Article By: Sarah Cappello Cappello Rowe Lawyers Sydney

After one of the worse bush fire seasons in living memory, many people and business are finally starting to take stock and turn their attention onto getting back on track. Unfortunately, this also means now identifying the damage and disruption that has been caused and looking at how losses and shortfalls can be mitigated.

Thankfully, the Federal and State governments have announced a range of support measures to assist affected businesses and individuals. This summary is designed to help affected residents in bushfire areas and their advisers to identify the available support as at the date of this article.

We know that after everything that has occurred, worrying about what support is available, to whom and how to access it can be difficult to determine and, as such, we have endeavoured to make this summary as simple as possible to help point everyone in the right direction. 

What are the Australian Taxation Office (ATO)’s identified affected areas?

The ATO has identified a range of affected postcodes (here). For taxpayers who have been affected by the bushfires, but are not in the listed postcodes, there is an Emergency Support Infoline you can contact for assistance (1800 806 218). 

What ATO tax relief is available?

Deferral of tax obligations

Any income tax, activity statement, self-managed superannuation fund, fringe benefits tax and excise return lodgments, and their associated payments, outstanding following the bush fires will be deferred until 28 May 2020.

This deferral is automatically applied based on the affected postcodes (above).

However, large PAYG withholders (who have previously withheld more than AU$1m tax annually) are required to pay and lodge as normal.

The ATO also offers to taxpayers who expect to have difficulties making payments by the deferred deadline, payment plans tailored to each taxpayer’s circumstances including an interest-free period.

The ATO have also announced that they will remit penalties or interest charged during the time taxpayers have been affected by the bushfires. 

Prioritised refunds for affected taxpayers

Taxpayers in the relevant bushfire zones automatically will have their refunds processed as a priority. 

Tax relief for volunteers

In some circumstances, volunteers assisting people affected by a disaster also may be given more time to pay their tax obligations.

Improving cashflow by varying PAYG instalments

Quarterly PAYG instalment payers may vary to nil on their activity statements for the December 2019 quarter (and later periods in the 2019/20 financial year) by lodging a revised activity statement.

The ATO has advised that it will not apply penalties or charge interest to varied instalments for taxpayers within the affected postcodes in the 2019/20 financial year.

Instalment amounts from previous quarterly activity statements for 2019/20 can be claimed as a credit on the next activity statement.

Bringing forward net GST refunds

In order to gain the benefit of earlier recognition of net GST refunds due to large purchases to replace stock or other costs to get business back on track, some businesses may change their GST reporting to monthly, in order to obtain quicker access to net GST amount refunds.

Note that:

• A change to monthly GST reporting must be maintained for 12 months before any election back to quarterly reporting may be made;
• Any change made now will take effect from 1 April 2020, as reporting may only be changed at the start of a quarterly reporting period; and
• If you are registered for fuel tax credits, this monthly reporting will apply to both GST and fuel tax credits.

Ongoing tax audits

Any current audits in respect of taxpayers in affected postcodes will be temporarily suspended, subject to two exceptions:

• Taxpayers may request the ATO continue the audit; and
• If a risk of fraud has been identified, any reviews would need to be completed before issuing any refunds. 

Recovery of lost records

Where affected individuals and businesses have had records lost or destroyed in the bushfires, the ATO can assist by:

• Assisting taxpayers to find their lost tax file numbers (TFNs);
• Reissuing income tax returns, activity statements, and notices of assessment; and
• Assist to reconstruct tax records lost or damaged in the bushfire. 

Are payments from the government to assist with relief taxable?

All relief and recovery payments and benefits provided by Australian governments in relation to the bushfires will be tax free for payments received in the 2019/20 and later income years.

Affected taxpayers will not be subject to income tax on these support payments and they will not reduce any current year or prior year tax losses. 

What types of payments are included?

The payment or benefit must be provided an entity for the purpose of providing relief from the effects of bushfires commencing in Australia or assist the entity in recovering from the bushfires.

The payment must be made by the Federal, a State or Territory, or a local government. Donations and other forms of charitable support are outside the scope of this specific relief measure. 

What payments may be available?

While there are a range of support schemes and payments, the following payments have been identified as being tax free.

• Disaster Recovery Payments: The Disaster Recovery Payment from the Federal Government is a one-off payment of AUD 1,000 for eligible adults and AUD 400 for eligible children who have been directly affected by a major disaster either in Australia or overseas. Information on this scheme is available here. 
• Disaster Recovery Allowance: The Disaster Recovery Allowance is a short-term payment paid for a maximum of 13 weeks for the loss of income as a direct result of the bushfires equivalent to the Newstart or Youth Allowance, based on an individual’s circumstances. Information on this scheme is available here.  
• Natural Disaster Relief and Recovery Arrangements: These are joint funding schemes between the Federal and State governments where the State government has control over how the assistance programs are provided. The type of payments vary across the States and include in NSW:
  • Personal hardship and distress assistance (NSW); and
  • the AU$15,000 recovery grants for eligible primary producers, small businesses and non-profit organizations (NSW).

What about private donations and charitable support?

If the amounts are private and domestic in nature, such as gifts provided for food, clothing and temporary shelter, these amounts should not be assessable.

However where private support is received to compensate for lost income, these amounts could be assessable income. Conversely amounts spent on business expenses, such as purchasing new trading stock or feed for livestock should be deductible.

What about support for rural fire service volunteers?

Volunteer fire fighters who are self-employed or work for small and medium businesses, and who have been called out for more than 10 days this fire season, will be able to apply for payments for lost income of up to AUD 300 per day up to a total of up to AUD 6,000 per person.

The Federal government has legislated that government support payments to volunteer firefighters will be tax free on a similar basis to the support payments discussed above.

To be eligible for tax free status, a payment must be:

• Made on or after 1 January 2020;
• For the purpose of compensating the individual for loss of income resulting from the        performing volunteer work fighting the bushfires in the 2019/20 financial year; and
• Made by a State or Territory under an agreement with the Federal government. 

Payments from an individual’s employer and any worker’s compensation payments will likely continue to be assessable income. 

What about where we have crowdfunded support?

Also note that the ATO has provided information to assist taxpayers who crowdfund to assist to identify the correct tax treatment for the participants in the fund raising (here). 

Is there any relief for superannuation guarantee payments?

Employers must still lodge and pay superannuation guarantee (SG) obligations for their employees.

The ATO recommends that employers unable to pay quarterly SG payments by the due date contact them as soon as possible. They can discuss with the ATO entering into payment arrangements.

Where records are lost or damaged as a result of the bushfires, the ATO recommends employers make an estimate of their contributions using old records from employees, their bank, the superannuation fund they contribute to, or records of PAYG payments (which the ATO hold).

New South Wales government relief

The New South Wales government has announced it will provide some additional tax and regulatory relief measures for affected residents and businesses. 

Motor vehicle duty

For vehicles written off in a declared natural disaster, a refund of the motor vehicle duty paid on replacement vehicles will be available. 

Payroll tax

An exemption is available for wages payable to an employee for bushfire-fighting activities or emergency operations identified as “emergency services leave”.

Substantiation will be required such as a letter outlining the employee’s period of involvement with Rural Fire Services NSW or NSW SES.  

Council rates

Relief from council rates is available for the third and fourth quarters of the 2019/20 financial year for residents and farmers who have lost their homes, and for business owners whose properties have been destroyed beyond repair by the bushfires.

Affected persons need to request this relief (or request a refund if rates have already been paid) at a Service NSW centre.  

Waste levy fees

Waste levy fees will be waived for residents disposing of bushfire generated waste at nominated facilities. This waste includes building materials, furniture, and any other bushfire generated waste. 

General assistance available from Revenue NSW

Other general assistance measures include:

• Allowing taxpayers more time to lodge documents or returns;
• Extending payment deadlines;
• Not charging late payment interest;
• Arranging for instalment plans for taxpayer debts; and
• Putting objections and reviews on hold if further information is required, including extending the discretion to accept out of time objections.

Other State specific measures

Both the Victorian and South Australian Governments have announced a range of measures to support affected residents. We have only summarised the NSW measures in this article, however would be happy to assist to identify measures in other States.

All states and territories

There also may be relevant standing arrangements any most States for people affected by natural disasters regarding tax, duty, and other revenue obligations for example:

• Extend the time for lodging documents or returns;
• Extend the time for making payments without charging interest;
• Arrange a payment plan to allow for a debt to be paid by instalments; or
• Allow land tax exemption to be claimed following a natural disaster even though the land is not being used as a principal place of residence/for primary production purposes.

Where you are unsure about the available support in your State, it may be best to contact your local advisor or the State revenue authority.

How can Cappello Rowe assist you?

Cappello Rowe understands that this can be an extraordinarily stressful time, as you try and return to normal after experience catastrophic hardship. We would be happy to have an obligation free discussion with you and/or your local advisor to discuss any support that may be available to you to help rebuild following this devastating season.

 

If you would like more information or require further advice, please do not hesitate to contact us on 02 8325 1520 or alternatively email info@cappellorowe.com.au