COVID-19, these devices will generally be exempt from FBT.
If employees are allowed to use the provided monitor, mouse or keyboard outside the workplace, or provide them with stationery or computer consumables, or pay for their telephone and Internet use, then “minor benefits exemption” or “otherwise deductible rules” may apply, exempting employers from FBT.
Minor benefits exemption
Minor benefits exemption refers to benefits worth less than $300, this prerequisites include:
- Benefits provided infrequently and irregularly.
- Low taxable value of secondary benefits and other similar or identical benefits (if deemed to be ancillary benefits).
- The possible total taxable value of secondary benefits and other related benefits is very low (related benefits are benefits provided with secondary benefits, such as electricity and telephone charges provided as part of the accommodation package).
- It is difficult to calculate the taxable value of benefits and any related benefits. Benefits provided by unexpected situations (for example, unexpected overtime).
Other deductible rule
Other deductible rules simply mean that if the employer does not pay for the expenses, those employees who are also eligible for deduction in the personal tax are eligible for deductions, which means that this part of the Welfare spending may also save employers from FBT.
FBT about accommodation, food and transportation
If the employer provides emergency accommodation, food, transportation, or other assistance to employees adversely affected by COVID-19, the employer is exempt from FBT as long as the following two conditions are met:
- The benefit to your employees is emergency assistance, which provides immediate relief.
- The employee is affected by COVID-19 or is at risk of being harmed by it.
- For example, temporary accommodations provided for employees in the “fly out” mode of work cannot return to their normal place of residence, which is within the scope of FBT exemption.
FBT about the benefits of protecting employees from COVID-19
If the employee’s job responsibilities are close contact with the client and the employer provides the employee with gloves, masks, disinfectants and antimicrobial sprays to enable the employee to perform their duties, these benefits will exempt the employer from FBT under the emergency assistance exemption .
Examples of such jobs include: medical industry (eg doctors, nurses, dentists and professional medical staff)/cleaning industry/beauty salons/industry retail, cafes and restaurants, etc.
If your employee’s specific job duties are not of the above type, and you provide employees with minor, non-recurring and irregular benefits of less than AUD 300, you can apply minor benefits exemption.
FBT and emergency medical care
If the employer provides emergency health care services for employees affected by COVID-19, the FBT exemption only applies to one of your employees (or employees of an affiliate), at your premises (or affiliate’s premises), in Health services at or near the employee’s workplace.
If you pay your employees’ daily medical or hospital expenses, you need to pay FBT. However, if you pay for the transportation of employees seeking medical assistance from the workplace, FBT is exempted.
FBT and COVID-19 test for employees
The COVID-19 test provided by the employer to the employee (as long as it is provided by a legally qualified professional doctor or nurse) does not need to pay FBT. It is worth mentioning that employers providing employees with flu vaccines (or providing reimbursement for employees to go to GPs to vaccinate themselves during this period of work from home) is also exempt from FBT.
FBT and cancelled events
If an employee should have participated in an event that has now been cancelled and is responsible for paying the attendance fee for the cancelled event, and the employer reimburses them, the employer may have to pay FBT, unless there are other circumstances that make “other deductible rule” apply.
Good and Service Tax (GST)
GST and medical supplies
COVID-19 has led many companies to focus on the medical appliance industry. In GST tax, as long as certain conditions are met (including in the goods and services tax law), the sale of medical auxiliary equipment and appliances does not need to pay goods and services tax. For example, breathing aids.
However, items such as hand disinfectants and personal protective equipment (including disposable masks, disposable gloves, etc.) contain GST.
Change the GST reporting period of the company
During this period, companies can consider changing the GST reporting cycle.
If you report quarterly and want to refund GST, then switching to a monthly report means you can get a GST refund you are entitled to more quickly. It should be noted that you can only change from the beginning of the new quarter; for example, if you request a change in May, the change will take effect from 1 July; and after selecting the monthly report and paying GST, you must maintain the monthly report 12 months before you can choose to revert to the quarterly report.
At the same time, if you have registered fuel tax credits (fuel tax credits), and also change the GST report from quarterly to monthly, you also need to apply for fuel tax credits every month.