Now that the legislation in relation to the stimulus package has passed through parliament, we have more clarity around the measures announced and how they will be implemented. Below we have given a brief summary (as brief as we can be) on the measures for business and individuals.
Boosting cash flow for businesses
Businesses with less than $50 million turnover (based on their prior years turnover) and employ staff, may be eligible to receive a payment of up to $100,000 (with a minimum total payment of $20,000) based on their PAYG withholding in two stages.
Stage 1 payment (credit)
Commencing from 28 April 2020, qualifying businesses will receive a tax free payment equal to 100% of the tax withheld on employees wages, up to a maximum of $50,000 but no less than $10,000.
The tax free payment will be calculated and paid by the ATO as an automatic credit to your Integrated Client Account with the ATO. Any remaining credit on your account will be refunded. This means that if you currently have amounts owing to the ATO and the stage 1 credit does not clear your amount owing, you will not receive a refund.
Businesses who lodge quarterly Activity Statements will have credits processed after the lodgement of their March and June Activity Statements. Monthly Activity Statement lodgers will receive the payment each month from March to June. However, if you are only eligible for the minimum amount of $10,000, that credit will be processed with the March Activity Statement and there will be no credit with the June Activity Statement.
Stage 2 payment (credit)
For employers that remain active, an additional tax free payment will be available from June 2020 to September 2020. Businesses that lodge Activity Statements quarterly will receive additional payments with each payment equal to 50% of their total Stage 1 payment (up to a maximum of $50,000).
Monthly lodgers will receive an additional payment in their June 2020, July 2020, August 2020 and September 2020 Activity Statement lodgements with each payment being equal to a quarter of the total initial Stage 1 payment (up to a maximum of $50,000).
Any stage 2 payments will be credited to your ATO account to first clear any debt and then any available credit will be paid to businesses.
The above measures are confusing and will become much clearer as the payments (credits) commence. This link illustrates some examples that will assist clients to understand the stimulus payments from a practical point of view.
Incentives for businesses to purchase assets
Belowvare some of the initial measures that were announced and are probably the clearest measure and are available for those businesses with turnover of less than $500 million.
Instant asset write off
The threshold for asset purchases that can be written off in full in the year of purchase has been increased from $30,000 to $150,000 from 12 March 2020 to 30 June 2020.
Accelerated depreciation
A 50% immediate deduction will be available for eligible NEW assets as long as they are installed and ready for use prior to 30 June 2021. The assets must be new, not second hand to qualify.
Subsidy for trainees and apprentices
A tax free payment to eligible employers for the period 1 January 2020 to 30 September 2020. They will be able to claim a wage subsidy of 50% of an trainees or apprentice’s wage up to $21,000 per person. Employers mush register by April 2020 and all claims made by 31 December 2020.
Banking and Loan support
A number of measures have been announced in relation to assistance to be provided by the banks. Every bank has announced different measures such as 6 month loan repayment deferrals and reductions to business loan interest rates. We suggest that each client contact their bank manager or bank directly to discuss measures available to them.
Coronavirus SME Guarantee loan scheme
Businesses with turnover of up to $50 million will be eligible to apply for a loan of up to $250,000. The loans will be for a maximum term of 3 years with an initial 6 month repayment holiday. The loans will be unsecured which means businesses will not have to provide any security.
However these loans will be subject to the banks credit assessment processes. It is expected that these loans will be available from April 2020.
State Government Support for Business
The Victorian state government has also announced some measures to assist business.
Payroll tax waived
Business with annual taxable wages of up to $3 million will have their payroll tax for the 2019-20 year waived. This means that any payroll tax paid since 1 July 2019 will be refunded. Returns will need to continue to be lodged however no payment will be required for the remainder of the financial year. In addition, payroll tax for the period 1 July 2020 to 30 September 2020 can be deferred.
Land tax deferral – Non residential property
Land owners due to pay their land tax for the 2020 year and have at least one non residential property with total taxable landholdings less than $1 million will be provided the option to defer their land tax payment until after 31 December 2020. The SRO will contact eligible taxpayers.
Temporary relief for financially distressed businesses
Increase the value of which a creditor can issue a statutory demand on a company from $2,000 to $20,000. This will apply for six months. The timeframe for a company to respond to a statutory demand will also be extended temporarily from 21 days to six months.
The threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings will temporarily increase from $5,000 to $20,000 and again will apply for 6 months. The time to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.
Temporary relief will also be provided for directors from any personal liability for trading while insolvent.
Support for Individuals
Various measures have been announced to assist individuals which will also comprise of individuals who have businesses that have been impacted.
Expanding access to Centrelink support – $550 Coronavirus Supplement
For those individuals who have been impacted, Centrelink will provide a Coronavirus Supplement for the next 6 months of $550 per fortnight. To be eligible to receive this payment, you need to be receiving the Jobseeker Payment, Youth Allowance or Parenting Payment.
It is also expected that the Government will expand access to the above income support payments to assist people who have been impacted by the economic downturn. Asset testing for the above payments will also be waived for the period of the Coronavirus supplement.
$750 tax free payment
Two separate $750 tax free payments will be made to social security, veteran and other income support recipients and to eligible concession card holders. The first payment will be made on 31 March 2020. The second payment will be made on 10 July 2020 (unless you are receiving the $550 Coronavirus supplement).
Early access to superannuation
Will be available to individuals who meet one or more of the following requirements:
You are unemployed
You are eligible to receive the Jobseeker payment, youth allowance for jobseekers, parenting payment, special benefit or farm household allowance.
On or after 1 January 2020 you were made redundant or your working hours were reduced by at least 20% or if you are a sole trader and your business was suspended or your turnover reduced by at least 20%
Under this new compassionate grounds of release, eligible individuals will be able to access (as a lump sum) up to $10,000 of their superannuation entitlements before 1 July 2020 and a further $10,000 from 1 July 2020 (subject to a six month time frame).
If you are looking to access this entitlement, you will need to apply though the myGov website (at www.my.gov.au).
If you have any questions or would like us to understand how any of the above measures apply to your business, please do not hesitate to contact our office.