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.
- 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.