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Coronavirus Stimulus Package
Support for Individuals and Households
1. Income support for individuals
Over the next six months, the Government is temporarily expanding eligibility to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight. This will be paid to both existing and new recipients of Jobseeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit. The expanded access covers permanent employees who are stood down or lose their employment, sole traders, the self-employed, casual workers, and contract workers who meet the income tests as a result of the economic downturn due to the Coronavirus.
2. Payments to support households
The Government is providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders. The first payment will be made from 31 March 2020 and the second payment will be made from 13 July 2020.
To be eligible for the payment, you must be residing in Australia and be receiving certain social security payments for example age pension, disability support pension and carer payment, or holding certain concession cards for example pensioner concession card and Commonwealth seniors health card.
3. Temporary early release of superannuation
The Government is allowing individuals affected by the Coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21. Individuals will not need to pay tax on amounts released, and the money they withdraw will not affect Centrelink or Veterans’ Affairs
4. Temporarily reducing superannuation minimum drawdown rates
The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for 2019-20 and 2020-21. This measure will benefit retirees with account-based pensions and similar products by reducing the need to sell investment assets to fund minimum drawdown requirements.
5. Reducing social security deeming rates
As of 1 May 2020, the upper deeming rate will be 2.25 per cent, and the lower deeming rate will be 0.25 per cent.
Support for Businesses
1. Job Keeper Payment
Businesses that estimate a 30% or more decline in their turnover relative to a comparable period last year because of the Coronavirus and have a turnover of less than $1 billion will be eligible to receive a fortnightly wage subsidy up to $1,500 per fortnight per eligible employee. For businesses with a turnover greater than $1 billion, the decline needs to be 50% or more.
The payments will be made to the eligible employers. Eligible employers will be required to pass on the payments they receive to the eligible employees. An employee will be eligible for the JobKeeper payment if on 1 March 2020 he or she was a full time, part time or long-term casual (employed on a regular basis over the last 12 months) employee. In addition, an eligible employee must be an Australian citizen, a permanent resident or a holder of special category visa and at least 16 years age. An employee can only receive JobKeeper payment from one nominated employer.
If a business satisfies the decline in turnover and other eligibility requirements, one non-employee business participant from the business may also be eligible for the JobKeeper payment. The business participants can be a sole trader, a partner in the partnership, a beneficiary of trust and a director/shareholder in the company. An eligible business participant must not be an employee of another business (except a casual employee) and must not be in receipt of a JobKeeper payment from another business.
2. Boosting cash flow for employers
The Government will provide $20,000 to $100,000 cash flow boost payments to eligible small and medium-sized businesses and not-for-profits (NFPs) that employ people. Employers will receive an initial payment equal to 100 per cent of the tax withheld from their salary and wages reported in the activity statements for a monthly or quarterly period from March to June 2020. This will also depend on the reporting cycle of the business. Eligible entities which receive initial cash flow boost payments will receive a second round of payment equal to the initial cash flow boost payment when they lodge the activity statements for the monthly or quarterly period from June to September 2020. Eligible entities will receive at least $20,000 from both payments.
In brief, a business with less than $50 million turnover will be eligible for cash flow boost payments if it had an ABN and actively made payments, such as salary and wages, and director fees, subject to PAYG withholding on 12 March 2020, when the Government initially announced the cash flow boost payment. The ATO has pointed out that a business will not be eligible for cash flow boost payments if it has entered into an arrangement to artificially restructure the business to meet the eligibility criteria or increase salary and wages paid in a particular period to maximise the cash flow boost amounts. Penalties and interest charges may apply to these arrangements.
3. Temporary relief for financially distressed businesses
The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and to initiate bankruptcy proceedings against an individual as well as temporarily increasing the time companies, and individuals have to respond to statutory demands they receive. The package also includes temporary relief for directors from any personal liability for trading while insolvent, and providing temporary flexibility in the Corporations Act 2001 to provide targeted assistance from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.
The ATO will tailor 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.
4. Increasing the instant asset write-off
The Government is increasing the instant asset write-off threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million until 31 December 2020. It was initially up to 30 June 2020.
5. Backing business investment
The Government is introducing a time-limited 15-month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.
6. Supporting apprentices and trainees
Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for nine months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).
7. Coronavirus SME Guarantee 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 guarantee up to $40 billion of new lending. This will provide businesses with funding to meet cash flow needs by further enhancing lenders’ willingness and ability to ensure credit.
8. Payroll tax refunds (Victoria State Government)
The Victoria State Government will provide full payroll tax refunds for the financial year 2019/20 to small and medium sized businesses with payroll of less than $3 million. The same businesses will also be able to defer payroll tax payments for the first three months of the financial year 2020/21 until 1 January 2021.
9. Business support fund (Victoria State Government)
The Victoria State Government will provide $10,000 to the eligible businesses which employ staff, have been subject to closure or are highly impacted by Victoria's Non-Essential Activity Directions issued by the Deputy Chief Health Officer, have a turnover of more than $75,000 and have payroll of less than $650,000. Eligibility for this fund will be assessed against the industry classification of the applicants.
Protect Your Business from the Coronavirus
To help protect your business and reduce the risk/effect of the coronavirus on your business, you should consider the following:
1. Avoid unnecessary interstate and overseas travel, you may not be able to come back or you may be quarantined (in isolation for extended periods regardless of health). All this can mean lengthy time off work and away from your business. There could be also enforced travel restrictions.
2. If someone at your business gets sick, they can infect the rest of the employees. Then, your business won’t be able to function. If possible, businesses may allow certain staff to work from home to reduce the potential of wiping out their team by limiting exposure and risk.
3. Improve basic hygiene – more frequent hand washing and wiping down of surfaces. Alcohol-based products are recommended.
4. Have a documented contingency plan. For example, have back-up arrangements in case employees responsible for certain roles are unable to perform or make special arrangements for vulnerable employees.
Vincent Wan
CPA, Registered Tax Agent
March 2020