FEDERAL GOVERNMENT STIMULUS PACKAGE
In addition to the first round of economic stimulus announced on 12 March 2020, on Sunday 22 March 2020, the Federal Government announced a second economic stimulus package which brings the total Federal stimulus to $189 billion, representing 9.7 percent of GDP. The targeted stimulus package has four parts:
• Household and Individual stimulus payments
• Cash flow assistance to help small and medium sized business
• Supporting business investment
• Relief for financially distressed business
• Targeted support for the most severely affected sectors, regions and communities
• Supporting the flow of credit
On 23 March 2020, Parliament passed the Coronavirus Economic Response Package Omnibus Bill 2020 enacting both rounds of stimulus
1. Supporting Individuals and Households
Support for households
In addition to the one-off $750 payment announced on 12 March 2020, the Government has announced a second $750 payment for pensioners, social security, veteran and other income support recipients and eligible concession card holders.
The first payments will be paid to eligible recipients between 31 March 2020 and 13 April 2020. The second payment will be paid from 13 July 2020. Both payments will be exempt from tax.
Support for Individuals
The Government is establishing a new time-limited income supplement to be paid at the rate of $550 per fortnight, for a period of six months (the ‘Coronavirus Supplement’). The Coronavirus Supplement will be made available to recipients who receive the following payments:
• Jobseeker payments;
• Parenting payment; or
• Special benefits and farm household allowance.
Early Access to Superannuation
The Government will allow eligible recipients to apply to access up to $10,000 of their superannuation up to 30 June 2020. Eligible recipients will be able to access a further $10,000 from 1 July 2020 to 24 September 2020.
To be eligible for the early release of superannuation, a recipient must satisfy one or more of the following conditions:
• Is unemployed.
• Is eligible to receive one of the following payments under the Social Security Act 1991:
o jobseeker payment;
o parenting payment;
o special benefit or farm household allowance; or
• On or after 1 January 2020:
o Were made redundant; or
o Had their working hours reduced by 20 percent; or
o Is a sole trader whose business was suspended or has suffered a reduction in turnover of 20 percent or more.
Reduction in Superannuation Drawdown Requirements and Deeming Rates
To assist retirees to manage the impact of volatility in financial markets on their retirement savings, the Government will temporarily reduce the superannuation minimum drawdown requirements by 50 percent for the 2020 and 2021 financial years. The Government will also reduce the social security deeming rates in recognition of the impact of low interest rates on savings.
2. Cash flow assistance for businesses
Cash payments for employers
As part of the second economic response package, the government has enhanced its boosting the cash-flow for employer’s measures. Small and medium-sized businesses will receive tax free payments of up to $100,000 (up from $25,000), with a minimum payment of $20,000 (up from $2,000). It is expected that this measure will benefit around 690,000 businesses, employing around 7.8 million people.
To be eligible for the payment, you must be a business or not-for-profit entity with an aggregated turnover of less than $50 million, that employs staff between 1 January 2020 and 30 June 2020. As a result of the employment requirement, sole traders are not eligible for the payment.
The payments will now be based on 100 percent of PAYG withheld over the period 1 January 2020 to 30 June 2020 up to a maximum of $50,000 and a minimum of $10,000. The payments will be delivered by the ATO as a credit in the activity statement system from 28 April 2020 as eligible businesses lodge their activity statements. Where the credit places a business in a refund position, the ATO will deliver the refund within 14 days.
Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020. Monthly lodgers will be eligible to receive the payment for lodgement for the month’s March 2020 to June 2020. To align with quarterly lodgers, monthly lodgers will receive a 150% credit for the month of March 2020.
An additional payment will be made between July to October 2020. Eligible recipients will receive the additional payment equal to the total cash flow payment received to 30 June 2020. As a result, eligible recipients will receive at least $20,000 and up to $100,000 under both payments.
Quarterly lodgers will be eligible to receive the additional payment for the quarters ending June 2020 and September 2020. Monthly lodgers will be eligible to receive the payment for lodgement for the month’s June 2020 to September 2020.
Apprentice and Trainee Wage Subsidy
This remains unchanged from the 12 March 2020 announcement.
$1.3 billion has been allocated to maintain the continued employment of around 120,000 apprentices and trainees. Eligible small business will be eligible to apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage from 1 January 2020 to 30 September 2020. This measure will effectively reimburse the employer for 50 percent of the wage of an apprentice or trainee for a period of 9 months, up to a maximum of $21,000. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.
The subsidy will be available to small businesses who employ fewer than 20 full-time employees or employers of any size that re-engage an eligible out-of-trade apprentice or trainee.
Employer’s will be eligible to register for the subsidy from April 2020 and final claims to be lodged by 31 December 2020.
3. SUPPORTING BUSINESS INVESTMENT
In an effort to encourage businesses to continue with current investments or bring forward planned investments, the Government has allocated $3.9 billion to increase the instant asset write off and provide a 15-month investment incentive.
Increasing the instant asset write off
This remains unchanged from the 12 March 2020 announcement.
The instant asset write-off threshold will be increased from $30,000 to $150,000 and expanded access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million). The increase threshold will apply to both new and second-hand assets, used, or installed ready for use between 12 March 2020 and 30 June 2020.
This measure offers a significant tax incentive to any businesses looking to make large capital investments in plant and equipment.
Backing business investment
This remains unchanged from the 12 March 2020 announcement.
A temporary 15-month investment incentive will be introduced to support business investment and economic growth over the short term, by accelerating depreciation deductions on certain new assets purchased after 12 March 2020 and installed or used by 30 June 2021.
Businesses with a turnover of less than $500 million will be eligible for an accelerated depreciation deduction of 50 per cent of the cost of an eligible asset, with existing depreciation rules applying to the balance of the asset’s cost.
Eligible assets are assets that qualify for depreciation under Division 40 of the Income Tax Assessment Act 1997 and does not include second-hand assets or buildings and other capital works.
4. RELIEF FOR FINANCIALLY DISTRESSED BUSINESSES
The economic impact of COVID-19 is expected to place previously profitable businesses under financial distress. In order to provide these businesses with opportunity to trade through the current economic conditions, without the threat of insolvency actions, the Government has announced several relief measures.
• Six-month temporary increase in the threshold that creditors can issue a statutory demand on a company and the time companies must respond to a statutory demand. A creditor issuing a statutory demand under the Corporations Act 2001 will now require a claim of $20,000, up from $2,000. The timeframe to respond to a statutory demand will be extended from 21 days to 6 months.
• Six-month temporary increase in the threshold that creditors can initiate bankruptcy proceedings against a debtor and the time companies must respond to a statutory demand. The minimum amount of debt required to initiate bankruptcy proceedings will increase from $5,000 to $20,000. The timeframe to respond to a bankruptcy notice will be extended from 21 days to 6 months
• Temporary relief for directors from personal liability for trading while insolvent. This will apply to debts incurred in the ordinary course of the company’s business over the next six months.
5. ASSISTANCE FOR SEVERELY AFFECTED REGIONS
This remains unchanged from the 12 March 2020 announcement.
The Government has set aside $1 billion to support those regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on industries such as tourism, agriculture and education.
These measures will include waiving fees and charges for tourism businesses, promoting domestic tourism and identifying alternate export markets or supply chains for effected businesses.
6. SUPPORTING THE FLOW OF CREDIT
The Government Reserve Bank of Australia (‘RBA’) and the Australian Prudential Regulation Authority have coordinated action to support the flow of credit to small and medium businesses.
SME Guarantee Scheme
The Government will provide a guarantee of 50 percent for new unsecured loans provided to SME’s for working capital. This measure will enhance the willingness for lenders to provide credit to businesses and help support their businesses through current economic difficulties.
Businesses with a turnover of under $50 million will be eligible for loans on the following terms:
• Maximum loan value of $250,000;
• Period of up to three years, with an initial six-month repayment holiday; and
• Fully unsecured.
Efficient Access to Credit
The Government is providing an exemption from responsible lending obligations for lenders providing credit to existing small business customers. This measure is intended to expediate access to credit for small business.
Reducing the Cost of Credit
The RBA announced a funding facility of 90 billion at a fixed interest rate of 0.25 percent. This low cost funding for lenders is expected to help reduce interest rates for borrowers.
STATE GOVERNMENT STIMULUS PACKAGES
In addition to the Federal Government stimulus package, several States have also announced packages to support local businesses.
Western Australia
On 16 March 2020 the WA State Government announced an economic response to COVID-19 aimed at providing relief for businesses and households. The key measures for local business were targeted at payroll tax relief and assistance.
• Small to medium businesses with a payroll of between $1 million and $4 million will receive a one-off cash grant of $17,500.
• Small businesses that have total payrolls of under $7.5 million, can apply to defer their payroll tax payments until 21 July 2020.
• The Government will bring forward the payroll tax threshold increase to $1 million. This was planned to commence from 1 January 2021, however, will be brought forward to 1 July 2020.
New South Wales
The NSW State Government announced a $2.3 billion stimulus package to boost health services and economic stimulus. The key measures for local business were targeted at payroll tax relief and assistance:
• Businesses with payrolls of $10 million or less will have their payroll tax waived for 3 months from April 2020 to June 2020.
• Bring forward the payroll tax threshold increase to $1 million. This increase will be brought forward to 1 July 2020.
Queensland
On 17 March 2020 the QLD State Government announced a package to support workers and businesses affected by COVID-19. The Government announced two key measures to support local business:
• Extending the payroll tax deferral (originally for businesses affected by natural disasters). This will enable all COVID-19 affected businesses with a payroll of $6.5 million or less to extend the due date for the lodgement and payment of 2020 payroll tax returns to 31 July 2020. As with the initial payroll tax deferral offer, the Office of State Revenue will also work with affected businesses to create repayment plans for the deferred tax liabilities.
• The creation of a new $500 million loan facility, interest free for the first 12 months, to support businesses to keep Queenslanders in work. The $500 million concessional loan facility is available to facilitate loans of up to $250,000 with an initial 12-month interest free period for businesses to retain staff.
Tasmania
On 17 March 2020 the Tasmanian State Government announced a package to support workers and businesses affected by COVID-19. The Government announced several key measures to support local business:
• The creation of a new $20 million loan facility, for interest free loans to small businesses in the hospitality, tourism, seafood and export sectors. The loans are available to businesses with a turnover of less than $5 million to assist with the investment in new equipment or restructuring business operations.
• Businesses in the hospitality, tourism and seafood sectors will have their payroll tax liabilities waived from March 2020 to June 2020 (i.e. 4 months). Other businesses with payrolls of up to $5 million can apply to have their payroll tax waived for April 2020 to June 2020 (subject to the impact of COVID-19 on the business).
• One year payroll tax rebate for businesses that employ a young person aged 24 years or under.
• Businesses that hire an apprentice or trainee in the hospitality, tourism, building and construction, or manufacturing sectors will receive a $5,000 cash grant.
Victoria
On 21 March 2020 the Victorian State Government announced an economic response to COVID-19 aimed at providing relief for businesses and households. The key measures for local business were targeted at payroll tax relief and assistance.
• Full payroll tax refund for the 2020 financial year for businesses with a payroll of less than $3 million. Payments will begin this week and are expected to save businesses an average of $23,000.
• Businesses with a payroll of under $3 million will also be allowed to defer payroll tax payments for July, August and September 2020 until 1 January 2021.
• The Government is also looking to provide rent relief for commercial tenants in Government buildings and pay supplier invoices within 5 days.
Australian Capital Territory (‘ACT’)
On 20 March 2020 the ACT Government announced an economic response to COVID-19 aimed at providing relief for businesses and households. The key measures for local business were targeted at payroll tax relief and assistance.
• Six-month waiver on payroll tax for businesses in the hospitality, creative arts and entertainment industries.
• Interest free payment deferrals of payroll tax for businesses with payrolls of under $10 million, commencing 1 July 2020.
AUSTRALIAN TAX OFFICE ADMINISTRATIVE MEASURES
As part of the Federal economic stimulus, the Australian Taxation Office (‘ATO’) have implemented a series of administrative measures to assist Australian individuals and businesses experiencing financial difficulty as a result of COVID-19. The administrative measures being offered:
Payment Deferrals
The ATO will work with businesses to defer payments for income tax, GST, FBT and excise payments for up to four months.
Remitting Interest and Penalties
The ATO will consider remitting interest and penalties applied to tax liabilities incurred after 23 January 2020.
Low Interest Payment Plans
Where businesses are having difficulties paying existing and ongoing tax liabilities, the ATO will discuss entering low interest payment plans.
*We note that these relief options will not be automatically applied, so businesses (or their agents) will need contact the ATO to discuss and apply them.
AUSINDUSTRY
AusIndustry have announced that as a result of the difficult economic circumstances being experienced by businesses, 2019 Research and Development applications will be accepted until 30 September 2020 (extended from 30 April 2020). This extension is automatic, and a request is not required.
