That's a wrap - COVID-19 compliance & SMSF auditor independence
by Lisa Armstrong, on 15/08/20 10:50
What a week!
- COVID-19 stimulus measures - the information the Government can now share to ensure compliance
- The SMSF Auditor social media battle over the updated independence requirements
- FASEA exam dates until November 2021 released
- Help desk question of the week - When a client's decline in turnover is a lot less than requirements and access to JobKeeper beyond July
- Funny video of the week with work from home fails
- Coming up
We have JobKeeper 2.1, the updated rules, but not detail on how the alternative tests work.
In the interim, determining compliance for the stimulus measures is a world of ugly for the regulators. The task of ensuring that only those entitled to the various measures, and no funny business was going on, is well underway with a forest of letters sent to those outside of the statistical margins questioning their access. In the background, legislative instruments have been flowing fast to enable social services to disclose protected information to the ATO and visa versa. See Social Security (Coronavirus Economic Response—2020 Measures No. 12) Determination 2020, and on the flip side Social Security (Coronavirus Economic Response—2020 Measures No. 5) Determination 2020 allowing the Tax Commissioner to share TFNs. The ATO are well into their COVID-19 economic response support – 2019-20 to 2020-21 data-matching program that reviews JobKeeper, early access to super and the cashflow boost.
On the positive, the $1,500 pandemic leave disaster payment is now a thing for Victorians who have no other means of support when they are required to be in isolation or care for a person in isolation (see the eligibility criteria).
Meanwhile, for SMSF Auditors, a social media battle is in play over the interpretation of May’s 2020 SMSF Auditor Independence guide released by the Accounting Professional & Ethical Standards Board (APESB) and the professional bodies. Chapter 8 makes it clear that an SMSF auditor cannot audit an SMSF where the auditor, their staff or their firm has prepared the financial statements for the SMSF unless it is a “routine or mechanical service”. One camp states that smaller firms can no longer possibly manage an SMSF client’s compliance and audit work. The other says it’s possible within strict guidelines. Whichever side you barrack for, there will be significant changes that impact on how SMSF services are delivered. See the catalyst, Hayes Knight Director Ray Itaoui's comments in Accountants Daily.
A reminder that the Super Guarantee Amnesty ends on 7 September 2020. If there is any risk that your clients have not been paying staff at correct entitlements, do a review.
For those that need to do it, the FASEA exams are on now (13-18 August). Good luck to everyone doing this round (if you need a refresh pre exam, see Knowledge Shop’s FASEA exam prep IQ). The exam sitting dates until November 2021 have been released. A lot of the market are telling us early 2021 is the sweet spot. Some are waiting for face to face exams to resume because they cannot or are unwilling to enable FASEA’s exam software (some issues with punching through firewalls to use the software).
Parliament sits again with our freshly out of iso politicians on 24 August 2020. We’ll bring you the latest as it occurs on our twitter feed.
Have a great weekend.
Managing Director, Knowledge Shop
Help desk question of the week
Our top Q&A live from the Knowledge Shop's professional help desk: When a client's decline in turnover is a lot less than requirements and access to JobKeeper beyond July 2020.
We have a client who had estimated drop in over 30% for the April - June 2020 quarter and therefore had accessed the JobKeeper subsidy from April to June 2020. However, the actual turnover only dropped by 20% for April to June 2020 compared to April to June 2019 quarter, although there was a drop of over 50% in actual turnover for May, and then business picked up in June.
Can the client still claim the JobKeeper for July 2020 onwards, given the actual drop in turnover for June quarter was only 20%.
If the client passed the turnover reduction test for the June quarter and this was based on reasonable estimates / predictions at the time they enrolled in JobKeeper and made initial claims for payments, then the fact that actual turnover was higher than predicted should not of itself prevent access to JobKeeper. However, it will be important for the client to ensure that they have records which support the position taken and the calculations performed.
The ATO has some comments dealing with situations like this which I have extracted below:
"Question: My business suffered a steep decline in turnover in March, but I’ve changed to a new business model and I may build the business up again soon. Does this mean I lose JobKeeper?
Answer: No. You only need to satisfy the decline in turnover test once to be entitled to JobKeeper. For example, satisfying it for March 2020 (compared in March 2019) is sufficient, even if your business recovers to previous levels after this.
There are ongoing reporting obligations for current and projected GST turnover, but even where these show a recovery of turnover they don’t affect eligibility.
Question: What happens if my predicted fall in turnover happens to be incorrect, so that the fall ends up being less than the 30% or 50%?
Answer: This does not necessarily mean you are ineligible for JobKeeper.
Your projected GST turnover is a point-in-time test and needs to be a reasonable assessment of what was likely at the time you calculated the test. If, at a later stage, it eventuates that your actual turnover for your test period is greater than your prediction of your projected turnover, you do not lose access to JobKeeper. We will accept your assessment of these turnovers unless we have reason to believe that your calculation of your projected GST turnover was not reasonable.
If there is a significant difference between your projected turnover and what eventuates, we may need to assess whether your assessment was reasonable, so you need to keep good records of your calculations.
Integrity rules are in place to deny or reduce an entitlement to JobKeeper payments if schemes are contrived to ensure payment conditions are satisfied, such as temporarily reducing or deferring turnover. Exceeding your turnover predictions by itself does not trigger these integrity rules.
Our compliance focus will be particularly directed toward schemes where there has not been a genuine fall in turnover in substance, but arrangements are contrived to ensure the turnover test is satisfied."
Also see the ATO's comments on predictions / estimates in LCR 2020/1.
See also our overview of JobKeeper 2.1 and the eligibility requirements for JobKeeper from 28 September 2020.
Video of the week
And for a bit of humour to brighten up your week. Here's the best of the work from home fails compiled by the The Ellen Show.
COVID-19 Tax Issues Webinar
Thursday, 20 August 2020
Explores the common tax-related issues that have arisen as a result of COVID-19 and how to deal with these in practice, including how JobKeeper and cash flow boost amounts should be recognised on client tax returns and the tax treatment when these amounts are extracted from business entities.
Instant Asset Write-off and Depreciation Rules - 2020 & 2021 Web
Thursday, 27 August 2020
The practical detail and application of the key changes to the depreciation rules likely to impact on your business clients. We work through the timing rules, identify which assets can qualify for an immediate deduction, when SBE general pools can be written-off, how the accelerated depreciation rules apply, and the differences between being a small business entity or medium business entity.
Tax Consolidation Essentials Webinar
Thursday, 3 September 2020
Demystifies the tax consolidation regime, helping you to identify clients that might benefit from the system as well as assisting those already using the system to navigate their way through the provisions. How to form a tax consolidated group, the pros and cons of tax consolidation, and dealing with tax losses and capital losses.
Small Business CGT Concessions Webinar Series
Thursdays: 10, 17 & 24 September 2020
This 3-part series focuses on the key aspects of the small business CGT concessions in a methodical and practical way. Across the series we cover a wide range of issues including the problem areas that often prevent clients from accessing the concessions and the solutions that might make the difference, maximising the tax effectiveness of the concessions, planning opportunities for clients who are thinking of selling business assets, and preparing clients for a CGT audit.
FASEA Exam Prep Live Online
14, 15 & 16 September 2020
Fast track your exam preparation. Designed to get you exam ready, this intensive web series was developed by industry specialists to bring you up to speed as quickly as possible. It's pragmatic, detailed and backed-up by reference materials to support your study. Or online on-demand!
Unpaid Trust Distributions Webinar
Thursday, 15 October 2020
The different options available when dealing with unpaid trust distributions and how to best manage them. Latest ATO guidance on expiring sub-trusts, options to prevent deemed dividends, and your checklist for releasing unpaid distributions.