On 22 March 2020, the Australian Federal Government announced a second set of stimulus package in response to the economic effects of the coronavirus (COVID-19) as the outlook has deteriorated since its initial response announced on 12 March 2020. These economic stimulus packages now total $189 billion (i.e. 9.7% of annual GDP).

On 23 March 2020, the Australian Business Growth Fund (Coronavirus Economic Response Package) Bill 2000 passed both Houses    of Parliament and received royal assent the next day.

There are 3 target areas:

1. SUPPORTING INDIVIDUALS & HOUSEHOLD 
  • Temporary early release of superannuation
    • Individuals affected by the coronavirus will be able to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21, tax free.
    • To be eligible, the individual must:
    • Be unemployed;
    • Be eligible to receive a job seeker payment, youth allowance (for jobseekers), parenting payment, special benefit or farm household allowance; or
    • On or after 1 January 2020, be made redundant; have their working hours reduced by 20% or more; or if you are a sole trader, have your business suspended (or your business’s turnover reduced by 20% or more).
    • Eligible individuals can apply online through myGov from mid-April 2020 to 30 June 2020 for access to the 2020 year early release, and from 1 July 2020 to approximately 30 September 2020 the 2021 year early release. Once the Australian Taxation Office (“ATO”) has approved the application, it will notify the individual’s superannuation fund without the need for them to apply to the fund.
    • Money withdrawn will not affect Centrelink or Veterans’ Affairs payments.
  • Temporarily reducing superannuation minimum drawdown rates
    • Temporarily reducing minimum drawdown by 50% for account-based pensions and similar products for 2019-20 and 2020-21, reducing the need to sell investment assets to fund minimum drawdown by retirees.
  • Income support for individuals
    • In the next 6 months, temporarily expanding eligibility to income support payments and establishing a new, time-limited coronavirus supplement to be paid at $550 per fortnight.
    • Existing and new recipients of JobSeeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit, or small businesses that develop e-commerce and online services will be eligible.
  • Payments to support household
    • Making 2 separate $750 payments (first payment from 31 March 2020 and second payment from 13 July 2020) to social security, veteran and other income support recipients and eligible concession card holders.
    • Those eligible for the coronavirus supplement will not receive the second payment.
  • Reducing social security deeming rates
    • Reducing both the upper and lower social security deeming rates by a total of 0.75% (including 0.5% announced on 12 March 2020).
    • As of 1 May 2020, the upper and lower deeming rates will be 2.25% and 0.25% respectively, reflecting the low interest rate environment and its impact on income from savings.
    • The change will benefit around 900,000 income support recipients, including around 565,000 Age Pensioners (who will, on average receive around $105 more in the first full year).
2. SUPPORTING BUSINESSES  
  • Increasing the instant asset write off (same as that announced on 12 March 2020)
    • From 12 March 2020 until 30 June 2020, increasing the instant asset write off threshold from $30,000 to $150,000, and expanding access to businesses with aggregated annual turnover of less than $500 million (up from $50 million).
    • This threshold applies on a per asset basis, to both new and second-hand assets first used (or installed ready for use) in this period.
  • Backing Business Investment (same as that announced on 12 March 2020)
    • For new assets purchased from 12 March 2020 and first used (or installed) by 30 June 2021, businesses with aggregated annual turnover of less than $500 million will be able to deduct 50% of the asset’s cost on installation, with the remaining cost being depreciated under existing rules, in order to accelerate depreciation deductions.
    • Eligible assets are new assets (including intangibles such as patents) that are depreciable under Division 40 of the Income Tax Assessment Act 1997 (“ITAA 1997”). Similar to IAWO, capital works (e.g. buildings, structural improvements, etc) depreciable under Division 43 of the ITAA 1997 do not qualify for BBI. In addition, second hand assets are also excluded.
    • Generally, assets that do not qualify for IAWO may qualify for BBI provided they are new assets that do not fall into any categories of excluded assets above.
    • This means that in the first eligible year, the business will be able to claim not only 50% of the cost, but also the allowable depreciation of the balance of cost of the asset under applicable depreciation rules.
  • Boosting cash flow for employers
    • Small and medium businesses as well as not-for-profits (including charities) with aggregated (prior year) annual turnover of less than $50 million which employ workers will qualify for this temporary cash flow assistance.
    • For March to June 2020, eligible employers will receive a payment equal to 100% of their salary and wages withheld (up from 50%), with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $10,000 for eligible businesses that pay salary / wages but are not required to withhold tax.
    • Quarterly lodgers will receive this “cash flow boost” in their March 2020 and June 2020 quarters activity statements, while monthly lodgers in their March 2020 to June 2020 monthly activity statements (with payment at a rate of 300% in the March 2020 statement to be on equal footing with quarterly lodgers).
    • For July to October 2020, eligible entities must continue to be active to receive an additional payment equal to the total initial “cash flow boost” they have received, meaning a total of at least $20,000 and maximum of $100,000 under both payments.
    • The “cash flow boost” will be tax free and automatically credited by the Australian Taxation Office upon employers lodging upcoming activity statements from 28 April 2020.
  • Supporting apprentices and trainees (same as that announced on 12 March 2020)
    • Small businesses which employ fewer than 20 full-time employees with an apprentice (or trainee), can apply for a wage subsidy of 50% of the apprentice’s (or trainee’s) wage paid from 1 January 2020 to 30 September 2020.
    • The wage subsidy is capped at $21,000 ($7,000 per quarter) per eligible apprentice (or trainee). Existing apprentices (or trainees) employed prior to 1 January 2020 can also qualify.
    • 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, provided 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 to 31 December 2020, and must have their eligibility assessed by an Australian Apprenticeship Support Network (AASN) provider.
  • Assistance for coronavirus affected regions and communities
    • The Government has set aside an initial $1 billion to support those regions and communities that have been disproportionately affected by the Coronavirus, including those heavily reliant on industries such as:
      • Tourism
      • Agriculture
      • Education
    • The $1 billion will be provided through existing or newly established Government programs, and will be used to help businesses identify alternative export markets or disrupted supply chains.
    • In addition, the Government will provide relief to the airline industry from a number of taxes and Government charges estimated up to $715 million.
  • Temporary relief for financially distressed businesses
    • Temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands.
    • Temporarily providing relief for directors from any personal liability for trading while insolvent, and flexibility in the Corporations Act 2001 to provide targeted relief from provisions of the Act to deal with unforeseen events arisen as a result of the Coronavirus health crisis.
    • Tailoring solutions by the Australian Taxation Office for owners or directors of businesses that are struggling, including temporary reduction of payments or deferrals, or withholding enforcement actions (such as director Penalty Notices and wind-ups).
    • This measure provides a safety net for otherwise profitable and viable businesses which may be pushed into insolvency and winding up.
3. SUPPORTING THE FLOW OF CREDIT
  • Support for immediate cash flow needs of SMEs
    • Under the coronavirus small and medium enterprises (SME) guarantee Scheme, the Government will provide a guarantee of 50% to SME lenders to support new short-term unsecured loans for working capital, up to $40 billion of new lending.
    • SMEs with a turnover of up to $50 million will be able to borrow up to a maximum of $250,000 for 3 years with an initial 6 months repayment holiday without security.
    • The scheme will commence early April 2020 till 30 September 2020.
  • Quick and efficient access to credit for small businesses
    • Temporary 6-month exemption from responsible lending obligations for lenders providing any credit for business purposes (including new credit, credit limit increases and credit variations / restructures) to existing small business customers.
  • Reserve Bank of Australia’s support for flow and reduced cost of credit
    • Reserve Bank of Australia’s (RBA) package announced on 19 March 2020 will put downward pressure on borrowing costs for households and businesses.
    • Banks will have access to at least $90 billion funding at 0.25% fixed interest rate reducing banks’ funding costs (thus in turn reducing interest rates for borrowers).
    • RBA’s term funding facility will offer additional low-cost funding to banks if they expand their business lending, with particular incentives applying to new loans to SMEs.
    • In addition, RBA announced a further easing in monetary policy by reducing the cash rate to 0.25%. It is also extending and complementing the interest rate cut by taking active steps to target a 0.25% yield on 3-year Australian Government Securities.
  • Support for non-ADI and smaller ADI lenders in the securitisation market
    • Providing the Australian Office of Financial Management (AOFM) with $15 billion to invest in structured finance markets used by smaller lenders (including non-Authorised Deposit-Taking Institutions (non-ADI) and smaller Authorised Deposit-Taking Institutions (ADI), making direct investments in primary market securitisations by these lenders and in warehouse facilities.
  • Australian Prudential Regulation Authority ensuring banks are well placed to lend
    • Australian Prudential Regulation Authority (APRA) will temporary change its expectations regarding bank capital ratios to support banks’ lending to customers, particularly if they wish to take advantage of the new facility being offered by RBA.

For further information, please refer to the various fact sheets available on the Australian Treasury website at https://treasury.gov.au/coronavirus

If you have any questions, please do not hesitate to contact one of our partners (Mark, Greg and Justin) or our tax director (Melanie).

 

 Federal Stimulus Package 1

On 12 March 2020, the federal government announced an Economic Stimulus Package to help the Australian economy withstand and recover from the economic impacts of the coronavirus (COVID-19). It is designed to support business continuity, confidence and employment.

These measures are intended to be legislated in late March 2020 and include:

Increasing the Instant Asset Write-Off (IAWO)

  • From 12 March 2020 until 30 June 2020, the government will increase the instant asset write off threshold from $30,000 to $150,000, and expand access to businesses with aggregated annual turnover of less than $500 million (up from $50 million).
  • This threshold applies on a per asset basis, to both new and second-hand assets first used (or installed ready for use) in this period.

Backing Business Investment (BBI)

  • For new assets purchased from 12 March 2020 and first used (or installed) by 30 June 2021, businesses with aggregated annual turnover of less than $500 million will be able to deduct 50% of the asset’s cost on installation, with the remaining cost being depreciated under existing rules, in order to accelerate depreciation deductions.
  • Eligible assets are new assets (including intangibles such as patents) that are depreciable under Division 40 of the Income Tax Assessment Act 1997 (“ITAA 1997”). Similar to IAWO, capital works (e.g. buildings, structural improvements, etc) depreciable under Division 43 of the ITAA 1997 do not qualify for BBI. In addition, second hand assets are also excluded.
  • Generally, assets that do not qualify for IAWO may qualify for BBI provided they are new assets that do not fall into any categories of excluded assets above.
  • This means that in the first eligible year, the business will be able to claim not only 50% of the cost, but also the allowable depreciation of the balance of cost of the asset under applicable depreciation rules. 

Boosting Cash Flow for Employers

  • This measure will provide temporary cash flow assistance to small and medium businesses with aggregated (prior year) annual turnover of less than $50 million which employ workers.
  • Eligible businesses that withhold tax on their employees’ salary and wages will receive a payment equal to 50% of the amount withheld, from the Australian Taxation Office upon lodgement of their activity statements, up to a maximum of $25,000 in total. 

    TYPE OF LODGER            ELIGIBLE PERIOD                              LODGEMENT DUE DATE

    Quarterly                            Quarter 3 (Jan, Feb, Mar 2020)         28 April 2020   
                                                      Quarter 4 (Apr, May, June 2020)      28 July 2020

    Monthly                                 March 2020                                             21 April 2020
                                                       April 2020                                                21 May 2020
                                                       May 2020                                                 21 June 2020
                                                       June 2020                                               21 July 2020  

  • Eligible businesses that pay salary / wages but are not required to withhold tax will still receive a minimum payment of $2,000. 
  • This cash flow payment will be tax free. 

Supporting Apprentices and Trainees

  • Small businesses which employ fewer than 20 full-time employees with an apprentice (or trainee), can apply for a wage subsidy of 50% of the apprentice’s (or trainee’s) wage paid from 1 January 2020 to 30 September 2020.
  • The wage subsidy is capped at $21,000 ($7,000 per quarter) per eligible apprentice (or trainee). Existing apprentices (or trainees) employed prior to 1 January 2020 can also qualify.  
  • 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, provided 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 to 31 December 2020, and must have their eligibility assessed by an Australian Apprenticeship Support Network (AASN) provider.

Assistance for Severely Affected Regions

  • The Government has set aside an initial $1 billion to support those regions and communities that have been disproportionately affected by the Coronavirus, including those heavily reliant on industries such as:
    • Tourism
    • Agriculture
    • Education
  • The $1 billion will be provided through existing or newly established Government programs including:
    • Waiver of the Environmental Management Charge for tourism businesses that operate in the Great Barrier Reef Marine Park for the remainder of 2020.
    • Waiver of entry fees to Commonwealth National Parks for the remainder of 2020.
    • Additional assistance to help businesses identify alternative export markets or supply chains.

 

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