In light of the continued economic uncertainty associated with the Coronavirus – the federal and state governments have introduced a multi-billion dollar stimulus package aimed at assisting medicos and their practices impacted by the virus as well as kick-starting the wider Australian economy.

With medical professionals being on the front line in the battle against Coronavirus, we have reviewed and summarised the various federal and state concessions available to assist you and your business during this challenging time.

The federal government and Australian Taxation Office (ATO) have advised of the following measures.

JobKeeper Payment

Medical businesses who have seen their turnovers decline by at least 30% relative to a comparable period a year ago due to the COVID-19 pandemic will be able to access a wage subsidy from the Federal Government to help keep employing staff. The subsidy totals $1,500 per eligible employee, per fortnight, from 30 March 2020 for a maximum of six months. Eligibility criteria apply. The ATO have also flagged that for businesses that have not been operating for 12 months there will be alternative tests to establish eligibility.

The first payment will be received by eligible employers in the first week of May. These payments will be taxable in the hands of the employee.

Businesses will need provide the Australian Taxation Office (ATO) with the number of eligible employees on their books as at 1 March 2020, and those still employed each month. This will work through the Single Touch Payroll system. Applications are now open via the ATO’s website.

It is important that superannuation contributions continue to be made on behalf of your employees, and this is based on the employee’s standard wage.

Businesses without employees, such as the self-employed, are also eligible for the JobKeeper Payment from 30 March 2020. Businesses without employees will need to provide an ABN for their business, nominate an individual to receive the payment and provide that individual’s Tax File Number, and provide a declaration as to recent business activity. They will also need to provide a monthly update to the ATO to declare their continued eligibility for the payments. Payment will be made monthly to the individual’s bank account.

For more details and information visit our JobKeeper for Medicos page.

PAYGW Concessions

Medical businesses (defined as sole traders, medical trusts and medical companies) with a turnover of less than $50 million per year will be eligible for a 100% credit of any PAYG Withholding amounts that are owed to the ATO up to a maximum of $50,000 for the period 1 January to 30 June 2020.

Where the business continues to operate and employ in the second half of this calendar year, the business will be eligible to receive “boost payments” between June and September 2020. The amount of the boost payment, will be determined by the payments received in the first half of this calendar year.

The benefit here is to help you retain staff and continue with your trading.

Businesses that pay salary and wages will be eligible to receive a minimum payment of $10,000 for the period 1 January to 30 June 2020. These businesses then receive a further $5,000 following the lodgement of the June 2020 BAS and then another $5,000 after the lodgement of the September 2020 BAS. Hence, employers will receive a minimum benefit of $20,000 over the calendar year. Note that medico businesses will still receive this minimum $20,000 payment even if they do not withhold tax on any wages that they pay, provided that they have an ABN and are registered for PAYGW prior to 12 March 2020.

These PAYGW concessions apply regardless of whether businesses report quarterly or monthly wages to the Tax Office. These concessions are tax-free and will be credited to the businesses “Integrated Client Account” with the Tax Office, within 14 days of the BAS being lodged.

Note that anti-avoidance provisions apply. You are unable to register your medico business now to get access to these concessions. You are also unable to access these concessions if you have entered into a scheme for the dominant purpose to benefit from these concessions.

Deferring tax payments to the tax office

The ATO have advised that they are willing to provide payment arrangements for up to 6 months, for all tax that is payable. These payment arrangements are free of any general interest charges.

The ATO is willing to accept longer than 6 month payment arrangements, however these will attract a general interest charge. The general interest charge is a lower rate than what has previously been provided by the Tax Office.

PAYGI variations and refunds

For taxpayers effected by a downturn in their business from COVID-19, there is the ability to vary their PAYG Instalments to nil for the March 2020 quarter. Tax payers are also able to claim a refund from the ATO in relation to any PAYG Instalments paid in the September 2019 and December 2019 quarters. This can all be done when preparing and lodging your March 2020 BAS.

Do note that any reduction in the PAYG instalments may still result in the repayment of these amounts when the 2020 year tax return is lodged, likely around April 2021. These variations are to assist with current cash flow operations of the business. They may need to be repaid after the tax return is lodged, based on the businesses earnings for the financial year.

Increasing the instant asset write off

The current instant asset write-off allows small businesses to immediately deduct the cost of new business assets costing less than $30,000. This has increased to $150,000 for the period 12 March 2020 to 30 June 2020, available for all business with a turnover of less than $500 million.

Note, Motor Vehicles will still be subject to the car cost depreciation limit of $57,581 for the 2020 financial year.

Changing reporting frequency

Businesses on a quarterly reporting cycle can now choose to change their GST reporting to monthly, to get quicker access to GST refunds. Note that if you do change your reporting method, you must continue with that reporting method for 12 months before you can revert back.

Remitting General interest charges

The ATO have advised that they will consider a full remission of general interest charges in relation to any charges levied on tax liabilities after 23 January 2020 where that debt is under a payment arrangement.

Low-Interest Payment Plans

Impacted businesses can apply to the ATO for lower-interest payment arrangements in relation to existing and ongoing tax liabilities.

Coronavirus SME Guarantee Scheme

The Federal Government has established the Coronavirus SME Guarantee Scheme which is to support small and medium enterprises (SMEs) to get access to working capital.

The Government will guarantee 50% of new loans issued by eligible lenders to SMEs, with the maximum amount of each loan to be $250,000 per borrower. The terms of these loans include:

  • The loans are unsecured
  • There is an initial 6 month repayment holiday
  • Term of loan is for 3 years.

To apply for this loan, businesses are to contact their lender for assistance.

Superannuation and pension withdrawals

The minimum pension percentage has been halved for the 2019-20 and 2020-2021 financial years ensuring that pensioners are able to retain more funds in their super funds rather than having to draw down on their balances while stock prices are low.

Queensland State Government Concessions

The Queensland Government is providing Queensland based businesses access to the following:

Interest free loans
Medico businesses are able to apply for an interest free loan of up to $250,000 per borrower, to help them retain staff. The terms of these loans include:

  • The loan is available for up to 50% of an entity’s annual wage. This is calculated as the average of the wage and superannuation expense for the 2018 and 2019 years
  • The term of the loan is for a maximum of 10 years
  • The first year of the loan is interest and repayment free
  • The loan repayments for the next 2 years are interest only
  • The repayments then convert to principle and interest, to ensure the loan is repaid per the term of the loan.

To apply for this loan, email the Queensland Government at [email protected]

Deferral of QLD Payroll tax
Medico businesses who pay payroll tax as their wages are more than $1.3 million, are able to apply for concessions. These concessions are based on whether businesses pay more or less than $6.5 million in Australian taxable wages.

Banking concessions

Banks are offering businesses who have been impacted by the outbreak, with various concessions to their business banking:
  • Up to a 6 month deferral for business loan repayments
  • Suspension of interest repayments
  • Providing early access to term deposits without break fees
  • Access to additional credit
  • Deferring the payment of some fees and charges
  • Deferring payments for business credit cards
Banks are also providing concessions to residential mortgages as well. Each lender has their own banking concessions that are available which can include some or all of the above. Please contact your lender to discuss your available options.

Other cash flow boosting considerations

Reportable Fringe Benefits

Medicos working in the public hospital system may be able to salary package expenses by forgoing part of their pre-tax salary in return for their employer paying the expenses on their behalf. Some medicos may end up working for more than one hospital in this period and they can therefore access this concession from each hospital they are employed by.

A variety of expenses can be salary sacrificed and these include (but not limited to):

  • Rent or mortgage payments
  • Utilities
  • Health insurance premiums
  • Non-work related memberships
  • Motor vehicle expenses
  • Expenses relating to holidays

If items such as professional memberships are salary sacrificed, these expenses cannot not be claimed as a deduction in your income tax return as they have been paid using pre-tax income. Hence, when you are considering expenses to salary sacrifice, then it is best to use expenses not able to be claimed as a tax deduction.

For the March 2020 FBT year, below the FBT concession cap:

We recommend discussing your salary sacrificing options further with your advisor.

Insurance Review

With an increasing number of medico professionals being seconded into the public system, it may be prudent to contact your financial advisor or insurance agent to review your current level of insurance. Your insurance may no longer meet your current needs.

Superannuation Guarantee Opt Out

Higher income earners with multiple employers are able to opt-out of superannuation guarantee payments. Given that many medicos may be working in a number of hospitals during this COVID-19 period, it may be useful to consider opting out of receiving superannuation guarantee from some of your employers. This will assist you from unintentionally going over the concessional contributions annual cap, and allow you to negotiate additional salary instead of the money going into your super fund.

If this is of interest to you, please contact your advisor as they can assist you with the steps that are required.

Negatively Geared Properties

A number of medicos own negatively geared properties in their personal name. A benefit for these taxpayers, is that this investment helps reduce their taxable income, in which their overall tax payable is calculated from. Hence, they pay a reduction in tax.

These medicos can elect to have their employer withhold a lower amount of tax from their salary and thus, their take home pay in their bank account is more as a result. By having an employer withhold less tax from wages, this allows the medico to take a real time advantage of the cash benefits from their negative geared investment as opposed to waiting until the lodgement of their tax return.

To take advantage of this, a “PAYG Withholding variation form” needs to be lodged with the Tax Office. Note that the last date for lodgement of these forms is 30 April of the application year.

Fraud Awareness

The Australian Competition and Consumer Commission (ACCC) and Association of Certified Fraud Examiners (ACFE) are warning of the need to be vigilant in relation to fraud during the COVID-19 crisis. With these uncertain times in our economy, scams are more likely to be frequently deployed. Stay fraud aware with ACCC resources.

Where to from here

On behalf of the team at Pilot Partners, we would like to thank each of you for efforts on the frontline dealing with this unprecedented medical emergency. It’s a very tough time for those of you working in the medical profession and our thoughts are with you.

If you require any further guidance or assistance in relation to the Coronavirus (COVID-19) stimulus and administrative relief measures, please contact Angela Stavropoulos or Kristy Baxter from our Medical Specialist Team, on [email protected] or 07 3023 1300.