Taxes:  Essential flood recovery guide

Updated 11 February 2011.

Individuals and businesses affected by a natural disaster are able to seek assistance from the revenue authorities to help cope with their ongoing tax obligations. Some of the assistance is automatically implemented for all taxpayers but other assistance will need to be applied for.

ATO obligations
The ATO offer assistance in times of natural disaster in a number of ways:

• fast tracking refunds for taxpayers impacted by a natural disaster, including refunding amounts credited to existing debts where a payment deferral or arrangement is currently in place
• providing deferrals for lodgement obligations 
• helping reconstruct tax records where documents have been destroyed, or
• offering personal visits from ATO staff where appropriate.

ATO lodgement extension announcement
Further automatic extensions have been announced by the ATO today for lodgement activity statements, income tax lodgements and payment obligations since December for taxpayers affected by the recent natural disasters

In particular:

• December & January monthly activity statements deferred until 21 March 2011
• December quarterly activity statements deferred until 28 March 2011 (excluding large Pay As You Go withholders)
• Income Tax lodgement and payment obligations due in February 2011 have been deferred for one month
   

An updated list of identified affected postcodes can be found on the ATO website, http://www.ato.gov.au/corporate/content.asp?doc=/content/00189316.htm.

ATO tax payments, interest charges and penalties
The ATO are often quite willing to negotiate tax debt payments by installments, with a partial or full reversal of general interest charges and any applicable penalties. In addition, it may be worth applying for remission of either interest penalties and/or penalties that may have been imposed automatically to an outstanding amount if you have been affected by a disaster. Please contact your usual Grant Thornton advisor to discuss your options, and if appropriate, we can negotiate for penalty remission or payment terms on your behalf.

Business Activity Statement Concession already announced – monthly lodgers
In response to the current situation, the ATO have already put in place an automatic extension for the lodgement and payment of Monthly December Business Activity Statements for businesses and tax agents in Queensland, the Tweed and certain flood affected postcodes. The automatic extension is for one month from 21 January 2011 to 21 February 2011 and the due date should already have been amended on the Business Portal for businesses identified by the ATO. The relevant postcodes are listed on the ATO website at: http://www.ato.gov.au/corporate/content.asp?doc=/content/00189316.htm

If you have previously been granted an extension beyond the revised 21 February due date, this will still apply.

For businesses whose premises (or their tax agent's) are not included in the areas identified, the concession will not currently apply automatically, and an application for an extension of time will be required.

We are liaising with the ATO to try and achieve recognition that serious consequences will be felt by businesses on a much wider basis, based a range of factors including customer location and supplier location. In the meantime, we can assist with lodging an extension application based on your business’ circumstances.

Other lodgements
The extension above assists monthly BAS lodgers only.  No further automatic extensions have been put in place by the ATO. Applicable lodgement deadlines include the income tax lodgement deadlines of 17 January and 28 February, as well as December quarterly BAS lodgements.

The standard process to apply for a deferral is still available where you have identified that the floods will impact on your ability to report or make payments. If you do not qualify for the automatic concession and need help accessing a deferral, please contact us to work with the ATO on your behalf.

PAYG instalments
As a result of the impact of the floods the level of PAYG instalments being paid to the ATO may no longer be appropriate for your business. Where the change in circumstances would mean that you have already paid too much PAYG, it is possible to claim a credit in your next activity statement. Where payments are still needed but at a lower level, a process is available to vary the instalment level. Please speak to us so that we can assist you with this process.

Superannuation guarantee
Where your business has been affected by the natural disaster, difficulties may also be encountered in meeting super guarantee obligations.  Currently, there is no relief available.

If you cannot make your contributions for a quarter, you must lodge a superannuation guarantee charge statement and make a non-deductible payment. In an emergency the ATO may extend the time for lodgement of this statement, although no announcement has been made about this as yet.  We recommend that superannuation payments be made on time if at all possible.  Where this is not possible, a superannuation guarantee charge statement should be lodged as soon as possible as interest will continue to accrue on shortfall contributions until the statement is lodged. As the interest is paid to the employee to compensate for lost earnings, the ATO have no discretion in waiving it (as is the case with income tax). However they will not impose other usual penalties, and will consider remitting any general interest charge at the time the super guarantee debt is paid.

Fringe Benefits Tax
An FBT exemption exists for some Emergency Assistance which you might provide to your employees. Emergency assistance under the FBT legislation includes assistance for the immediate relief of a victim of an emergency and the assistance is in the form of:

• first aid or other emergency health care
• emergency meals, food supplies, clothing, accommodation, transport, or use of household goods
• temporary repairs, or
• any similar matter

For the health care assistance, this does not extend to assisting with medical or hospital bills and only covers treatment provided on work premises. Dependent on the circumstances and nature of assistance provided, other exemptions may be available and we are happy to provide detailed information to assist you in ensuring you provide help without incurring an FBT bill.

"Bucket collections" from staff that may be passed on to other staff affected by the floods will not be subject to FBT.

Capital expenditure
As part of the reconstruction effort, businesses will incur significant levels of capital expenditure. At present no concessions have been announced to assist affected businesses with ensuring that this additional expenditure does not result in negative taxation consequences.  We will continue to lobby the authorities to put in place suitable measures to assist businesses at this time.

Other considerations
In addition to the statutory reporting and payments required by the ATO, there are some other considerations which you should consider to help you manage your tax obligations.

In respect of GST, it is worth considering any outstanding debts which you believe will no longer be recoverable. Steps should be taken to write these off in order to reclaim the GST as soon as possible. For those whose systems are down, whilst you may not be able to process invoices currently, if you are able to maintain a simple spreadsheet of the invoices you have received in order to reclaim input tax credits as soon as possible, this will assist with managing cash flow. You are able to amend a BAS at a later stage if you have had to work on the basis of estimated figures initially.

In respect of Fuel Tax Credits, it appears that any fuel which has been lost, stolen or destroyed should have a decreasing adjustment included in the activity statement (to reduce the Credits claimed) when the loss is identified in order to reflect the fact that the fuel was not used for an allowable purpose.  Hopefully this position will be clarified so that Credits are not lost unfairly.

Queensland Office of State Revenue (QOSR) obligations
In addition to the obligation discussed above, other tax obligations may be payable to the Queensland Office of State Revenue for Payroll Tax, Land Tax or other duties. The QOSR have not put in place any automatic concessions but have advised that they are prepared to offer help so that those who have been affected by the floods do not have to worry about their tax obligations during this time.

In particular, they will work to:

• extend the time to lodge documents or returns with our office
• extend the time for amounts to be paid without interest being charged
• arrange for debts to be paid in instalments

We can assist with the process of obtaining suitable relief from the QOSR to allow time for you to get back on your feet.

Queensland local council obligations
Brisbane City Council has advised that due to the recent flood event, Brisbane ratepayers will be provided with an extra 30 days to pay rates bills.

All Brisbane ratepayers in flood affected homes will receive a $100 rebate on their water bill so that they can use the water needed to clean up after the flood.

Other regional councils are putting in place appropriate measures to assist ratepayers experiencing financial hardship and the relevant councils should be contacted for further advice.  The directory for local governments in Queensland can be found at: http://www.dip.qld.gov.au/local-government-directory/index.php

Donations to relief funds
If you wish to coordinate efforts from your staff to donate to disaster relief funds, contributions from staff can be obtained by way of cash collections or salary sacrifice arrangements (ie. pre-tax salary deductions which may make it easier for staff to afford a desired larger donation). No FBT will apply provided the recipient fund has deductible gift recipient status. The contribution relating to sacrificed salary will be a deductible expense for the business, offsetting the reduced deduction for salary.

This information is general in nature and we urge you to contact your usual Grant Thornton advisor or email our office at flood.assistance@au.gt.com should you have any questions.