What does it mean to us as individuals and business owners?
The recent $17.6 billion stimulus package outlined by the Federal Government is aimed at supporting small to medium business and vulnerable consumers in the evolving COVID-19 coronavirus pandemic. The package is designed to help protect the economy, maintain confidence and keep people in jobs.
We have analysed the information available over recent days and summarised as detailed below –
Cash Flow assistance for small to medium businesses
- Those employers with less than 20 employees and a turnover of less than $50m, will receive up to $25,000 tax free as a credit based on their PAYG withholding commitments
- How does this work,
o for example, your 31 March 2020 BAS submission, 50% of your PAYG withholding amount (W2), will be paid to your business. This will continue for the March 2020 and June 2020 BAS quarters and March 2020, April 2020, May 2020 and June 2020 monthly IAS.
- A minimum payment of $2000 may be available to small businesses that pay wages, but are not required to pay tax on those wages.
- Several reports are indicating that this payment will be made as a credit against your BAS payment due. But if you are entitled to a refund it will be paid in 14 days.
- From Thursday 12th March 2020 the Government is increasing the instant asset write-off threshold from $30,000 to $150,000 until 30 June 2020
- This now applies to all business with an aggregated annual turnover of less than $500m. This has increased from $50m
- The new $150,000 threshold applies per asset along with second hand assets first used or installed and ready for use by 30 June 2020
Note, the announcement did not mention the depreciation limit on cars, however we are taking the approach that it will still apply in this instance.
Accelerated Depreciation Rules to Encourage Business Investment
- Accelerating depreciation deductions for the next 15 months through to 30 June 2021. For businesses with a turnover of less than $500m, you will be able to deduct 50% of the cost of eligible asset installation, with the existing depreciation rules applying to the balance of the asset cost.
- These eligible assets must be new assets acquired after 12th March 2020 that can be depreciated under Division 40 of the ITAA97 (mainly plant and equipment and specified intangible assets)
Wage subsidies to support businesses employing apprentices and trainees
- Employers with less than 20 full-time employees, may be entitled to apply for government funded wage subsidies for 50% of apprentice and trainees wages for up to nine months, from 1 January 2020 to 30 September 2020 to a maximum of $21000 per apprentice/trainee.
- The apprentice or trainee must be in training with the business as at 1 March 2020
- If the employer is unable to retain that apprentice, the subsidy will be available to a new employer that employs that apprentice
One-Off $750 payment for households
- A tax free payment of $750 will be made to individuals who receive social security, veteran and other income support payments.
- These payments will commence to be paid automatically from 31 March 2020
Interest relief ATO
- For the tax obligations for people and businesses affected by the coronavirus, (and this will be a case by case) there is the possibility of interest relief for debts incurred. We assume this will not include debts incurred prior to the coronavirus outbreak.
Other ATO measures
The Government is also implementing the following administrative measures to assist businesses experiencing financial difficulty as a result of the Coronavirus
- Deferring by up to 4 months the payment date of amounts due through the BAS (including PAYG instalments), income tax assessments, FBT assessments and excise
- Allow businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to have access to GST refunds that they may be entitled to
- Allow business to vary PAYG instalment amounts to zero for the March 2020 quarter. Businesses that vary the PAYG instalments to zero can also claim a refund of any instalments made for the September 2019 and December 2019 quarters
- Remitting any interest and penalties incurred after 23 January 2020 that have been applied to tax liabilities
- Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter in to low interest payment plans