While the Federal Government’s Jobkeeper and Cash Flow Boost have wrapped up, the ongoing pandemic and resulting lockdowns continue. This means that businesses and individuals right across the country, particularly in the capital cities, continue to face income loss. As of August 11th 2021, additional economic assistance packages have been announced as a direct result of the most recent lockdowns and restrictions.

FEDERAL GOVERNMENT

At present the government has not reinstated the JobKeeper initiative. Instead, they have provided a payment directly for individuals who have lost work hours.

             COVID-19 Disaster Payment

On 3rd June 2021, the Federal Government announced a COVID-19 disaster payment. This is now a tax-free, non-assessable, non-exempt income payment for the individual recipient. At the time this payment was made in response to the Victorian lockdown in May/June, however it was also made available to future Commonwealth declared hotspots.

This payment is aimed at individuals who have lost paid work hours due to the restrictions imposed by lockdowns. The support provided is based on the number of working hours lost:

• Over 20 hours = $750 a week payment
• 8-20 hours = $450 a week payment
• JobSeeker, Austudy, Age pension recipients who have lost at least a full day’s work in a week may also be eligible for a payment of $200 a week.

NEW SOUTH WALES

NSW has a number of measures available to provide economic support due to the current wave of lockdowns.

The NSW 2021 COVID-19 Business Grant and NSW 2021 JobSaver payments are available for NSW businesses (including non-profit organisations and sole traders) with a turnover between $75,000 and $50 million in the 2020 financial year, and have had under $10 million in wages.

             NSW COVID-19 Business Grant

Eligible businesses can apply for grants of between $7,500 and $15,000. The amount of the grant depends on the extent to which the business turnover declined during the first 3 weeks of the Greater Sydney lockdown (26 June to 17 July 2021) compared to:

• The same period in 2019; or
• The same period in 2020; or
• The 2 week period immediately before the Greater Sydney lockdown.

The amount of the grant will depend on the decline in turnover:

• 30% or more decline = $7,500 grant
• 50% or more decline = $10,500 grant
• 70% or more decline = $15,000 grant

These grants are likely going to be declared to be tax-free grants. Applications can be made until 13 September 2021.

             NSW 2021 JobSaver

The JobSaver cashflow boost is a cashflow boost for eligible businesses available from week 4 of the current NSW lockdown. It is to help businesses maintain their employee headcount. This payment is made in fortnightly amounts based on 40% of their NSW payroll payments, with a minimum of $1,500 a week and a maximum of $100,000 a week.

To receive the payment, the business must maintain their staff levels through the lockdown. Non-employing businesses (sole traders) may receive a payment of $1,000 a week.

             Micro Business Grants

For smaller businesses, with turnovers between $30,000 and $75,000 (in the 2020 financial year), who have experienced a decline of at least 30% of their income, but are not able to apply for the previous two grants, the Micro Business Grant is available.

Applications for this grant close on 18 October 2021.

             NSW Payroll Tax Concessions

Businesses with under $10 million in payroll for the 2021/2022 financial year, who have experienced a 30% decline in turnover will have their annual payroll tax liability reduced by 25%. 

Businesses will also have the option to defer their 2020/2021 annual payment as well as the July and August monthly payments until 7 October 2021. 

             NSW Land Tax Concessions

Up to 100% relief may be available to residential or commercial landlords who have provided rent reductions to eligible tenants. Note that the property owner cannot apply for this concession as well as the Residential Tenancy Support Payment.

             Residential Tenancy Support Payment

Residential landlords with eligible properties may be eligible for grant up to $3,000 if they provide rent reductions to their tenants. They will be eligible for either this grant, or up to 100% land tax concession.

             Short Term Eviction Moratorium and Other Tenant Safe Guards

An eviction moratorium is in place until 11 September 2021. Where a residential tenant has lost at least 25% of their income due to COVID-19 (along with other eligibility criteria), the landlord will not be able to evict the tenant prior to mediation.

             Targeted Industry Support

Other targeted industry support applies to some of the most hard hit industries (such as tourism and entertainment industries).

VICTORIA

The Victorian government has issued a range of grants to assist businesses impacted by the shutdowns.

             Business Costs Assistance Program Round Three (BCAP3)

Eligible businesses who received the Round Two payments (BCAP2) for business costs assistance were automatically paid this additional grant.

Businesses who missed the Business Costs Assistance Program Round Two may be able to apply for the “BCAP2 July Extension” grant instead.

             Small Business COVID Hardship Fund

Businesses who were not eligible for support under existing programs but experienced a turnover reduction by at least 70% (and have a payroll of under $10 million) may be able to access pay grants of up to $5,000. A second round of funding under this grant was announced on 6 August 2021. This grant enables Small Businesses to access grants of up to $8,000.

             A New Business Continuity Fund

This is an additional grant announced on 28th July 2021, that will be automatically applied to any business that was eligible for the BCAP2 or BCAP2 July Extension, where their business was impacted by capacity limits in the CBD.

             Specific Industry Funds

Licensed Hospitality Venues, Alpine Businesses, and Events organisers, have specific grants available for their Industry, due to recognition of the particular hardships that these industries have faced during lockdowns. These grants are between $5,000 and $25,000 for eligible businesses located in areas impacted by the lockdowns.

             Commercial Tenancy Relief for Victorian Businesses

This relief involves the reintroduction of the Commercial Tenancy Relief Scheme. Support is also being provided to landlords who provide rent relief. This relief is generally available where the business has a turnover below $50 million and their revenue has reduced by at least 30% due to coronavirus.

QUEENSLAND

Queensland also has a range of grants available, primarily for small to medium businesses. To be eligible, the business must have a turnover of at least $75,000, an annual payroll of under $10 million and a reduction in turnover of at least 30%.

             2021 COVID-19 Business Support Grants

Eligible small businesses within areas that were locked down may apply for a $5,000 business support grant. Larger businesses in hospitality and tourism have now been added to this grant, subject to meeting relevant criteria.

             Queensland Tourism and Hospitality Package

A range of measures specific to the tourism and hospitality industry includes:

• Deferral of payroll tax liabilities
• Waiving, refunding, or deferring certain fees and licensing costs
• A cleaning rebate to aid eligible businesses and nonprofit entities impacted as potential exposure sites

OTHER

State assistance has also been offered in South Australia, Western Australia, and the Northern Territory.

With lockdowns continuing to be announced, particularly in the Eastern States, it is likely that further extensions, top ups or additional grants will continue to be announced.

Changing Economies

Monetary systems around the world have faced a rather large change in the form of digital assets. In barely a decade, virtual currencies have grown and become embraced around the world in many forms. Here we take a look at what digital assets are and how they are being used on a global scale.

Foundational Concepts of Digital Assets

To understand digital assets it is important to understand a range of foundational concepts and terms such as blockchain, DLT, DeFi, Decentralised Exchanges, Staking, and more. The information in this blog will only provide a brief overview of this information. For more details you can download the full paper on Digital Assets: A Window Into the New Economy, by our Founder John Marcarian.

Blockchain

In very simple terms a blockchain is an online record of transactions. This could include money, exchange of goods, or exchange of information.

Each transaction creates a record that is gathered with further transaction records into blocks. These blocks are linked together with cryptography.

Blockchain stores these records across many locations at the same time. This means that if any of the information in a blockchain is changed, everyone involved in the network has to consent to the changes. Since the information can only be changed if every record is changed at the same time, it is difficult to hack into, and therefore potentially more secure, transparent, and cost effective to hold than traditional databases.

DLT

The online record of the data and transactions that comprise blockchains is typically known as a distributed ledger. Any technology that utilises this type of system is collectively known as DLT.

Blockchain is one form of DLT.

As we are only in the early stages of DLT we are still discovering all the potential applications that it could be used for.

Decentralised Finance (DeFi)

DeFi is, simply put, a term that covers a large range of applications within the public blockchain world that are distributing traditional economies. It refers to the financial applications that utilise blockchain technologies. This is in contrast to the centralised financial markets where all the risks and control are with the central system, such as the banks and financial institutions.

Smart contracts are contracts that are automated in programming languages so that they are accessible by anyone using the internet. They allow individuals to engage in financial applications without relying on an intermediary.

DeFi now provides a fully functioning economy that is accessible to users across the globe via the internet. This allows individuals and businesses to buy and sell, lend and borrow, and invest with digital currencies.

Decentralised Exchanges

One of the central functions of DeFi is decentralised exchanges. This means that users can exchange their assets without needing to rely on a centralised system or intermediary. Two examples of decentralised exchanges are the UniSwap and the Pancake Swap.

The Uniswap allows users to swap their tokens even if there is not a user on the other side of the trade.

The Pancake Swap is essentially a newer alternative option to the Uniswap, with a very similar user experience. It is driven by strong marketing strategy that has rapidly built community engagement and dedicated followers.

Binance Smart Chain

In September 2020 a blockchain service was introduced that allows developers to use smart contracts in order to build their own decentralised apps. This is Binance Smart Chain.

It is one example of how DLT is rapidly expanding and increasing in functionality as the world continues to embrace this technology.

Wallets

A wallet is an app that functions essentially like a virtual wallet for your virtual currency. While you don’t have to have a wallet, it helps keep all your digital assets in one place. Just like a real wallet with physical cash.

Staking

Staking is where the owner of cryptocurrencies locks their holdings into their crypto wallet in order to receive rewards.

While blockchains typically rely on the process of mining to add new blocks to the blockchain, staking involves locking up your cryptocurrency coins so that they can be randomly selected to create a block. Larger stakeholders typically have a higher chance of being selected as the next block validator.

Different blockchain networks then reward staking accounts in different ways and using different factors.

Some coin holders also pool their resources in order to create a staking pool and increase their chances of being selected for validating blocks and rewards.

Stablecoins

To help reduce volatility around cryptocurrencies, stablecoins offer digital assets that are tied to a stable, physical asset, such as gold or fiat currency. This keeps the value more stable.

To The Future

With rapid growth occurring in digital assets, this complex world gives users around the globe the tools to partake in a decentralised system of finance. We are still watching to see how this economic system will continue to be shaped and how it will influence the economy around it. While there are many potential advantages to the decentralised system, there are also many issues to be addressed.

One of the issues is how these digital assets are taxed. We consider this issue in the blog on International Taxation of Digital Asset Transactions. 

Digital Assets: A Window Into the New Economy has been written by our Founder, John Marcarian 

Download the Digital Assets: A Window into the New Economy Paper Now

John is an Australian Chartered Accountant with over 25 years of experience.

John has a deep understanding of digital assets and the Fourth Industrial Revolution presently underway around the world in the area of blockchain and digital assets. 

A recognised tax specialist in digital assets, John has a qualification from the MIT Sloan School of Management in BlockChain technologies. 

He has contributed tax expertise to a specialist US publication on international tax and digital assets.

He works regularly with companies issuing tokens and other forms of digital assets. This unique blend of skills gives John a practical day to day knowledge of the business challenges faced by entrepreneurs in the digital asset market.

The Growth of Digital Asset Transactions

Digital assets have become a rapidly growing phenomenon over the past decade. With this new growth comes the question of how to tax these assets.

Guidance on how to account for the vast array of digital assets is currently lacking, as is an international consensus on how to tax digital assets.

To understand more about what digital assets are and how they are spreading globally, we recommend reading our blog and downloading the paper on Digital Assets: A window into the new economy.

Different Approaches Around the Globe

Some countries currently regard digital assets as being currency for tax purposes. This includes Belgium, Italy, and Poland. This means that realised gains and losses would be taxable.

Many others, including Australia, view Digital Assets as a form of intangible assets, with gains and losses being treated under the capital gains regime. For countries such as Singapore and Hong Kong, classifying digital assets as property means that individuals avoid taxation, as there are no capital gains taxes applicable for individuals.

Mining Digital Currencies

Virtual currencies can be created through what is known as the mining process. This is where rewards are generated via a proof of work protocol, rather than through purchasing the digital assets. The question arises as to whether we should be taxing the digital currencies at this point of creation, or not until they are actually disposed of and there is a measurable flow of revenue.

             Mining: Taxation at the Point of Creation

One potential taxation point for digital assets is at the point of creation.

Many major companies including Finland, New Zealand, Japan, Norway, the United Kingdom, and the United States, consider such creation events to be taxable as ordinary income, with the costs of production allowed as a deduction. When the digital assets are later sold, this is treated as a capital gains event and taxed under the relevant capital gains regime.

Some countries, including Australia, Canada and Singapore, only tax the creation of digital assets through mining activities if the activity takes place as a business activity (as opposed to a hobby).

             Mining: Taxation on Disposal

Many countries ignore the creation of digital assets through mining as a taxation point. Instead, the first taxation point is the disposal of the digital currency. In these countries the total disposal value is included as assessable income (less allowable costs incurred to mine the digital asset).

Usually countries that tax digital assets this way treat the income as a capital gain.

             Mining: Taxation on Receipt

In some taxation jurisdictions the mining activities are taxed on a receipts basis when those activities are carried on as a business. This means that all mined digital assets are treated like stock and included in business income as income, losses or sales revenue. Deductions are treated in the same manner as any other business deduction.

Disposal of Virtual Currencies

Regardless of the different taxation options, most countries agree that disposal of a digital asset is a taxation event. Disposals can occur through loss, exchange, or sale of the digital asset.

             Exchange for Fiat Currency

Most major economies regard the disposal of digital assets for fiat currency to be a taxable event. Although there are notable exceptions, such as Italy, where such transactions are not taxed unless they are treated as speculative trading.

             Exchange for Other Virtual Currency

In most countries the exchange of one digital asset for another digital asset is considered to be a taxable exchange. Other countries however, do not consider such exchanges to be taxable. This is possibly due to the difficulty in accurately valuing the realised gains or losses on such exchanges.

Other countries, such as Australia, Belgium, and Japan, vary their treatment of these type of exchanges depending on the type of owner and how the virtual currency is expected to be used.

             Exchange for Goods and Services

With virtual currencies becoming more acceptable globally, it is becoming common for these digital assets to be used to purchase goods and services. This typically means that the person using the virtual currency to make a purchase has realised a taxable event. The person receiving the virtual currency as payment, likewise is in receipt of taxable income at that same value. The tax treatment then depends on that country’s personal income tax rules.

             Exchange for no Value

Other situations of disposal may include gifting the digital asset, loss or theft. In these situations the owner of the digital asset has disposed of their holding but not received anything in exchange.

Some countries tax the recipient of gifts, others tax the disposal at the deemed value of the asset being disposed.

When it comes to theft or loss, this is typically deductible if the individual is running a business and the digital assets are trading stock, but not if they are holding the assets as private individuals.

Conclusion

Creating a cohesive treatment for digital assets, let alone a consensus on how to tax these assets, is a long way from being realised. This will require a lot of research and collaboration to come to fruition as the world continues to embrace the use of virtual currencies on an ever increasing scale.

Our Founder, John Marcarian, goes into further detail in the International Taxation of Digital Asset Transactions paper.

International Taxation of Digital Asset Transactions has been written by our Founder, John Marcarian

Download the International Taxation of Digital Asset Transactions Paper Now

John is an Australian Chartered Accountant with over 25 years of experience.

John has a deep understanding of digital assets and the Fourth Industrial Revolution presently underway around the world in the area of blockchain and digital assets.

A recognised tax specialist in digital assets, John has a qualification from the MIT Sloan School of Management in BlockChain technologies.

He has contributed tax expertise to a specialist US publication on international tax and digital assets.

He works regularly with companies issuing tokens and other forms of digital assets. This unique blend of skills gives John a practical day to day knowledge of the business challenges faced by entrepreneurs in the digital asset market.