Here’s the details on Government Stimulus Package | Trekk Advisory

Here’s the details on Government Stimulus Package (UPDATED)

By Jess Kitchin

March 22, 2020

The total being injected into the economy is now at $189 billion (following the $17.6 billion first economic stimulus package, $90 million from the RBA and $15 million from the Government to make access to finance easier) at 22nd March 2020.

Support has been split across four parts/main areas of focus:

  • Supporting business investment
  • Providing cash flow assistance to help small and medium sized business to stay in business and keep their employees in jobs
  • Targeted support for the most severely affected sectors, regions, and communities;
  • Household stimulus payments that will benefit the wider economy

SME’s to get up to $100,000 to boost Cashflow

The Govt is providing up to $100,000 to SME’s, and not-for profits (including charities) that employ people, with a minimum payment of $20,000. These payments will help businesses’ and not-for-profits’ cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff.

On 12 March 2020, the Government announced the ‘Boosting Cash Flow for Employers’ measure. The measure initially provided up to $25,000 to business, with a minimum payment of $2,000 for eligible businesses. Small and medium sized business entities with aggregated annual turnover under $50 million and that employ workers are eligible.

The Government has enhanced this measure as part of the second economic response package. Not-for-profit entities (NFPs), including charities, with aggregated annual turnover under $50 million and that employ workers will now also be eligible. This will support employment activities at a time where NFPs are facing increasing demand for services.

Under the enhanced scheme, employers will receive a payment equal to 100 per cent of their salary and wages withheld (up from 50 per cent), with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $20,000.

An additional payment is also being introduced in the July – October 2020 period. Eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments they have received. This means that eligible entities will receive at least $20,000 up to a total of $100,000 under both payments.

This additional payment continues cash flow support over a longer period, increasing confidence, helping employers to retain staff and helping entities to keep operating. The cash flow boost provides a tax free payment to employers and is automatically calculated by the Australian Taxation Office (ATO). There are no new forms required.

Eligibility

To qualify for the additional payment, the entity must continue to be active. For monthly activity statement lodgers, the additional payments will be delivered as an automatic credit in the activity statement system. This will be equal to a quarter of their total initial Boosting Cash Flow for Employers payment following the lodgment of their June 2020, July 2020, August 2020 and September 2020 activity statements (up to a total of $50,000).

For quarterly activity statement lodgers the additional payments will be delivered as an automatic credit in the activity statement system. This will be equal to half of their total initial Boosting Cash Flow for Employers payment following the lodgment of their June 2020 and September 2020 activity statements (up to a total of $50,000).

Timing

Payments will be made as a credit of up to 100% of the amount withheld from salary and wages and will be automatically applied to activity statements starting with your March BAS.

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 the March 2020, April 2020, May 2020 and June 2020 lodgments. To provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (300 per cent) in the March 2020 activity statement. The minimum payment will be applied to the entities’ first lodgment. (Treasury)

The second additional payment will require the entity to continue to be active and will be delivered as a portion of the amount previously paid under these incentives in the earlier period. It will be paid as follows:

  • Quarterly Activity Statement lodgers = half of the amount previously paid on lodgement of June BAS and a half on lodgement of the September BAS.
  • Monthly Activity Statement lodgers = quarter of amount previously paid on lodgement of the June, July, August and September BAS/IAS’s.

Example - Sean’s Hairdresser Salon

Sean owns a hairdresser’s salon on the Gold Coast. He employs 12 hairdressers, with average salary of $50,000 per year. Sean reports withholding of $8,788 for his employees in each of his monthly BAS.

Under the Government’s changes, Sean will be eligible to receive the payments on lodgement of his relevant BAS. Sean’s business will receive:

  • A credit of $26,364 for the March period, equal to 300 per cent of his total withholding.
  • A credit of $8,788 for the April period.
  • A credit of $8,788 for the May period.
  • A credit of $6,060 for the June period, before he reaches the $50,000 cap. Sean will also receive an additional payment of $12,500 for the June period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.
  • An additional payment of $12,500 for the July period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.
  • An additional payment of $12,500 for the August period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.
  • An additional payment of $12,500 for the September period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.

Under the previously announced Boosting Cash Flow for Employers measure, Sean’s business would have received a total payment of $25,000.

Under the Government’s enhanced Boosting Cash Flow for Employers measure, Sean’s business will receive $100,000. This is an additional $75,000 to support his business.

 Read more examples in the Treasure documents by clicking here.

Wage subsidies for apprentice’s & trainees

The Government is supporting small business to retain their apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage paid during the 9 months from 1 January 2020 to 30 September 2020.

Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter). Support will also be provided to the National Apprentice Employment Network, the peak national body representing Group Training Organisations, to co-ordinate the re-employment of displaced apprentices and trainees throughout their network of host employers across Australia.

Eligibility

 The subsidy will be available to small businesses employing fewer than 20 full-time employees who retain an apprentice or trainee.

The apprentice or trainee must have been in training with a small business as at 1 March 2020. Employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will be eligible for the subsidy.

Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network (AASN) provider. This measure will support up to 70,000 small businesses, employing around 117,000 apprentices.

Timing

  • Employers can register for the subsidy from early April 2020.
  • Final claims for payment must be lodged by 31 December 2020.

Further information is available at:

  • The Department of Education, Skills and Employment website found here
  • Australian Apprenticeships website found here

For further information on how to apply for the subsidy, including information on eligibility, contact an Australian Apprenticeship Support Network (AASN) provider.  

Temporary Relief for Financially Distressed Businesses (and their directors)

  • A temporary increase in the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000 [and this will be for 6 months]  and the time companies have to respond to statutory demands they receive (from 21 days to 6 months);
  • A temporary increase in the threshold for a creditor to initiate bankruptcy proceedings (increased from $5,000 to $20,000), an increase in the time period for debtors to respond to a bankruptcy notice (increased from 21 days to 6 months), and extending the period of protection a debtor receives after making a declaration of intention to present a debtor’s petition (increased from 21 days to 6 months) ;
  • Temporary relief for directors from any personal liability for trading while insolvent (directors will be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business. This will relieve the director of personal liability that would otherwise be associated with the insolvent trading. It will apply for six months); and
  • Providing temporary flexibility in the Corporations Act 2001 to provide targeted relief for companies from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis (the Treasurer will be given a temporary instrument-making power in the Corporations Act 2001 to temporarily amend 3 provisions of the Act to provide relief from specific obligations or to modify obligations to enable compliance with legal requirements during the crisis. The instrument-making power will apply for six months. Any instrument made under this power will apply for up to six months from the date it is made).

For owners or directors of a business that are currently struggling due to the Coronavirus, the ATO will tailor solutions for their circumstances, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.  

Further information is available on the Treasury website, here.

 Supporting the flow of credit

The Government proposes the setup of the Coronavirus SME Guarantee Scheme. The scheme will provide a guarantee equal to 50% to those that lend to SME’s to support short-term unsecured loans to SME’s with the intention of increasing the willingness of banks to lend SME’s money during these times.

Other eligibility criteria can be summarised as follows:

Turnover will need to be less than $50million

  • Maximum loans of $250,000
  • Loan term up to 3 years
  • No repayments required in the first 6 months
  • Loans will be otherwise unsecured finance [ie no assets required to be provided]

RBA also announced earlier in the week a further cut in the official cash rate to 0.25% and the establishment of a term funding facility for the bank system so that banks can have access to at least 0billion in funding at a fixed interest rate of 0.25% per annum [further reducing funding costs to banks]. (Business Depot)

Further information available on the Treasury website, here.

Early Access of up to $10k from Super

The Government is allowing individuals affected by the Coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21. 

While superannuation helps people save for retirement, the Government recognises that for those significantly financially affected by the Coronavirus, accessing some of their superannuation today may outweigh the benefits of maintaining those savings until retirement.

Eligible individuals will be able to apply online through myGov to access up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for approximately three months (exact timing will depend on the passage of the relevant legislation).  

For more information on how to apply, timing and other impacts, head to Treasury website, here.

Providing support for Retirees

The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for the 2019-20 and 2020-21 income years.

The Government is also reducing both the upper and lower social security deeming rates by a further 0.25 percentage points in addition to the 0.5 percentage point reduction to both rates announced on 12 March 2020.

Further information available on the Treasury website, here.

Administrative Relief from the ATO

 In the wake of the announcement, the ATO has released a string of measures to provide some administrative relieve for certain tax obligations for people affected by the Coronavirus outbreak, on a case-by-case basis.

From Accountants Daily, measures include:

  • up to a four-month deferral of the payment date of amounts due through the business activity statement, including PAYG instalments, income tax assessments, fringe benefits tax assessments and excise.
  • quarterly GST reporting businesses can opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.
  • businesses will be allowed to vary Pay As You Go (PAYG) instalment amounts to zero for the April 2020 quarter.
  • Businesses that vary their PAYG instalment to zero will also be allowed to claim a refund for any instalments made for the September 2019 and December 2019 quarters.
  • The ATO will also look to remit any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities, and allow affected business to pay their existing and ongoing tax liabilities by allowing them to enter into low-interest payment plans.

“Our message to businesses feeling the impact of the coronavirus is simply this: let us know. Reach out to us. We can help,” said Commissioner Chris Jordan, “The ATO will work shoulder-to-shoulder with businesses to assist them through this difficult period and do what we can to ease the pressure.”

Unlike the bushfire relief measures, which applied automatically to particular geographic areas, assistance measures for those impacted by COVID-19 will not be automatically implemented.

Instead, businesses and their advisers will be required to contact the ATO on its 1800 806 218 Emergency Support Infoline to discuss their situation.

Additionally, the ATO is setting up a temporary shop front in Cairns within the next few weeks with dedicated staff specialising in assisting small business and is currently considering further temporary ‘shop fronts’ and face-to-face options.

Huge Increase to Instant Asset Write Off Threshold

From yesterday Thursday 12th March 2020, the instant asset write-off thresh has been increased from $30,000 (for businesses with an aggregated turnover of less than $50 million) to $150,000 (for businesses with an aggregated turnover of less than $500 million) until 30 June 2020.

This means that new equipment, vehicle, machine or hardware that you want can be immediately written off within the requirements. For example, assets that may be able to be immediately written off are a concrete tank for a builder, a tractor for a farming business, and a truck for a delivery business.

Accelerated Depreciation to 30 June 2021 [Investment Allowance]

 The government is encouraging business investment and economic growth by providing a 15-month investment incentive  (through to June 2021) by accelerating depreciation deductions.

Businesses with a turnover of less than $500 million will be able to immediately deduct 50 percent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.

As announced, this measure is proposed to only apply to new depreciating assets first used, or installed ready for use, by 30 June 2021.

This would be applicable for:

  • asset purchases greater than $150k before 30 June 2020; and
  • asset purchases greater than $30k between 1 July 2020 and 30 June 2021.

The examples from Treasury show that this 50% deduction is to be treated like an investment allowance as a reduction on the original cost which is used for additional depreciation deductions [which are in addition to the 50% deduction].

Stimulus payments to households to support growth

A one-off tax-free payment of $750 to pensioners, social security, veteran and other income support recipients and eligible concession card holders. Around half of those that will benefit are pensioners.

The payment will be tax free and will not count as income for Social Security, Farm Household Allowance and Veteran payments.

There will be one payment per eligible recipient. If a person qualifies for the one off payment in multiple ways, they will only receive one payment.

Payments will be from 31 March 2020 on a progressive basis, with over 90 per cent of payments expected to be made by mid-April.

Assistance to severely affected regions

The Government has also committed to set aside $1 billion to support 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.  This will include:

  • The waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef
  • Marine Park and the waiver of entry fees for Commonwealth National Parks.
  • The provision of additional assistance to help businesses identify alternative export markets or supply chains.

Here to help

Australian Government has also created this fact sheet on the economic response to the coronavirus and it details all the incentives for cashflow assistance for businesses.

If you want to know more about how this will impact your business, if you’re unsure on how to start or best way to take advantage, please don’t hesitate to contact us at hello@trekk.accountants or contact your closest office location. 

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About Jess

Marketing Manager

Jess is our marketing gal for all Trekk offices, locations, and projects. There's usually a large buzz of projects and activities across all the offices that she's juggling too kick our marketing goals! Jess has a Bachelor in Business (Management & Marketing), and outside of work she's a bit of a book-worm, often challenging herself to read a book a week. Her favourite genres are historical fiction, psychological thrillers and fantasy.  

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