The government announces increased tax benefits in response to the Coronavirus, which includes $25,000 cash boost for eligible businesses as well as an investment incentive.
The Australian Government announced its response to assisting the economy in light of the Coronavirus. This assistance will be provided through a $17.6 billion economic stimulus package.
The purpose of the economic stimulus package is to protect the economy by maintaining confidence, supporting investment and keeping people in their jobs. Additional household income and business support will flow through to strengthen the wider economy.
The Government has also stated that it will provide an additional $2.4 billion to support Australia’s health system to help manage any further Coronavirus outbreak.
At the time of writing this article, the package of Bills has not yet been passed by Parliament, but is expected to be considered for urgent passage in the final sitting week in March 2020.
The Government’s economic response targets four key areas:
- Support for business investment
- Cash flow assistance for employers
- Stimulus payments to households to support growth
- Assistance for severely affected regions
Support for business investment
Increased instant asset write-off threshold for small business
From Thursday 12 March 2020, the instant asset write-off threshold has been increased from $30,000 to $150,000.
The $150,000 instant asset write-off will be expanded to include businesses with an aggregated turnover of less than $500 million until 30 June 2020.
15-month business investment incentive
This is a time-limited 15-month investment incentive (through to 30 June 2021) which will operate to accelerate certain business depreciation deductions.
It will allow businesses to immediately deduct 50% of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost. This incentive will also be available to businesses with a turnover of less than $500 million.
It’s important to note that this investment incentive is proposed to only apply to new depreciating assets first used, or installed ready for use, by 30 June 2021.
Tax-free payments of $25,000 to small and medium businesses
Tax-free payments of up to $25,000 for eligible small and medium businesses i.e., with a turnover of less than $50 million that employ staff) based on their PAYG withholding obligations.
Cash flow assistance for Business
This assistance will support businesses to manage cash flow challenges resulting from the economic impacts of the Coronavirus. It will also help businesses retain their employees. These two measures are designed to support small and medium business and to improve business confidence
Boosting cash flow for employers – $25,000 cash payments
The Boosting Cash Flow for Employers measure will provide up to $25,000 back to small and medium-sized businesses, with a minimum payment of $2,000 for eligible businesses. The payment will provide cash flow support to businesses with a turnover of less than $50 million that employ staff.
The payment will be tax free and based on their PAYG withholding obligations. Eligible businesses will receive a payment equal to 50 per cent of taxes withheld from employees’ salary and wages up to $25,000.
Eligible businesses that pay salary and wages will receive a minimum payment of $2000, even if they are not required to withhold tax.
The payment will be delivered as a credit in the activity statement system from 28 April 2020 upon businesses lodging eligible upcoming activity statements. Where this places the business in a refund position, the ATO will deliver the refund within 14 days.
This measure will benefit around 690,000 businesses employing around 7.8 million people.
Supporting apprentices and trainees
The Government will support small business to help them retain their apprentices and trainees.
Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020 capped at $7000 each quarter per each eligible apprentice or trainee.
Businesses with less than 20 full-time staff will be eligible, however employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will continue to be eligible for the subsidy. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.
This measure will support up to 70,000 small businesses, employing around 117,000 apprentices.
Stimulus payments to households to support growth
The Government’s stimulus payments are designed to help 6.5 million Australians on lower incomes. This payment will support confidence and domestic demand in the economy.
The Government will provide a one-off $750 payment to social security, veteran and other income support recipients and eligible concession card holders. Around half of those that will benefit are pensioners.
There will be one payment per eligible recipient. For example, if a person qualifies for the one-off payment in multiple ways, they will only receive one payment. The payment will be tax free and will not count as income for Social Security, Farm Household Allowance and Veteran payments.
Assistance for severely affected regions
Support for Coronavirus-affected regions and communities
The Government has set aside $1 billion to support those regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on industries such as tourism, agriculture and education.
This will include the waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and the waiver of entry fees for Commonwealth National Parks. It will also include additional assistance to help businesses identify alternative export markets or supply chains. Targeted measures will also be developed to further promote domestic tourism.
Tax Obligation Administrative Relief
The Australian Tax Office (ATO) is also providing administrative relief for some tax obligations for people affected by the Coronavirus outbreak, on a case-by-case basis. The ATO will set up a temporary shop front in Cairns within the next few weeks with dedicated staff specialising in assisting small business. In addition, it will consider ways to enhance its presence in other significantly affected regions, making it easier for people to apply for relief. The ATO is considering further temporary shop fronts and face-to-face options.
If you would like further information about the proposed economic stimulus package and how it affects your business please contact our Melton Accountants on (03) 9746 6479.