Unpacking the Government’s economic stimulus package

Gino Farina Self Employed

The Federal Government’s coronavirus stimulus package seeks to keep businesses afloat and workers employed. A brief summary of the key elements of the package is listed for quick reference.

Stimulus payments to households

Aim: To assist lower-income Australians

Eligibility: Predominately pensioners, along with those receiving social security, veteran and other income support recipients and eligible concession cardholders

Benefit: The government will provide a one-off $750.00 payment – One payment per eligible recipient (ie. if a person qualifies for the one-off payment in multiple ways, only one payment will be made)

This payment will be tax-free. More information here.

Cash flow assistance for employers

Aim: To aid businesses in managing cash flow challenges and help businesses retain employees.

Eligibility:

  • Business entities who have an annual turnover of less than $50 million
  • Business entities who pay wages and withhold tax on those wages

Benefit:

  • Cash payments of up to $25,000 are available on business activity statements (BAS) or instalment activity statements (IAS) lodged for the period 1 January 2020 to 30 June 2020
  • Employers who withhold tax on employee’s salaries will be eligible for a payment of 50 per cent of the amount withheld, up to a cap of $25,000 for the current financial year (with a minimum payment of $2,000)
  • The payment will be automatically calculated in the form of a credit, allocated to the client’s activity statement account – either enhancing a refund or reducing a current debt with 14 days of lodgement of the March to June 2020 BAS/IAS’
  • Monthly lodgers will receive a payment calculated at three times the rate for the March 2020 lodgement, to ensure similar treatment to those quarterly lodgers
  • For employers who pay wages however are not required to withhold tax, they are still eligible for a $2,000 cash payment

All amounts received will be tax-free to the business.

Apprentices and trainees wage subsidy

Eligibility: Small businesses who employ fewer than 20 full-time workers who retain an apprentice or trainee

Benefit: Employers will receive 50 per cent of each trainee or apprentice wage, up to $7,000 per quarter, on wages paid from 1 January 2020 to 30 September 2020

More information here.

Four-month tax deferral

Eligibility: Businesses who have been affected by COVID-19

Benefit: Payment dates for business activity statements, fringe benefits tax, income tax & excise payments are eligible to be deferred for a period of up to four months

This will be granted at the Australian Taxation Office’s discretion, on a case by case basis.

GST reporting cycle

Eligibility: Businesses with a turnover of $20 million or less

Benefit: Businesses who currently report on a quarterly basis have the option to change to a monthly basis, allowing access to GST refunds earlier

  • This applies from 1 April 2020
  • If registered for fuel tax credits, this will need to be reported monthly, also
  • If a business changes this reporting basis, it must remain in place for 12 months

Amending PAYG instalment rate

Eligibility: Businesses who report on the quarterly or monthly PAYG instalment system

Benefit:

  • For quarterly payers, if you vary your instalment amount for the March 2020 quarter, you are also allowed to claim a refund for any excess instalments that were paid in the September and December 2019 quarters
  • For monthly payers, you must contact the ATO to discuss varied instalment rates and refunds

Taxpayers that receive income from trusts (investment trusts and business operating through a Trust) can vary their PAYG instalment rate accordingly

Increasing the instant asset write-off

The government has increased the instant asset write-off threshold from $30,000 to $150,000 per asset, from 12 March 2020 until 30 June 2020. This applies to the purchase of new or second-hand assets first used or installed ready for use.

More information here.

Backing business investment

The government has introduced a 15-month investment incentive, (accessible until 30 June 2021), aimed at supporting economic growth and business investment in the short term, by increasing depreciation deductions. Businesses will be eligible to deduct 50 per cent of the cost of an eligible asset on installation with existing depreciation rules applicable to the remainder of the asset’s cost.

Assistance for severely affected regions

The government has set aside $1 billion to support regions and communities who have been economically impacted the most – including those heavily reliant on industries such as tourism, education and agriculture.

More information here.

Newstart and pensioners

Waive of the assets test and waiting period for JobSeeker allowance. This will also enable people who then receive JobSeeker allowance to access a raft of other potential Centrelink benefits. If you earn less than $1075 per fortnight, you may also be eligible.

There will be an additional $550 per fortnight for those receiving the JobSeeker payment and carers.

A further $750 income support payment for those on income support.

Access to superannuation

From April, members of superfunds who face hardship because of the coronavirus will be able to access superannuation up to $10,000 this final year, and $10,000 next financial. The withdrawal will be tax-free and will apply to those currently eligible for the supplement, and sole traders whose hours work hours or income has fallen 20 per cent or more as a result of the coronavirus. The mechanism will be via declaration to the Tax Office. More details as to the eligibility will follow.

The minimum pension requirement has also been halved. Eg. If your current requirement is 4 per cent of your fund balance, it is now 2 per cent, for this financial year and the next.

SMEs

Increase cash payments to SMEs, All employing businesses will receive at least $20,000 and larger SMEs will receive up to $100,000. The payment will be automatically paid through the tax system over the next 6 months. We will be seeking more information as to the eligibility as information flows through.

SMEs with turnover up to $50m will be able to access unsecured loans for up to $250,000, under the Coronavirus SME Guarantee Scheme, to provide access for working capital. The government will guarantee 50 per cent of any of the new loans issues by eligible lenders.

Companies

Temporary relief under the Corporations Act for directors of companies trading while insolvent, impacted by the Coronavirus, to assist companies in getting through this difficult period.

More specific details can be found for businesses can be found here.