The Federal Government will today announce an economic stimulus package in response to the coronavirus outbreak to hopefully help stimulate the economy. The measures will include incentives to fast track investment, apprentice wage subsidies and cash payments of up to $25,000 for small and medium businesses to save jobs and help businesses battle supply disruptions. In addition to the business measures there will be one-off cash payments to pensioners and Newstart recipients in a measure aimed at helping stimulate consumer demand.
A high level summary of the key items expected to be announced today are listed below. Please note following the formal release of the stimulus package we will provide a further detailed analysis.
Business Payments Up To $25,000
The government will include a $6.7 billion funding assistance package for small and medium businesses to assist with; the payment of wages, put on extra staff and invest or prepare for the downturn. Under these measures, eligible businesses with turnovers of up to $50 million will be eligible for tax free payments of up to $25,000.
Businesses that pay the ATO income tax (PAYG Withholding Tax) on employees’ salary and wages either monthly or quarterly will receive a payment equal to 50% of the amount withheld up to a maximum of $25,000.
Business Asset Write-Off Scheme
The current business instant asset write-off scheme will be significantly expanded. The expanded instant asset write-off is expected to operate from today to the 1 July 2020 to help stimulate business investment. At this time it is unclear whether this measure will be included in the announcements to be made today however if not announced today then the expectation is that there will be something in the May budget to this effect aimed at driving growth.
Under the present scheme, businesses with turnovers of up to $50 million can instantly write-off assets valued at up to $30,000.
Under the changes to be announced today the business turnover threshold will increase to $500 million and the asset value that can be written-off will increase to $150,000.
If contemplating a significant asset purchase(s) and you are seeking the access to the expanded instant asset write-off proposed measures above, we would recommend holding off (if this can be done) on the asset purchase until the formal release of the Government’s stimulus measures to ensure you are eligible and within the specified date range that will apply.
Apprentice Wage Assistance
Wage subsidies will be provided to small businesses who employ apprentices. The package will offer up to $7,000 each quarter as a wage assistance for each apprentice so small businesses can retain existing apprentices & trainees or re-employ apprentices & trainees who lose their position from a small business because of the coronavirus downturn.
Cash Payments to Pensioners & Newstart Recipients
It is expected that within the stimulus package there will be one-off cash payments to both pensioners and Newstart recipients to help stimulate consumer demand. No further details are available at this time on these proposed measures.
Tax Rates
At this point in time there has been no indication that the Government is looking to reduce marginal tax rates or offer tax rebates to taxpayers as a measure to help stimulate consumer spending. However, if the impact of the coronavirus deepens or lasts for a sustained period the Government may well look at marginal tax rates and/or tax rebates at the lower income levels as a further stimulus measure.
Next Steps
We will provide a more detailed update following the formal release of the Government’s stimulus package today which will include a detailed analysis of the implications and the benefits for small business.
In the interim, we would suggest you wait until the formal release and detailed analysis of the Government’s stimulus package which will be provided next week. However, should you have a pressing issue with a transaction that is in process or about to be entered into, then please contact your account manager.
