Prepared by Matt Spindler
26 March 2020
WITH COVID-19 INTERRUPTING ALL OUR LIVES, THE GOVERNMENT HAS ANNOUNCED ADDITIONAL SUPPORT TO SMALL BUSINESSES. IN ADDITION TO PREVIOUS ANNOUNCEMENTS, PLEASE SEE BELOW MORE KEY POINTS FOR THE NEW MEASURES AS WE CURRENTLY UNDERSTAND THEM.
CASH FLOW SUPPORT FOR EMPLOYERS
1. Eligible businesses are any business that was a registered employer (registered for PAYG Withholding) prior to 12 March 2020. The turnover threshold to be eligible is $50 million per annum measured using turnover from the 2019 financial year (until 30 June 2020) i.e. the most recent year.
2. The maximum payment has been increased from $25,000 to $100,000 (split into two lots of $50,000).
3. The minimum payment has been increased from $2,000 to $20,000 (split into two lots of $10,000)
4. The first round will be calculated as 100% of the PAYG withholding of employees wages.
5. For quarterly lodgers, this will be 100% of your PAYG withholding for your March BAS up to a maximum of $50,000. The same calculation will occur in the June quarter but please note this aspect is limited to $50,000 in total up to and including 30 June 2020.
6. For monthly lodger, your March quarter payment will be 300% of the PAYG withheld in your March BAS with subsequent payments for April, May & June up to your maximum of $50,000.
7. An additional payment has been announced which is calculated as 100% of the payments received in point 5 and 6 above. This will split into two payments (50% each) which you will receive following lodgement of your June 2020 BAS and your September 2020 BAS.
8. The payments will be applied as a credit on your ATO account. Where this gives rise to a refund, the ATO has indicated they will issue refunds within 14 days.
9. The payments are tax-free to your business entity.
10. Please note, if you operate your business through a company and you withdraw these funds to meet personal payments, the payment from your company to you will have income tax implications. We will advise on this if required when we complete your March BAS.
SUPPORTING APPRENTICES & TRAINEES
1. To be eligible you must have fewer than 20 full-time employees and retain an apprentice and/or trainee. The apprentice or trainee must have been in training with a small business as at 1 March 2020.
2. This subsidy is also available if an eligible business re-engages an eligible out of trade apprentice or trainee.
3. Registrations open early April 2020.
4. There is an initial eligibility assessment that will be undertaken when you register. This assessment will be undertaken by an Australian Apprenticeship Support Network provider. This will likely be a web-based assessment.
5. The payments are calculated based on 50% of each apprentice’s wages capped at $21,000 in total (i.e. $7,000 per quarter).
6. The relevant period is the 9 months from 01 January 2020 to 30 September 2020.
SMALL BUSINESS LOANS (BANK LOANS)
1. The Australian Banking Association has announced a relief package that includes deferral of principal & interest repayments for all term loans and retails loans for a period of 6 months.
2. To be eligible you must have less than $3 million in total debt owed.
3. Please note interest will still be calculated on these loans.
4. At the end of the deferral period your loan will either be extended (to cover the additional repayments & interest) and/or your repayments will be increased for the remaining term of the loan.
SMALL BUSINESS LOANS (CORONA VIRUS SME GUARANTEE SCHEME)
1. Available for eligible businesses with turnover less than $50 million.
2. The Federal Government will guarantee 50% of new SME unsecured loans (not secured over assets such as real estate or equipment) issued by eligible lenders up to a value of $250,000.
3. The government will not repay 50% of the loan – it is simply a measure to give the banks more confidence to lend to SME’s.
4. The government is working with banks to help support unsecured lending to SME’s.
5. The Scheme commences in April 2020 and the loans will be available until 30 September 2020.
6. The loans will be for a 3-year term with an initial 6-month repayment deferral (please note they will likely still accrue interest in this period).
7. This measure does not apply to existing or refinanced loans.
8. The loans will have no establishment fees.
PAYROLL TAX (NSW)
1. Waiver of Payroll Tax for the months of April, May & June 2020.
2. Available for businesses that pay Payroll Tax to Revenue NSW (not PAYG Withholding) with a total payroll less than $10 million.
3. Increase in Payroll Tax threshold to $1 million effective from 1 July 2020.
LAND TAX DEFERRAL (NSW)
1. To be eligible you must have at least one non-residential property and total taxable land value (aggregated, excluding principal place of residence) below $1 million.
2. Eligible land taxpayers will be able to defer payment until post 30 June 2020.
3. Revenue NSW will contact eligible landholders.
AUSTRALIAN TAX OFFICE DEFERRAL SUPPORT
1. Deferring by up to four months the payment date of amounts due through the Business Activity Statement (including PAYG instalments), Income Tax assessments, Fringe Benefits Tax assessments and excise (careful planning will be required as they will need to be paid at some point).
2. Allow businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.
3. Allowing businesses to vary Pay As You Go (PAYG) instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters (you can choose to vary the Company Tax instalment to zero but bear in mind this could lead to a large amount due on completion of your 2020 tax returns).
4. Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities.
5. Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low-interest payments plans.
INSTANT ASSET WRITE OFF & ACCELERATED DEPRECIATION
1. Increase of the immediate asset write-off limit from $30,000 to $150,000 (please note at this stage we are assuming the deductibility of passenger vehicles will still be limited to the current cost limit of $57,581). Applies to assets acquired on or after 12 March 2020 and on before 30 June 2020.
2. Accelerated depreciation for assets over $150,000 (Please call us if looking to acquire a business asset over $150,000).
INCOME SUPPORT FOR INDIVIDUALS & SOLE TRADERS
1. Effective 27 April 2020, the government is expanding eligibility to income support payments to include sole traders.
2. New Coronavirus supplement payment to be paid at a rate of $550 per fortnight for 6 months. This is for all existing and new recipients of Job Seeker Payments, Youth Allowance, Parenting Payment, Farm Household Allowance and Special Benefit.
3. Sole Traders and causal workers who earn less than $1,075 per fortnight will be eligible for the full supplement.
4. Two one-off payments of $750 for people on certain Centrelink benefits.
EARLY ACCESS TO SUPERANNUATION
1. To be eligible you must:
(a) Be an individual or sole trader AND
(b) Been unemployed OR
(c) Eligible for Jobseeker, Youth Allowance, Parenting Payment etc OR
(d) Been made redundant on or after 1 January 2020 OR
(e) Had your working hours reduced by 20% or more, or if you are a sole trader, had your business suspended or your turnover had reduced by 20% or more.
2. This measure is for people who are in financial distress.
3. Applications can be made through MyGov from mid-April 2020.
4. Eligible persons who are approved will be able to access $10,000 from their superannuation prior to 30 June 2020 and an additional $10,000 between 1 July 2020 and 30 September 2020.
5. These payments will be tax-free and wont affect eligibility for other Centrelink benefits.
Please note that any advice relating to employees should be from Fair Work, your employment lawyer or your HR advisor. Fair Work has published the following:
MINIMUM PENSION PAYMENTS
1. Minimum pensions drawn from superannuation have been reduced by 50% for 2020 and 2021 financial years.
2. We will contact all clients prior to 30 June to advise of minimum pension rates.
IT’S NOT “FREE” MONEY
As a final word on the above announcements please bear in mind this money may not be “free”. Firstly, any loan taken out, even under concessional conditions, will need to be repaid at some point. While short-term survival is the highest priority, please consider the longer term impact this may have.
Secondly, the government is stepping in to try and keep the economy afloat in the short-term. At some stage, this money will likely need to be repaid indirectly. The more the government spends now, the longer it will take to recover. In my opinion, it is likely once the Corona Virus is overcome we may be looking at significant tax reform and increased taxes for a reasonable period of time (hopefully I’m wrong). Please note this is only my opinion but I believe it is worth bearing in mind before everyone jumps in to collect whatever they can off the government (even if they don’t need it to keep their business afloat). The recent hoarding suggests many people will take everything they can get which is why I believe we may be in for an extended recovery period.