Government Stimulus: Summary Information (23/3/20)

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To help business owners and individuals better understand the Australian Government’s Stimulus support in response to the COVID-19 Crisis, CFO On-Call has created a summary overview of the various supports that will be available to Australian businesses and individuals over the coming months.

If you need help working out exactly what this means for your business, please feel free to call us on 1300 362 436 (Australia) or 0800 180 400 (New Zealand) and one of our CFOs will be happy to discuss it with you – no charge, no obligation. We are very keen to ensure that as many businesses as possible survive the situation and as few people as possible lose their jobs.

BUSINESSES – Aggregated Turnover of Less Than $500 Million

Instant Asset Write-off – the instant asset write-off threshold for asset purchases has been increased from $30,000 to $150,000 from 12 March 2020 until 30 June 2020.

    • Assets acquired must have a cost less than $150,000
    • At this stage cars that are subject to the depreciation cost limit do not benefit from the $150,000 limit uplift (but this may change)

Accelerated Depreciation – a 50% immediate deduction for the costs of eligible new assets upon installation, with existing depreciation rules applying to the balance of the asset’s cost, until 30 June 2021.

    • The instant asset write-off takes precedence over this measure where it applies
EMPLOYERS – Small and Medium Sized Businesses (Aggregated Turnover of Less Than $50 Million and Not-For-Profits (including Charities)

Tax-free payment

    • Equal to 100% of tax withheld on salary and wages up to $100,000 (minimum payment $20,000).
    • The ‘payment’ is up to a maximum of $100,000 and is not a guaranteed $100,000
    • The turnover test is based on the turnover for the 2019 financial year
    • It is for businesses that employ to help keep people in a job
    • It is payable in two stages (March to June and then July to October 2020 Activity statements) – with the maximum limit of $50,000 and minimum limit of $10,000 applying to each stage
    • Employers will need to be registered as employers and form part of the PAYGW system and still need to withhold tax from employee remuneration – even if that is a nil withholding required for a period – and they needed to be established and registered as of 12 March 2020
    • On lodgement of the activity statements, a credit will be generated equal to the greater of 100% of the tax reported as being withheld from employee wages or the minimum benefit amount
    • The timing of the relief depends on whether monthly or quarterly activity statements are lodged – with some timing benefits for monthly lodgers that allow for early credits for expected withholding in later months
    • So rather than being an actual payment received for withholding above the minimum $10,000 benefit, the measure will allow businesses that qualify to not pay over the tax withheld from employee wages – so in effect the cash remains in the business each time wages are paid and amounts are withheld
    • The employees will still receive a credit for the tax withheld against their tax obligations
    • This will be automatically calculated by the Australian Taxation Office with no requirement to apply. The BAS/IAS just needs to be lodged. So, employers need to remain active to claim the maximum entitlements. A refund BAS will be paid within 14 days of lodgement.

Loans – the government is providing a 50% guarantee on new short-term unsecured loans of up to $250,000 to SMEs (must have an aggregated annual turnover of less than $50 million).

      • The loans will be for up to 3 years with an initial 6 month repayment holiday and are unsecured
      • There will still be lender credit assessment processes that apply
      • The loans will commence in April 2020 and be available for loans made by participating lenders until 30 September 2020
TEMPORARY RELIEF for Financially Distressed Businesses
  • The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive.
        • The minimum demand threshold for statutory demands for payment has been increased from $2,000 to $20,000
        • The timeframe for a company to respond has been increased form 21 days to 6 months
        • These changed thresholds will apply for 6 months only
  • The package also includes temporary relief for directors from any personal liability for trading while insolvent, and providing temporary flexibility in the Corporations Act 2001 to provide temporary and targeted relief from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.
  • The ATO will tailor solutions for owners or directors of business that are currently struggling due to the Coronavirus, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.
EMPLOYERS OF APPRENTICES AND TRAINEES with less than 20 full-time employees
  • Tax-free payment – For the period 1 January 2020 to 30 September 2020, eligible employers can claim a wage subsidy of 50% of an apprentice or trainee’s wages to a maximum of $21,000 per apprentice or trainee for the defined period ($7,000 per quarter).
  • Employers must register and be assessed with registration starting in April 2020 and final claims must be lodged by 31 December 2020
SUPERANNUATION
  • Early withdrawal – Tax free payment of up to $10,000 per year for FY19/20 and FY20/21, available to those that are unemployed, eligible for job seeker and other specified payments, have been made redundant after 1 January 2020 or had working hours reduced by more than 20% after 1 January 2020, sole traders whose businesses are suspended or there is a reduction in turnover of more than 20%.
  • Applications are made through mygov.
  • Greater flexibility for retirees – there will be a reduction in the minimum drawdown requirements for account-based pensions and similar products by 50% for FY19/20 and FY20/21.
INDIVIDUALS
  • Tax-free payment – Two $750 payments to social security, veteran and other income support recipients and eligible concession card holders. The first payments will commence automatically from 31 March 2020 and the second payment from 13 July 2020.
  • Tax free payment – $1,100 per fortnight additional payment for some income support recipients.
DEPARTMENT OF SOCIAL SERVICES

Expanding Eligibility and Qualification for Payments

From 27 April 2020, the Government has also put expanded eligibility and qualification criteria in place for six months.

Eligibility for JobSeeker Payment and Youth Allowance for jobseekers will also be expanded to assist:

  • sole traders and self-employed people. They will be able to meet mutual obligation requirements by continuing to operate their businesses.
  • people caring for someone infected or in isolation as a result of contact with Coronavirus.

Click here for more details.

Please get in touch with CFO On-Call if you need help working out exactly what this means for your business. We are here to help. You can call us on 1300 362 436 (Australia) or 0800 180 400 (New Zealand) and one of our CFOs will be happy to discuss it with you – no charge, no obligation.