Further to the Federal Government’s Part 1 Business Stimulus Package ($17.6B) the Government yesterday announced a further stimulus package referred to here as Business Stimulus Package Part 2 ($66B).
These business measures announced yesterday by the Government have been provided to support Australian businesses to manage the cash flow challenges and retain employees as result of COVID-19 virus pandemic . Assistance includes cash flow support to businesses and temporary measures to provide relief for financially distressed businesses. Detailed below are the following support measures;
- Boosting Cash Flow for Employers
- Increasing the Business Asset Instant Write-Off Scheme
- Backing Business Investment – Accelerated Depreciation
- Measures to Provide Credit Support
- Apprentices & Trainees Wage Assistance
- Temporary Relief for Financially Distressed Businesses
- Boosting Cash Flow for Employers – Two Tranches
( Extension of PAYG Withholding Tax Support x2 )
Please note the cash payments to employers are in two tranches “Boosting Cash Flow Boost for Employer Payments” (which is an extension and increase of previous announcements of the 12 March 2020) and also an “Additional Payment “ for those eligible entities as detailed below in two tranches;
Further to the Employer cash flow measure announced on 12 March 2020, the Government is providing up to $100,000 (in two tranches of up to $50,000) to eligible small and medium-sized businesses and not-for-profits (NFPs) that employ people with a minimum payment of $20,000. These payments will help businesses and NFPs with their cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff.
Small and medium-sized business entities with an aggregated annual turnover less than $50 million and that employ workers are eligible. NFPs, including charities, with aggregated annual turnover under $50 million and that employ workers will now also be eligible. This will support employment at a time where NFPs are facing an increasing demand for their services.
Tranche 1 Eligibility – Boosting Cash Flow for Employer Payments (up to $50,000)
Under the enhanced scheme, employers will receive a payment equal to 100 per cent of their salary and wages tax withheld (up from 50 per cent), with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $10,000.
How it Works
Eligibility – small and medium sized business entities and NFPs with aggregated annual turnover under $50 million (based on prior year turnover) and that employs workers will be eligible.
- The payment will be delivered by the ATO as an automatic credit in the Activity Statement system from 28 April 2020 upon employers lodging eligible upcoming Activity Statements.
- Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld, up to a maximum payment of $50,000.
- Eligible employers that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.
- The payments will only be available to active eligible employers established prior to 12 March 2020. However, charities which are registered with the Australian Charities and Not-for-Profits Commission will be eligible regardless of when they were registered, subject to meeting other eligibility requirements. This recognises that new charities may be established in response to the Coronavirus pandemic.
Timing of Payments – Boosting Cash Flow for Employer Payments
The payments will be applied to a limited number of Activity Statement lodgements. The ATO will deliver the payment as a credit to the entity upon the lodgement of their Activity Statements. Where the entity is in a refund position, the ATO will deliver the refund within 14 days.
Quarterly Business Activity Statement Lodgers
- Q3 (Jan+Feb+Mar’20) – lodgement due date 28 April 2020 – refund 14 days after lodgement
- Q4 (Apr+May+Jun’20) – lodgement due date 28 July 2020 – refund 14 days after lodgement
- Eligible to receive payments for BAS returns quarters ending March 2020 and June 2020
- If on our BAS lodgement list then the due dates above are extended by 30 days
Monthly Instalment & Business Activity Statement Lodgers
- M09 (Mar’20) – lodgement due date 21 April 2020 – refund 14 days after lodgement
- M10 (Apr’20) – lodgement due date 21 May 2020 – refund 14 days after lodgement
- M11 (May’20) – lodgement due date 22 June 2020 – refund 14 days after lodgement
- M12 (Jun’20) – lodgement due date 21 July 2020 – refund 14 days after lodgement
- Eligible to receive payments for BAS/IAS returns Mar’20, Apr’20, May’20 and Jun’20
- To provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (300%) of the March 2020 Business Activity Statement.
- The minimum payment will be applied to the entities’ first lodgement
- If on our BAS lodgement list then the Mar’20 and Jun’20 due dates are extended by 30 days
Tranche 2 Eligibility – Additional Payment (up to $50,000)
An additional payment is also being introduced in the July 2020 to October 2020 period. Eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments they have received. This means that eligible entities will receive at least $20,000 up to a total of $100,000 (ie up to $50,000 tranche 1 and up to $50,000 tranche 2) under both payments.
How it Works
To qualify for the additional payment, the entity must continue to be active.
Monthly Business Activity Statement Taxpayers – the additional payments will be delivered as an automatic credit in the activity statement system. This will be equal to a quarter of their total initial Boosting Cash Flow for Employers payment following the lodgement of their June 2020, July 2020, August 2020 and September 2020 activity statements (up to a total of $50,000).
Quarterly Business Activity Statement Taxpayers – the additional payments will be delivered as an automatic credit in the activity statement system. This will be equal to half of their total initial Boosting Cash Flow for Employers payment following the lodgement of their June 2020 and September 2020 activity statements (up to a total of $50,000).
Timing of Payments – Additional Payment
The additional payment will be applied to a limited number of activity statement lodgements. The ATO will deliver the payment as a credit to the entity upon lodgement of their activity statements. Where the entity is in a refund position, the ATO will deliver the refund within 14 days.
Quarterly Business Activity Statement Lodgers
- Q4 (Apr+May+Jun’20) – lodgement due date 28 July 2020 – refund 14 days after lodgement
- Q1 (Jul+Aug+Sep’20) – lodgement due date 28 October 2020 – refund 14 days after lodgement
- Eligible to receive payments for BAS returns quarters ending June 2020 and September 2020
- Each additional payment will be equal to half of their total initial “Boosting Cash Flow for Employers Payment” (up to a total of $50,000).
- If on our BAS lodgement list then the due dates above are extended by 30 days
Monthly Business Activity Statement Lodgers
- M12 (Jun’20) – lodgement due date 21 July 2020 – refund 14 days after lodgement
- M01 (Jul’20) – lodgement due date 21 August 2020 – refund 14 days after lodgement
- M02 (Aug’20) – lodgement due date 21 September 2020 – refund 14 days after lodgement
- M03 (Sep’20) – lodgement due date 21 October 2020 – refund 14 days after lodgement
- Eligible to receive payments for Activity Statement returns Jun’20, Jul’20, Aug’20 & Sep’20
- Each additional payment will be equal to a quarter of the total initial “Boosting Cash Flow for Employers Payment” (up to a total of $50,000).
- If on our BAS lodgement list then the Mar’20 and Jun’20 due dates are extended by 30 days
Refer to ATO Fact Sheet “Cash Flow Assistance for Business” which contains worked examples
- Increasing the Business Asset Instant Write-Off Scheme
No change to the Business Asset Instant Write-Off Scheme previously announced by the Government in the Business stimulus package announced on the 12 March 2020.
In summary, the Government has increased the instant asset write-off threshold from $30,000 to $150,000 and expanded the access to include businesses with an aggregated annual turnover of less than $500 million (up from $50 million) for asset acquisitions up to 30 June 2020.
Refer to ATO Fact Sheet “Delivering support for business investment”
- Backing Business Investment
The Government is introducing a time limited 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term by accelerating asset depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.
Refer to ATO Fact Sheet “Delivering support for business investment”
- Measures to Provide Credit Support
The Government, together with the Reserve Bank of Australia and the Australian Prudential Regulation Authority, are taking a coordinated action to ensure there is a flow of credit in the Australian economy, especially for small to medium sized businesses.
Coronavirus SME Guarantee Scheme
This scheme includes measures to ensure businesses can continue to access small business loans during this period of uncertainty. The government will look to provide a guarantee of 50 per cent to SME lenders for new unsecured loans to be used for working capital. SMEs with a turnover of up to $50 million will be eligible to receive these loans. The loan must have a maximum total size of $250,000 per borrower, be up to three years (with an initial six-month repayment holiday) and in the form of unsecured finance. The Scheme will commence early April 2020 and be available for new loans made by participating lenders until 30 September 2020.
Measures by the Reserve Bank of Australia
The Reserve Bank of Australia (RBA) has announced a term funding facility for the banking system, which will allow banks to have access to at least $90 billion at a fixed interest rate of 0.25%. The facility offers additional low-cost funding to banks if they expand their business lending, with particular incentives applying to new loans to SMEs. The RBA also announced a further reduction in the cash rate to 0.25% and is taking active steps to target a 0.25% yield on 3-year Australian Government Securities.
Measures Provided by Banks
In addition to the above, the major banks have all offered a range of cash flow assistance measures with regards to the deferral of loan repayments, interest rate reductions on existing loans and low fixed rate loan refinance options.
The range of offerings varies between banks and varies between commercial loans and residential loans. If you have a commercial loan and/or residential loan we strongly recommend that you contact your banker to see what the bank is offering particular to your circumstances.
Refer to ATO Fact Sheet “Delivering support for business investment”
https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Supporting_the_flow_of_credit_1.pdf
- Apprentice Wage Assistance
The Government is supporting small business to 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 9 months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).
Support will also be provided to the National Apprentice Employment Network, the peak national body representing Group Training Organisations, to co-ordinate the re-employment of displaced apprentices and trainees throughout their network of host employers across Australia.
Refer to ATO Fact Sheet “Cash Flow Assistance for Business” – refer to the end of the publication which contains worked examples
- Temporary Relief for Financially Distressed Businesses
The economic impacts of the Coronavirus and health measures to prevent its spread could see many otherwise profitable and viable businesses temporarily face financial distress. It is important that these businesses have a safety net to make sure that when the crisis has passed they can resume normal business operations. One element of that safety net is to lessen the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business.
The Federal Government will provide a safety net to lessen the threat of actions that could unnecessarily push business entities into insolvency and force the winding up of the business. There are four main elements of the package.
- There will be a temporary increase in the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive. The dollar value for insolvency claims will increase from $2,000 to $20,000 and the dollar value to initiate bankruptcy claims will increase from $5,000 to $20,000. Certain time periods (e.g. for responding to bankruptcy claims and responding to statutory demands) will be increased from 21 days to 6 months. There will also be an extension of the period of protection a debtor receives after making a declaration of intention to present a debtor’s petition from 21 days to 6 months. These measures will apply for a six-month period.
- 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. This measure will apply for six months. However, flagrant cases of dishonesty and fraud will still be subject to criminal penalties. Any debts incurred by the company will still be payable by the company.
- The Treasurer will also be given a temporary instrument-making power in the Corporations Act 2001. This will enable the Treasurer to temporarily amend the Act to provide relief under the Act or to modify obligations to enable compliance during the crisis. The instrument-making power will apply for six months.
- Owners or directors of a business that is currently struggling due to COVID-19, the ATO will look to tailor solutions. This may include temporary reduction of payments or deferrals of withholding enforcement actions including Director Penalty Notices and wind-ups.
Refer to ATO Fact Sheet “Temporary Relief for Financially Distressed Businesses”
- Next Steps
It is important that you consider your position and how these rules apply to your circumstances.
Our Client Account Managers will be in touch with you in due course re a review of your situation and determination of what action is required to access these Government benefits.
However, in the interim if there are pressing matters or you need urgent assistance then please contact direct your Client Account Manager who will be able to help you.
Further stimulus measures are expected to be released by the Government in the coming week(s) and as soon as they are released we will provide further client updates.
