Jump to Section
MELBOURNE, 23 March 2020 – Across the weekend both the Federal and Victorian Governments released stimulus packages in response to the detrimental economic impact of the Coronavirus. We have summarised the key features of these responses below.
Both levels of Government noted that additional stimulus initiatives are likely to be released in the near future as the true economic impact of the Coronavirus becomes clearer. Further, the Federal and Victorian Budgets will be delayed to later in the year.
The Australian Government yesterday announced its 2nd stimulus package to support businesses, workers and households due to the likely financial impact of the Coronavirus.
The key aspects of this 2nd stimulus package include:
- The previously announced tax-free payment of $25,000 for employers with under $50 million turnover has been increased to $50,000. An additional payment equal to this amount for employers will also be available from July to October 2020, taking the total available payments to $100,000 (minimum $20,000).
- Making loans available for SMEs to meet cash flow needs with the Government providing a guarantee of 50% of the loan. $40 billion will be made available under a new Coronavirus SME Guarantee Scheme.
- The Banks having access to at least $90 billion in funding at a fixed interest rate of 0.25% through the RBA providing a term funding facility for the banking system. By reducing funding costs for banks, it is intended this will help reduce interest rates for borrowers.
- The introduction of laws to make it harder for creditors to force companies into liquidation and the ATO will work with companies and directors that have amounts outstanding to the ATO.
- Support to low-income individuals and households, through additional payments and allowing early access to Superannuation.
Further, the measures need to become law through the introduction of legislation. Given the urgency of these support measures, the Government intends to introduce the stimulus package into Parliament this week.
The key aspects of the Victorian Government’s tax measures to support business include:
- A full waiver of Payroll Tax for the 2019-20 financial year for businesses with annual taxable wages of up to $3 million.
- For those businesses with annual taxable wages up to $3 million, they can also defer paying payroll tax for the first quarter of the 2021 financial year.
- Deferral of 2020 land tax payments where the Taxpayer has at least one non-residential property and total taxable landholdings below $1 million.
As always, there will be certain eligibility requirements so please reach out if you would like to understand whether your business qualifies for the support.
In the meantime, we have outlined below the key details of each of the above measures based on announcements from the Governments and other available information.
Federal Government Response
Cash Flow Support for Business
Boost to Employers
The Government has increased the tax free payment to be made to businesses with aggregated annual turnover under $50 million. This payment is designed to cover salary costs as follows:
- The payment will now be equal to 100% (up from 50%) of PAYG withheld for businesses that withhold tax, with a minimum of $20,000 and up to a maximum of $100,000. (This is an increase on the previous maximum amount of $25,000)
- For those businesses that pay salary and wages but are not required to withhold tax will also receive the minimum payment of $10,000.
- Not for Profits, including charities, with aggregated annual turnover under $50 million and that employ workers will now also be eligible.
- The payments will only be made to active eligible employers established prior to 12 March 2020. This seems to indicate that the business needs to have registered for PAYG withholding by this date and had engaged employees.
The payment will be made by the ATO and will appear as a credit on activity statements lodged from 28 April 2020 onwards:
- Quarterly lodgers can access up to $50,000 of the credit in their March 2020 and June 2020 quarterly activity statements.
- Monthly lodgers can access the credit in their March 2020 through to June 2020 monthly activity statements. As monthly lodgers will only have one month’s worth of PAYG withholding in their March activity statement (compared to quarterly lodgers who will have three month’s worth), the March credit will be calculated at 300% of the March PAYG withholding. For example, if a business has $10,000 of PAYG withholding in March, they will be entitled to a credit of $30,000 for their March BAS.
- The additional maximum amount of $50,000 will be made via activity statements lodged through the July-October 2020 period ie. the payment will be staggered across the activity statements to be lodged. This 2nd payment will be calculated by reference to the amount received in the activity statements lodged in respect of the 2020 financial year.
- Should the payment put the business in a credit position for that activity statement, the credit will then be refunded by the ATO.
Temporary relief for financially distressed businesses
The purpose of this measure is to allow businesses to resume normal operations once the Coronavirus threat has eased. This will be achieved by:
- The Government temporarily increasing the threshold at which creditors can issue a statutory demand on a company or to initiate bankruptcy proceedings against an individual;
- Temporarily increasing the time companies and individuals have to respond to statutory demands received from creditors;
- Providing temporary relief for directors from any personal liability for trading whilst insolvent; and
- The ATO working with business owners and directors by temporarily reducing payment requirements, delaying enforcement actions including Director Penalty Notices and wind-ups and more easily allowing deferrals of amounts owed to the ATO.
Other Measures Previously Announced
There is no change to these measures previously announced on 12 March:
- The increase in the instant asset write-off threshold to $150,000 ie. the ability to immediately write-off an asset for use by 30 June 2020.
- The investment allowance which accelerates depreciation deductions for the purchase of new depreciable assets up to 30 June 2021, so that 50% of the asset’s cost can be claimed in the year of purchase.
- Support to businesses taking on apprentices.
Supporting the flow of Credit for Business
This represents a co-ordinated approach by the Government, the Reserve Bank of Australia (“RBA”) and the Australian Prudential Regulatory Authority (“APRA”) to ensure the flow of credit in the Australian economy. There are various targeted measures to support the flow of credit and these include:
- Immediate cash flow needs for SMEs – a Coronavirus SME Guarantee Scheme will be established whereby the Government will provide a guarantee of 50% to SME lenders to support new short-term unsecured loans to SMEs. This is designed to provide businesses with funding to meet cash flow needs as lenders should be more willing to lend. This scheme will commence in early April 2020 and will be available for new loans until 30 September 2020. The loans will have a maximum size of $250,000 and will be up to three years, with an initial six month repayment holiday.
- Quick and efficient access to credit for SMEs – a temporary exemption from responsible lending obligations will be introduced for lenders providing credit to existing small business customers.
- RBA supporting the flow and reducing the cost of credit – Banks will now have access to at least $90 billion in funding at a fixed interest rate of 0.25%. This will reduce funding costs for banks, which in turn should help reduce interest rates for borrowers. There will be specific incentives provided to the banks in making new loans to SMEs. The timeline of when funds will be made available and the process to apply for such funding is still to be released.
- Easing of APRA regulations — banks will have their capital ratios reduced to allow them to make additional loans to businesses in order for the RBAs $90 billion facility to the banks to be effectively implemented.
- Support for Non-Authorised Deposit-Taking Institutions (Non-ADI) and smaller ADI lenders – $15 billion will be made available to these lenders. This will assist smaller lenders, who will not benefit from the RBA’s $90 billion funding facility, to maintain access to funding and support competition in the lending market.
Support for individuals & household
Significant payments to assist lower-income Australians will be made, along with various measures to assist self-funded retirees and age pensioners. These measures include:
- Income support – over the next six months, the Government is temporarily expanding eligibility to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight. This will be paid to both existing and new recipients of Jobseeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit. This payment recognises many Australians will be out of a job for extended periods and payments should commence from 27 April 2020. Importantly sole traders and contract workers should be eligible for this payment
- Support to households – two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders. The first payment will be made from 31 March 2020 and the second payment will be made from 13 July 2020.
- Early release of superannuation – individuals affected by the Coronavirus can access up to $10,000 of their superannuation in the 2020 financial year and a further $10,000 in the 2021 financial year. Eligibility requirements around being unemployed, having working hours reduced, sole traders having reduced turnover etc. Will need to apply to the ATO but no tax will be payable on the amounts released.
- Temporarily reducing superannuation minimum drawdown rates – this will be available for account-based pensions and similar products for the 2020 and 2021 financial years. This will benefit retirees with account-based pensions and similar products by reducing the need to sell investment assets to fund minimum drawdown requirements. The default minimum drawdown rates will be reduced by 50% for the 2020 and 2021 financial years.
- Reduction to social security deeming rates – due to low interest rates and its impact on the income from savings, this change will benefit around 900,000 income support recipients, including around 565,000 Age Pensioners. They will, on average receive around $105 more of the Age Pension in the first full year the reduced rates apply.
Victorian Government Response
The Victorian Government announced on 21st March a $1.7 billion economic survival and jobs package,
Payroll Tax Relief for Business
The Government will provide full payroll tax refunds for the 2020 financial year to SME businesses that have a payroll (taxable wages) of less than $3 million. The $3 million threshold will be calculated on a Group basis.
The payment of the payroll tax refunds should commence from 27 March 2020, with the State Revenue Office (“SRO”) to contact eligible businesses.
For a business with a $3 million payroll, they will be entitled to the maximum refundable amount of $113,975. A business with say a $2 million payroll, will be entitled to a refund $65,475.
These businesses will also be able to defer any payroll tax for the first three months of the 2021 financial year until 1 January 2021. This is a deferral and not a waiver, but will free up cashflow for the business.
Land Tax Deferral
Land owners due to pay 2020 land tax that have at least one non-residential property and total taxable landholdings below $1 million have the option of deferring their 2020 land tax payment. The payment due date can be deferred to 31 March 2021.
The SRO will again contact taxpayers eligible for this deferral.
Other Support Measures
Various other measures were announced to provide relief to businesses, which include:
- Businesses that have paid for a renewable liquor licence for 2020 will be reimbursed their licence fee and those yet to pay will have the fee waived.
- The Government paying all outstanding supplier invoices within five business days – releasing up to $750 million into the economy earlier.
- Supporting the hospitality sector by waiving liquor licensing fees for 2020 for affected venues.
- Providing $500 million to establish a Business Support Fund. The fund will support the hardest hit sectors, including hospitality, tourism, accommodation, arts and entertainment, and retail.
- Establishing a $500 million Working for Victoria Fund in consultation with the Victorian Council of Social Services and Victorian Trades Hall Council. The fund will help workers who have lost their jobs find new opportunities, including work cleaning public infrastructure or delivering food.
- Commercial tenants in government buildings will be able to apply for rent relief.
For a more detailed discussion of these measures, please refer to the Treasury : https://treasury.gov.au/coronavirus and the SRO : https://www.sro.vic.gov.au/news/new-tax-measures-support-businesses
Otherwise please feel free to reach out to your contact person at Slomoi Immerman Partners, or our office on 613 8376 1600 or email@example.com