In response to the Coronavirus outbreak in Australia and around the globe, the Government of Australia announced a stimulus package last week . Find below a summary of the information available in relation to the financial assistance, eligibility and timing for Australian businesses.
The below measures are planned to be introduced to parliament in the final Autumn sitting week of 22 to 26 March 2020 for urgent consideration and implementation.
Increasing the instant asset write-off (IAWO)
The instant asset write-off threshold has been increased from $30,000 to $150,000 and expanded access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million). This applies from 12 March 2020 until 30 June 2020, for new or second‑hand assets first used or installed ready for use in this timeframe.
The threshold applies on a per asset basis, so eligible businesses can immediately write‑off multiple assets. As it stands today, the IAWO is due to revert to $1,000 for small businesses (turnover less than $10 million) from 1 July 2020.
Business benefits from increased asset threshold
Under the new $150,000 instant asset write‑off, businesses would claim an immediate deduction of up to $150,000 for purchases of the assets in the 2019‑20 income year. At the company tax rate of 27.5 per cent, business will pay up to $41,250 less tax in 2019‑20.
This will improve cash flows and help businesses withstand and recover from the economic impact of the Coronavirus.
We'll provide more information about how to access the IAWO as it becomes available.
Backing business investment (BBI)
A time limited 15 month investment incentive to support business investment and economic growth over the short term, by accelerating depreciation deductions. This applies to eligible assets acquired from 12 March 2020 and first used or installed by 30 June 2021. Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset cost.
The key features of the incentive are:
benefit — deduction of 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost
eligible businesses — businesses with aggregated turnover below $500 million
eligible assets — new assets 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 announcement and first used or installed by 30 June 2021. Does not apply to second‑hand Division 40 assets, or buildings and other capital works depreciable under Division 43
Small business benefits from the BBI
Under the new BBI, businesses would claim an up-front deduction of 50 per cent for assets before placing the asset in their small business simplified depreciation pool. They can still claim a further 15 per cent deduction on the depreciated value of the asset. If a business was to purchase a truck of $260,000 under the new BBI, the business can claim an up-front deduction of 50 per cent of the truck’s value ($130,000) before placing the asset in their small business simplified depreciation pool. Then, a further 15 per cent deduction can be claimed on the depreciated value of the truck ($19,500). As a result of the two deductions, the business will be able to claim a deduction totalling $149,500 in the 2019-20 income year, $110,500 more than under existing arrangements. At the company tax rate of 27.5 per cent, the business will pay $30,387.50 less tax in the 2019-20 income year.
Boosting cash flow for employers
Provides $25,000 back to small and medium-sized businesses, with a minimum payment of $2,000 for eligible businesses. The payment will provide cash flow support to businesses with a turnover of less than $50 million that employ staff. The payment will be tax free.
Small and medium business entities with aggregated annual turnover under $50 million and that employ workers will be eligible. Eligibility will generally be based on prior year turnover.
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.
Eligible businesses that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 50 per cent of the amount withheld, up to a maximum payment of $25,000.
Eligible businesses that pay salary and wages will receive a minimum payment of $2,000, even if they are not required to withhold tax.
The Boosting Cash Flow for Employers measure will be applied for a limited number of activity statement lodgments. The ATO will deliver the payment as a credit to the business upon lodgment of their activity statements. Where this places the business in a refund position, the ATO will deliver the refund within 14 days.
Monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgments. To provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (150 per cent) in the March 2020 activity statement. The minimum payment will be applied to the business’ first lodgment.
Business benefits from the measure
If a business was to 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, the business reports withholding of $15,008 for its employees on each business activity statement (BAS).
Under the Government’s changes, the business will be eligible to receive the Boost on lodgment of each of her BAS. They would receive:
A payment of $22,512 for the March period, equal to 150 per cent of the total withholding.
A payment of $2,488 for the April period, before the business reaches the $25,000 cap.
No payment for the May period, as the business has now reached the $25,000 cap.
No payment for the June period, as the business has now reached the $25,000 cap.
Supporting apprentices and trainees
If you employ an apprentice or trainee you may be eligible for a wage subsidy of 50 per cent of their wage paid from 1 January 2020 to 30 September 2020. You can register for the subsidy from early April 2020.
The Government is supporting small business to retain their apprentices and trainees. 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 from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer.
Employers will be reimbursed up to a maximum of $21,000, per eligible apprentice or trainee ($7,000 per quarter).
Support will also be provided to the National Apprentice Employment Network, who are responsible for coordinating the re‑employment of displaced apprentices and trainees throughout their network of host employers across Australia.
The subsidy will be available to small businesses employing fewer than 20 full‑time employees who retain an apprentice or trainee. 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. The apprentice or trainee must have been in training with a small business as at 1 March 2020. Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network (AASN) provider. Employers can register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020.
The ATO will provide administrative relief for certain tax obligations (similar to relief provided following the bushfires) for taxpayers affected by the Coronavirus outbreak, on a case-by-case basis. The ATO will set up a temporary shop front in Cairns within the next few weeks with dedicated staff specialising in assisting small business. In addition, the ATO will consider ways to enhance its presence in other significantly affected regions to make it easier for people to apply for relief, including considering further temporary shop fronts and face-to-face options.
If you have been affected by the Coronavirus, the ATO can work with you to defer some payments and vary instalments you have due.
Monthly GST credits
Businesses on a quarterly reporting cycle may elect to change their GST reporting and payment to monthly, to get quicker access to GST refunds you are entitled to. You can only change from the start of a quarter, so a change now will take effect from 1 April 2020.
Pay as you go instalments
If you're a quarterly pay as you go (PAYG) instalments payer you can vary your PAYG instalments on your activity statement for the March 2020 quarter. You can do this by lodging a revised activity statement before your instalment is due and before you lodge your income tax return for the year. Businesses that vary their PAYG instalment rate or amount can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
Remitting interest and penalties
Where your business is affected by the Coronavirus, the ATO will consider remitting interest and penalties applied to tax liabilities incurred after 23 January 2020.
Low interest payment plans
If your business has been affected by the Coronavirus and you need help to pay your existing and ongoing tax liabilities, you can contact us to discuss entering a low interest payment plan.
Employers will still need to meet their ongoing super guarantee obligations for their employees.
Health and safety
As an employer, you're required to ensure the health and safety of your workers. If an employee is at risk of infection from Coronavirus, you should request the employee seek medical clearance from a doctor, work from home or not work during the risk period.
You need to provide information and procedures to all employees and contract staff. Inform staff who meet the isolation criteria that they should remain isolated in their home.
$750 Stimulus Package
Low income earners will receive a one-off payment of $750 to assist with the effects of the Coronavirus pandemic. This includes people on the Age Pension, Newstart, the Disability Support Pension, Carers' Allowance, Youth Allowance, Veterans’ Affairs payments, Family Tax Benefit and those holding a Pensioner Concession Card or Commonwealth Senior Health Card.
People who receive these payments or hold the above mentioned cards will receive the payment automatically. We note that the payment will be subject to legislation passing and will be tax exempt. The government will introduce these measures for discussion and implementation at the end of March.
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