COVID-19 - More Cash for Businesses and Households

On Sunday the Government announced a second set of economic initiatives which, combined with the 12 March 2020 response total $189 billion across the forward estimates, representing 9.7 per cent of annual GDP.

The Government is targeting three key areas:

1. Support for Businesses

Boosting cash flow for employers

  • Providing a Tax-free payment of 100% (originally 50%) of Pay As You Go withheld with a minimum of $10,000 (originally $2,000) and maximum of $50,000 (originally $25,000) which covers the amounts withheld between 1 January 2020 to 30 June 2020; and
  • To be received as an automatic credit in the activity statement account from 28 April 2020 upon lodgement of each BAS/IAS.

Additional payment

  • Eligible entities will receive an additional payment equal to the total of all of the 'Boosting cash flow for employers' payments they have received (during March 2020 and June 2020 periods);
  • Quarterly lodgers will be eligible to receive the additional payment for the quarters ending June 2020 and September 2020. Each additional quarterly payment will be equal to half of their total initial Boosting Cash Flow for Employers payment (up to a total of $50,000); and
  • Monthly lodgers will be eligible to receive the additional payment for the June 2020, July 2020, August 2020 and September 2020 lodgments. Each additional monthly payment will be equal to a quarter of their total initial Boosting Cash Flow for Employers payment (up to a total of $50,000).

This means that eligible entities will receive at least $20,000 and up to a total of $100,000.

The payments will only be available to active eligible employers established prior to 12 March 2020. However, charities which are registered with the Australian Charities and Not-for-profits Commission will be eligible even if they weren't registered on 12 March 2020.

To qualify for the additional payment, the entity must continue to be active.

Temporary relief for financially distressed businesses

  • Temporarily increasing the threshold creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive (now 6 months rather than 21 days);
  • Temporary relief for directors (for debts incurred in the ordinary course of business) from any personal liability for trading while insolvent; and
  • The ATO has been instructed to provide tailored solutions for owners or directors of business that are currently struggling due to the Coronavirus, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.

Supporting apprentices and trainees

  • 50% wage subsidy of their wages for up to nine months from 1 January 2020 to 30 September 2020;
  • Employers will be reimbursed up to $7,000 per quarter with a maximum of $21,000 per eligible apprentice or trainee during the period;
  • Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer (essentially the payment follows the apprentice or trainee); and
  • Eligibility for the abovementioned are as follows:
    • Small businesses employing fewer than 20 full-time employees who retain an apprentice or trainee. The apprentice or trainee must have been in training with a small business as at 1 March 2020;
    • Employers of any size and Group Training Organisationsthat re-engage an eligible out-of-trade apprentice or trainee will be eligible for the subsidy; and
    • Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network (AASN) provider.

Employers can register for the subsidy from 2 April 2020. Final claims for payment must be lodged by 31 December 2020.

2.Supporting Individuals and Households

Income support for individuals

  • Establishing a new, time-limited 'Coronavirus Supplement' to be paid at a rate of $550 per fortnight. It will be paid to both existing and new recipients of Jobseeker Payment, Youth Allowance for Jobseekers, Parenting Payment, Farm Household Allowance and Special Benefit;
  • Waiving of asset testing from 27 April for 6 months, except for Farm Household Allowance and Special Benefit; and
  • Temporarily expanding eligibility for Jobseeker Payment and Youth Allowance for Jobseekers from 27 April for 6 months to include;
    • permanent employees that have been stood down or lost employment;
    • sole traders, self-employed workers, casual works and contract workers who's income has reduced, and;
    • those caring for someone affected by coronavirus.

The standard income tests for the Jobseeker Payment and Youth Allowance for Jobseekers will still be applied to determine an applicant's eligibility to receive payments.

Claiming the Coronavirus Supplement

  • Existing recipients of the payments mentioned above will automatically begin receiving the supplement from April 27 onwards; and
  • Non-existing recipients will need to lodge a claim and if the claim is accepted, the Coronavirus Supplement will be paid out from April 27 onwards.

Temporary early release of superannuation

  • Early access up to $10,000 from superannuation in 2019-20 and a further $10,000 in 2020-21;
  • Eligible individuals will be able to apply online through myGov;
  • To apply for early release the following requirements need to be satisfied:
    1. You are unemployed; or
    2. You are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (including single and partnered payments), special benefit or farm household allowance; or
    3. On or after 1 January 2020:
      • you were made redundant; or
      • your working hours were reduced by 20 per cent or more; or
      • if you are a sole trader & your business was suspended or there was a reduction in your turnover of 20 per cent or more.

No Tax will be payable on amounts released and the money people withdraw will not affect Centrelink or Veterans' Affairs payments.

Payments to support households

  • Two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders;
  • The first payment will be on 31 March 2020 and the second will be on 13 July 2020. Both payments will be processed automatically;
  • The first payment (announced on 12 March 2020) will be available to people who are eligible payment recipients and concession card holders at any time from 12 March 2020 to 13 April 2020 inclusive;
  • The second payment will be available to people who are eligible payment recipients and concession card holders on 10 July 2020; and
  • The payment will be exempt from Tax and will not count as income for the purposes of Social Security, Farm Household Allowance and Veteran payments.

Temporarily reducing superannuation minimum drawdown rates and reducing social security deeming rates

  • Reduction to the minimum pension payment requirements for account based pensions by 50% for the 2019-20 and 2020-21 financial years; and
  • From 1 May 2020, the upper pension deeming rate will be 2.25 per cent and the lower pension deeming rate will be 0.25 per cent (overall a 0.75 reduction from 12 March 2020).

3.Supporting the flow of credit

Supporting the immediate cash flow needs for small and medium sized enterprises (SME)

  • Implementing a Coronavirus SME Guarantee Scheme. Under the scheme the Government will provide a guarantee of 50 per cent to SME lenders to support new short-term unsecured loans to SMEs;
  • The Scheme will commence early April 2020 and be available for new loans made by participating lenders until 30 September 2020;
  • SME's with a turnover of up to $50 million will be eligible to receive these loans;
  • The Government will provide eligible lenders with a guarantee for loans with the following terms:
    • Maximum total size of loans of $250,000 per borrower;
    • The loans will be up to three years, with an initial six month repayment holiday; and
    • The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.
  • The Government will encourage lenders to provide facilities to SMEs that only have to be drawn if needed by the SME.

Easier access to credit for small business

  • Cuts made to red tape by providing a 6 month exemption from responsible lending obligations for lenders providing credit to existing small business customers; and
  • This will apply to any type of business credit including new credit, credit limit increases and credit variation and restructures.

Announcements made on 12 March 2020

Increasing the instant asset write off

No changes from 12 March 2020 stimulus package announcement.

On 12 March 2020 there was an increase to the instant asset write-off threshold from $30,000 to $150,000 until 30 June 2020. Further, expanding access to the instant asset write-off to include businesses up to an aggregated turnover of $500 million (previously $50 million).

The above measures apply to purchases made from 12 March 2020 and up to 30 June 2020.

The instant asset write off is due to revert to $1,000 for small businesses (turnover less than $10 million) from 1 July 2020.

Backing business investment

No changes from 12 March 2020 stimulus package announcement.

On 12 March 2020 a depreciation incentive was introduced through to 30 June 2021. The depreciation incentive is an accelerated depreciation deduction for businesses with a turnover of less than $500 million. These businesses will be able to deduct 50% of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset's cost.

Support for Coronavirus-affected regions and communities

$1 billion will be set aside to support regions most significantly affected by the Coronavirus outbreak.

These funds will be available to assist during the outbreak and the recovery. In addition, assistance is being provided to the airline industry by providing relief from a number of Taxes and Government charges estimated to total up to $715 million.

What does this mean?

The above information summarises the very recent Government announcements. We strongly recommend talking with your usual Hall Chadwick adviser to determine how you can maximise the potential benefits arising out of this government initiative.