As it stands, in terms of COVID-19*, globally, there has been a reported 1,273,990 cases, 69,444 deaths, and 260,247 recoveries. And, domestically, there has been a reported 5,687 cases, 35 deaths, and 757 recoveries.
While COVID-19 is first and foremost a public health issue, clear economic and financial issues have emerged.
In response to this, the Government has recently announced, and now legislated (where applicable), policies targeting three areas:
- Support for businesses;
- Supporting the flow of credit; and
- Supporting individuals and households.
Support for businesses
Increasing the instant asset write-off
The instant asset write-off threshold will be increased to $150,000 (up from $30,000), and access will be increased to include businesses with aggregated annual turnover less than $500 million (up from $50 million).
This applies to new or second-hand assets first used or installed ready for use in the period beginning on 12 March 2020 and ending on 30 June 2020.
Please note: The instant asset write-off is due to revert to $1,000 for small businesses (those with aggregated annual turnover less than $10 million) on 1 July 2020.
ATO administrative relief
The ATO will be providing administrative relief, on a case-by-case basis, for certain tax obligations for taxpayers affected by the COVID-19 pandemic. For example, the ability to defer payment of certain taxes for up to six months, and allowing businesses to vary PAYG instalment amounts to zero for the March 2020 quarter. Businesses that vary to zero can claim a refund for any instalments made for the September 2019 and December 2019 quarters.
Backing business investment
Businesses with aggregated turnover less than $500 million will be eligible to deduct 50% of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.
This applies to eligible assets acquired (i.e. new plant, equipment and specified intangible assets), and first used or installed, in the period beginning on 12 March 2020 and ending on 30 June 2021.
Boosting cash flow for employers
Businesses and not-for-profits that held an ABN on 12 March 2020 and continue to be active, employ workers, and have an aggregated annual turnover less than $50 million, will be eligible to receive a tax-free initial payment to cover the costs of their:
- director fees
- wages and salaries
- compensation payments
- eligible retirement or termination payments
- voluntary withholding from payments to contractors.
Importantly, there is additional eligibility criteria that businesses must meet. Businesses must have:
- derived business income in the 2018–19 financial year and lodged their 2019 tax return on or before 12 March 2020; or
- made GST taxable, GST-free or input-taxed sales in a previous tax period (since 1 July 2018) and lodged the relevant activity statement on or before 12 March 2020.
Please note: Charities registered with the Australian Charities and Not-for-profits Commission will be eligible to receive the payment, regardless of when they were registered.
Businesses and not-for-profits that withhold tax, will be eligible to receive a payment equal to 100% of their wages and salaries withheld, with a minimum payment of $10,000 and a maximum payment of $50,000.
Whereas, businesses and not-for-profits that aren’t required to withhold tax, will be eligible to receive a minimum payment of $10,000.
The ATO will deliver the payment as a credit to businesses and not-for-profits from 28 April 2020 upon lodgement of their activity statements. And, where this places businesses and not-for-profits in a refund position, the ATO will deliver the refund to them within 14 days.
This applies to the following periods:
- For quarterly lodgers, the quarters ending March 2020 and June 2020.
- For monthly lodgers, the months March 2020, April 2020, May 2020 and June 2020.
Please note: To align with quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (300%) in the March 2020 activity statement.
Furthermore, businesses and not-for-profits that continue to satisfy the above eligibility requirements, will be eligible to receive a tax-free additional payment.
- For quarterly lodgers, this will be equal to half (50%) of their total initial payment following the lodgement of their June 2020 and September 2020 activity statements.
- For monthly lodgers, this will be equal to a quarter (25%) of their total initial payment following the lodgement of their June 2020, July 2020, August 2020 and September.
Coronavirus SME guarantee scheme
Under a new scheme, the Coronavirus SME Guarantee Scheme, small and medium enterprises (SME) lenders will be provided with a 50% guarantee by the Government on new unsecured loans on the following terms:
- Maximum total size of loans of $250,000 per borrower.
- The loans will be up to 3 years, with an initial 6 month repayment holiday.
SMEs with aggregated turnover up to $50 million will be eligible to receive these loans from Government-approved SME lenders, but will still be subject to their credit check processes.
This applies to eligible loans issued from 23 March 2020 that are approved by 30 September 2020.
Employers – businesses (not subject to the Major Bank Levy), not-for-profits (including charities), and self-employed individuals – will be eligible for a wage subsidy to continue to pay their employees, if they:
- Have an aggregated annual turnover less than $1 billion and their turnover has been reduced by more than 30% to a comparable period a year ago (of at least a month); or
- Have an aggregate annual turnover of $1 billion or more and their turnover has been reduced by more than 50% relative to a comparable period a year ago (of at least a month).
Please note: The Tax Commissioner will be able to use their discretion where a business was not in operation a year earlier, or where their turnover a year earlier was not representative of their usual or average turnover.
The subsidy, the JobKeeper Payment, is $1,500 per fortnight, per nominated and notified eligible employee. Businesses (including sole traders) can receive the payment for multiple employees and if they have no employees, in relation to a single individual.
Employers can register their intention to apply with the ATO from 30 March 2020. Employers will receive their first payment in the first week of May (backdated to a start date of 1 March 2020), payable for up to 6 months. An employee is deemed eligible, if they:
- Are at least 16 years of age;
- Are not in receipt of a JobKeeper Payment from another employer;
- Were employed by the employer on 1 March 2020 (including those stood down or re-hired) and are employed at the time of the claim;
- Are full-time, part-time, or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020); and
- Are an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder at 1 March 2020.
Please note: Employers must ensure that each eligible employee receives at least $1,500 per fortnight (before tax); however, it will be up to the employer if they want to pay super on any additional wage paid because of the JobKeeper Payment. For example, if an eligible employee:
- Ordinarily receives less than $1,500 in income per fortnight (before tax), their employer must pay them, at a minimum, $1,500 per fortnight (before tax).
- Ordinarily receives $1,500 or more in income per fortnight (before tax), they will continue to receive their regular income according to the prevailing workplace arrangements. The JobKeeper Payments will subsidise part or all of their income.
- Has been stood down, their employer must pay them, at a minimum, $1,500 per fortnight, (before tax). Alternatively, if they were employed on 1 March 2020, and subsequently ceased employment and then were re-engaged by their employer, they will receive, at a minimum, $1,500 per fortnight (before tax).
Please note: The receipt of the JobKeeper Payment by an employee may affect their eligibility for payments from Services Australia (e.g. JobSeeker Payment) as the JobKeeper Payment must be reported as income.
It’s important to note that this is still a proposed measure at time of writing, and legislation needs to be passed to make it effective. Changes could be made.
Support for coronavirus-affected regions and communities
$1 billion will be set aside for the purposes of making payments to support communities, regions and industry sectors affected by the economic impacts of COVID-19.
This applies from 25 March 2020, and payments will continue until 30 June 2021.
Reduction of the cash rate
Among other announcements, such as a term funding facility for the banking system, the Reserve Bank of Australia has further eased monetary policy by reducing the cash rate to a historic low of 0.25%.
Supporting apprentices and trainees
Businesses with fewer than 20 full-time employees, who retain an apprentice or trainee, will be eligible for a wage subsidy of 50% of the apprentice’s or trainee’s wage.
The apprentice or trainee must have been in training with the business as at 1 March 2020. And, the subsidy is up to a maximum of $21,000 per apprentice or trainee ($7,000 per quarter).
However, where the apprentice or trainee is unable to be retained, a business of any size that re-engages the apprentice or trainee will be eligible for the subsidy after successful completion of an eligibility assessment.
This applies for up to 9 months from 1 January 2020 to 30 September 2020. And, businesses can register for the subsidy from early-April 2020, with final claims being lodged by 31 December 2020.
Please note: A business will not be eligible to claim the subsidy for any period where they choose to claim the JobKeeper Payment for the same apprentice or trainee.
Temporary higher thresholds and more time to respond to demands from creditors
For individuals in financial distress, the minimum amount of debt required to be owed before a creditor can initiate involuntary bankruptcy proceedings will be increased to $20,000 (up from $5,000). And, the timeframe in which a debtor has to respond to a bankruptcy notice will be increased to 6 months (up from 21 days).
For businesses in financial distress, the statutory minimum for a creditor to issue a statutory demand will be increased to $20,000 (up from $2,000). And, the timeframe in which a debtor has to respond to a statutory demand will be increased to 6 months (up from 21 days).
And, in relation to any debtor, the timeframe in which a debtor is protected from enforcement action by a creditor following presentation of a declaration of intention to present a debtor’s petition will be increased to 6 months (up from 21 days).
This applies from 25 March 2020, and will continue for 6 months.
Temporary relief from directors’ personal liability for trading while insolvent
Directors will be relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business. This will relieve the director of personal liability that would otherwise be associated with trading while insolvent.
This applies from 25 March 2020, and will continue for 6 months.
If you would like to discuss anything mentioned above, and its relevance to your financial situation, goals and objectives, please do not hesitate to contact us.
Click here for part one of this two-part series.
*Center for Systems Science and Engineering (CSSE). GIS Dashboard: Coronavirus COVID-19 Global Cases by Johns Hopkins CSSE.
^UPDATE as at 8 April 2020. Although all reasonable efforts were made to ensure that this article reflected the most current version of the Treasury JobKeeper Payment fact sheets as at 6 April 2020, it has become apparent that Treasury made certain updates to the fact sheets just before the publication of this article. Accordingly, and for completeness, those updates are set-out below:
- Charities registered with the Australian Charities and Not-For-Profit Commission (ACNC) will be eligible for the JobKeeper Payment if they estimate their turnover has or will likely fall by 15% (or more).
- The relevant estimated percentage fall in turnover for businesses (including not-for-profits) is 30% (or more) or 50% (or more), applicable to their turnover size.
- Businesses that are part of a consolidated group for income tax purposes, will be subject to the relevant percentage amount (or more) applicable to the consolidated group’s turnover size.
- Governments (and their agencies) will be ineligible for the JobKeeper Payment.
- For employees to be eligible, they must be at least 16 years of age at 1 March 2020, a resident for Australian tax purposes on 1 March 2020, and not receiving Parental Leave Pay from Services Australia.
- Employees receiving workers compensation will be eligible for the JobKeeper Payment if they are working, for example on reduced hours.