No images? Click here 16 April 2020 Synstrat UpdateIt’s been a few weeks now since the movement restrictions have been in place. We’re all getting used to a different kind of rhythm at home and at work, so too are the kids. Staples are easier to locate in your local grocery store as the panic has lost its vigour. It’s not time to become complacent though; the length of our isolation will be determined by our own actions. Australians have done this during multiple wars and previous pandemics. If our forebears could wash their hands and keep a safe distance, so can we. Quite appropriate to think like that with ANZAC day around the corner… In this update we’ll look at what the next few months will look like for your cashflow, and what effect virus will have on the value of your practice. JobKeeper fine-tuning The JobKeeper rules are being cobbled together and a process is starting to take shape. Treasury has handed the responsibility for the application and payment of JobKeeper amounts to the Australian Taxation Office (ATO). Treasury’s rules are in place and the ATO are moving quickly to put systems in place for us to use. The following are the next steps to apply for and receive the JobKeeper payments: 1. Are you eligible? Small to medium businesses which have suffered a fall in turnover of at least 30% will be eligible. For this purpose, your turnover is what you would report at label G1 of your Business Activity Statement using either the cash or accrual method that applies to you. Your turnover calculation is made by comparing either a calendar month ended from 31st March 2020 or a quarter starting from 1 April 2020 with the same period in 2019. Once you have identified a period that has, or will, qualify there is no need for further re-testing for the remainder of the payments. For businesses that have not yet faced a 30% reduction but are forecasting that they will, there is a potential trap here. What if you forecast a 30% reduction, apply and receive payments but only actually experience, say, a 27% reduction? Treasury has set out that ‘there will be some tolerance where employers, in good faith, estimate a 30 percent or more fall in turnover but actually experience a slightly smaller fall.’ What qualifies as a slightly smaller fall has not been quantified and in the worst case you could be asked to repay JobKeeper payments with interest if your forecast can’t be justified. Also be aware that there are integrity provisions in the legislation that apply where an entity does something for the sole or dominant purpose of obtaining or increasing the JobKeeper payment (e.g. artificially pushing turnover down to meet the decline in turnover condition) so that the entity would not be entitled to the JobKeeper payment. If in doubt, seek advice! On the basis that your business does qualify, we move to step two… 2. Notify your employees Individuals are only permitted to receive the JobKeeper payment from one employer. Also, those in receipt of government pensions, Paid Parental Leave and other payments are ineligible for JobKeeper. Any workers who are in Australia on temporary residence or working holiday visas aare also ineligible. A notice should be provided to your staff where they acknowledge that they are eligible for the payment via your business. The notice is available from the ATO here. The notice does not need to be sent to the ATO, keep it with your employee records. 3. Enrol and apply for the JobKeeper payment From 20th April you will be able to apply for the JobKeeper payments using the ATO’s Business Portal or your Tax Agent (Synstrat). For those who do not have a MyGovId to access their business details online, you can set one up by downloading the App from your App store. Alternatively, we can make the application on your behalf. If you want to get the JobKeeper payments for the two fortnights in April, your enrolment needs to be completed by the end of April. 4. Pay your staff at least $1,500 per fortnight Many of you are concerned about paying staff before there is any confirmation from the ATO that you’ll get reimbursed. That’s understandable however you will have to pay all eligible staff before the end of April and have it reported via Single Touch Payroll to be receive the payments. The JobKeeper payment is a taxable allowance and you will need a new pay category or two to get your payslips correct. Superannuation and leave accruals do not apply to JobKeeper payments however tax may need to be withheld. Superannuation is still payable on any hours worked by employees. Remember, too, that employees which have been stood down continue to accrue their leave entitlements. Yet another complication for your payslips. The good news is that there is no need to move to fortnightly pay runs if you are paying more or less frequently e.g. monthly/ weekly. If you have already run your April payroll, once your application has gone through you will need to amend the April payroll to include the JobKeeper payments and report the amendment with Single Touch Payroll. Contact your Synstrat Accountant if you need help or advice on this. Rent issues for tenants and landlords A new National Code of Conduct has been issued to put a framework around, amongst other issues, reductions of rent. Again, eligibility criteria apply with the main one being that the tenant must be eligible for the JobKeeper program. The ATO has also confirmed that they will not consider a reduction in rent received by a Self-Managed Super Fund to be a breach for the 2019/20 and 2020/21 years. There are parameters around both issues, but the main concepts are:
The Victorian government has recently confirmed land tax discounts of 20% and deferrals of payments for commercial landlords. Other states have similar policies. Residential rental grants are available in some states too. The ‘bite’ behind the Code of Conduct is that where agreement cannot be reached the matter is subject to a leasing dispute resolution process for binding mediation by the Small Business Commissioner. Our assessment of the impact on veterinary and dental businesses Vets were designated an essential service on 27 March and, consequently, have been largely unimpacted financially so far, although operationally they have been deeply impacted. Veterinary practices are largely continuing with operational restrictions to ensure social distancing and human safety. Some are beginning to plan to reduce staffing but not many. As a likely recession bites into community purchasing power there is an expectation that discretionary spending will be impacted, and that veterinary business growth will halt and/or fees will slowly turn down. The impact on the profession is likely to not be as deep as others, but it potentially may take longer to recover to previous levels. Dentists have been hit harder. On 26 March 2020 the Australian Health Protection Principal Committee (AHPPC) recommended that all dental practices should implement level 3 restrictions including that all routine examinations and treatments should be deferred. Dentistry was hit very hard and most practices have either stood down most of their staff or significantly cut their hours. Practices are seeking rent relief and applying for government support. There is an expectation that dentistry will experience a sharp V-shaped downturn with a strong recovery as restrictions are relaxed. There may be even a short-term overshoot as catch up work is undertaken that has been deferred during restrictions. This is a generalisation, as some practices will pick up new clients and prosper, some practices will not recover to their previous level, and some marginally economic practices may not survive the restrictions. We are aware that some practices, who are confident of their future, are using the disruption and very favourable tax concessions to undertake refurbishments and to re-equip. The current state of practice sales and valuations It is clear after talking with lawyers, bankers and brokers that virtually all deals that were on foot or planned as at early-March have now been halted. This is for a variety of reasons, but it is mainly driven by the lack of visibility of earnings and cash flows causing buyers to pause. There is some evidence that credit has become harder to access for purchasers, but this is on a bank-by-bank basis and is not across the board. If businesses experience a sharp V-shaped recovery, then we would expect very limited impact on valuations. However, Synstrat has adopted wait-and-see approach to valuations until we have evidence of that recovery before we can assess whether there has been any permanent diminution in a practice’s value. Whilst there is an expectation that the recovery will come, without evidence, it is merely an untested assumption. We have anecdotal evidence that there are some bargain hunters around who are on the lookout for distressed practice sales. We urge any dentist or vet who is having difficulty maintaining their practice through the restrictions to seek advice before they contemplate selling their practice. A practice’s value could be significantly destroyed if you are not adequately advised. Contact your Synstrat accountant, David Collins or Graham Middleton if you are in this position and need help. With only a few more weeks until the government funding becomes available, we wish you well in maintaining the cashflow of your business. We are available to discuss any concerns with you as required. The Synstrat Team The above information is general advice only. To discuss how this may affect your personal situation, please contact your Synstrat Adviser before taking any specific action on (03) 9843 7777 or office@synstrat.com.au The Synstrat Group provides Business Advice, Accounting and Financial Services. Prepared by Synstrat Accounting Pty Ltd for clients of Synstrat Group. Liability Limited by a scheme approved under Professional Standards Legislation Synstrat Accounting Pty Ltd P. 03 9843 7777 ACN 053 416 149 If you are not the intended recipient of this communication please delete and destroy all copies of this message and telephone Synstrat on +61 3 9843 7777 immediately. If you are the intended recipient of this communication you should not copy, disclose or distribute this communication without the authority of Synstrat. Any views expressed in this communication are those of the individual sender, except where the sender specifically states them to be the views of Synstrat. If you do not wish to receive this email in future, please reply to the sender requesting termination of service. |