FEDERAL GOVERNMENT STIMULUS PACKAGE
On 12 March 2020, the federal government announced a $17.6 billion economic plan to assist individuals, businesses and the Australian economy as it deals with the significant challenges posed by the spread of COVID-19. The targeted stimulus package has four parts:
• Household stimulus payments
• Cash flow assistance to help small and medium sized business
• Supporting business investment
• Targeted support for the most severely affected sectors, regions and communities
1. Household stimulus payments
The Government has allocated $4.8 billion to provide a one-off $750 payment to pensioners, social security, veteran and other income support recipients and eligible concession card holders.
The payments are restricted to one payment per eligible recipient (even where a recipient may be eligible for the payment under multiple systems) and will be tax free. Payments will begin from 31 March 2020 and will paid through the social security system.
2. Cash flow assistance for businesses
Cash payments for employers
The government has allocated $6.7 billion to boost the cash-flow for employers. Small and medium-sized businesses will receive up to $25,000 for businesses, with a minimum payment of $2,000. It is expected that this measure will benefit around 690,000 businesses, employing around 7.8 million people.
To be eligible for the payment, you must be a business with a turnover of less than $50 million, that employs staff between 1 January 2020 and 30 June 2020. As a result of the employment requirement, sole traders are not eligible for the payment.
The payments will be based on 50 per cent of PAYG withheld over the period 1 January 2020 to 30 June 2020. The payments will be delivered by the ATO as a credit in the activity statement system from 28 April 2020 as eligible businesses lodge their activity statements. Where the credit places a business in a refund position, the ATO will deliver the refund within 14 days.
Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020. Monthly lodgers will be eligible to receive the payment for lodgement for the month March 2020 to June 2020. To align with quarterly lodgers, monthly lodgers will receive a 150% credit for the month of March 2020.
Apprentice and Trainee Wage Subsidy
$1.3 billion has been allocated to maintain the continued employment of around 120,000 apprentices and trainees. Eligible small business will be eligible to apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage from 1 January 2020 to 30 September 2020. This measure will effectively reimburse the employer for 50 percent of the wage of an apprentice or trainee for a period of 9 months.
Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.
3. SUPPORTING BUSINESS INVESTMENT
In an effort to encourage businesses to continue with current investments or bring forward planned investments, the Government has allocated $3.9 billion to increase the instant asset write off and provide a 15-month investment incentive.
Increasing the instant asset write off
The instant asset write-off threshold will be increased from $30,000 to $150,000 and expanded access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million). The increase threshold will apply to both new and second-hand assets, used, or installed ready for use between 12 March 2020 and 30 June 2020.
This measure offers a significant tax incentive to any businesses looking to make large capital investments in plant and equipment.
Backing business investment
A temporary 15-month investment incentive will be introduced to support business investment and economic growth over the short term, by accelerating depreciation deductions on certain new assets purchased after 12 March 2020 and installed or used by 30 June 2021.
Businesses with a turnover of less than $500 million will be eligible for an accelerated depreciation deduction of 50 per cent of the cost of an eligible asset, with existing depreciation rules applying to the balance of the asset’s cost.
Eligible assets are assets that qualify for depreciation under Division 40 of the Income Tax Assessment Act 1997 and does not include second-hand assets or buildings and other capital works.
4. ASSISTANCE FOR SEVERELY-AFFECTED REGIONS
The Government has set aside $1 billion to support those regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on industries such as tourism, agriculture and education.
These measures will include waiving fees and charges for tourism businesses, promoting domestic tourism and identifying alternate export markets or supply chains for effected businesses.
STATE GOVERNMENT STIMULUS PACKAGE
In addition to the Federal Government stimulus package, several States have also announced packages to support local businesses.
On 16 March 2020 the WA State Government announced an economic response to COVID-19 aimed at providing relief for businesses and households. The key measures for local business were targeted at payroll tax relief and assistance.
• Small to medium businesses with a payroll of between $1 million and $4 million will receive a one-off cash grant of $17,500.
• Small businesses that have total payrolls of under $7.5 million, can apply to defer their payroll tax payments until 21 July 2020.
• The Government will bring forward the payroll tax threshold increase to $1 million. This was planned to commence from 1 January 2021, however, will be brought forward to 1 July 2020.
New South Wales
The NSW State Government announced a $2.3 billion stimulus package to boost health services and economic stimulus. The key measures for local business were targeted at payroll tax relief and assistance:
• Businesses with payrolls of $10 million or less will have their payroll tax waived for 3 months from April 2020 to June 2020.
• Bring forward the payroll tax threshold increase to $1 million. This increase will be brought forward to 1 July 2020.
On 17 March 2020 the QLD State Government announced a package to support workers and businesses affected by COVID-19. The Government announced two key measures to support local business:
• Extending the payroll tax deferral (originally for businesses affected by natural disasters). This will enable all COVID-19 affected businesses with a payroll of $6.5 million or less to extend the due date for the lodgement and payment of 2020 payroll tax returns to 31 July 2020. As with the initial payroll tax deferral offer, the Office of State Revenue will also work with affected businesses to create repayment plans for the deferred tax liabilities.
• The creation of a new $500 million loan facility, interest free for the first 12 months, to support businesses to keep Queenslanders in work. The $500 million concessional loan facility is available to facilitate loans of up to $250,000 with an initial 12-month interest free period for businesses to retain staff.
On 17 March 2020 the Tasmanian State Government announced a package to support workers and businesses affected by COVID-19. The Government announced a number of key measures to support local business:
• The creation of a new $20 million loan facility, for interest free loans to small businesses in the hospitality, tourism, seafood and export sectors. The loans are available to businesses with a turnover of less than $5 million to assist with the investment in new equipment or restructuring business operations.
• Businesses in the hospitality, tourism and seafood sectors will have their payroll tax liabilities waived from March 2020 to June 2020 (i.e. 4 months). Other businesses with payrolls of up to $5 million can apply to have their payroll tax waived for April 2020 to June 2020 (subject to the impact of COVID-19 on the business).
• One year payroll tax rebate for businesses that employ a young person aged 24 years or under.
• Businesses that hire an apprentice or trainee in the hospitality, tourism, building and construction, or manufacturing sectors will receive a $5,000 cash grant.
In addition, we are expecting packages to be announced for Victoria and the ACT in the coming days.
AUSTRALIAN TAXATION OFFICE ADMINISTRATIVE MEASURES
As part of the Federal economic stimulus, the Australian Taxation Office (‘ATO’) have implemented a series of administrative measures to assist Australian individuals and businesses experiencing financial difficulty as a result of COVID-19. The administrative measures being offered:
The ATO will work with businesses to defer payments for income tax, GST, FBT and excise payments for up to four months.
Remitting Interest and Penalties
The ATO will consider remitting interest and penalties applied to tax liabilities incurred after 23 January 2020.
Low Interest Payment Plans
Where businesses are having difficulties paying existing and ongoing tax liabilities, the ATO will discuss entering low interest payment plans.
*We note that these relief options will not be automatically applied, so businesses (or their agents) will need contact the ATO to discuss and apply them.