COVID-19 stimulus package – keeping your business healthy
Late last week the Federal Government announced a targeted stimulus package to address the financial challenges which result from the national and international spread of COVID-19.
The stimulus package has been broken into four parts:
- supporting business investment;
- providing cash flow assistance to help SMEs keep business and employees;
- targeted support for the most affected areas; and
- household stimulus payments.
The package provides a mix of tax-related concessions available to the end of the 2020 or 2021 financial years, and cash payments or subsidies to both individuals and businesses. Legislation will be introduced to Parliament to cover the below provisions, which is expected to be passed by 26 March 2020.
Here’s what you and your business need to know
Support business investment: Instant asset write off – section 40-82, Income Tax Assessment Act 1997 (Cth) (ITAA97)
The 2020 Federal Budget announced that the instant asset write off available to small business entities (section 328-180 ITAA97) would be extended to depreciating assets acquired and first used/installed by medium-sized businesses on 2 April 2019 and before 30 June 2020 (section 40-82). A medium-sized business was defined as having an aggregated annual turnover between $10 million and $50 million, and the instant write off was available for any number of new depreciating assets that cost less than $30,000.
The stimulus package has increased the instant asset write off threshold from $30,000 per asset to $150,000 per asset, and extended access to the write off to all businesses with an aggregated annual turnover of less than $500 million.
The increased threshold and access are available with respect to all purchases made from 12 March 2020 to 30 June 2020. For the 2021 financial year, the availability of instant asset write-offs of this nature will revert to small businesses only as anticipated in the 2020 Federal Budget.
This is estimated to be worth approximately $700 million across Australia.
Support business investment: Accelerated depreciation deductions – division 40 ITAA97
For depreciating asset purchases that are not eligible under the above instant asset write off provisions, an additional 50 percent of the asset cost will be deductible in the year of purchase. Any business with an aggregated annual turnover of less than $500 million will also be able to access this investment incentive.
The increased access and depreciation will be available from 12 March 2020 to 30 June 2021, covering the next financial year. This is expected to be worth $3.2 billion to businesses across Australia.
Cash flow assistance for business: Pay As You Go (PAYGW) for SMEs
An SME with an annual aggregated turnover of less than $50 million which employs workers will have access to a tax credit equal to 50 percent of the PAYGW withholding declared in the April and June 2020 activity statements.
A minimum credit of $2,000 is available regardless of the amount of PAYGW, and the maximum credit available is $25,000 across the two activity statements.
These credits will be automatically applied to the business or instalment activity statement, and any refund will reportedly be paid within 14 days.
This incentive is expected to be worth $6.7 billion across Australia, and affect approximately 690,000 businesses.
Cash flow assistance: subsidy for small business
Small businesses with less than 20 full-time employees that employ apprentices or trainees will be able to access a subsidy to cover 50 percent of the apprentice’s/trainee’s wage for up to nine months. The subsidy will be available from 1 January 2020 to 20 September 2020, covering the March, June and September quarters.
If an employer is unable to retain an apprentice or trainee, the subsidy will be available to any new employer. The employer will need to register a claim for the subsidy before 31 December 2020, and satisfy an assessment by an Australian Apprenticeship Support Network provider.
This incentive is expected to be worth $1.3 billion across Australia, and support approximately 120,000 apprentices and trainees.
Household stimulus: $750 payments
A one-off tax-free payment of $750 will be available to specified members of the community, including pensioners, those on social security, veterans, and other income support recipients and eligible concession card holders. The payments will not be included in any relevant income tests for the above people, and each person can only receive one payment regardless of whether they qualify under multiple categories. The payments will be made progressively from 31 March 2020, and are expected to be complete in April. These payments are expected to be worth $4.8 billion to the Australian community.
Targeted assistance: support package
At present, $1 billion is being held to support areas that are expected to be disproportionately affected by COVID-19, including various sectors and communities, particularly those heavily reliant on industries such as tourism, agriculture and education.
The Federal Government has also confirmed that administrative relief will be available on a case by case basis.
To date, the ATO has identified the following as areas for potential relief:
- Deferring by up to four months the payment date of amounts due through the business activity statement (including Pay As You Go (PAYG) instalments), income tax assessments, fringe benefits tax assessments and excise.
- Allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.
- Allowing businesses to vary PAYG instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
- Remitting any interest and penalties, incurred on or 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 into low interest payment plans.
You can access the full ATO media release here.
In addition to the Federal Government provisions, the Queensland Government announced earlier last week that employees that pay $6.5 million or less in Australian taxable wages, and have their business either directly or indirectly affected by COVID-19 may be able to access payroll tax relief. Eligible entities can apply any time for the relief through an online payroll tax deferral application, with the available relief to defer all payroll tax payment due dates from the February return period, up to and including the May return period and 2020 annual return, to 3 August 2020.
Within a week of making the above announcement, the Queensland Government has since advised that the relief will be extended to all businesses, not just those that pay $6.5 million or less in Australian taxable wage. The situation is fluid in all states and territories in Australia, and like the response to the virus itself, announcements and updates on tax and stimulus packages are occurring constantly as similar approaches are adopted.
If you or your clients have been affected either directly or indirectly by the COVID-19, or expect that you will be, please contact us and we will be able to assist. Once the legislation is released, we will be able to provide more specific advice on the application of the above relief.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.