On 23 March 2020, the Federal Government urgently passed legislation to introduce economic stimulus measures to address the impact of the coronavirus pandemic.
The two packages of measures, worth $17.6 billion and $66 billion, combined with the relief provided by the Reserve Bank of Australia and the Government’s support to smaller lenders, brings total support to $189 billion.
An overview of the Federal Government’s incentives is set out below.
Support for Businesses
The Government is supporting businesses to manage cash flow challenges and retain employees. Assistance includes cash flow support to businesses and temporary measures to provide relief for financially distressed businesses. The measures are as follows:
- Boosting cash flow for employers
- Temporary relief for financially distressed businesses
- Increasing the instant asset write-off
- Backing business investment
- Supporting apprentices and trainees
Boosting cash flow for employers
The Government is providing, over two tranches of payments, up to $100,000 to eligible small and medium-sized businesses, and not-for-profits that employ people, with a minimum payment of $20,000.
Small and medium-sized business entities and not-for-profits with aggregated annual turnover under $50 million and that employ workers are eligible for assistance. Eligibility will generally be based on prior year turnover.
Eligible employers will receive a payment equal to 100% of their salary and wages withheld, with the maximum payment being $50,000. The minimum payment will be $10,000.
An additional payment will be made in the July – October 2020 period. Eligible entities will receive an additional payment equal to the Tranche 1 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.
How will the payments be received?
- The payment will be delivered by the ATO as an automatic credit in the activity statement system from 28 April 2020 upon employers lodging eligible upcoming activity statements. Where this places the entity in a refund position, the ATO will deliver the refund within 14 days
- Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100% of the amount withheld, up to a maximum payment of $50,000.
- Eligible employers that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.
- The payments will only be available to active eligible employers established prior to 12 March 2020. However, registered charities may be eligible regardless of the date of registration – this recognises that new charities may be established in response to the Coronavirus pandemic.
Eligibility details for Tranche 2 payment
The second cash flow boost payments are available to all entities that received any amount of the first cash flow boost, even if the circumstances of the entity have subsequently changed, provided the entity remains ‘active’, ie lodges a GST return for the relevant period and notifies the Commissioner in the approved form.
- Quarterly lodgers will be eligible to receive the additional payment for the quarters ending June 2020 and September 2020. Each additional payment will be equal to half of their total initial Boosting Cash Flow for Employers payment (up to a total of $50,000).
- Monthly lodgers will be eligible to receive the additional payment for the June 2020, July 2020, August 2020 and September 2020 lodgments. Each additional payment will be equal to a quarter of their total initial Boosting Cash Flow for Employers payment (up to a total of $50,000).
Temporary relief for financially distressed businesses
The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000, and the time companies have to respond to statutory demands they receive, from 21 days to 6 months.
There is a new temporary, six-month period in which a new safe harbour from the directors’ duty to prevent insolvent trading applies. The new safe harbour provides temporary relief from personal liability for insolvent trading where it applies.
The ATO will tailor arrangements for directors of business that are struggling due to the Coronavirus pandemic, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.
Increasing the instant asset write-off
The Government is increasing the instant asset write-off threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.
This proposal applies from 12 March to 30 June 2020, for new or second-hand assets first used or installed ready for use in this timeframe. The threshold applies per asset.
Backing business investment – accelerated depreciation deductions
The Government is introducing a 15-month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions.
Businesses with a turnover of less than $500 million will be able to deduct 50% of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.
Eligible assets are new assets that can be depreciated under Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997) (including plant and equipment, and certain intangible assets such as in-house software) acquired after 12 March 2020 and first used or installed by 30 June 2021.
The accelerated deductions do not apply to second-hand Division 40 assets, or buildings and other capital works depreciable under Division 43 of the ITAA 1997.
Supporting apprentices and trainees
In order to support small business to retain their apprentices and trainees, the Government will provide eligible employers with a wage subsidy of 50% of the apprentice’s or trainee’s wage for 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 that employs that apprentice. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).
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 can register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020.
Support for Coronavirus-affected regions and sectors
The Government has set aside $1 billion to support communities, regions and industries most significantly affected by the Coronavirus outbreak. These funds will be available to assist during the outbreak and to help with the recovery.
In addition, the Government is assisting the airline industry through a package of up to $715 million through various measures, including the provision of relief from aviation fuel tax charges and Airservices Australia charges from 1 February 2020 for a period of 8 months.
Supporting Individuals and Households
Australian Government’s assistance to support individuals and households includes the following measures:
- Temporary early release of superannuation,
- Income support for individuals,
- Payments to support households,
- Temporarily reducing superannuation minimum drawdown rates; and
- Reducing social security deeming rates.
Temporary early release of superannuation
The Government is allowing individuals affected by the Coronavirus to access up to $10,000 of their superannuation in the 2019-20 income year and a further $10,000 in the 2020-21 income year.
Individuals will not need to pay tax on amounts released and the money they withdraw will not impact Centrelink or Veterans’ Affairs payments.
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.
- In order to apply for early release, an individual must satisfy any one or more of the following requirements:
they are unemployed; or
- they are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
- on or after 1 January 2020:
- they were made redundant; or
- their working hours were reduced by 20 per cent or more; or
- if the individual is a sole trader – their business was suspended or there was a reduction in their turnover of 20 per cent or more.
Individuals will be able to apply for early release of their superannuation from mid-April 2020. Separate arrangements will apply to members of self managed superannuation funds, and it is anticipated that the ATO will provide guidance on this measure shortly.
Temporarily reducing superannuation minimum drawdown rates
The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50% for the 2019-20 and 2020-21 income years. This measure is intended to benefit retirees holding these products by reducing the need to sell investment assets to fund minimum drawdown requirements.
Reducing social security deeming rates
The Government will also reduce social security deeming rates to reflect the low interest rate environment. This change is expected to benefit around 900,000 income support recipients, including around 565,000 people on the Age Pension who will, on average, receive around $105 more from the Age Pension in the first full year that the reduced rates apply.
Income support for individuals
Over the next six months, the Government is temporarily expanding eligibility to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight. This will be paid to both existing and new recipients of the JobSeeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.
During the period of the Coronavirus supplement, there will be expanded access to the above income support payments.
For example, the Jobseeker Payment and Youth Allowance Jobseeker criteria will provide access for permanent employees who are stood down or lose their employment, sole traders, the self-employed, casual workers, and contract workers who meet the income tests as a result of the economic downturn due to the Coronavirus. This may also include a person required to care for someone who is affected by the Coronavirus.
Payments to support households
The Government will make two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders. The first payment will be made from 31 March 2020 and the second payment will be made from 13 July 2020. Around half of those who will benefit are pensioners.
Victorian Government Relief
On 21 March 2020, the Victorian Premier announced a $1.7 billion economic survival and jobs package.
Payroll tax refunds
The Government will provide full payroll tax refunds for the 2019-20 income year to small and medium-sized businesses with payroll of less than $3 million. Businesses do not need to apply for these refunds – they will be made automatically. Eligible businesses are expected to receive refunds in their bank accounts by the end of this week.
These same businesses will also be able to defer any payroll tax for the first three months of the 2020-21 income year until 1 January 2021. The State Government is expected to provide further details regarding these deferral arrangements.
The Victorian Premier also announced that commercial tenants in government buildings can apply for rent relief, and 2020 land tax payments will be deferred for eligible small businesses.
The Victorian Government will also establish:
- a $500 million Business Support Fund which will support the hardest hit sectors, including hospitality, tourism, accommodation, arts and entertainment, and retail.
- a $500 million Working for Victoria Fund which will help workers who have lost their jobs find new opportunities, including work cleaning public infrastructure or delivering food – providing vital contributions to Victoria’s response to the pandemic.
The Victorian Government will also facilitate job matching to help Victorians find short-term or casual roles.
How can Rigby Cooke help?
Please contact us if you would like to discuss your eligibility in respect of any of the above measures. We will update you if further incentives are announced.
|Disclaimer: This publication contains comments of a general nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional advice. No responsibility can be accepted by Rigby Cooke Lawyers or the authors for loss occasioned to any person doing anything as a result of any material in this publication.
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