Last week, we discussed the stimulus package that had been announced but not yet passed through Parliament. As we forecast, the Commonwealth Government then announced a second round of stimulus measures. Both packages were passed by Federal Parliament earlier this week. In this article, we will look at the effect of the measures from both the first and the second announcements.
The total stimulus measures include elements directed at both businesses and individuals. We will look at the assistance available to each of these groups separately.
Please note that there are also some state-based measures that have been introduced, in particular for business, addressing things like payroll tax. Please contact us if you would like to know more about these.
Assistance for Business
100% Cashback on PAYG Withholding
Employers who withhold tax on behalf of employees and then remit that tax to the Commonwealth will receive 100% of that amount back as a rebate, up to a total limit of $100,000.
The total rebate comes in two instalments of $50,000 that cover two separate periods of time. The first rebate relates to the period between 1 January 2020 and 30 June 2020. Up to $50,000 of PAYG Withholding tax paid during this period will be rebated to eligible employers. If employers pay less than $50,000 of PAYG withholding tax, their rebate will be capped to the actual amount paid – although there is a minimum payment of $10,000 for eligible employers.
As an example, if an employer withholds $25,000 in PAYG tax over the six months from 1 January to 30 June and then remits this money to the Tax Office, that employer will receive $25,000 cash back as a rebate upon lodgment of the relevant BAS’s.
The second instalment relates to the period 1 July 2020 to 30 September 2020. The mathematics are exactly the same as for the first instalment – the first $50,000 of PAYE withholding tax for that three-month period will be rebated to eligible employers. If less than $50,000 is withheld, then that lesser amount will be rebated.
The rebate is tax-free to the employer. It is not expected to be passed on to the employee, even though the PAYG tax that is being withheld comes from employee wages and salaries. The idea is to reward those employers who are employing people – especially those employers who retain employees beyond 30 June. This is also the reason why the benefit is being paid as a rebate after the employer has remitted tax to the tax office: this is an integrity measure to make sure that the rebate is only being provided to genuine employers.
While the maximum payable in each of the two periods is $50,000, there is a minimum of $10,000 payable to eligible employers in each period. Employers who withhold less than $10,000 in tax in one or both periods should receive $10,000 for that period.
Employers do not need to apply for the rebates: they will be automatically calculated when employers lodge their BASs for the relevant period.
Incentives to Retain Apprentices
As we reported last week, businesses that employ apprentices or trainees will be entitled to a wage subsidy of 50% of that apprentice or trainee’s wages between 1 January and 30 September 2020. The subsidy is capped at $21,000 for the nine-month period, with no more than $7000 being payable in any of the three periods. This benefit is portable, in the sense that it is available to an employer who takes on someone with an existing apprenticeship but who was forced to leave their previous employer.
Instant Write off Threshold Increases
As we wrote last week, businesses with turnover of less than $50 million can currently write off (depreciate) the full value of new assets purchased, up to a limit of $30,000. Basically, businesses get an immediate tax deduction for asset purchases up to $30,000. The threshold of $30,000 will be increased to $150,000 and the range of businesses which are eligible will be expanded to include those with revenue of up to $500 million. The change applies to assets purchased between March 12 2020 and June 30 2020.
There will be a further deduction for some purchased assets that exceed the threshold of $150,000. Provided the asset is eligible, over the 15 months to 30 June 2021 a business can depreciate 50% of the value of that asset. The remaining 50% of the value of the asset can be depreciated at normal rates. The government expects this measure to reduce the amount of tax collected by $3.2 billion.
Loan Guarantees for Small Business
The Commonwealth Government will guarantee 50% of amounts borrowed on new unsecured business loans. Please note that this does not mean that the government is itself lending money or taking on an obligation to repay the loan. The government is simply facilitating loans designed to provide short to medium term cash flow for eligible businesses. Those businesses will have to make repayments on these loans in full.
Please contact us if you are having cash flow problems and we can explain this measure further.
Assistance for Individuals
For the next six months, the Commonwealth will pay a ‘Coronavirus Supplement’ of $550 per fortnight to eligible recipients of social security payments. $550 is slightly less than the current amount paid as Newstart allowance to a single person with no children. So, the Coronavirus supplement effectively doubles the Newstart allowance for single people.
People with dependent children currently receive a slightly higher Newstart allowance. Their allowance will still increase by $550 per fortnight. It is not quite a doubling for those people.
The supplement will be paid to current and new recipients of a range of Social Security benefits, including Newstart allowance, youth allowance for jobseekers, parenting payments, farm household allowances and the Commonwealth’s special benefit.
Eligibility for these benefits has also been expanded. Unemployment benefits (Newstart and Youth Allowance for Jobseekers) will become available to: permanent employees who are stood down, sole traders, self-employed people, casual workers and contractors whose income falls below the appropriate threshold as a result of the coronavirus.
Ordinarily, unemployment benefits are subject to an assets test. The idea is that people need to draw down on their own reserves before applying for benefits. However, the assets test will be waived for the period of the Coronavirus supplement. This lets people access the benefits without first running down their savings.
This supplement will commence from 27 April 2020.
One-Off Cash Payments
As we reported last week, approximately 6.5 million income support recipients will receive a one-off payment of $750. To be eligible, a person needs to have been (i) residing in Australia; and (ii) receiving an eligible payment from the Commonwealth. Eligible payments include: aged, veterans and disability pensions; carer payments; Abstudy and Austudy payments; Newstart, Youth and Farm Household allowances; and family tax benefits. People who hold a pensioner concession card, a Commonwealth seniors health card or a veteran Gold card will also be eligible.
People adversely affected by the economic effects of the Coronavirus will be allowed to withdraw up to a total of $20,000 tax-free from their superannuation fund. $10,000 can be withdrawn before the end of the current financial year and a second amount of $10,000 can be withdrawn during the next financial year.
The Commonwealth has a simple two-sided economic agenda at the moment. Firstly, it aims to provide as much stimulus as possible to the spending side of the economy (via the cash payments being made available to individuals, almost all of which can be expected to be spent by those individuals). Secondly, the Commonwealth is also striving to ensure that the supply side of the economy remains functional (via the various payments being made available to employers).
Quite clearly, Australia is in the early stages of the overall impact of the Coronavirus on our community. Here’s hoping that these measures go a long way towards lessening the economic impact of the virus on our community. If you or anyone you know would like to discuss how to access these incentives or whether they apply to you, please feel free to get in touch.
Most people have realised that the seriousness of the crisis facing the community at the moment has really ramped up in the past week or so. One great thing we are seeing is an increase in people helping each other out. Long may this last. We continue to hope with all of our hearts that you and your loved ones stay safe and healthy.