COVID-19 - Summarising both of the Government's Business Support Packages
The government’s second business support package was released over the weekend. I have set out below the total package from both announcements as they impact on business. There are a number of other measures for households which I have not covered.
The tax free credit against business’ activity statements (numbered 1 below) is a significant upgrade on the previously announced measure. The depreciation measures (numbered 2 and 3) and the wage subsidy for apprentices (numbered 4) below are unchanged; these are explain in our previous blog post. The early superannuation withdrawal and business loan scheme, (numbered 5 and 6) are new measures.
These can be summarised as:
1. A tax free credit against a business’ activity statements, up to a maximum of $100,000. The amount to be received is determined by the amount of PAYG withholding that a business makes. The intention of the credit is that it covers 100% of PAYG withheld. The full amount will be received where a business withholds at least $50,000 in the activity statements due to be lodged during April to July inclusive. The credits are received on activity statements due to be lodged between April and October. The entitlement to the credit on the additional activity statements is determined by the level of PAYG withheld in the earlier activity statement.
There is now also a minimum credit of $20,000 which is available to businesses which pay wages but have a low (or zero) amount of PAYG withholding. The first instalment of $10,000 will be received where an activity statement due to be lodged in April or later records employee payments with less PAYG withholding than would have generated a $10,000 credit.
For further information, see the attached Treasury document, “Cash flow assistance for businesses” I have also provided two illustrations on the attached “Illustration of" . One for a business with monthly lodgement of employee withholding and one for a business with quarterly employee withholding.
2. An increased threshold for the 100% depreciation instant write off. This increases from $30,000 to $150,000 in respect of new or second hand items installed and ready for use up until 30 June 2020.
For further information, see the attached Treasury document, “Delivering support for business investment”.
3. A new 50% depreciation instant write off for new (not second hand) items installed ready for use from now up until 30 June 2021. This does not have a limit and would be used for items first installed ready for use after 1 July 2020 or for items costing more than $150,000 purchased before 30 June 2020. 50% of the cost of the item is an immediate tax deduction and the other 50% is depreciated at ordinary rates.
For further information, see the attached Treasury document headed, “Backing Business Investment (BBI)”
4. A wage subsidy of 50% an apprentice’s or trainee’s wage paid during the nine months from 1 January 2020 to 30 September 2020. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter). The subsidy will be available to small businesses employing fewer than 20 full-time employees who retain an apprentice or trainee. The apprentice or trainee must have been in training with a small business as at 1 March 2020.
For further information, see the attached Treasury document headed, “Supporting Apprentices and Trainees”
5. Early access to superannuation. This may have limited application as a person needs to be unemployed; eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or on or after 1 January 2020: they were made redundant; or had working hours were reduced by 20 per cent or more. For people who are a sole trader, if their business was suspended or there was a reduction in their turnover of 20 per cent or more.
Application is made to the ATO through the myGov website (www.my.gov.au) There are some areas of uncertainty here too. For example, is a person “unemployed” if they were not a sole trader but their business or income producing activity (tourist apartments) has ceased – or is the person required to be registered with Centrelink? These areas of uncertainty may be resolved by the application process.
For further information, see the attached Treasury document headed, “Early access to superannuation”.
6. Coronavirus SME Guarantee Scheme. Unsecured loans sound attractive, but they may have limited application when all conditions and features are known. They are for a maximum of three years and be subject to the lender’s normal credit assessment processes. The government will encourage lenders to provide the facility which is only drawn down, and subject to interest, as it is needed. It is intended for working capital and not available for refinancing existing loans.
Its most appropriate role may therefore be something which is secured but then only used as more attractive options are not available.
For further information, see the attached Treasury document headed, “Coronavirus SME Guarantee Scheme”
Please contact us for further details or for advice on how these measures may impact on your business.