Federal Government’s Economic Response COVID19

2 June

Instant asset write offs

The Australian Government’s instant asset write-off threshold is increased from $30,000 to $150,000. It now includes businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.

Depreciation deductions

The Australian Government’s Backing Business Incentives program provides a 50% deduction on the cost of an eligible asset on installation.

  • Available to businesses with an aggregated turnover below $500 million
  • Existing depreciation rules apply to the balance of the asset’s cost.

Growth & Expansion

Primary producers who export into key overseas markets of certain high-value products, such as seafood, premium red meat, dairy and horticulture, may be eligible for the Australian International Freight Assistance Mechanism.

The Australian Government has launched a 15-month investment incentive to support business investment and economic growth by accelerating depreciation deductions.

Under the Coronavirus Small and Medium Enterprises (SME) Guarantee Scheme, the Australian Government announced it will guarantee 50 per cent of new loans issued by eligible lenders to SMEs. The Scheme will support up to $40 billion of lending to SMEs (including sole traders and not-for-profits).

Flexible Financial Institutions

The Australian Banking Association (ABA) announced banks will defer loan repayments for businesses with loans up to $10 million for up to six months.
The Reserve Bank of Australia cut rates to an unprecedented low as part of emergency action to support the economy and established a Term Funding Facility to encourage lending opportunities. This complemented an investment of $15 billion by the Australian Government to enable smaller investors to support small businesses.

All major banks set up links on their websites to accept requests to defer home loan repayments due to the effect of COVID-19.

New working from home expenses rules for individuals

7 April
The Australian Tax Office has announced special arrangements for individuals claiming working from home expenses due to the coronavirus crisis.

The special new arrangement will allow people to claim a rate of 80 cents per hour for all their running expenses, instead of calculating costs for specific running expenses as taxpayers would under normal circumstances. The shortcut method applies to expenses incurred after March 1 2020.

Multiple people living in the same house can claim this new rate individually, and it is no longer a requirement to have a dedicated work from home area in order to claim.

Read more at ATO

JobKeeper Package

The Federal Government’s $130 billion JobKeeper subsidy is intended to keep Australian employees in work. Around 6 million workers will receive a fortnightly payment of $1,500 (before tax) through their employer. The subsidy will start on 30 March 2020, with the first payments to be received by employers in the first week of May.

Key Points

  • A flat $1,500 per employee per fortnight payment to eligible businesses
  • Payment will come as a credit on a business’s ATO account
  • Will last for 6 months
  • First payment to businesses in May, however back dated to 30th March
  • The Job Keeper payment will be the same $1,500 for all staff; Full-time, Part-time or Casual (regardless of hours)
  • Eligible Individuals can only receive one benefit – Job Seeker allowance or Job Keeper payment
  • Businesses with up to date ATO lodgements. Any arrears owing to ATO in the first instance will be offset by any receipt entitlements
  • It is important to know there will be anti-avoidance provisions in the legislation.

Read the more here.

Read our analysis of the JobKeeper Rules.

Read the FAQs at treasury.gov.au

Change to foreign investment

The Australian government has temporarily reduced the foreign investment threshold to $nil effective from 30 March 2020

  • all foreign investments regardless of value in Australian assets including businesses and property must make application to FIRB. There is no carve out for treaty countries such as the USA and China
  • the review response timeframe has been increased from 30 days to up to 6 months
  • a proposal must receive a statement of no objection to proceed
  • urgent foreign investments applications for investments that protect and support Australian business and Australian jobs will be given priority.

Read more from Mark Bailey here

Banks will extend the six month deferral of loans

Businesses with total business loan facilities of up to $10 million (up from the $3 million small business threshold) will now be able to defer repayments for loans attached to their business for six months. During this period banks have also agreed to not enforce business loans for non-financial breaches of the loan contract (such as changes in valuations).

Boosting Cash Flow for Employers payments

The Government is providing temporary cash flow support of up to $100,000 for eligible small and medium-sized businesses, and not-for-profits (NFPs) that employ staff to help with their cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff. This will be done through two sets of cash flow boosts, with the first delivered from 28 April 2020, through credits in the activity statement system. Eligible businesses do not need to apply with a separate form.

Eligible businesses and NFPs, must have held an Australian Business Number on 12 March 2020 and lodge their activity statement to receive the credit. Charities registered with the Australian Charities and Not for profits Commission are eligible, regardless of when they were registered, if they meet the other eligibility requirements.

  • SME’s with aggregated turnover of under $50M are eligible for these Payments. This includes NFP’s and charities.
  • This is a Payment for employers employ people and are paying wages. The Payment effectively occurs in two tranches both ranging from $10-50K, to be paid from March – June, and then June – September.
  • The first tranche of Payments is essentially equal to the employers PAYGW for the period from January to June this year, up to a maximum of $50,000.
  • The second tranche of Payments is equal to the first tranche of Payments, provided the employer is still employing staff. It is referred to as the “Additional Payment”. The Second tranche is not reliant on the amount of PAYGW for the second half of the year.

Instant Asset Writeoff thresholds increased

From Announcement date – 12 March 2020, to 30 June 2020, eligible business can instantly write off assets purchased costing up to $150,0000. To be eligible, aggregated turnover up to $500 million.

Backing Business Investment

New incentive, giving a 50% deduction for assets installed ready for use before 30 June 2021. To be eligible, aggregated turnover up to $500 million.

Temporary relief for financially distressed businesses for 6 months

  • Increase in the threshold at where creditor can issue statutory demand from $2,000 to $20,000.
  • Statutory timeframe for a company to respond to a statutory demand will be extended temporarily from 21 days to six months.
  • Threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will temporarily increase from $5,000 to $20,000.
  • Time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.
  • Directors will be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business.

Apprentices & Trainees Subsidy

  • Available to small businesses employing fewer than 20 full-time employees who retain an apprentice or trainee (who was with business before 1 March 2020).
  • Applications can be made 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
  • Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).
  • Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network (AASN) provider.

Early access to superannuation measures

Allowed to take $10,000 out of super in the 2020FY and another $10,000 in the 2021FY (TAX FREE) when the following is satisfied:

  • you are unemployed; or
  • you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
  • on or after 1 January 2020:
    • you were made redundant; or
    • your working hours were reduced by 20 per cent or more; or
    • if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more.

Temporary reduction in superannuation minimum drawdown requirements – these are halved for the 2019/20 and 2020/21 years. This measure will benefit retirees holding these products by reducing the need to sell investment assets to fund minimum drawdown requirements.

ATO Concessions

The ATO have said they will work with businesses effected by COVID 19 to do the following:

  • Defer payments for up to 6 months
  • Vary instalments.
  • Change to monthly GST reporting
  • Low interest payment plans
  • Remitting interest and penalties.