Coronavirus Economic Stimulus Package
The following is a broad summary of the key features of the Government’s Coronavirus Economic Stimulus Package as announced on 24 March 2020.
Support for businesses
Boosting cash flow for employers
Small and medium-sized businesses and not-for-profit entities may receive a total payment of up to $100,000 (in the form of a refundable credit) based on their PAYG withholding obligations. Eligibility requirements include an aggregated annual turnover of less than $50 million and the employment of people. The payment has a minimum total payment of $20,000 and is distributed in two stages:
Stage 1 payment (credit)
Starting from the lodgement of activity statements on 28 April 2020, eligible employers who withhold PAYG tax on their employees’ salary and wages will receive a tax-free payment. This payment will be equal to 100% of the amount withheld, up to a maximum of $50,000. Employers who pay salary and wages, but are not required to withhold PAYG tax will receive a minimum (tax-free) payment of $10,000.
The ATO will automatically calculate and pay the tax-free payment as a credit to eligible employers upon lodgement of their activity statements. Any resulting refund will also be paid to the employer. Quarterly lodger will be eligible to receive the payment for the quarters ending March 2020 and June 2020, while monthly lodgers will be eligible to receive the payment for the lodgements of March 2020, April 2020, May 2020 and June 2020.
It should be noted that the minimum payment of $10,000 will be applied to the entity’s first activity statement lodgement (whether for the month of March or the March quarter) from 28 April 2020.
Stage 2 payment (credit)
For active employers, an additional tax-free payment will be available for the June to October 2020 period as follows:
– Quarterly lodgers can receive the additional payment for the quarters ending June 2020 and September 2020. Each payment will be equal to 50% of their total initial (or Stage 1) payment, up to a maximum of $50,000.
– Monthly lodgers can receive the additional payment for the lodgement of their activity statement for June 2020, July 2020, August 2020 and September 2020. Each additional payment being equal to a quarter of their total initial (or Stage 1) payment, up to a maximum of $50,000.
The ATO will automatically calculate and pay the additional tax-free payment as a credit to an employer upon the lodgement of their activity statements from July 2020. If there is any resulting refund, it will be paid to the employer.
Note that eligibility for the above payments is subject to a specific integrity rule designed to prevent artificial or contrived arrangements that seek to access this measure. If an employer or an associate enters into a scheme with the sole or dominant purpose of obtaining or increasing any of the above payments for a particular employer, they will not be eligible for any such payments for the relevant period.
Wages subsidies for apprentices and trainees
Employers with less than 20 full-time employees who retain an apprentice or trainee, who was in training with the employer as at 1 March 2020, may be entitled to Government funded wage subsidies.
These subsidies will be equal to 50% of the apprentice’s or trainee’s wage paid during the nine months from 1 January 2020 to 30 September 2020.
The maximum wage subsidy over the nine-month period will be $21,000 per eligible apprentice or trainee.
Employers can register for the subsidy starting from early April 2020.
Increasing the instant write-off threshold for business assets
Broadly, the instant asset write-off threshold for depreciating assets will be increased from $30,000 (for businesses with an aggregated turnover of less than $50 million) to $150,000 (for businesses with an aggregated turnover of less than $500 million) until 30 June 2020.
The measure applies to both new and second-hand assets first used or installed ready for use in the period beginning on 12 March 2020 (i.e., the date on which this measure was announced) and ending on 30 June 2020.
Small Business Entities (‘SBEs’)
Note that SBE’s are businesses with aggregated turnover of less than $10 million.
SBEs will be able to claim an immediate deduction for depreciating assets that cost less than $150,000, provided that the relevant asset is first acquired at or after 7.30 pm on 12 May 2015, by legal time in the ACT, and first used or installed ready for use on or after 12 March 2020, but before 1 July 2020.
Additionally, SBEs will also be able to claim an immediate deduction for the following:
– An amount included in the second element of the cost of a depreciating asset (i.e., an improvement to the asset) that was first used or installed ready for use in a previous income year. The amount of the second element cost must be less than $150,000 and the cost must be incurred on or after 12 March 2020, but before 1 July 2020.
– If the balance of an entity’s general small business pool (excluding current year depreciation) is less than $150,000 at the end of the 2020 income year, a deduction can be claimed for this balance.
Medium Business Entities (‘MBEs’)
Note: These businesses have an aggregated turnover of at least $10 million and less than $500 million.
Under the measure, MBEs can claim an immediate deduction for the cost of an asset in an income year, provided the asset has a cost of less than $150,000, and it was first acquired during the period beginning at 7:30pm, by legal time in the ACT, on 2 April 2019 and ending 30 June 2020. Additionally, the taxpayer must start to use or have the asset installed and ready for use for a taxable purpose during the period beginning on 12 March 2020 and ending on 30 June 2020.
Support for individuals
The new Coronavirus supplement
A new six-month ‘Coronavirus supplement’ of $550 per fortnight will be paid to individuals who are currently eligible for certain income support payments, including the:
– Jobseeker Payment;
– Youth Allowance; and
– Parenting Payment (Partnered and Single).
Furthermore, it appears that this new (additional) supplement will be paid to eligible individuals as part of their existing income support payments (e.g., Jobseeker Payment and Youth Allowance).
Expanding access (and eligibility) to certain income support payments
For the period that the Coronavirus supplement is paid, the Government will also expand access to certain income support payments (e.g., the Jobseeker Payment, the Youth Allowance Jobseeker and the Parenting Payment) for eligible individuals.
For example, a new category of Jobseeker Payment and Youth Allowance Jobseeker will become available for eligible individuals financially impacted by the Coronavirus.
According to the Government, this could include, for example, permanent employees who are stood down or lose their employment; sole traders; the self-employed; casual workers; and contract workers who meet the income tests, as a result of the economic downturn due to the Coronavirus.
Additionally, asset testing for the JobSeeker Payment, the Youth Allowance Jobseeker and the 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.
Tax-free payments of $750 to eligible recipients
The Government will be providing two separate $750 tax-free payments (referred to as ‘economic support payments’) to social security, veteran and other income support recipients and to eligible concession card holders.
The first $750 payment will be available to individuals who are residing in Australia and are receiving an eligible Government payment, or are the holders of an eligible concession card, at any time from 12 March 2020 to 13 April 2020 (inclusive). This payment will be made automatically to eligible individuals from 31 March 2020.
The second $750 payment will be available to individuals who are residing in Australia and are receiving one of the eligible Government payments or are the holders of one of the eligible concession cards on 10 July 2020 (except for those receiving an income support payment that qualifies them to receive the $550 fortnightly Coronavirus supplement). This payment will be made automatically to eligible individuals from 13 July 2020.
Each of the $750 payments will be exempt from income tax and will not count as income for the purposes of Social Security, the Farm Household Allowance and Veteran payments.
Early access to superannuation benefits
The Government will introduce a new compassionate ground of release that will allow individuals to access their superannuation entitlements where those benefits are required to assist them to deal with the adverse economic effects of the Coronavirus, but only where one or more of the following requirements are satisfied:
– The individual is unemployed.
– The individual is eligible to receive the Jobseeker Payment, Youth Allowance for jobseekers, Parenting Payment (which includes the single and partnered payments), Special Benefit or Farm Household Allowance.
– On or after 1 January 2020 either:
– the individual was made redundant; or
– the individual’s working hours were reduced by at least 20%; or
– if the individual is a sole trader
– their business was suspended or there was a reduction in the business’s turnover of at least 20%.
Under this new compassionate ground of release, eligible individuals will be able to access (as a lump sum) up to $10,000 of their superannuation entitlements before 1 July 2020, and a further $10,000 from 1 July 2020 (subject to a six-month time frame).
Eligible individuals who are looking to access their superannuation entitlements under the above new ground of release will be able to apply directly to the ATO through the myGov website (at www.my.gov.au) and certify that the relevant eligibility criteria is satisfied.
Editor: Importantly, such lump sum superannuation withdrawals under this new compassionate ground of release will not be taxable to the recipient (i.e., they will be tax-free). Also, according to the Government, the amount withdrawn will not affect Centrelink or Veteran’s Affairs payments.
Reducing the minimum drawdown amounts for superannuation pensions
The Government will be temporarily reducing the superannuation minimum drawdown amounts for account-based pensions and similar products by 50% for the 2020 and 2021 income years.
Editor: This basically means that the total minimum annual pension amount that a superannuation fund is otherwise required to pay to a member receiving a pension from the fund (e.g., an account-based pension) will be reduced by half for these two income years.
Reducing social security deeming rates
From 1 May 2020, the Government will be reducing both the upper and lower social security deeming rates by a further 0.25 percentage points. This is in addition to the recent 0.5 percentage point reduction, resulting in an overall reduction to the social security deeming rates of 0.75 percentage points.
On this basis, as of 1 May 2020, the upper deeming rate will be reduced from 3% to 2.25%, and the lower deeming rate will be reduced from 1% to 0.25%.
Note: These reductions reflect the low interest rate environment and its impact on the income from savings. Broadly speaking, the social security deeming rates apply (for ‘income test’ purposes) to determine the amount of income that an individual is ‘deemed’ (or taken to) earn from financial investments (e.g., cash deposits and listed securities), irrespective of the actual amount of income (e.g., interest income and dividend income) earned by the individual. In most cases, the deeming rates apply for the purposes of applying the Age Pension ‘income test’.
Please note: This information is general in nature. Professional advice is recommended to confirm applicability to individual circumstance
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Disclcaimer: The information provided within this article is general information only. None of the comments in these notes are intended to be advice, whether legal, financial product or professional. You should obtain specific advice regarding your particular circumstances from a tax or legal professional.
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