COVID-19 Government Stimulus Package – What this may mean for you and your practice?

COVID-19 Government Stimulus Package – What this may mean for you and your practice?

Summary:

On 12 March, the Australian Government announced a significant Economic Response to the Coronavirus and on Sunday 22 March significantly boosted that response. Further many banks have announced support packages for their customers, including payment deferrals for six months.

Adverse eventsFactsheets
31 / 03 / 2020

We have provided a summary below of some of the recently announced measures that may apply to you and your practice.

It is important that you seek advice from your tax professional to ensure that you are eligible and can take advantage of the support and assistance available.

Boosting cashflow to employers

Small and medium sized businesses (including medical practices) and not-for-profit organisations that employ people may be eligible to receive a payment of between $20,000 and $100,000 to assist with operating expenses.

Where the employer is required to withhold tax on salary and wages, the employer will be entitled to an amount equal to 100% of the amount withheld (up to a maximum of $50,000). Those employers who are not required to withhold tax will receive a minimum payment of $10,000.

The payment will be tax free and received as a credit on the business’ activity statements by the ATO from 28 April 2020. The timing of the credit will vary depending on the required frequency of lodgement of activity statements (eg: monthly or quarterly).

An additional payment is also being made from 28 July 2020. Eligible businesses will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments received.

March to June 2020 

  • Eligible business employers are small and medium business entities established before 12 March 2020 and not-for-profits (NFPs), with aggregated annual turnover under $50 million (generally based on prior year turnover).
  • The cash benefit will be by way of a credit automatically applied in activity statements lodged by eligible businesses due from 28 April 2020 (for the March quarter).
  • The credit will be applied at the rate of 100% of the employer’s withholdings payments to the ATO for tax on their employees’ salary and wages. The total credit will be capped at $50,000.
  • Eligible employers will receive a minimum cash benefit of $10,000, even if not required to withhold tax from their employees’ salary and wages.
  • Quarterly activity statement lodgers will receive the credit in their March activity statement with any balance up to the maximum $50,000, in their June Activity statement.
  • For monthly lodgers, the credit applied in their March activity statement will be 300% of the withholdings reported (subject to the $50,000 cap). This aligns their treatment with the quarterly lodgers.

June to October 2020 

  • An additional tax-free cash benefit equal to the total Boosting Cash Flow for Employers cash benefits received by eligible employers to 30 June, will be provided to them after June.
  • For eligible employers continuing to be active, the additional cash benefit will be automatically applied by way of a credit in relevant activity statements they lodge between July and October 2020.
  • Quarterly activity statement lodgers will be eligible to receive credit for half of the additional cash benefit in each of their June and September quarterly statements.
  • Monthly activity statement lodgers will be eligible to receive credit for a quarter of the additional cash benefit in each of their June, July, August and September monthly statements.

This means eligible entities will receive at least $20,000 cash benefits and up to a maximum of $100,000 under both payments.

Refunds created by the credits will be paid within 14 days.

These payments will be calculated and paid automatically by the Australian Tax Office (ATO).

Instant Asset Write Off

From 12 March 2020, the instant write-off threshold will increase from $30,000 to $150,000.  This applies to new or second-hand assets used or installed and ready for use by 30 June 2020.

The increased write-off will apply on a per asset basis until 30 June 2020.

Accelerated Depreciation

Accelerated depreciation deduction of 50% will apply to eligible assets until 30 June 2021.

Eligible assets are those acquired after the announcement and are used or installed ready for use by 30 June 2020. However, it does not apply to second-hand assets, building or other capital works deductible under separate tax provisions.

Small business loans – relief package

Australian banks will provide support to eligible small businesses by deferring loan payments for up to six months, where assistance is required as a result of COVID-19. The intention is for banks to implement this as soon as possible.

Assistance can include:

  • A deferral of scheduled loan repayments – some are offering for six months
  • Waiving fees and charges
  • Interest free periods or no interest rates increases
  • Debt consolidation to help make repayments more manageable

For more information, contact your bank and see Banking - Financial Hardship

Coronavirus Guarantee Scheme

The Coronavirus Guarantee Scheme will provide a Government guarantee of 50% of the value of new loans issued by eligible lenders to small and medium sized businesses. The intention of this measure is to increase access to loans by businesses impacted by the Coronavirus.

For further information you should contact your financial institution.

ATO - Administrative Options available to assist businesses impacted by COVID-19

The Australian Tax Office (ATO) has announced a range of measures to assist affected businesses with their tax obligations including:

  • Deferring by up to six months the payment date of amounts due through the business activity statement (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise
  • Allow 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 Pay As You Go (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.

Additional information - Early release of superannuation - For Eligible Individuals

Individuals in financial stress as a result of the Coronavirus will be able to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21.

  • Eligible individuals will be able to apply online through myGov for access of up to $10,000 of their superannuation before 1 July 2020.
  • They will also be able to access up to a further $10,000 from 1 July 2020 for another three months.
  • They will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.

The Government will allow individuals in financial stress as a result of the Coronavirus to access up  to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21.

JobKeeper Payment

The JobKeeper Payment (announced 30 March 2020) is a subsidy to businesses, which will be paid to employers for up to six months, for each eligible employee that was on their books on 1 March 2020 and is retained or continues to be engaged by that employer.

Where a business has stood down employees since 1 March, the payment will help them maintain connection with their employees.

Employers will receive a payment of $1,500 per fortnight per eligible employee. Every eligible employee must receive at least $1,500 per fortnight from this business, before tax. In the circumstance of an employee earning less than the $1500 per fortnight, the full amount must be passed on (before tax).

The program will commence on 30 March 2020, with the first payments to be received by eligible businesses in the first week of May as monthly arrears from the Australian Taxation Office. Eligible businesses can begin distributing the JobKeeper payment immediately and will be reimbursed from the first week of May.

Eligible employers will be those with annual turnover of less than $1 billion who self-assess that have a reduction in revenue of 30 per cent or more, since 1 March 2020 over a minimum one-month period.

Eligible employers include businesses structured through companies, partnerships, trusts and sole traders. Not for profit entities, including charities, will also be eligible.

Full time and part time employees, including stood down employees, would be eligible to receive the JobKeeper Payment.  Where a casual employee has been with their employer for at least the previous 12 months they will also be eligible for the Payment.  An employee will only be eligible to receive this payment from one employer.

Eligible employees include Australian residents, New Zealand citizens in Australia who hold a subclass 444 special category visa, and self-employed individuals.

Eligible businesses can apply for the payment online and are able to register their interest via ato.gov.au.

These payments will be calculated and paid automatically by the Australian Tax Office (ATO) directly to eligible businesses.

COVID-19 Summary Document  

Timing for assistances

Date Support
Immediately, with deductions to be included in 2019-2010 tax returns

Increased instant asset write off

For example: Qualifying assets must be depreciating assets (ie; plant and equipment and specified intangible assets, ie; patents). Expenditure on capital works, including certain buildings, subject to socalled amortisation tax deductions does not qualify.

To assist the new asset must be acquired after the stimulus package announcement on 12 March 2020 and must be first used or installed on or after before 30 June 2021.

As soon as practicable Support for Coronavirus-affected regions and communities
As soon as practicable Accelerated Depreciation
As soon as practicable Small Business Loans – Relief Package
As soon as practicable Coronavirus Guarantee Scheme
As soon as practicable ATO Administrative Options to assist businesses impacted by COVID-19
As soon as practicable Early release of superannuation - For Eligible Individuals
From 28 April 2020 First phase of Boosting Cash Flow for Employers
1 May 2020 JobKeeper Payments - Eligible businesses distribute payments (backdated to 1 April).
From 21 July 2020 Second phase of Boosting Cash Flow for Employers

Additional resources

Source: Treasury, Overview Links:

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