• Supporting business investment
• Cash flow assistance to help small and medium sized business to stay in business and keep their employees in jobs
• Targeted support for the most severely affected sectors, regions and communities
• Household stimulus payments that will benefit the wider economy

Brett Kelly

B.Bus, CA, M.Tax, FTIA

Founder & CEO of Kelly Partners Group Holdings (ASX: KPG)

Government Coronavirus Stimulus Package

The Federal Government has announced its $17.6 billion Corona Virus Stimulus Package that is designed to bolster the Australian economy as the illness continues to spread. The Prime Minister, Scott Morrison said the stimulus package would have three priorities:

• Keep people in work
• Keep businesses open and
• Ensure the economy bounces back when the spread of the disease abates.

The key measures are summarised as follows:

Grants of up to $25,000 for Small Businesses

One of the most significant offerings for small business is a grant of up to $25,000 for small-to-medium businesses with employees. Businesses with turnover of up to $50 million, that employ staff in the period between January 1, 2020 and June 30, 2020 will be eligible for the funding.

The payments will be tax free and equal to 50% of employee’s PAYG withholding amount on your March and June quarterly BAS’s. If you lodge monthly, it will apply to the March to June BAS’s (with March’s withholding amount multiplied by 3 then 50% to make up for January and February). This will be done until you reach the $25,000 cap.

The funds will be delivered as a credit in the activity statement system, so you will pay a reduced amount upon lodgement. (For example, if your March quarter PAYG withholding is over $50,000, you can simply pay $25,000 less than the overall net amount payable on your BAS, and the subsequent credit will match the difference.) If your credit amount would put you into a refund position, payments of refunds will commence after 28 April 2020.

Those that pay wages but are not required to pay tax are likely to receive a minimum payment of $2,000.

TIP: If you don’t pay wages for principals, and you wouldn’t get the full $25,000 benefit, pay some PAYG withholding for principals for March to June and get 50% of it back as a tax-free windfall. 

Keeping Apprentices Employed

In a bid to keep apprentices and trainees employed in their roles, the Government will offer eligible employers (who employ fewer than 20 employees) a wage subsidy of 50% of the apprentice’s or trainee’s wage for up to 9 months from January 1, 2020 to September 30, 2020.  

The subsidy will be limited to $21,000 per apprentice - $7,000 per quarter for the first three quarters of 2020. PM Scott Morrison reportedly said, “We want to ensure that as we go through these difficult months and quarters ahead, that young people and apprentices will be able to continue. As a result, we’ll be ensuring that we will provide a wage subsidy which will support 117,000 apprentices right across Australia.”

Instant Asset Write-Off Extension

In a bid to encourage investment, the Prime Minister has also pledged to significantly extend the instant asset write-off for small and medium-sized businesses.

Currently, the tax write-off is available to businesses with a turnover of up to $50 million, for purchases of up to $30,000. That will be extended to include companies with turnover of up to $500 million and purchases of up to $150,000. The extension will apply until June 30, 2020.

For depreciable assets acquired from March 12, 2020 to June 30, 2020, the instant asset write-off threshold will increase from $30,000 to $150,000. Further, it will be available for businesses with group-wide annual turnover below $500 million (up from $50 million). This allows a full deduction for the cost to acquire the asset (new or second-hand), rather than deducting the cost over a number of years. The threshold is net of any GST credit. For example, a piece of equipment costing $165,000 (including $15,000 of GST for which you are entitled to claim a GST credit) will not qualify – the net-of-GST-credit cost must be less than $150,000. 

In addition, the Government is accelerating depreciation deductions, through a limited 15-month investment incentive. Until June 30, 2021 businesses with a turnover of less than $500 million will be able to deduct an additional 50% of an asset cost in the year the asset is purchased.

One-Off Payments

The Government has confirmed it will provide one-off $750 tax free payments to pensioners, social security, veteran and other income support recipients. It will be tax free, and not count as income for certain means-tested benefits.  Payments will commence from 31 March.  

Targeted Sector Support

Finally, the Government will commit $1 billion to support businesses in sectors that have been severely impacted such as travel, tourism, agriculture and education. This support will include waiving fees and charges for business operating in the Great Barrier Reef Marine Park and in other national parks, plus assistance in identifying new export markets and supply chains. There will also be a push to promote domestic tourism, the Government says.

There will also be administrative relief for certain tax obligations, including deferral of tax payments by up to four months. This administrative relief will be provided on a case-by-case basis and businesses will need to apply. We expect more details will follow on eligibility and the application process.