Federal Government support

The Federal Government has announced a $130 billion stimulus package, the third and largest package revealed to further boost the Australian economy as we continue to navigate COVID-19.

We have summarised what this new package means for you and/or your business & the initiatives being taken to financially assist us all in these difficult times.

Please note this summary is as at 31 March, 2020.

JobKeeper program

• $1,500/fortnight job keeper payment
• Applies to full time, part time and casuals who have been working for a business greater than 12 months
• Payments will flow to employers through the tax system from the first week of May and backdated
• If staff have been stood down they are still eligible
• To qualify business turnover reduced by 30% or more (or 50% if >$1B)
• Must be employed as at 1 March 2020
• If employee have applied for Job seeker, they can transition across
• No superannuation guarantee is payable on the payment

Cash flow assistance

Businesses and not for profit entities (NFPs) with aggregated turnover under $50 million (generally based on prior year turnover) that employ workers will be eligible to receive a minimum of $20,000 and up to $100,000.  The payments will be tax free.

How it works-

 First payment

Eligible businesses that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100% of the amount withheld, up to a maximum payment of $50,000.

Eligible businesses that pay salary and wages where eligible will receive a minimum payment of $10,000, even if they are not required to withhold tax.

The payment will only be available to active eligible employers established prior to 12 March 2020.

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 provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (300%) in the March 2020 activity statement.

The payment will be delivered by the Australian Taxation Office (ATO) as a credit in the activity statement system from 28 April 2020 upon businesses lodging eligible upcoming activity statements. Where the credit places the business in a refund position, the ATO will deliver the refund within 14 days.

The minimum payment will be applied to the entities first lodgement.

Additional payment

To qualify for the additional payment, the entity must continue to be active.

Eligible businesses that continue to employ staff will receive an additional payment of up to $50,000 on tax withheld from employees’ salary and wages for the July to October 2020 period.

Eligible businesses that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.

Quarterly lodgers will be eligible to receive the additional payment for the quarters ending June 2020 and September 2020.

Monthly lodgers will be eligible to receive the additional payment quarterly over their June 2020, July 2020, August 2020 and September 2020 lodgements.

Similar to the first payment, the ATO will apply a credit upon lodgement of the businesses activity statements.  Where the credit places the business in a refund position, the ATO will deliver the refund within 14 days.

Enhancing the instant asset write-off

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.

The IAWO is due to revert to $1,000 for small businesses (turnover less than $10 million) from 1 July 2020.

This proposal applies from announcement until 30 June 2020, for new or second-hand assets first used or installed ready for use in this timeframe.

Backing business investment (BBI)

The Government is introducing a time limited 15 month investment incentive to support business investment and economic growth over the short-term, by accelerating depreciation deductions.

How it works – 

Businesses with aggregated turnover below $500 million are entitled to receive a deduction of 50% of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.

The asset acquired must be a new asset that can be depreciated under Division 40 of the Income Tax Assessment Act 1997 (i.e. plant, equipment and specified intangible assets, such as patents) acquired after 12 March 2020 and first used or installed by 30 June 2021.

Note that BBI measures do not apply to second-hand Division 40 assets, or buildings and other capital works depreciable under Division 43.

Supporting apprentices and trainees

The Government is supporting small business to retain their apprentices and trainees by way of 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.

The subsidy will be available to small businesses employing 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 of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will be eligible for the subsidy.

Support will also be provided to the National Apprentice Employment Network, the peak national body representing Group Training Organisations, to co-ordinate the re-employment of displaced apprentices and trainees throughout their network of host employers across Australia.

How it works –

Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).

Employers can register for the subsidy from early-April 2020. Final claims for payment must be lodged by 31 December 2020.

Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network (AASN) provider.

For further information on how to apply for the subsidy, including information on eligibility, contact an Australian Apprenticeship Support Network provider. Details of AASN providers in each region is available at https://www.australianapprenticeships.gov.au/

Temporary relief for financial distressed businesses

The key features of the Government’s insolvency related package are:

• A temporary increase in the threshold at which creditors can issue a statutory demand on a company and time companies have to respond to statutory demands they receive;
• A temporary increase in the threshold for a creditor to initiate bankruptcy proceedings, and increase in the time period for debtors to respond to a bankruptcy notice, and extending the period of protection a debtor receives after making a declaration of intention to present a debtors petition;
• Temporary relief for directors from any personal liability for trading while insolvent; and
• Providing temporary flexibility in the Corporations Act 2001to provide targeted relief for companies from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.

Coronavirus SME Gurantee Scheme

Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50% to SME lenders for new unsecured loans to be used for working capital in an attempt to support businesses in the upcoming months.

How it works-

The Government will provide eligible lenders with a guarantee for loans with the following terms:

• Maximum total size of loans of $250,000 per borrower.
• The loans will be up to 3 years, with an initial 6 month repayment holiday.
• The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide asset as security for the loan.

The lenders’ usual credit assessment processes will apply, with the exception that lenders will look through the cycle to sensibly take into account the uncertainty of the current economic conditions.

There will be an emphasis for lenders to provide loan products that only have to be drawn if needed by the SME.  This will only incur interest on monies drawn, and if the SME does not draw down from the facility, no interest will be charged.

The Scheme will commence in early April 2020 and be available for new loans made by participating lenders until 30 September 2020.

Income Support for Individuals – Coronavirus supplement

On 22 March 2020, the Government announced it will provide a temporary Coronavirus supplement of $550 a fortnight to new and existing income recipients from 27 April 2020 for six months.

 How it works-
The income support payment categories to receive the Coronavirus supplement are:

JobSeeker Payment (and payment progressively transitioning into JobSeeker Payment)
Youth Allowance
Parenting Payment (Partnered and Single)
Austudy
ABSTUDY (Living Allowance)
Farm Household Allowance
Special Benefit

From 20 March 2020, Sickness Allowance was closed to new entrants and was replaced by the JobSeeker Payment.  This does not mean that people who previously may have been eligible for Sickness Allowance are now unable to access income support.   JobSeeker Payment better accommodates individual circumstances, including assisting people who are sick or bereaved.

 Anyone who is eligible for the Coronavirus supplement will receive the full rate of the supplement of $550 per fortnight, in addition to their regular fortnightly payment.

 From 27 April 2020, there will be expanded access to the income support payments listed above.  Eligibility for JobSeeker Payment and Youth Allowance for jobseekers will also be expanded to assist:

Permanent employees who are stood down or lose their employment
Sole traders and self-employed people
Casual workers
Contract workers

The above could include a person required to care for someone infected or in isolation as a result of contact with Coronavirus.

 The Government will also reduce means testing requirements and waiting times for certain payments.  In particular, asset testing for JobSeeker Payment, Youth Allowance and Parenting Payment will be waived for the period of the Coronavirus supplement.  Income testing will still apply to the person’s other payments, consistent with current arrangements.

 The Coronavirus supplement will commence from 27 April 2020.

 Expanded access for payments and faster claims processing will commence from 25 March 2020.

Stimulus payments to households to support growth

The Government will provide two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders.

There payments will be paid as follows:

• The first payment will be available to eligible recipients and concession card holders at any time from 12 March to 13 April 2020 inclusive.
• The second payment will be available to eligible recipients and concession card holders on 10 July 2020.

A person can be eligible for both the first and second support payments.  However, they can only receive one $750 payment each round, even if they qualify in multiple ways.

The payment will be exempt from taxation and will not count as income for Social Security, Farm Household Allowance and Veteran payments.

How it works-

First payment

To be eligible for the first payment, you must be residing in Australia and be receiving one of the following eligible payments or hold one of the following concession cards at any time from 12 March 2020 to 13 April 2020 inclusive:

• Age Pension
• Disability Support Pension
• Carer Payment
• Parenting Payment
• Wife Pension
• Widow B Pension
• ABSTUDY (Living Allowance)
• Austudy
• Bereavement Allowance
• Newstart Allowance
• Youth Allowance
• Partner Allowance
• Sickness Allowance
• Special Benefit
• Widow Allowance
• Family Tax Benefit, including Double Orphan Pension
• Carer Allowance
• Pensioner Concession Card holders
• Commonwealth Seniors Health Card holders
• Veteran Service Pension; Veteran Income Support Supplement; Veteran Compensation payments, including lump sum payments; War Widow(er) Pension; and Veteran Payment.
• Veteran Gold Card holders
• Farm Household Allowance

Where someone has lodged a claim for one of the above payments or concession cards at any time from 12 March 2020 to 13 April 2020 inclusive, and the claim is subsequently granted, they will also receive the payment.

The first payment will be paid automatically from 31 March 2020 to eligible recipients.

Second payment

To be eligible for the second payment, you must be residing in Australia and receiving one of the abovementioned eligible payments or holding one of the concession cards that were eligible for the first payment, except for those who are receiving income support payment that is eligible to receive the Coronovirus supplement.

The second payment will be paid automatically from 13 July 2020 to eligible recipients.

Early release of superannuation

While superannuation helps people save for retirement, the Government recognise that for those significantly financially affected by the Coronavirus, accessing some of their superannuation today may outweigh the benefits of those savings until retirement.

Eligible individuals will be able to apply online through myGov to access 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 approximately three months (exact timing will depend on passage of relevant legislation).

How it works-

 To apply for early release, you must satisfy any one or more of the following requirements:

• You are unemployed; OR
• You are eligible to receive a JobSeeker Payment, Youth Allowance for jobseekers, Parenting Payment (partnered and single), Special Benefit or Farm Household Allowance; OR
• On or after 1 January 2020:
  • You were made redundant; or
  • Your working hours were reduced by 20% or more; or
  • If you are a sole trader, your business was suspended or there was a reduction in your turnover of 20% or more.

People accessing their superannuation will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.

If you are eligible for this new ground of early release, you can apply directly to the ATO through the myGov website: https://my.gov.au/.

Separate arrangements will apply if you are a member of a Self Managed Superannuation Fund (SMSF).

You will be able to apply for early release of your superannuation from mid-April 2020.

Superannuation minimum drawdown rates and social security deeming rates

The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50% for the 2019-20 and 2020-21 financial years.

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.

This measure will have no impact on the underlying cash balance for 2019-20 and a negligible impact in 2020-21.

Social security deeming rates

The Government has reduced the deeming rates by a further 0.25% to reflect the latest rate reduction by the Reserve Bank of Australia.  As of 1 May 2020, the lower deeming rate will be 0.25% and the upper deeming rate will be 2.25%.

The change will benefit around 900,000 income support recipients.

Assistance for severely affected regions