The global COVID-19 pandemic has brought considerable suffering to thousands around the world and plunged the Australian economy into unprecedented and unchartered territory.
To manage this unfortunate and severe impact on the Australian business community, the Reserve Bank of Australia (RBA), with support from the Federal Government, has provided several stimulus packages to help stem some concerns over access to capital and business continuity. These proposed measures are aimed at reducing disruption to businesses across Australia.
In addition to the first stimulus package of $17.6 billion announced on 12 March 2020, the Federal Government has also announced a second $66.1 billion COVID-19 stimulus package on 22 March 2020. Their aim is to provide further assistance to impacted Australian businesses and workers. Both stimulus packages have been passed by both the lower and upper houses of Parliament, and are currently awaiting royal assent.
The main areas of support provided by the stimulus packages include:
- Support for businesses
- Supporting the flow of credit
- Support for individuals and households
Cash Payments for Employers
Eligible small and medium sized employers will receive a cash flow boost with a minimum total credit of $20,000, and up to $100,000 against their BAS/IAS liabilities. These concessions are available to employers (both businesses and not-for profits) with an aggregated annual turnover of less than $50m.
Cash Flow Boost – First Payment
The cash flow boost will be provided in two tranches.
- The first will be for the period from March 2020 to June 2020, with a minimum credit of $10,000 and a maximum of $50,000. This cash flow boost can be claimed against your total GST/PAYGW/PAYGI liabilities in the either the monthly or quarterly BAS/IAS ending 31 March 2020 onwards. If the credit will result in a refund for that BAS/IAS, you will receive the net refund amount within 14 days into your nominated bank account. Businesses on a quarterly reporting cycle can elect to change their reporting cycle from quarterly to monthly on the basis that this will result in a net refund position.
- The initial cash flow boosts will be delivered as credits in the activity statement system from the Government’s announced date of 28 April 2020. If you lodge early, you will not receive the cash flow boost before this date.
Example
| 1ST CASH FLOW BOOST – MONTHLY LODGER | PAYG Withholding amount per BAS/IAS | Cash Flow Boost Claim Amount | Claim period |
|---|---|---|---|
| PAYGW over $50,000 | $100,000 | $50,000 | March 2020 Activity Statement |
| $100,000 | $0 | April 2020 Activity Statement | |
| $100,000 | $0 | May 2020 Activity Statement | |
| $100,000 | $0 | June 2020 Activity Statement | |
| Totals (Mar-Jun) | $400,000 | $50,000 | |
| PAYGW $10,000 to $50,000 | $13,000 | $39,000** | March 2020 Activity Statement |
| $13,000 | $11,000 | April 2020 Activity Statement | |
| $13,000 | $0 | May 2020 Activity Statement | |
| $13,000 | $0 | June 2020 Activity Statement | |
| Totals (Mar-Jun) | $52,000 | $50,000 | |
| PAYGW under $10,000 | $2,000 | $10,000 | March 2020 Activity Statement |
| $2,000 | $0 | April 2020 Activity Statement | |
| $2,000 | $0 | May 2020 Activity Statement | |
| $2,000 | $0 | June 2020 Activity Statement | |
| Totals (Mar-Jun) | $8,000 | $10,000 |
** 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 20 activity statement (i.e., $13,000*3=$39,000).
| 1ST CASH FLOW BOOST – QUARTERLY LODGER | PAYG Withholding amount per BAS | Cash Flow Boost Claim Amount | Claim period |
|---|---|---|---|
| PAYGW over $50,000 | $100,000 | $50,000 | March 2020 Activity Statement |
| $100,000 | $0 | June 2020 Activity Statement | |
| Totals (Mar-Jun) | $200,000 | $50,000 | |
| PAYGW $10,000 to $50,000 | $13,000 | $13,000 | March 2020 Activity Statement |
| $13,000 | $13,000 | June 2020 Activity Statement | |
| Totals (Mar-Jun) | $26,000 | $26,000 | |
| PAYGW under $10,000 | $2,000 | $10,000 | March 2020 Activity Statement |
| $2,000 | $0 | June 2020 Activity Statement | |
| Totals (Mar-Jun) | $4,000 | $10,000 |
Cash Flow Boost – Second Payment
The second additional amount will be for the period June 2020 to September 2020, with a minimum credit of $10,000 and up to $50,000. This cash flow boost is claimed over the period June 2020 to September 2020 against your total GST/PAYGW/PAYGI liabilities.
- For monthly lodgers, each month (i.e., June, July, August and September) you can claim 25% of the amount each month against the total amount payable in the BAS/IAS. If the credit will result in a refund for that BAS/IAS, you will receive the net refund amount within 14 days into your nominated bank account.
- If you are a quarterly lodger, you claim 50% of the claim amount in the June 2020 quarter and 50% of the claim amount in the September 2020 quarter. If the credit will result in a refund for that BAS/IAS, you will receive the net refund amount within 14 days into your nominated bank account.
Example – Quarterly Activity Statement
Tim received initial cash flow boosts of $10,000. When Tim lodges his June and September 2020 quarterly business activity statements, he will receive additional cash flow boosts as follows:
- $5,000 for quarter ended June 2020; and
- $5,000 for quarter ended September 2020
Example – Monthly Activity Statement
Sarah received the maximum initial cash flow boosts of $50,000. When Sarah lodges her June to September 2020 business activity statements, she will receive additional cash flow boosts as follows:
- June 2020: $12,500;
- July 2020: $12,500;
- August 2020: $12,500; and
- September 2020: $12,500.
Additional Support for Businesses
The ATO has made the additional following changes to support businesses through these economic circumstances:
- The ATO will allow variations to reporting obligations to ensure businesses are able to maintain working capital. For example, we can vary the PAYG Instalment amount on your next BAS to take into account reduced income;
- The Instant Asset Write-Off (IAWO) has been increased to $150,000 for assets purchased from 12 March 2020 to 30 June 2020. The Instant Asset Write-Off will be available to businesses with an aggregated turnover of less than $500m;
- A wage subsidy of 50% will be available for eligible employers for their apprentices or trainees on wages paid between 1 January 2020 and 30 September 2020;
- A tax deduction of 50% of the cost of eligible assets with existing depreciation rules applying to the balance of the assets’ cost;
- Temporary relief for financially distressed businesses by providing higher thresholds and more time to respond to creditors;
- Temporary relief for directors from any personal liability for trading while insolvent;
- NSW will waive payroll tax for businesses with payrolls of up to $10m for three months (March, April, and May 2020);
- The payroll tax threshold will be increased to $1m for the next financial year in NSW (2020-21); and
- The ATO will consider remitting interest and penalties on any tax liability incurred after 23 January 2020.
Supporting the Flow of Credit
- Establishment of the Coronavirus SME Guarantee Scheme whereby the Government will guarantee 50% of new loans issued by eligible lenders to SMEs.
- Australian Office of Financial Management (AOFM) will manage a $15 billion facility to smaller ADIs and non-ADI lenders.
- $90 billion of new lending to the Australian business community, in particular SME’s, by ADI lenders with a reduce cash rate to 0.25%.
Support for Individuals and Households
- New six-month COVID-19 income support for both existing and new recipients of various benefit payments, such as JobSeeker Payment, Youth Allowance Payment, Parenting Payment, Farm Household Allowance and Special Benefit. Eligible individuals could receive $550 a fortnight;
- Eligible households to receive two separate payments of $750;
- Individuals in financial stress because of COVID-19 can have access of up to $20,000 of their superannuation early. The access to superannuation will be available in two instalments of $10,000 available in 2019-20, and a further $10,000 available in 2020-21;
- Temporary reduction in superannuation minimum drawdown rates of 50% for 2019-20 and 2020-21 financial years; and
- A decrease in social security deeming rates, with the upper deeming rate being 2.25% and the lower deeming rate 0.25%.
There is a lot to do and we understand and assure you that you are not on your own. Calibre Business Advisory is working closely with our clients to ensure you are kept up-to-date on policy changes and the potential impacts to your businesses.
Calibre Business Advisory invests more time than most firms into finding solutions for our clients. Contact our business advisors and tax accountants to discover new options for your business in Australia and beyond.
Important Disclaimer: Readers should not act solely on the basis of the material on this page. Items herein are general comments only and do not constitute or convey advice. Legislation and proposals of legislation are also subject to constant change. We therefore recommend that formal advice be sought before acting in any of the areas. This news article is issued as a guide to the readers. Calibre Business Advisory Pty Ltd and its associated entities disclaims any losses that may be incurred as a result of the reader undertaking any action based on this article.