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The Stimulus Package: $17.6b to support the economy

March 2020


The Government has announced a $17.6 billion investment package to support the economy as we brace for the impact of the coronavirus.

As the country braces for the evolving coronavirus pandemic, the Federal Government has released a yet-to-be-legislated four-part package that focuses heavily on business investment, sustaining employers, and driving cash into the economy. Here's the topsheet:

For Business:

  • An increase and e­xtension of the instant asset write-off
  • Accelerated depreciation deductions
  • Cash-flow assistance for SMEs, including tax-free payments of up to $25,000 for employers and a wage subsidy of up to 50% of an apprentice of trainee wage
  • Targeted support for severely impacted sectors, regions, and communities, particularly tourism.

For individuals:

·      A $750 tax-free payment to social welfare recipients, with the aim of driving cash into the economy.

So what does this mean for you and/or your business?

Business investment

Increase and extension of the instant asset write-off

Effective: 12 March, 2020

The instant asset write-off threshold will increase from $30,000 to $150,000 and access will be expanded to include businesses with aggregated turnover of less than $500 million until 30 June 2020.

The instant asset write-off reduces the tax liability of your business in the form of a tax deduction and enables your business to claim an upfront deduction for depreciating assets in the year it was bought and used (or installed, ready to use).

If your business is in a company structure with turnover under $50m, you will get back 27.5% in your 2019-20 company return if the company acquires an asset that is used by 30 June 2020. If your business is likely to make a tax loss for the year, then the instant asset write-off is unlikely to provide a short-term benefit to you.

This is the fourth increase or extension to the instant asset write-off and businesses will need to be wary of what they are claiming and when:

Instant asset write-off thresholds

Small Business*

Medium business**

Large business***

1 July 2018 - 28 January 2019

$20,000

-

-

29 January - 2 April

$25,000

-

-

2 April - 12 March 2020

$30,000

$30,000

-

12 March - 30 June 2020

$150,000

$150,000

$150,000

* aggregated turnover under $10 million

** aggregated turnover under $50 million

***aggregated turnover under $500 million

Assets will need to be used or installed ready for use from when the changes were announced on 12 March 2020 until by 30 June 2020 to qualify for the higher threshold.

Anything previously purchased does not qualify for the higher rate but may qualify for one of the other thresholds. Similarly, anything purchased but not installed ready for use by 30 June 2020 will not qualify.

The instant asset write-off only applies to certain depreciable assets, for example:

  • A concrete tank for a builder
  • A tractor for a farming business
  • A truck for a delivery business

You will also need ensure that there is a relationship between the asset purchased by the business and how the business generates income. You can't for example just go and purchase multiple television sets if they have no relevance to your business.

There are some assets that don't qualify such as:

  • Horticultural plants
  • Capital works (building construction costs etc)
  • Assets leased to another party on a depreciating asset lease, etc.

To access the instant asset write-off, your business needs to meet the following criteria:

  • Your business must be a trading business, buying the assets to carry on a business in its own right.
  • Your business needs to have an aggregated turnover under $500 million (the annual turnover of the business plus the annual turnover of any affiliates or connected entities). The aggregation rules are there to prevent businesses splitting their activities to access the concessions.  Another entity is connected with you if:

o   You control or are controlled by that entity; or

o   Both you and that entity are controlled by the same third entity

Accelerated depreciation deductions

Accelerated depreciation rules will also apply from 12 March 2020 until 30 June 2021, bringing forward deductions that would otherwise be claimed in later years.

Businesses with turnover of less than $500 million will be able to deduct 50% of the cost of the asset in the year of purchase and claim a further deduction in that year by applying the normal depreciation rules to the balance of the asset cost, unless the business can't claim it as an immediate deduction for the full cost of the asset.

This incentive will only be available in relation to new assets that are acquired after 12 March 2020 and are first used or installed ready for use by 30 June 2021. It will not apply to second-hand assets or buildings and other capital works expenditure.

Cash flow assistance for small and medium sized business

Tax-free payments up to $25,000 for employers

Tax-free cash flow support between $2,000 and $25,000 will be available to eligible businesses with a turnover of less than $50 million that employ staff between 1 January 2020 and 30 June 2020. It is not a cash payment but a credit equal to 50% of the PAYG amounts withheld from salary and wages paid to employees.

The entitlement will be triggered by the employer lodging their activity statement. If the credit puts the business in a refund position, the excess amount will be refunded by the ATO within 14 days.

If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $2,000 will still be made.

How your business lodges its activity statements determines how you'll get a credit.

  • Businesses that lodge activity statements on a quarterly basis will be eligible to receive the credit for the quarters ending March 2020 and June 2020.
  • Business that lodge on a monthly basis will be eligible for the credit for the March 2020, April 2020, May 2020 and June 2020 lodgments. The minimum $2,000 payment will be applied to the first lodgement.

Eligibility for the measure will be based on prior year turnover. We will have to wait for the legislation for the finer details.

Wage subsidy of up to 50% of an apprentice or trainee wage

Eligible employers can apply for a wage subsidy of 50% of the apprentice's or trainee's wage for up to 9 months from 1 January 2020 to 30 September 2020. To be eligible:

  • Payments are accessible to businesses with less than 20 employees
  • Employers will receive up to $21,000 per apprentice ($7000 per quarter)
  • Where the business cannot retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.
  • The apprentice or trainee must have been in training with the 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 also be eligible for the subsidy.

It is expected that employers will be able to register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020.

Targeted support for severely affected sectors, regions and communities

$1 billion of the stimulus package has been committed to support sectors, regions, and communities that will be disproportionately affected by the economic impact of the coronavirus, for example, tourism, agriculture and education are specifically mentioned.

Initial measures include:

  • Waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and Commonwealth National Parks
  • Additional assistance to help businesses identify alternative export markets or supply chains
  • Measures to promote domestic tourism

Further plans and measures will be developed with the affected industries and communities. Other administrative relief for some tax obligations will also be provided, including deferred tax payments up to four months.

Other initiatives to bring support to the communities are being considered.

For Individuals, household stimulus payments to drive cash into the economy

Tax-free $750 payment to social welfare recipients

A one-off, $750 cash payment will be made to pensioners, social security, veteran and other income support recipients and eligible concession card holders. There will be one payment per eligible recipient even if they qualify in multiple ways.

Payments will be from 31 March 2020 on a progressive basis, 90% are expected to be made by mid-April. The payment will be tax-free and will not count as income for social security, farm household allowance or veteran payments.

Casual employees able to access the Newstart 'sickness payment'

While not part of the stimulus package, the Prime Minister has stated that casual employees required to self-isolate or who contract the coronavirus will be eligible for a sickness payment (jobseeker payment) through Newstart. The normal waiting period for this payment will be waived.

More information

The Government has signalled that these initiatives may be followed by additional stimulus, however it's important to speak to your accountant now to find out find out more about your eligibility or how the stimulus package may benefit you and your business.

Contact us on 02 9957 4033 for more information.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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