The Federal Government has taken vital steps to support business investment and continuity in Australia during these extraordinary times.
Federal Parliament will sit on Wednesday 8 April 2020 to discuss further legislation to support the government’s economic response to the COVID-19 pandemic, including the JobKeeper payment that has been the subject of considerable commentary and debate in the past week.
We take this opportunity to review for our clients the stimulus measures that the Federal Government has announced so far to combat the economic effects of COVID–19.
This article summarises the 8 Coronavirus stimulus measures that might be crucial to your business in 2020.
- The JobKeeper payment;
- Changes to the instant asset write-off tax concession;
- Special instant depreciation allowances for new asset purchases;
- Cash flow assistance for employers;
- Support for trainees and apprentices;
- Coronavirus SME Guarantee Scheme;
- Administrative relief for certain tax obligations; and
- Temporary relief for financially distressed businesses.
This $1,500 per employee fortnightly wage subsidy is big news for businesses (including not-for-profits and the self-employed) hard-hit by the Coronavirus economy.
Employers are eligible for the subsidy if:
- they have an annual turnover of less than $1 billion and their turnover has fallen by more than 30%; or
- they have an annual turnover of $1 billion or more and their turnover has fallen by more than 50%.
To establish eligibility, most businesses will need to show that their turnover in the relevant BAS reporting period has fallen, or is predicted to fall, by the threshold amount when compared to the same period last year. However, the Tax Commissioner has a broad discretion to consider additional information to establish eligibility.
Employees are eligible if they:
- are full-time, part-time or long-term casual (regular shifts for the last 12 months or more) employees;
- have been employed by their employer since 1 March 2020 (including those stood down or re-hired);
- are Australian citizens, permanent visa-holders or New Zealanders living in Australia; and
- are not currently receiving the JobKeeper payment from another employer.
In order to receive the subsidy for an employee who usually earns less than $1,500 per fortnight before tax, an employer must supplement the employee’s ordinary wage so that they receive at least $1,500 per fortnight before tax. A superannuation contribution is not required on the wage supplement.
If you are an eligible employer with eligible employees (or if you’re self-employed and otherwise eligible), register your interest in applying for the JobKeeper payment on the ATO website.
Payments will commence in the first week of May 2020, back paid to 30 March 2020, and will be available for six months.
Instant Asset Write-Off
The instant asset write-off (IAWO) threshold has been increased from $30,000 to $150,000 per asset.
Any business with aggregated annual turnover of less than $500 million (up from $50 million) can claim the special IAWO until 30 June 2020.
The IAWO is due to revert to $1,000 for small businesses (with a turnover of less than $10 million) from 1 July 2020.
Instant Asset Depreciation
Until 30 June 2021, businesses with an aggregated annual turnover below $500 million will be able to depreciate 50% of the cost of new eligible depreciable assets immediately on installation.
What is an eligible asset? Any new assets that can be depreciated under Division 40 of the Income Tax Assessment Act 1997, such as plant, equipment and intangible assets such as patents are eligible.
The concession does not apply to secondhand assets or buildings and other capital works.
Cash Flow Assistance for Employers
On 12 March 2020, the Government announced the Boosting Cash Flow for Employers scheme.
Under that scheme, businesses with employees and an aggregated annual turnover under $50 million in FY2019 were due to receive tax free payments of between $2,000 and $25,000.
Those payments were to be automatically calculated by the Australian Taxation Office (ATO) at 50% of an eligible business’s salaries and wages withheld.
On 22 March 2020, the Government announced that not for profit entities (NFPs) with employees and an aggregate annual turnover under $50 million in FY2019 are also eligible under the scheme.
On 22 March 2020, the Government also increased the payments available under the scheme.
Eligible employers can now expect to receive between $20,000 and $100,000 under the scheme in the next six months, in two-phase.
The payments will be delivered on a rolling basis by the ATO from 28 April 2020 as automatic credit in the business activity statement system when employers lodge their eligible upcoming activity statements.
Where that credit results in a net tax refund, the ATO will deliver the refund within 14 days.
The payments will only be available to eligible employers established before 12 March 2020.
Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive payments equal to 100% of their salary and wages withheld in the lodgement period, up to a maximum of $50,000.
All eligible employers will receive at least $10,000, regardless of whether they are required to withhold tax on salaries and wages.
For quarterly lodgers, payments will be made in phase 1 on lodgement of activity statements for Quarters 3 and 4, due on 28 April 2020 and 28 July 2020 respectively.
For monthly lodgers, payments will be made in phase 1 on lodgement of activity statements for March 2020 through to June 2020, each due for lodgement on the 21st day of the following month.
During phase 2, eligible employers will receive payments equal to total amount they received during phase 1.
Quarterly lodgers will receive their phase 2 payments in two equal instalments on lodgement of their activity statements for Quarter 4 of 2020 and Quarter 1 of 2021, due on 28 July 2020 and 28 October 2020 respectively.
Monthly lodgers will receive their phase 2 payments in 4 equal instalments on lodgement of their activity statements for June 2020 through to September 2020, each due for lodgement on the 21st day of the following month.
Support for Apprentices and Trainees
From early April 2020, eligible businesses will be able to apply for a wage subsidy of 50% of their apprentice or trainee’s wage paid during the 9 months from 1 January 2020 to 30 September 2020 up to a maximum of $21,000 per apprentice or trainee.
Eligible businesses are:
- small businesses employing less than 20 full time employees who retain apprentices or trainees (who were in training at 1 March 2020); and
- employers of any size that re-engage eligible out-of-trade apprentices or trainees.
Employers will be able to access the subsidy after an eligibility assessment by an Australian Apprenticeship Support Network (AASN) provider.
Claims for payment must be lodged by 31 December 2020.
Coronavirus SME Guarantee Scheme
Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50% to lenders on new unsecured working capital loans to SMEs.
SMEs with a turnover of up to $50 million are eligible to receive these loans, which operate like a revolving line of credit, up to a maximum total loan amount of $250,000 per borrower.
The loans are for a three-year term with an initial six month repayment holiday. They will be available from early April 2020 to 30 September 2020.
The Government is also providing an exemption from responsible lending obligations for lenders providing any type of credit to their existing small business customers in the next six months.
This scheme temporarily lifts some of the barriers small businesses face in accessing credit. Speak to your financial advisor if you are considering accessing credit under this scheme and think carefully about your ability to repay any money you borrow.
Administrative Relief for Tax Obligations
The ATO will provide administrative relief for certain tax obligations for taxpayers affected by Coronavirus on a case-by-case basis, similar to the relief provided to those affected by bushfires.
The relief for businesses includes allowing businesses to vary their PAYG instalment amounts to zero for the March 2020 quarter and claim a refund of instalments paid for the September and December 2019 quarters.
The ATO’s administrative relief is not automatic. To find out more, contact the ATO’s Emergency Support Infoline on 1800 806 218 or speak to your BAS or tax agent.
Temporary relief for financially distressed businesses
Significant temporary changes have been made in the areas of personal and corporate insolvency. Tom Darbyshire summarised those changes for you here.
For any further information, please contact any of the Kott Gunning partners.
The information published on this website is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.