The Australian Government has announced an economic stimulus package in response to the coronavirus.
The key measures designed to support businesses cash flow, encourage investment and help businesses retain their employees include:
Tax-free payment of between $2,000 and $25,000
To be eligible business entities must have aggregated annual turnover of under $50 million (based on the 2018/2019 tax year) and employee staff.
Eligible businesses that withhold PAYGW tax on their employees’ salary and wages will receive a payment equal to 50% of the amount of tax withheld, up to a maximum payment of $25,000.
Eligible businesses that pay salary and wages, but don’t withhold any PAYGW tax (as their employees do not earn enough) will receive a minimum payment of $2,000.
The payment will only be available for a limited time. The payment will be credited to your Quarterly March 2020 and June 2020 activity statements (BAS) when you lodge these (monthly lodgers will be eligible on their March, April, May and June 2020 IAS).
Where the credit places the business into a refund position, the ATO will pay the refund within 14 days.
Example: Sean’s Hairdresser Salon
Sean employs one apprentice who earns $37,970 per year and two stylists who both earn $44,260 per year. In the March and June 2020 quarterly BAS, Sean reports withholding of $4,570 for his employees
Under the Government’s changes, Sean will be eligible to receive the payment on lodgement of his BAS. Sean’s business will receive:
- A payment of $2,285 for the March quarter, equal to 50 per cent of his total withholding.
- A payment of $2,285 for the June quarter, equal to 50 per cent of his total withholding.
Sean’s business will receive a total payment of $4,570. Sean may also benefit from the assistance for existing apprentices and trainees measure.
Apprentice and Trainee Wage Subsidy of up to $21,000
Eligible employers can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wage paid during the 9 months from 1 January 2020 to 30 September 2020.
Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).
To be eligible your business needs to employ 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 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 early-April 2020. Final claims for payment must be lodged by 31 December 2020. For further information on how to apply for the subsidy, including information on eligibility, contact an Australian Apprenticeship Support Network (AASN) provider.
Increasing the Instant Asset Write-Off to $150,000
The Government is increasing the instant asset write-off (IAWO) threshold from $30,000 to $150,000 and expanding access to include all businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020, effective immediately.
Accelerated depreciation deduction of 50%
The government is introducing a 15-month Backing Business Investment” (BBI) incentive by accelerating depreciation deductions.
Eligible businesses with aggregated turnover below $500 million and who purchase new plant & equipment (that can be depreciated under Division 40 of the ITAA1997) acquired after the announcement and first used or installed by 30 June 2021 can get a deduction of 50% of the costs in the year acquired, with existing depreciation rules applying to the balance.
Example: Small business benefits from the BBI
Joan and Bruce own a company, NC Transport Solutions Pty Ltd, through which they operate a haulage business on the North Coast of New South Wales. NC Transport Solutions Pty Ltd has an aggregated annual turnover of $8 million for the 2019-20 income year. On 1 May 2020, Joan and Bruce purchase a new truck for $260,000, exclusive of GST, for use in their business.
Under existing tax arrangements, NC Transport Solutions Pty Ltd would depreciate the truck using their small business simplified depreciation pool. Under the pooling rules, NC Transport Solutions Pty Ltd 4 would deduct 15 per cent of the asset’s value upon entry to the pool, leading to a tax deduction of $39,000 for the 2019-20 income year.
Under the new BBI, NC Transport Solutions Pty Ltd would instead claim an up-front deduction of 50 per cent of the truck’s value ($130,000) before placing the asset in their small business simplified depreciation pool. Joan and Bruce would then claim a further 15 per cent deduction on the depreciated value of the truck ($19,500). As a result of the two deductions, Joan and Bruce are able to claim a deduction totalling $149,500 in the 2019-20 income year, $110,500 more than under existing arrangements. At the company tax rate of 27.5 per cent, Joan and Bruce will pay $30,387.50 less tax in the 2019-20 income year.
The following measures are designed to assist lower income Australians and severely affected regions and communities
- One-off $750 cash payment from 31 March – to aged pensioners and people on Newstart, the disability support pension, carers’ allowance, youth allowance, veterans support payments and family tax benefits. The payment will be tax-free and will not count as income.
- $1 billion fund – to assist regional business and industries directly affected including trade and tourism businesses.
ATO administrative relief – the ATO will provide relief for certain tax obligations for taxpayers affect by the coronavirus outbreak on a case-by-case basis. Taxpayers can contact the ATO on 1800 806 218 for further information