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Economic Stimulus #2 released

As the Coronavirus pandemic continues to have a societal and economic impact on Australian communities, the Federal Government has announced a second Economic Stimulus Package for businesses and individuals to the tune of $66.1 billion. This comes on the back of the initial Stimulus Package of $17.6 billion announced last week.

State governments and banking institutions have also announced measures to help businesses offset against the economic downturn and individuals cope with financial hardship.

In this article we look at the key measures form this latest Economic Stimulus Package, as well as this previously announced, to give a broad and comprehensive summary of the assistance available.


Business

Tax-free credits on PAYG Withholding, up to $100,000 in total

  • Eligible small and medium-sized employers will be provided a 100% tax-free credits of up to $50,000 (and a minimum of $10,000) on PAYG Withholding on wages to 31 March 2020.
  • A second tranche of tax-free, credits of up to $50,000 (and a minimum of $10,000) on PAYG Withholding on wages will also be paid for the period to 30 June 2020.
  • This second payment is calculated as the total credit in the first payment, split evenly over the June 2020 to October 2020 BAS/IAS lodgement period.
  • The credit is now calculated on 100% of PAYGW of your wages, paid in two separate calculation periods.
  • If these tax credits place an entity in a refund position, the ATO will deliver the refund within 14 days.

Key points about this tax account credit

  • If you take your ‘salary’ as a dividend or director's drawing and want to maximise your credit, you could explore changing the treatment of your remuneration from drawings to salary.
  • If you have an existing debt with the ATO this benefit will offset your existing liability.

How to apply for the PAYG Withholding tax account credit

This credit will automatically be processed upon lodgement for your BAS and IAS. Please contact your Accounting Adviser at The Peak Partnership before lodgement as in may be possible to further reduce your tax liability or increase your refund due to changed trading conditions.


50% subsidy on apprentice wages, up to $21,000

  • Eligible employers can apply for a wage subsidy of 50% of apprentice or trainee wages for up to nine months from 01 January 2020 to 30 September 2020 (up to a maximum of $21,000 per eligible apprentice or trainee).
  • If a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.


Tax Incentives for Small Business Owners

We reported on the increased and extended Instant Asset Write-Off in our earlier blog, but it's worth reinforcing that this incentive is now available for businesses with a turnover of less than $500 million

  • The immediate tax deduction threshold has been increased from $30,000 to $150,000 for assets purchased between 12 March 2020 and 30 June 2020.
  • Assets over $150,000 will attract an additional 50 percent depreciation rate of the asset cost in the year of purchase for assets purchased between 01 July 2019 and 30 June 2021

Key points about the Instant Asset Write-Off

It’s important to note that these are tax incentives, not cash back incentives. In other words, you need to spend the money, and pay income tax in order to get the tax benefit.

The tax benefits will be applicable for your FY 2020 and FY 2021 tax returns, which means you won’t see any benefit until you’ve lodged your 2020 and 2021 returns.

How to apply

This credit will be processed by your Accounting Adviser at The Peak Partnership upon preparation and lodgement for your 2020 and 2021 income tax returns (whichever financial year/s the eligible asset is acquired).


Tax Payment Deferrals

The Australian Tax Office (ATO) is providing SMEs payment deferral concessions for businesses directly impacted by COVD-19. These deferral options are outlined as follows:

  • Deferring by up to four months the payment date of amounts due through the Business Activity Statement (including PAYG instalments), income tax assessments, Fringe Benefits Tax assessments and excise.
  • Allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get faster access to GST refunds they may be entitled to.
  • Allowing businesses to vary PAYG instalment amounts to $0.00 for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
  • Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities.
  • Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low interest payment plans.

Key points about tax payment deferrals

  • You will still need to pay employee Superannuation Guarantee contributions.
  • These relief provisions are not automatically applied. We need to contact the ATO to make any of the above requests for assistance.

How to apply

Businesses can call the ATO’s Emergency Support Infoline on 1800 806 218 to discuss relief options based on their needs and circumstances.


Government underwritten cash flow loans for SME

  • The Federal Government will provide a guarantee of 50% of new loans written by banks and SME lenders to support new short-term unsecured loans to SMEs.
  • This does not mean the Federal Government is issuing or funding loans directly.
  • It means that the Government is providing a guarantee to banks and SME lenders to reduce their risk to provide unsecured loans to SMEs that need the cash for working capital.

Key point

Expect a new type of loan product issued by banks and non-bank lenders, tailored for SME that have been directly disrupted by Coronavirus.

How to apply

  • Contact your bank or lending institution about this package.
  • Refer to the ‘Coronavirus SME Guarantee Scheme’ and ask what new loan products are available to assist.


Queensland Government Business Concessions

Interest-Free Business Loans

The Queensland Government will offer $500 million in loans to eligible businesses to retain employees and maintain operations. Details are: 

  • Loans up to $250,000.
  • First 12 months is interest-free.
  • The State Goverrnment is currently taking expressions of interest before rolling the concessional loans out.

How to apply

To apply online, go to Queensland COVID-19 Jobs Support Loans.


UPDATED: Payroll Tax Concessions

The Queensland Government has confirmed its stimulus package in relation to Payroll Tax concessions for businesses affected by Coronavirus. The package includes:

  • refunds of two months’ Payroll Tax payments.
  • Payroll Tax ‘holiday’ for three months – ie. employers won’t have to pay Payroll Tax for three months.
  • deferral of Payroll Tax for the 2020 calendar year, until 14 January 2021.

This is different from the initial announcement, which included a deferral of payroll tax.

To be eligible for the refund, holiday and deferral, a business will need to be:

  • an employer that pays taxable wages of $6.5 million or less
  • an employer that pays taxable wages of $6.5 million or more that has been negatively affected by Coronavirus.

Employers who pay taxable wages of $6.5 million or less can apply for:

  • two month Payroll Tax refund;
  • three month Payroll Tax holiday;
  • Payroll Tax deferral for the 2020 calendar year.

Employers who pay more than $6.5 million in taxable wages and have been negatively affected by Coronavirus, can apply for:

  • Payroll Tax deferral for the 2020 calendar year;
  • two month Payroll Tax refund.

A business will be affected by Coronavirus if their current turnover, profit, customers, bookings, retail sales, supply contracts or other factors are negatively affected, compared with normal operating conditions.

How to apply

Complete the online Payroll Tax Refund/Holiday application form or ask your Accounting Adviser at The Peak Partnership for assistance.


Banks and Lending Institutions

Specific COVID-19 concessions have been announced by the following banks (and other lenders are expected to follow along similar lines):

Commonwealth Bank

  • Deferring repayments on a variety of business loan and overdraft products for six months.
  • Reducing commercial interest rates by 0.25% on selected loan types.
  • Waiving merchant terminal fees for impacted customers with CBA payment terminals for 90 days.
  • Waiving early redraw fees on business term deposit accounts (including Farm Management Deposit accounts).
  • Waiving establishment fees and excess interest on Temporary Excess products.
  • Deferring repayments on vehicle and equipment finance loans, and providing tailored restructuring options that meet individual customer needs.

How to apply: More information can be found here.

ANZ

  • Suspending interest repayments.
  • Deferral of business loan repayments for up to six months, assessed on a case-by-case basis.
  • Providing early access to term deposits without incurring break fees.
  • Providing access to additional credit subject to approval.

How to apply: Contact ANZ or your relationship manager.

NAB

  • Businesses needing fast access to cash can apply online for an unsecured QuickBiz Loan of up to $100,000 or QuickBiz Overdraft up to $50,000, subject to lending criteria and T&C.
  • Deferral of business loan repayments for up to six months, assessed on a case-by-case basis.
  • Extension of a business loan term by a period of up to three months, where individual circumstances warrant.
  • Support to restructure existing business loans, including equipment finance.
  • Business credit card deferred repayments.

How to apply: Contact NAB on 1300 769 650 (Monday to Friday 8.00 am - 6.00 pm) or your relationship manager.

Westpac

  • Continuing it's hardship assistance program.
  • Deferral of business loan repayments for up to six months, assessed on a case-by-case basis.
  • Small business overdrafts will be reduced by 2% for new and existing customers, effective 06 April 2020.
  • 1% reduction to variable interest rates on small business cash-based loans, effective 06 April 2020.
  • A 2.29% p.a. fixed rate home loan for one, two and three years for owner-occupied customers on principal and interest repayments with a Premier Advantage Package, effective 27 March 2020.
  • Special 12-month term deposit of 1.7% p.a. to provide customers a higher return on their savings, an increase of 0.7% (up to $500,000 per customer). For Australians aged 65 years and over the rate will be 2% p.a. for eight months (up to $500,000 per customer). Effective 27 March 2020.

How to apply: Contact Westpac or your relationship manager.


INDIVIDUALS

Income support for individuals

There will be an expansion to the eligibility of income support payments and the establishment of a new, time-limited coronavirus supplement. The amount will be equal to $550 per fortnight, payable to existing and new recipients of Jobseeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.

For more information, the Treasury has released detailed information on this measure (click here).

Payments to support certain concessional recipients

Social security, veteran and other income support recipients and eligible concession card holders will be eligible to receive two separate $750 payments (an increase from that announced in the first stimulus package). The payments are to be made from 31 March 2020 (first payment) and from 13 July 2020 (second payment).

The second payment will not be made to those eligible for the coronavirus supplement. If there are two eligible recipients in a family, both will become eligible for the payment. Therefore, a couple may receive a total of $3,000 in payments.

For more information, the Treasury has released detailed information on this measure.

Temporary early release of superannuation

Certain individuals affected by the coronavirus can access up to $10,000 of their superannuation in 2019-2020 and a further $10,000 in 2020-2021. Individuals will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.

The criteria for accessing super earlier is that you must satisfy one of the following conditions:

  1. You are unemployed.
  2. You are eligible to receive a Jobseeker payment, Youth Allowance for jobseekers, Parenting Payment (which includes the single and partnered payments), special benefit or Farm Household Allowance.
  3. You were made redundant on or after 01 January 2020.
  4. Your working hours were reduced by 20 per cent or more on or after 01 January 2020.
  5. If you are a sole trader, your business was suspended or there was a reduction in your turnover of 20 per cent or more on or after 01 January 2020.

Individuals eligible for early release can apply directly to the ATO through the myGov website, where they will need to certify that the above eligibility criteria are satisfied.


PEAK Summary

Everyone has been impacted by Coronavirus in some way and we're all coming to terms with the speed and frequency of change. As financial experts, we're keeping a close eye on the economic landscape and we intent to keep our audiences updated.

We encourage you to contact us if you need advice about your business or your finances.

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