Coronavirus Government Stimulus Package
The Federal Government announced its 2nd Stimulus package in a week on Sunday 22 March.
Holmans Accounting & Taxation
So what is new in these announcements?
Federal Government Business Package:
- Overall, the measures are very similar to the 1st announcements, just larger in benefit.
- The timing and application of the benefits has also changed, so it is vital to plan, understand when it applies to your business, what that benefit will be and the timing of the payment.
- The Government haven’t ruled out further Stimulus measures. The situation and Government support seem to be changing daily.
- Wages Support:
- Under the new scheme, an eligible business (turnover under $50 million) that withholds tax on employees’ salary and wages will receive a payment equal to 100% (up from 50%) of the amount withheld to a maximum payment of $100,000 (over the quarters March, June and September).
- The minimum payment is now $10,000 (up from $2,000)
- The payment is tax free and commences from 31 March Quarter BAS.
- Timing of the payment varies depending on whether you lodge monthly/quarterly and how much of the benefit you are entitled to.
- The payment will only be available to active employers established prior to 12 March 2020.
- The payment will be delivered as an automatic credit on your business’s ATO activity statement account from 28 April 2020 upon lodging of eligible activity statements.
Holmans Comment: Overall, Holmans are a little disappointed in this announcement. While the benefit is large and the businesses it applies to also very generous, it really only covers the PAYG Withholding of the employees. The employer must still pay for the net wage and employee superannuation. This unfortunately won’t benefit businesses like Restaurants and Gyms (to the same extent), where the business has been forced to close or turnover is significantly down.
The active date of 12 March is also a disappointment, with businesses who are not on structured wages by that date, missing out on the benefit.
More information can be found here – or by contacting your accountant.
- Temporary Relief for Financially Distressed Businesses
The Government have announced a temporary increase in the threshold at which creditors can issue a statutory demand on a business ($20,000, up from $2,000) and an increase in the time businesses have to respond to those statutory demands (6mths, up from 21 days),
Quote from the Fact Sheet “To make sure that companies have confidence to continue to trade through the Coronavirus health crisis with the aim of returning to viability when the crisis has passed, directors will be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business. This will relieve the director of personal liability that would otherwise be associated with the insolvent trading. It will apply for six months.”
Holmans Comment: This is a sensible change and is designed to encourage businesses to trade into the uncertain future. Importantly, this isn’t a get out of jail free card, care must still be taken to ensure that the business is being sensibly managed (up to date business records to be kept and closely monitored by management, lodging BASs on time, only incurring sensible debts).
- Asset Investments and Write-Off
- Immediate Asset Write-off – No change to the previous announcement. The threshold for the instant asset write-off will be raised from $30,000 to $150,000, and expanded to businesses with an annual turnover up to $500M (increased from $50M). This will be eligible from 12 March up to 30 June 2020. Please note, there are restrictions on assets like buildings and cars, so you should consult with your accountant first before making large purchases.
- Accelerated Depreciation for assets costing over $150,000. Businesses with a turnover of less than $500M will be able to deduct 50 percent of the cost of an eligible asset on installation, followed by normal depreciation thereafter on the remaining balance.
Holmans Comment: This is mainly a timing benefit, as you always received a deduction for the depreciation, it has just been brought forward to match the purchase commitment. This will suit businesses who are already committed to projects, or those in a position to expand/upgrade.
- Apprentice Subsidy – Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage paid during the 9 months 1 January 2020 and 30 September 2020.
Holmans Comment: This is one of the few back dated measures, meaning eligible businesses can get a cash injection for wages paid back to January.
- Industry Packages – This is one of the most disappointing things about the announcements to date. These are still being formalised and there are no real details except for an amount being set aside by the Government.
- Sole Traders and Contractors
Holmans Comment: Another disappointing part of the recent announcements. Essentially little assistance (except those offered by the ATO on deferrals so-on). The Government are relying on Centrelink to pick up any shortfall. It is vital you talk to your accountant where you may need to vary PAYG Instalments so-on.
- Our recommended advice:
- There is no change to our recommended advice, planning is vital – please refer to here
- Individual Support can be found here:
More information can be found here.
