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A recording of this webinar and all slides used in this session will be sent out to all registered participants If you do not receive an email within 5 business days, please contact our Events team at rsvp@pitcher.com.au 1 Pitcher Partners is
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Pitcher Partners is an association of independent firms.
If you do not receive an email within 5 business days, please contact our Events team at rsvp@pitcher.com.au
Craig Whatman, Partner
April 2020
Pitcher Partners Advisors Proprietary Limited
ABN 80 052 920 206
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Pitcher Partners is an association of independent firms.
This presentation (‘Presentation’) has been produced by Pitcher Partners Advisors Proprietary Limited and has been prepared for informational and discussion purposes only. The information provided in this document is of a general nature and has been prepared without taking into account your objectives, circumstances, financial situation or particular needs. This Presentation does not constitute personal advice. This Presentation has been prepared by us in the ordinary course of our profession. In providing this Presentation, we are not purporting to act as solicitors or provide legal advice. Appropriate advice should be sought prior to acting on anything contained in this Presentation or implementing any transaction or arrangement that may be referred to in this Presentation. Information contained within this Presentation is based on the relevant law and its interpretations by relevant authorities as it stands at the time the information is provided. Any changes or modifications to the law and/or its interpretation after this time could affect the information we have provided. This Presentation, or any part thereof, must not be distributed, copied, used, or relied on by any person, without our prior written consent. To the maximum extent permitted by law, Pitcher Partners will not be liable for any loss, damage, liability or claim whatsoever suffered or incurred by any person arising directly or indirectly out of the use or reliance on the information contained within this Presentation. Pitcher Partners is an independent member of Baker Tilly International. Baker Tilly International Limited is an English company. Baker Tilly International provides no professional services to clients. Each member firm is a separate and independent legal entity, and each describes itself as such. Pitcher Partners is not Baker Tilly International’s agent and does not have the authority to bind Baker Tilly International or act on Baker Tilly’s behalf. None of Baker Tilly International, Pitcher Partners, not any of the other member firms of Baker Tilly International have any liability for each other’s acts or omissions. The name Baker Tilly and its associated logo is used under license from Baker Tilly International Limited. Pitcher Partners is an association of independent firms. Any trademarks, logos, and service marks contained herein may be the registered and unregistered trademarks of their respective owners. Nothing contained herein should be construed as granting by implication, or otherwise, any license or right to use any trademark displayed without the written permission of the owner. Liability limited by a scheme approved under Professional Standards Legislation.
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Pitcher Partners is an association of independent firms.
Who is eligible? How do you assess your eligibility? When do you assess your eligibility? How do you determine turnover? What is projected GST turnover? Turnover and BAS reporting The risk of getting it wrong Ongoing compliance
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Pitcher Partners is an association of independent firms.
Register interest in scheme from 30 March 2020 on ATO website https://www.ato.gov.au/Job-keeper-payment/ Employers (or their tax agent) can enrol from 20 April 2020 Eligible Employers Payable to eligible employers and non-employer businesses (e.g. self- employed) who have requisite decline in their turnover during the relevant period Eligible Employees Payment of $1,500 (gross before tax) to each employee who is employed by an eligible employer
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Pitcher Partners is an association of independent firms.
An entity will satisfy the decline in turnover test when compared to the same month or quarter in 2019 if the entity is
An ACNC-registered charity (excluding universities and schools) and its turnover has decreased by at least 15% Any other entity and its turnover has decreased by at least 30% An entity that has aggregated turnover of more than $1b and its turnover has decreased by at least 50%
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Pitcher Partners is an association of independent firms.
How do you test a decline in turnover? Two ways an entity may satisfy a decline in turnover test Basic test Alternative test
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Pitcher Partners is an association of independent firms.
Requires a comparison between the test period and a comparison period
The turnover test period must be
after 30 March 2020 and before 1 October 2020
1 July 2020 The relevant comparison period must be the period in 2019 that corresponds to the test period – e.g. if testing April 2020, you must compare with April 2019
The employer can choose an eligible month or quarter as a test period irrespective of whether they lodge their BAS monthly or quarterly The test only needs to be satisfied in one test period
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Pitcher Partners is an association of independent firms.
The Commissioner may determine an alternative test for a class of entities by way of legislative instrument or take other factors into account for individual entities
Where a business was not in operation a year earlier The turnover for the prior year was not representative of the entity’s usual or average turnover
e.g. because of drought,
highly variable
The Commissioner has discretion to consider additional information that the business can provide to establish that they have been adversely affected by COVID-19
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Pitcher Partners is an association of independent firms.
Projected GST turnover is the sum of the value of all supplies an entity has made or is likely to make, during the relevant period
The relevant period for JobKeeper purposes = the test period (month or quarter)
What to include Taxable supplies GST-free supplies What to exclude Input taxed supplies e.g. residential rents and income from financial supplies Supplies for nil consideration provided they are not taxable under the associate rules Supplies not connected with the enterprise Supplies not connected with the indirect tax zone (Australia)
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Pitcher Partners is an association of independent firms.
Special modifications for the JobKeeper Payment
An entity that is a DGR – each gift described in 30-15 ITAA and received, or likely to be received (e.g. a donation) is to be treated as consideration for a supply, the value of which is equal to the amount of the gift ACNC-registered charities who are not DGRs must include gifts received or likely to be received by way of monetary donation, gifts of property with a value greater than $5,000 and listed Australian shares
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Pitcher Partners is an association of independent firms.
received in relation to a supply
Don't rely on what has been reported on the BAS!
The value of all supplies that an entity has made will not necessarily be the amount that is reported at G1 on the BAS
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Pitcher Partners is an association of independent firms.
Checklist of issues to consider when calculating your turnover
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Pitcher Partners is an association of independent firms.
Checklist of issues to consider when calculating your turnover
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Pitcher Partners is an association of independent firms.
A partnership return is not lodged and each joint venture party includes 50% of the value of each rent payment as a taxable supply in their own BAS
EXAMPLE 1
Impact Likely to constitute a partnership for GST purposes The JV entities may not meet the threshold test of carrying on an enterprise in their own right or may not meet the decline in turnover test
BusCo1 BusCo2 Commercial rental property Joint bank account Managing agent 50% 50%
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Pitcher Partners is an association of independent firms.
Cash basis accounting
Timing of when amounts reported on BAS driven by when payment is received, not when invoices are issued Attribution of GST on BAS may differ to value of supplies made in a period
Accruals accounting
Timing of when amounts reported on BAS driven by when invoices are issued, unless payment is received first
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Pitcher Partners is an association of independent firms.
TradeCo is under the $10m threshold and accounts for GST on cash basis
Impact Should TradeCo compare their invoiced amounts or cash collections when testing their decline in turnover? GST turnover rules refer to supplies made in a period But no time of supply rule in GST Act, only attribution rules Clarification needed from ATO
EXAMPLE 2
April 2019 $500,000 of sales invoiced $300,000 collected in cash for prior months' sales April 2020 $300,000 of sales expected to be invoiced $290,000 expected to be collected in cash for prior months' sales
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Pitcher Partners is an association of independent firms.
How does an adjustment impact the value of a supply? Timing
Adjustment events occurring in a later tax period
GST-free supplies Credits and discounts Bad debts
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Pitcher Partners is an association of independent firms.
Sales in April 2019 = $400,000 Expected sales in April 2020 = $350,000 This represents a decline of only 12.5% Is this the correct result? What if ServiceCo delays its 30 April 2020 invoice to 1 May 2020?
Impact Do you apportion the weeks in this case? To what extent can an entity change its invoice dates to achieve a better result?
EXAMPLE 3
ServiceCo invoices its clients on a weekly basis each Thursday April 2019 4 Thursdays with $100,000 invoiced each Thursday April 2020 5 Thursdays with $70,000 invoiced each Thursday
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Pitcher Partners is an association of independent firms.
On the balance of probabilities, it can be predicted a supply is more likely than not to be made
Commissioner has power to determine which methods an entity may use to determine if a supply is likely to be made Based on an ‘objective assessment’ of the entity’s prospects, one that a reasonable person would make having regard to the facts and circumstances (GSTR 2001/7) Bona fide business plans and budgets Growth patterns Existing and prospective contracts
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Pitcher Partners is an association of independent firms.
Impact Did the entity satisfy the basic decline in turnover test? Is the entity eligible for the Jobkeeper payment from April? What if the actual GST turnover for April was $900,000? Overpayment debt risk Penalties Interest
EXAMPLE 4
Projected
GST turnover
Actual
GST turnover
April 2019
April 2020
April 2020
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Pitcher Partners is an association of independent firms.
Evidence establishing how projected GST turnover was calculated will be crucial to supporting an entity’s eligibility for the payment
Examples Business plans Budgets Current and future contracts
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Pitcher Partners is an association of independent firms.
Administrative requirements Ongoing compliance
Must report current GST turnover for reporting month and projected GST turnover for following month to the Commissioner within 7 days of the end
Administrative requirement only, there is no requirement to assess eligibility
Ensure what is reported is accurate as reported figures could be used in post scheme reviews of businesses
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Pitcher Partners is an association of independent firms.
01 02 03 04 05
Obtain BAS for the relevant period Split the BAS into months and obtain total amounts for each month Obtain a detailed report of items included in the BAS (transaction report) Reconcile the transaction report to the BAS and ensure it reconciles Review the transaction report and ensure treatment of individual transactions correct Review P&L and check items of income and negative expenses and classification Reconcile the P&L with items in the BAS Review and analyse the treatment of difficult items that are relevant to your business Scrutinise the logic behind the projected GST turnover Ensure that projections are in accordance with the rules in GSTR 2001/7 Check actual calculations after month end If actual results are materially different, consider whether this creates ‘overpayment debt’ risk
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Pitcher Partners is an association of independent firms.
Please submit your questions through the Question function in this webinar and our team will answer them as part of a FAQ document, which will be sent to you with the recording and slides post webinar
Pitcher Partners is an association of independent firms.
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Craig Whatman
Partner +61 3 8610 5617 craig.whatman@ pitcher.com.au
Peter Quattrocchi
Client Director +61 3 8612 9255 peter.quattrocchi@ pitcher.com.au
Elisha Herbert
Senior Manager +61 3 8612 9220 elisha.herbert@ pitcher.com.au
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Pitcher Partners is an association of independent firms.