Next week, the Commonwealth Parliament is expected to pass an emergency $17.6 billion stimulus package. The package is designed to boost the Australian economy – a boost that is needed due to the current and expected future impact of the Coronavirus. The Government’s hope is that its measures will boost spending (on things other than groceries) by households and assist businesses to ‘weather the storm’ caused by Coronavirus.
On Tuesday this week media outlets started to report an expected second round of stimulus, with some speculating that the second tranche will be directed to sectors most negatively exposed to the effects of Coronavirus, such as tourism and the sports industry. It may be that, while Parliament is sitting next week, further stimulus measures are also approved. But, as of this week we can expect that Parliament will approve the following assistance for households and businesses.
Approximately 6.5 million income support recipients will receive a one-off payment of $750. To be eligible, a person needs to have been (i) residing in Australia; and (ii) receiving an eligible payment on March 12, 2020. Eligible payments include: aged, veterans and disability pensions; carer payments; Abstudy and Austudy payments; Newstart, Youth and Farm Household allowances; and family tax benefits.
In addition, people who hold a pensioner concession card, a Commonwealth seniors health card or a veteran Gold card will also be eligible.
The payments are expected to be made in the first two weeks of April 2020. In total, the government is expecting to pay $4.8 billion.
There are also some additional potential payments for people who become unable to work because they have either been diagnosed with the Coronavirus or are in isolation for preventative reasons. The specific details of these payments have not been released.
Business assistance is available for eligible businesses, which are effectively divided into two categories. The first is category is businesses with a turnover of less than $50 million per year. The second category includes this category, but is extended to businesses with a turnover of less than $500 million per year.
Businesses with a turnover of less than $50 million per year and which employ workers will become eligible for a series of benefits. These include a boost to cashflow and assistance for employers with apprentices or trainees.
The tax system will be used to provide an untaxed cash benefit to eligible employers. The total benefit is expected to be $6.7 billion and will work as follows:
When the employer withholds tax on behalf of its employees and remits this money to the Tax Office, the Tax Office will then rebate 50% of the amount withheld to the employer. The maximum amount that will be rebated by the Tax Office is $25,000. (That is, businesses can claim the benefit on the first $50,000 of tax that they withhold).
The amount of tax being withheld is reported to the government via the business’s Business Activity Statement. Some businesses lodge these statements on a monthly basis. Others lodge these statements on a quarterly basis. Businesses which lodge on a monthly basis will receive rebates for the March, April, May and June months. Businesses which lodge on a quarterly basis will receive rebates for the March and June quarters.
Businesses will continue to receive the rebates until they reach $25,000. For example, if a business withholds $40,000 in taxes for the March quarter, it will receive a $20,000 rebate when it lodges its BAS for the March quarter. If it then withholds another $40,000 in taxes for the June quarter, it will only receive a further $5000 rebate when it lodges the June BAS, bringing the total rebated to $25,000.
All businesses which employ staff will receive a minimum of $2000. They will receive this even if the amount of tax withheld from staff is less than $4000. For example, a business might have only one employee who is paid $15,000 per year. As this is below the tax-free threshold, that business does not withhold any tax on behalf of that employee. The business will still receive the $2000 payment, however, because it is employing at least one person.
Where tax has been withheld, it is important to note that, while the money withheld and remitted to the Tax Office actually came from the employee, it is the employer who gets the financial benefit of the package.
Lastly, for small one or two person businesses which may operate using a trust, if a director receives a salary that business should qualify for at least the $2,000 – although this is something to check with your tax agent.
Apprentices and trainees constitute one of the most vulnerable employee groups within the community at this time. Businesses which employ apprentices or trainees will be entitled to a wage subsidy of 50% of that apprentice or trainee’s wages between 1 January and 30 September 2020. The subsidy is capped at $21,000 for the nine-month period, with no more than $7000 being payable in any of the three periods.
The apprentice or trainee must have been employed prior to 1 March 2020 and the business must have less than 20 full-time employees as of that date.
The total amount paid under this program is expected to be $1.3 billion.
At the moment, businesses with turnover of less than $50 million can instantly write off (depreciate) the full value of new assets purchased up to a limit of $30,000. Basically, businesses get an immediate tax deduction for asset purchases up to $30,000. The threshold of $30,000 will be increased to $150,000 and the range of businesses which are eligible will be expanded to include those with revenue of up to $500 million. The change applies to assets purchased before June 30, 2020. The government expects this change will reduce total tax collected by $700 million – which is to say that $700 million will remain in circulation within the economy.
There will be a further deduction for some purchased assets that exceed the threshold of $150,000. Provided the asset is eligible, over the 15 months to 30 June 2021 a business can depreciate 50% of the value of that asset. The remaining 50% of the value of the asset can be depreciated at normal rates. The government expects this measure to reduce the amount of tax collected by $3.2 billion.
If you would like to discuss any of the above measures, or generally talk to us about your personal financial management in the wake of the economic impact of the Coronavirus, please do not hesitate to get in touch.
As always, we hope that you and your loved ones remain safe from the virus and that the disruption caused by the community’s response does not affect you too negatively. Stay safe and we look forward to seeing you soon.
