The Federal Government’s Stimulus Package to help Australia through COVID-19

The Federal Government has made two economic stimulus package announcements so far – on 12 March 2020, a $17.6 billion package, then on 22 March 2020, a $66.1 billion package. These packages have now been legislated and most of the measures included have already taken effect.

The stimulus is designed to provide support for Australian businesses and Australians themselves, to help them combat the disruption and financial challenges resulting from the coronavirus. There are four key objectives:

    1: Support business investment
    2: Provide cash flow assistance for small and medium businesses, so they can stay in business and employees can retain their jobs
    3: Provide targeted support to the most impacted sectors, regions and communities
    4: Provide household stimulus payments that will flow on to benefit the larger economy.

Below we go over the key measures to support businesses, then those to support individuals.

Key measures to support businesses:

    1: Instant asset write-off threshold increase and eligibility extension
    From 12 March 2020, until 30 June 2020, the instant asset write-off is available to businesses with an aggregated turnover of less than $500 million, and the threshold is increased to $150,000.

    What this means is that eligible businesses can claim an upfront deduction in the year of purchase, for qualifying assets. This reduces their tax liability for that year. For example, a business in a company structure, with turnover of under $50 million, would get back 27.5% of the cost of a qualifying asset in their 2019-20 tax return, if they purchased an asset that was ready to use by 30 June 2020.

    To qualify for the instant asset write-off, assets must be:
      1. Eligible depreciable assets
      2. Bought new between 12 March 2020 and 30 June 2020
      3. Installed and ready for use between 12 March 2020 and 30 June 2020.

    If you are looking at purchasing assets, please contact us so we can confirm whether the intended purchase would qualify or not. Some assets are excluded from the instant asset write-off scheme.

    2: Acceleration of depreciation deductions
    From 12 March 2020, until 30 June 2021, businesses with a turnover of less than $500 million can deduct 50% of the cost of the asset in the year of purchase.

    They can also claim a further deduction in the year of purchase using the normal depreciation rules for the balance of the asset’s cost.

    3: Credit of PAYG amounts withheld
    Under the Boosting Cash Flow for Employers measures, eligible businesses who:

      1. Are required to withhold PAYG from salary and wages paid, will receive a credit of 100% on PAYG withheld, up to a maximum of $100,000 per employer, OR
      2. Are not required to withhold PAYG from salary and wages paid, will receive a minimum payment of $20,000.

    This applies to PAYG withheld in relation to quarters ending March 2020 and June 2020 (if you lodge quarterly) or months ending March 2020, April 2020 , May 2020 and June 2020 (if you lodge monthly). The credits/minimum payments are provided in two phases:

      1. Phase 1: Credit equal to 100% of PAYG payments withheld from salary and wages, up to a maximum of $50,000 OR if a business paid salary and wages in the relevant period, but was not required to withhold any tax, a minimum payment of $10,000. Phase 1 credits or payments are applied the quarters ending March 2020 and June 2020 (if lodging quarterly), or months ending March 2020, April 2020, May 2020 and June 2020 (if lodging monthly).
      2. Phase 2: Further credit or minimum payment, equal to the amount of credit or minimum payment already provided under Phase 1. Phase 2 credits or payments are spread equally across quarters ending June 2020 and September 2020 (if lodging quarterly), or months ending June 2020, July 2020, August 2020 and September 2020 (if lodging monthly).

    For example, if under Phase 1 a business received $30,000 of credits, then in Phase 2 it will receive a further $30,000 of credits – so a total benefit of $60,000.

    Where a business is not required to withhold PAYG from salary and wages paid, $10,000 of the minimum payment is applied to their first lodgement in the corresponding activity statement period under Phase 1 and $10,000 to their first lodgement in the activity statement period under Phase 2.

    The credit is capped at $100,000 per employer for the duration of the scheme. If the credit applied is above the level of your other tax liabilities, a refund of the excess amount will be made, generally within 14 days.

    To be eligible, businesses must:

      1. Have held an ABN as at 12 March 2020
      2. Still be operating
      3. Be a small or medium business entity, whether a sole trader, partnership, company, trust structure, or a not-for-profit organisation
      4. Have an annual aggregated turnover under $50 million
      5. Made payments you are required to withhold from (including if the amount required in withholding is zero), such as salary, wages, directors fees, compensation payments, eligible retirement or termination payments or voluntarily withholding from payments to contractors
      6. Have either:
          1. Obtained business income in the 2018-19 financial year and have lodged their business tax return for the 2018-19 financial year either on or before
            12 March 2020, OR
          2. Made sales since 1 July 2018 that are either GST taxable, GST free or input-taxed, and have lodged corresponding activity statements on or before 12 March 2020.

    The credits/payments under this measure are tax free.

    Be aware the ATO is monitoring for activity that may suggest a business is deliberately trying to increase the amount of benefit they receive under this measure, and if proven, they could deny benefits under this measure that a business might otherwise have received.

    4: Access to short-term unsecured loans for small and medium enterprises from April 2020
    Small and medium businesses with a turnover of up to $50 million will be eligible for new short-term unsecured loans of up to $250,000 from eligible lenders, through the Coronavirus SME Guarantee Scheme.

    This Scheme involves the Government providing a guarantee of 50% on new loans, with the following terms:

      1. The loan must be entered in by/on 30 September 2020
      2. The loan will be for up to three years and require no repayments for the first six months
      3. The loan is structured as unsecured finance, so borrowers do not have to provide an asset as security
      4. It is expected the lender would apply credit assessment processes and as well as consider the uncertainty of current economic conditions.

    Lenders would still have ultimate responsibility for deciding whether to extend credit and if so, to manage the loan.

    We suggest you contact your financial institution directly to see if they will be providing loans under this scheme.

    5: Apprentice and trainee wage subsidy
    Businesses with less than 20 employees will be able to receive a subsidy for apprentice or trainee wages between 1 January 2020 and 30 September 2020. The subsidy is for 50% of the wage for the relevant apprentice or trainee, and is capped at $21,000 per apprentice or trainee (not per business).

    To be eligible, the apprentice or trainee must have been in training with the business as at 1 March 2020.

    If a small business is unable to continue employing an apprentice, the subsidy will be available to that apprentice’s new employer.

    Businesses will be required to register for the subsidy. It is expected registrations will be able to be made from early April 2020 and close on 31 December 2020.

    6: Targeted support for the most impacted sectors, regions and communities
    The amount of $1 billion has been committed for further support for the most impacted sectors, regions and communities. Specific mention has been made of the tourism, agriculture and education sectors. Initially this includes measures such as:

      1. Waiving fees and charges for tourism businesses that operate in either the Great Barrier Reef Marine Park, or Commonwealth National Parks
      2. Assisting businesses to identify alternative export markets and/or supply chains
      3. Promotion of domestic tourism.

    The ATO is setting up a temporary shop-front in Cairns, to be staffed by persons specialised in assisting small businesses. Other locations are also being considered.

    Further measures are being developed in consultation with affected industries and communities.

    Australian airlines and airports will receive cash flow support of up to $715 million.

    7: Temporary increase in debt threshold at which creditors can issue statutory demands
    Normally a creditor can issue a statutory demand to a business for amounts of $2,000 and above, with response required by the business within 21 days.

    For a six month period from 25 March 2020, the debt threshold will be raised to $20,000 and the response time allowed will increase to six months.

    Only debts incurred in the ordinary course of business are subject to these temporary measures. Debts still remain payable.

    8: Temporary safe harbour for directors
    For six months from 25 March 2020, directors are protected from personal liability where a business continues trading while insolvent. See more at http://aicd.companydirectors.com.au/resources/covid-19/what-directors-need-to-know-about-lifting-director-liability-for-insolvent-trading.

    9: Eligibility for JobSeeker payments expanded
    Sole traders and those who are self-employed, who have had their income reduced, will now be able to access income support payments. See https://business.gov.au/Risk-management/Emergency-management/Coronavirus-information-and-support-for-business/Increased-and-accelerated-income-support.

    10: Administrative relief on a case by case basis
    Administrative relief for some tax obligations will be available on a case by case basis, including an option to defer tax payments for up to four months.

Key measures to support individuals:

    1: Early release of superannuation
    Individuals who meet eligibility criteria will be able to withdraw up to $10,000 of their superannuation balance in the 2019-20 financial year, plus a further $10,000 in the 2020-21 financial year. These withdrawals will be tax free and will not affect eligibility for payments from Centrelink or Veteran’s Affairs.

    To access their super, eligible individuals will need to apply online through the myGov website. Individuals will be able to apply from mid-April 2020. There will be a final date for applications, we will update this article when that date is clarified.

    To be eligible, individuals must meet one or more or the following criteria:
      1. Be unemployed
      2. Be eligible to receive a JobSeeker payment, youth allowance for jobseekers, parenting payment (single or partnered), special benefit or farm household allowance.
      3. On or after 1 January 2020, either:
          1. They were made redundant
          2. Their working hours were reduced by 20% or more
          3. In the case of a sole trader, business was suspended or turnover reduced by 20% or more.

    2: Cash payments to social welfare recipients
    Eligible individuals will receive two tax free payments of $750, up to a maximum of $1,500 per individual. These payments will be made in two phases:

      1. Phase 1: The first lot of payments will be made from 31 March 2020 onward, to individuals who were eligible at any time between 12 March 2020 and 13 April 2020.
      2. Phase 2: The second lot of payments will be made from 13 July 2020 onward, to individuals who were eligible as at 10 July 2020.

    To check eligibility, review the fact sheet at https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Payments_to_support_households_0.pdf. Payments will be made automatically.

    3: Coronavirus supplement
    Eligible individuals will receive a coronavirus supplement payment of $550 each fortnight for the next six months. The supplement is additional to any other income support payments the individual might be receiving.

    To be eligible, individuals must:

      1. Receive a job seeker payment, youth allowance for jobseekers, parenting payment (single or partnered), special benefit or farm household allowance.
      2. Not have access to employer entitlements such as annual or sick leave
      3. Not hold income protection insurance.

    Asset testing is waived however income testing still applies.

    Note that eligibility for income support payments is being extended to:

      1. Permanent employees who are either stood down or lose their job
      2. Casual workers
      3. Sole traders and the self employed
      4. Contract workers who meet the income test
      5. Individuals required to care for someone who is infected, or who are in self-isolation.

    4: Reduction in superannuation minimum drawdown rates
    Minimum drawdown rates for account based pensions and similar products are being reduced by 50% for 2019-20 and 2020-21. This will give retirees greater flexibility in managing their superannuation assets.

    5: Reduction in social security deeming rates
    From 1 May 2020, the lower deeming rate will be 0.25% and the upper deeming rate will be 2.25%. This will result in increases in social welfare payments for around 900,000 recipients, including pensioners.

    6: Temporary increase in debt threshold at which creditors can initiate bankruptcy proceedings
    Normally a creditor can issue bankruptcy proceedings for amounts of $5,000 and above, with response required by the business within 21 days.

    For a six month period from 25 March 2020, the debt threshold will be raised to $20,000 and the response time allowed will increase to six months.

If you have any questions about how you can benefit from stimulus package you can call us on 03 5339 3200 or contact us here.

Thanks for reading.

The information contained on this website has been provided as general advice only.  The contents have been prepared without taking account of your personal objectives, financial situation or needs.  You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.

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