Economic Stimulus Package - Covid-19

Prime Minister Scott Morrison recently announced a $17.6 billion economic plan to keep Australians in jobs, keep businesses in business and support households and the Australian economy.This package is designed to support the economy during and post the spread of the COVID -19 (“Coronavirus”).

A major focus of this package is on small and medium-sized businesses to stay in business via expansion of allowable deductions and cashflow assistance to businesses who employ staff. Another focus is on stimulating the income supported recipients and eligible concession card holders, of which half of those will be pensioners in order to support confidence and domestic demand in the economy.

Summary of Economic Stimulus Package

The key support measures that are to be put in place are the following:

1. Instant Asset Write Off Increase

From 12 March 2020 until 30 June 2020, businesses with aggregated annual turnover of less than $500 million, who purchase an asset under $150,000 will be able to write off the asset immediately as a deprecation deduction.the key support.

In comparison, the threshold Pre 12 March 2020, during the 2020 financial year is as follows:

The instant asset write off is available for the acquisition of both new and second hand assets, and the asset must be installed and ready for use by 30 June 2020.

We also note that the instant asset write off reverts to $1,000 for businesses with an annual turnover of less than $10 million after 30 June 2020.

2. Asset Depreciation Acceleration

From 12 March 2020 until 30 June 2021, businesses with a turnover less than $500 million that acquires an eligible asset, will be able to claim an accelerated depreciation deduction, for an additional 50% in the financial year of installation and ready for use.

This measure will not apply to second hand assets, nor to assets subject to the instant asset write off as mentioned above.

3. Cashflow Assistance – Small to Medium-Sized Businesses who employ

Eligible small to medium-sized businesses that employ staff, can receive tax free payments of a minimum of $2,000 and up to $25,000.

To be eligible your business must:

• Have prior years turnover of less than $50 million; and
• Employ staff.

Businesses will receive either a payment or multiple payments of 50% of their PAYG Withheld up to $25,000.

Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020. Monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgements. To ensure a similar treatment to quarterly lodgers, then payment for the monthly lodgers will be calculated at three times the rate (150%) in their March 2020 activity statement.

Businesses that pay salary & wages that are not required to withhold will receive a minimum payment of $2,000. The payment for the minimum will be applied to the business’ first lodgement.

Below is an example how this payment will be made:

Prior year turnover under $50 million, employs staff and lodges monthly:

Sarah’s Construction Business

Sarah owns and runs a building business in Victoria and employs 8 construction workers on average full-time weekly earnings who each earn $89,730 per year. In the months of March, April and June for the 2019-20 income year, Sarah reports withholding of $15,008 for her employees on each Business Activity Statement (BAS).
Under the Government’s changes, Sarah will be eligible to receive the payment on lodgement of each of her BAS. Sarah’s business receives:

• A payment of $22,512 for the March period, equal to 150 per cent of her total withholding.
• A payment of $2,488 for the April period, before she reaches the $25,000 cap.
• No payment for the May period, as she has now reached the $25,000 cap.
• No payment for the June period, as she has now reached the $25,000 cap.

4. Cashflow Assistance – Employment of Apprentices & Trainees

Eligible employers can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020. Subsidy will be available for current apprentices and where not able to retain an apprentice, the subsidy will then be available to a new employer that employs that apprentice.

5. One Off Stimulus Payment

A one off $750 tax free payment will be made to eligible recipients.

To be eligible you must be:
Residing in Australia; and
Hold one of the following concession cards (but not limited to) on 12 March 2020:

• Age Pension
• Special Benefit
• Disability Support Pension
• Carer Payment
• Family Tax Benefit
• Parenting Payment
• Carer Allowance
• Pensioner Concession Card holders
• Commonwealth Seniors Health Card holder
• ABSTUDY & ABSTUDY (Living Allowance)
• Farm household Allowance

Payments will start from 31 March 2020 of which majority of payments will be made by mid-April 2020.

If you receive regular payments then you will not need to do anything, this one-off payment will be automatically made.

If you hold a Commonwealth Seniors Health Card or Veteran Gold Card, you will be contacted in order to confirm your account details.

6. Assistance for Severely Affected Region

Once the virus has run its course, assistance will be provided to Severely-Affected Regions. Support will be provided to sectors, regions and communities adversely impact by the coronavirus including industries such as tourism, agriculture and education.
Assistance to be included:

• Waiver of fees and charges for tourism business operating in the Great Barrier Reef Marine Park and Commonwealth National Parks
• Identify alternative export markets or supply chains
• Promotion of domestic travel
• Administration relief for certain tax obligations including, deferring tax payments up to 4 months, on a case by case basis

We note the abovementioned measures are subject to them being passed in Parliament. The bill is expected to be introduced into Parliament in the final Autumn sitting week in March 2020 for Parliament’s urgent consideration and passage.

In light of the above stimulation package, it is clear that these changes will impact majority of our clients in order to benefit you in way of cash flow or tax savings during this time of economic downturn.

Should you wish to discuss any of the above, please do not hesitate to contact Sarah Walsh on 9854 8999.