The following is a broad summary of the key aspects of the Federal Government’s support package in response to the COVID-19 pandemic, as recently announced and enacted.
1. Cash flow assistance for businesses
The Government is providing cash flow assistance for eligible businesses (to manage cash flow challenges and to help businesses retain employees), in the form of:
- specific payments that are based on the amount of PAYG withheld from salary and wages paid to employees (and other similar payments – e.g., termination payments, director’s fees and payments to contractors that are subject to voluntary withholding arrangements); and
- wage subsidies paid to eligible employers who retain an apprentice or trainee.
Small and medium-sized businesses and not-for-profit entities, with an aggregated annual turnover of less than $50 million (usually based on their prior year’s turnover) that employ people, may be eligible to receive a total payment of up to $100,000 (with a minimum total payment of $20,000), based on their PAYG withholding obligations, in the following two stages:
Stage 1 payment
Commencing from the lodgement of March 20 BAS returns from 28 April 2020, eligible employers that withhold PAYG tax on their employees’ salary and wages will receive a tax-free payment equal to 100% of the amount withheld, up to a maximum of $50,000. Eligible employers that pay salary and wages will receive a minimum (tax-free) payment of $10,000, even if they are not required to withhold PAYG tax.
- Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020; and
- Monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgements. However, the payment for the March 2020 activity statement will be calculated as being three times the actual amount withheld.
The tax-free payment will broadly be calculated and paid by the ATO as an automatic credit to an employer, upon the lodgement of activity statements from 28 April 2020, with any resulting refund being paid to the employer. This means that:
Note that, the minimum payment of $10,000 will be applied to an entity’s first activity statement lodgement (whether for the month of March or the March quarter) from 28 April 2020.
Stage 2 payment
For employers that continue to be active, an additional (tax-free) payment will be available in respect of the June to October 2020 period, basically as follows:
- Quarterly lodgers will be eligible to receive the additional payment for the quarters ending June 2020 and September 2020, with each payment being equal to 50% of their total initial (or Stage 1) payment (up to a maximum of $50,000).
- Monthly lodgers will be eligible to receive the additional payment for the June 2020, July 2020, August 2020 and September 2020 activity statement lodgements, with each additional payment being equal to a quarter of their total initial (or Stage 1) payment (up to a maximum of $50,000).
The ATO will automatically calculate and pay the additional (tax-free) payment as a credit to an employer upon the lodgment of their activity statements from July 2020, with any resulting refund being paid to the employer.
Furthermore, eligibility for the above payments is subject to a specific integrity rule that is designed to stamp out artificial or contrived arrangements that are implemented to obtain access to this measure. In particular, if an employer or an associate enters into a scheme with the sole or dominant purpose of obtaining or increasing any of the above payments for a particular employer, for a period, the employer will not be eligible for any such payments for the relevant period.
2. Wages subsidies for apprentices and trainees
Employers with less than 20 full-time employees, who retain an apprentice or trainee who was in training with the employer as at 1 March 2020, may be entitled to Government funded wage subsidies equal to 50% of the apprentice’s or trainee’s wage paid during the nine months from 1 January 2020 to 30 September 2020. The maximum wage subsidy over the nine-month period will be $21,000 per eligible apprentice or trainee.
Employers can register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020. Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network (‘AASN’) provider.
3. Increasing the instant write-off threshold for business assets
Broadly, the depreciating asset instant asset write-off threshold will be increased from $30,000 (for businesses with an aggregated turnover of less than $50 million) to $150,000 (for businesses with an aggregated turnover of less than $500 million) until 30 June 2020.
The measure applies to both new and second-hand assets first used or installed ready for use in the period beginning on 12 March 2020 (i.e., the date on which this measure was announced) and ending on 30 June 2020.
As with the current instant asset write-off concession, the threshold will generally be applied to the GST-exclusive cost of an eligible asset (i.e., assuming the relevant business is entitled to an input tax credit for any GST included in the acquisition cost of the asset).
Importantly, this increased threshold also continues to operate on a ‘per asset’ basis, which means that eligible businesses can immediately write-off multiple assets (as long as each of the assets individually satisfy the relevant eligibility criteria).
4. Backing business investment – accelerating depreciation deductions for new assets
Broadly, a new time-limited 15-month investment incentive (which will be available up until 30 June 2021) will also be introduced to accelerate certain depreciation deductions for businesses with an aggregated turnover below $500 million, in respect of eligible depreciating assets.
This incentive basically allows a deduction equal to 50% of the cost of an eligible asset, with existing depreciation rules applying to the balance of the asset’s cost.
More specifically, the amount that an eligible entity (other than an SBE that is depreciating assets in its general small business pool) can deduct in the income year in which an eligible depreciating asset is first used or installed ready for use for a taxable purpose is:
- 50% of the cost (or adjustable value where applicable) of the asset; and
- the amount of the usual depreciation deduction that would otherwise apply (if it were calculated on the remaining cost of the asset).
Different rules will apply where an SBE is using the general small business pool (i.e., for assets that do not qualify for the instant asset write-off). In this case, the SBE may deduct an amount equal to 57.5% (rather than 15%) of the business-use portion of the cost of an eligible depreciating asset acquired by the entity in the year is it allocated to the pool.
5. Income support for individuals
From 27 April 2020, the Government will introduce a Coronavirus supplement of $550 per fortnight (payable to individuals currently receiving certain eligible income support payments) and will also temporarily expand access to certain income support payments, over a six-month period.
The Government will also provide two separate $750 tax-free payments to certain social security, veteran and other income support recipients, and to eligible concession card holders.
6. Introducing a new Coronavirus supplement
A new Coronavirus supplement at the rate of $550 per fortnight will be paid to individuals who are currently eligible for certain income support payments, including:
- Jobseeker Payment;
- Youth Allowance; and
- Parenting Payment (Partnered and Single).
According to the Government, anyone who is eligible for COVID-19 supplement will receive the full rate of the supplement of $550 per fortnight.
Furthermore, it appears that this new (additional) supplement will be paid to eligible individuals as part of their existing income support payments (e.g., Jobseeker Payment and Youth Allowance).