What CAs’ tax responsibilities are in a COVID-19 world
The pandemic crisis has pushed chartered accountants into a more important role than ever for their clients.
- The Australian government’s stimulus packages make it more important than ever for SMEs to be able to get advice from their accountants.
- Understanding the packages is vital for accountants to help their clients with tax and JobKeeper payments.
- Understanding the legislation now will allow accountants to have a voice in future conversations about the tax system.
By Penny Pryor
Following the announcement of the Australian government’s initial three stimulus packages, Dennis Barnett CA says he had more phone conversations with clients in four weeks than he’d normally have in four months, as they sought his advice and shared concerns about their businesses.
A partner at AFS & Associates in Bendigo, and a volunteer firefighter with Victoria’s Country Fire Authority, Barnett’s year got off to a traumatic start with a relief rotation in Mallacoota after cataclysmic fires tore through south-east Australia. More than 150 homes in the East Gippsland community were destroyed.
Barnett says it was a humbling experience and he is concerned for those fire-affected residents who were already trying to rebuild their lives and livelihoods be-fore COVID-19 hit.
The ripple effect of the coronavirus pandemic across the Australian business community has been huge. Accountants have played an important role both in helping clients with the impact on their businesses, and assisting them to navigate the relief measures offered by state and federal governments.
Hoa Wood, Australian Taxation Office deputy commissioner, individuals and intermediaries, acknowledges the important role CAs are playing during this time.
“As the Australian community confronts the unprecedented COVID-19 crisis, we know there are widespread impacts for all tax professionals, including chartered accountants, who are working hard to support clients while dealing with the impacts on their own businesses,” she says.
For many SMEs, the stimulus measures – particularly the JobKeeper announcement – meant they were able to stay in business and continue to employ staff, but getting advice from their accountants during this period was crucial.
“Obtaining a strong understanding of the stimulus measures in the short time available will challenge many professionals, and we encourage them to regularly visit both Chartered Accountants Australia and New Zealand resources and the ATO’s own website ato.gov.au/coronavirus,” Wood says.
Making sense of it all for clients’ sake
Following the stimulus announcements, Jon McArthur FCA, principal at Stature ARW Accounting in Sydney, admits he was spending up to half his day reading just to keep on top of potential tax impacts on his clients.
“Stimulus 1 and Stimulus 2 will be pretty much automated through the tax payment system,” he says, adding these measures are applied automatically to businesses that file their Business Activity Statements or Instalment Activity Statements.
Businesses require more advice and assistance around the third measure – or the JobKeeper payment – which requires them to pay wages to employees fortnightly and then to be reimbursed monthly (if they’ve made successful applications), he says.
“Some people might not have that cash to make the [wages] payment,” McArthur says, adding they will need guidance around what to do in such situations.
He notes that while the government’s extension of the instant asset write-off is welcome (it’s been increased from A$30,000 to A$150,000 for each asset), many businesses cannot even contemplate acquiring new assets in the current environment.
Deferrals for tax returns
Accountants can also play an important role for businesses that might be struggling to pay their tax, by negotiating a tax debt payment plan with the ATO. The ATO is generally sympathetic to such requests if the tax return lodgements are up to date, says Chartered Accountants Australia and New Zealand’s Australia tax leader, Michael Croker CA.
“The worst thing a taxpayer struggling with the financial impact of COVID-19 can do is hide and hope the ATO goes away,” he says.
“The worst thing a taxpayer struggling with the financial impact of COVID-19 can do is hide and hope the ATO goes away.”
In recognition of the increased burden on both businesses and accountants, the ATO announced some short-term blanket deferrals for lodgements in April.
Company 2018-19 income tax returns, which were due on 15 May 2020, were deferred to 5 June 2020 and SMSF annual returns were deferred from 15 May 2020 to 30 June 2020.
In addition, 2018-19 income tax returns for individuals and trusts were deferred to the 5 June concessional due date, provided clients could pay any liability by that date.
“The ATO isn’t just a tax collector; it’s a COVID-19 cash distributor and the eyes and ears of government,” Croker says. “Data contained in tax returns is vital to good pol-icy decision-making and administration.”
Acknowledging an increased workload
Indeed, this time of year is generally very busy for accountants as they put together clients’ tax returns. The ATO has offered some assistance in this regard, too, with Wood saying the ATO is “mindful of the extra pressures arising from things such as additional stimulus-related workloads, the need for some clients to be focused on other priorities, and the availability and productivity of their workforce.
“We know that tax professionals will be working hard to complete as many returns as possible,” she says. “Having regard to these pressures in unusual times, tax professionals will not be adversely affected if they do not meet the 85% on-time lodgement benchmark.”
The end game
In the long term, the stimulus packages the government is funding to the tune of billions of dollars will have to be funded somehow.
“The ledger is going to have to be squared,” says AFS & Associates’ Barnett, adding it is critical CAs contribute to any future discussion about the tax system and are prepared to do so when the time comes.
“We can’t just sit and take it. If we have any ideas, we need to share them,” he says. “What I would expect to see is our tax system will change.”
Whether that is a delay, or even abolition, of slated corporate tax reductions, further discussions about the rate of GST or provisions on land tax, accountants need to be ready to step up and make themselves heard. After all, they will be the ones at the coalface of implementing any big changes.
Strength in numbers
The resilience of the community in Mallacoota after the bushfires has shown Barnett just what people are capable of when placed in extreme circumstances.
“What has been really fantastic about this situation is how innovative businesses have been to get through this,” he says. “If we look now at cafes which had never previously done takeaway meals, they have changed their business model to be able to survive.”
FROM THE CA LIBRARY
Australian Master Tax Guide 2020, 66th EditionDownload the e-book