Last updated: 1 June 2020

ATO and OECD responses to COVID-19

Administrative relief from the ATO

The AustralianTaxation Office (ATO) is providing administrative relief for some tax obligations for people affected by the COVID-19 outbreak, including:

  • deferring certain tax payments for up to four months (including amounts payable through business activity statements (including Pay As You Go (PAYG) instalments), income tax assessments, fringe benefits tax and excise);
  • allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to obtain GST refunds more quickly;
  • allowing businesses to vary PAYG instalment amounts to zero for the March 2020 quarter. A "zero" variation for the March quarter will also permit a refund of instalments made for the September 2019 and December 2019 quarters; and
  • working with affected business to help them pay existing and ongoing tax liabilities with low interest payment plans.

Assistance measures for those businesses affected by COVID-19 will not be automatically implemented (ie. relief will be provided on a case-by-case basis).The ATO has also released a series of FAQs that deal with practical issues arising from the COVID-19 outbreak, covering topics relating to tax for individuals, tax for employers (including fringe benefits tax (FBT) and JobKeeper payments), PAYG obligations, interest and penalties, GST, and international tax questions. These include the deductibility of home office expenses (see further detail in the next paragraph), GST on cancelled supplies, FBT on a number of issues (including working from home, accommodation, food and transport, emergency assistance and other matters), remission of interest and penalties (including significant global entity penalty), the application of the safe harbour threshold for the thin capitalisation regime, corporate tax residency (including the issue of central management and control), permanent establishment issues, and transfer pricing documentation.

ATO position on home expenses

The ATO has announced special arrangements (see PCG 2020/3) available for taxpayers working from home as a result of the COVID-19 crisis. Broadly, taxpayers working from home between 1 March 2020 and 30 June 2020 will be eligible to apply the new “shortcut method” when calculating deductible ‘working from home’ expenses, allowing taxpayers to claim a tax deduction at the rate of 80 cents per hour for all eligible ‘working from home’ expenses in their personal income tax returns for that period. Further detail on these measures has been included here.

OECD guidance on cross-border issues

The OECD Secretariat has issued guidance on a number issues relating to creation of permanent establishments, residence of companies and cross-border workers.

Permanent establishment

  • Where employees of businesses exercise their employment in countries other than the country in which they regularly work during the COVID-19 crisis (eg. working from home), there is a concern that it will create a "permanent establishment" in those countries and trigger filling requirements and tax obligations. The OECD has noted that the exceptional and temporary change of the location of employees should not create permanent establishments for the employer in these instances.Further, the temporary conclusion of contracts in the home of employees or agents because of the COVID-19 crisis should not create permanent establishments for those businesses. The OECD also noted that a construction site permanent establishment would not be regarded as ceasing to exist when work is temporarily interrupted.

Place of residence – companies

  • Where the management of a company is carried out in another country due to travel and quarantine restrictions (e.g. chief executive officers or other senior executives have relocated or are unable to travel), the OECD's view is that these circumstances should not affect the residency status of the company under international tax treaty rules.

Place of residence – individuals

  • Where an individual is stranded in a country for a period of time and that country is not the individual's country of residence due to travel restrictions and quarantine measures, the OECD’s view is that, where there is a tax treaty between the two countries, the residency status of the individual will not change due to the "temporary" nature of the situation. 

Taxation of salary – cross-border workers

  • Where an individual who is a "cross-border worker" is quarantined in their country of residence and is temporarily out of work due to the COVID-19 crisis but continues to receive their salary from their employer under a stimulus package adopted by the country of their employer, the OECD's view is that the income will be taxed in the country where that individual exercised their employment prior to the COVID-19 crisis.

The ATO has not provided a formal response to the OECD's guidance noted above. However, a common theme runs through both the ATO statements and the OECD position on COVID-19 – that is, the unprecedented circumstances confronting the world at the present time should not, of themselves, create unintended cross border taxation consequences.

State and Territory-based tax measures

In addition to the Federal measures, the States and Territories have introduced or announced tax measures of their own in response to COVID-19, including those summarised below. Most of these measures are targeted towards providing payroll tax or land tax relief for eligible small or medium businesses, or businesses in particularly affected industries.

Relief in respect of other state taxes (eg. gaming taxes), as well as new arrangements to pay state taxes by instalments or extensions, may also be available.

Details of the precise criteria and processes for such relief vary by jurisdiction. 

Payroll tax

  • Businesses whose operations have been directly impacted by the Commonwealth Government's prohibited activities list can apply for a 6 month payroll tax waiver for April to September 2020.
  • Businesses with grouped Australian wages of up to $10M can defer their 2020-21 payroll tax until 1 July 2022.
  • Businesses in the construction industry can apply to defer their payroll tax liability for the 6 month period from April to September 2020.
  • In addition to the above measures, wages subsidised by JobKeeper payments will be fully exempt from payroll tax in the ACT.

Land tax

Landlords of residential properties who reduce rent for tenants impacted by COVID-19 by at least 25% may be eligible for a land tax credit equal to 50% of the rent reduction (capped at $1,300 per quarter) for up to 6 months.

Payroll tax

  • Businesses with grouped Australian wages of less than $10M for the 2019-20 financial year will only be required to pay 75% of the total payroll tax that would have otherwise been payable that financial year.   
  • Additionally, businesses with grouped Australian wages of less than $10M and who lodge and pay payroll tax monthly will not be required to make payments for the months of March, April and May 2020.
  • Such businesses will also have the option of deferring any remaining payroll tax payments for 3 months.
  • Businesses with grouped Australian wages over $10M for the 2019-20 financial year will be entitled to a 6 month deferral for the March 2020 period (normally due on 7 April 2020).
  • The next round of payroll tax cuts has been brought forward by raising the payroll tax threshold to $1M for the 2020-21 financial year.
  • In addition to the above measures, the NSW Government will exempt from payroll tax any wages which represent an additional payment to an employee's wages in order to meet requirements of the JobKeeper scheme (ie. a full exemption where employees have been stood down, or a partial exemption for the difference between the JobKeeper payment and the employee's earned wage).

Land tax

  • Landlords with tenants in financial distress can apply for a reduction in their land tax liability of up to 25% for the 2020 calendar year, provided that rent relief at least equal to the land tax reduction is provided to those tenants and the land tax is directly related to the property for which rent has been reduced.

Payroll tax

  • Businesses with payroll of below $7.5M whose turnover has been reduced by at least 30% due to COVID-19 will be eligible for a 6 month payroll tax waiver from 1 April 2020.
  • Businesses with payroll over $7.5M whose turnover has been reduced by at least 50% due to COVID-19 will be eligible for a 6 month payroll tax deferral from 1 April 2020.
  • Landlords seeking payroll tax relief must also provide rent relief if requested by commercial tenants due to COVID-19.
  • Payroll tax exemptions for hiring NT resident employees (that were introduced from 1 May 2018) have been extended to new hires up to 30 June 2021.
  • In addition to the above measures, wages made to employees working in the NT that are subsidised by JobKeeper payments will be fully exempt from payroll tax in the NT. 
 

Payroll tax

  • All businesses negatively affected by COVID-19 will now be eligible for deferral of payroll tax for the 2020 calendar year.
  • In addition, businesses with grouped Australian taxable wages of more than $6.5M and have been negatively affected by COVID-19 can apply to receive a refund of payroll tax paid for January and February 2020.
  • Businesses with grouped Australian taxable wages of up to $6.5M per annum who have been negatively affected by COVID-19 can apply to receive a refund of payroll tax already paid in November and December 2019, and a payroll tax holiday (i.e. no payroll tax to be paid) for January to March 2020.
  • Applications for the payroll tax refund and payroll tax holiday must be submitted to the Queensland Office of State Revenue before 31 May 2020.
  • In addition to the above measures, wages subsidised by JobKeeper payments will be fully exempt from payroll tax in Queensland.

Land tax

  • Landlords with tenants whose ability to pay rent are affected by COVID-19, or who are unable to secure tenants due to COVID-19 and require financial relief, can apply for a land tax rebate reducing land tax liabilities by 25% for the 2019-20 financial year.  Landlords with affected tenants must provide rent relief to those tenants at least commensurate to the land tax rebate.
  • Foreign companies and trustees of foreign trusts that own land will have the land tax foreign surcharge waived for the 2019-20 financial year.
  • Land tax liabilities for the 2020-21 financial year will be deferred for 3 months.

Payroll tax

  • Businesses with grouped Australian wages of below $4M will receive a six month payroll waiver for the March to August 2020 periods.
  • Businesses with grouped Australian wages of more than $4M that have been adversely impacted by COVID-19 can apply to defer their payroll tax for the period April to September 2020 until October 2020.
  • In addition to the above measures, wages subsidised by JobKeeper payments will be fully exempt from payroll tax in SA.

Land tax

  • Landowners paying land tax on a quarterly basis in the 2019-20 financial year will be able to defer payment of their third and fourth quarter instalments for up to 6 months.
  • The land tax reform transitional relief fund available to eligible landowners who will have increased land tax liabilities as a result of changes to the land aggregation rules commencing from 1 July 2020 will have relief increased from 50% to 100% of the increase in land tax liability for the 2020-21 financial year, subject to the existing relief criteria.
  • Landlords who have already fully paid their 2019-20 land tax liability and are eligible for relief under the scheme will be issued a refund equal to the value of eligible land tax relief.
  • Landlords may be eligible for a 25% reduction on the land tax payable in the 2019-20 financial year on properties leased to residential tenants or to commercial tenants (with annual turnover of up to $50 million) affected by COVID-19. The relief is available if the landlord provides rent relief to residential tenants experiencing financial hardship due to COVID-19 or eligible commercial tenants who experience a 30% drop in revenue due to COVID -19 and who are eligible for JobKeeper Payments. The rent reduction must be at least as much as the land tax reduction, and the land tax must be directly related to the property for which rent has been reduced.
  • Residential and non-residential landowners who are unable to secure a tenant because of COVID-19 are also entitled to a 25% land tax reduction if they can demonstrate that the land was leased to March 2020 but has since been vacant due to COVID-19.

Payroll tax

  • Businesses with grouped Australian wages of up to $5M will receive a waiver of payroll tax for the 2019-20 financial year.  Eligible businesses must only pay wages in Tasmania or the Tasmanian portion of wages paid must be 50% or greater of the business' Australian payroll.
  • Businesses with eligible employees in the Hospitality, Tourism and Seafood industries (within the meaning of the Tasmanian guidelines) will also receive a waiver of payroll tax in respect of wages paid or payable to such employees for the 2019-20 financial year.  Such businesses must also only pay wages in Tasmania or the Tasmanian portion of wages paid must be 50% or greater of the business' Australian payroll.
  • These businesses will also be provided full reimbursements for payroll tax already paid in the 2019-20 financial year.
  • Employers that pay payroll tax and employ youth employees aged 24 years and under between 1 April and 31 December 2020 will be eligible for a 12 month payroll tax rebate on wages relating to these employees.
  • Rebates are also available for employers that pay payroll tax and who have commenced employment of apprentices and trainees in the building, construction, tourism, hospitality and manufacturing industries between 1 July 2019 and 30 June 2021.
  • In addition to the above measures, wages subsidised by JobKeeper payments will be fully exempt from payroll tax in Tasmania. 

Land tax

Land tax will be waived for commercial properties for the 2020-21 financial year where the business owner can demonstrate that their business operations have been affected by COVID-19.

Payroll tax

  • Businesses with Victorian taxable wages of up to $3M will have payroll tax for the 2019-20 financial year waived, with payroll tax already paid to be reimbursed.
  • These businesses will also be to defer payroll tax for the first quarter of the 2020-21 financial year (i.e. July to September 2020) until January 2021.
  • This relief will be provided for each employer, so each member of a group that pays Victorian taxable wages of up to $3M per annum will be eligible.
  • In addition to the above measures, the Victorian Government will exempt from payroll tax any wages which represent an additional payment to an employee's wages in order to meet requirements of the JobKeeper scheme (ie. a full exemption for employees that are stood down, or a partial exemption for the difference between the JobKeeper payment and the employee's earned wage).

Land tax

  • Landowners with at least one non-residential property and total taxable landholdings below $1M can defer their 2020 land tax payment until 31 March 2021. Landowners that have already paid their 2020 land tax can request a return of the tax paid, but this will need to be paid in full by 30 March 2021.
  • Landlords who provide rent relief to tenants affected by COVID-19 may receive a 25% reduction on the 2020 land tax payable on the property.  For landlords of commercial property, the property must be leased to a tenant with an annual turnover of up to $50M that is eligible for the JobKeeper Payment.
  • Landlords receiving land tax relief can also defer any remaining land tax payable for 2020 to 31 March 2021.

Payroll tax

  • The increase in the payroll tax threshold to $1M will be brought forward and take effect on 1 July 2020.
  • Employers with grouped Australian taxable wages below $7.5M at 30 June 2020 will have their payroll tax waived from March to June 2020.
  • The payroll tax waiver is automatic for employers with grouped Australian taxable wages below $5M at 29 February 2020.  Employers with grouped Australian taxable wages of $5M or more at 29 February 2020 but who expect annual wages to be below $7.5M, or new employers registered for payroll tax from 1 March 2020, can apply for a deferral for lodgement and payment of payroll tax returns until 21 July 2020 (subject to the payroll tax waiver).
  • Businesses with grouped Australian taxable wages between $1M and $4M will receive a one-off grant of $17,500.
  • In addition to the above measures, wages subsidised by JobKeeper payments will be fully exempt from payroll tax in WA.

Land tax

Landlords of commercial properties may receive grants equivalent to 25% of their land tax bill for 2019-20 if they provide rent relief that equates to a minimum of 3 months' rent and freeze outgoings to small businesses (as defined by the Small Business Development Corporation Act 1983 (WA)) that have experienced at least a 30% reduction in turnover due to COVID-19.  Landlords cannot seek to recover this rent relief from tenants at the end of the period.