What COVID-19 Means for Households and Small/Medium Businesses
As the global Coronavirus (COVID-19) outbreak continues to evolve, it can be quite a concerning time for households and businesses. On the 12th of March 2020, the Australian Government announced their first economic stimulus package worth $17.6 billion, to support the most affected sectors. This first package has four sections:
- Supporting business investment;
- Providing cash flow assistance to help small and medium sized business to stay in business; and keep their employees in jobs;
- Targeted support for the most severely affected sectors, regions and communities; and
- Household stimulus payments that will benefit the wider economy [i].
Australian Prime Minister, Scott Morrison, stated “our targeted stimulus package will focus on keeping Australians in jobs and keeping businesses in business so we can bounce back strongly” [i]. On the 22nd of March, the Commonwealth Government released the second stage of its economic plan to “cushion the economic impact of the coronavirus and help build a bridge to recovery” [ii]. An additional economic support package of $66.1 billion has been announced. In summary, this package includes:
- Support for households (including casual workers, sole-traders, retirees and those on income support);
- Assistance for businesses to keep people in a job; and
- Regulatory protection and financial support for businesses to stay in business [ii].
This is an incredibly harrowing time, where many people and businesses are becoming overwhelmed. We understand that a lot of new information is being released daily, and can be quite difficult to process. We wanted to share some important information recently issued by the Australian government, to give a little piece of mind.
The first package includes incentives for small and medium sized businesses, to keep them afloat and employees in work during this trying time.
Tax Incentives for Business Investment
Instant Asset Write-off Increased:
- Increase in the instant asset write-off threshold of $30,000 to $150,000
- The higher threshold is in place from March 12th – June 30th 2020
- Applies to new and second-hand assets installed in businesses during these dates
- Eligible businesses will have an aggregated annual turnover of less than $500 million (up to $50 million) [iii].
Backing Business Investment Incentive:
- 50% accelerated depreciation for investments
- Temporary 15-month investment incentive available through to January 30th 2021
- Supports business investment and economic growth (short term)
- Eligible businesses will have a turnover of less than $500 million that are purchasing new depreciable assets [iii].
Cash Flow Assistance for Businesses
Boost Cash Flow Payments for Employers:
- Cash flow payment of up to $25,000 for employers
- A minimum payment of $2,000 may be available to businesses that pay wages but are not required to pay tax.
- Eligible businesses will have a turnover of less than $50 million that employ staff between January 1st 2020 and June 30th 2020 [iv].
Supporting Apprentices and Trainees
- Businesses can apply for subsidy of 50% of the apprentice’s or trainee’s wage for up to 9 months from January 1st – June 30th
- Eligible businesses will have fewer than 20 full-time employees who retain apprentice or trainee [iv].
- Tax-free, one-off $750 stimulus payment to individual income support recipients and eligible concession cardholders from March 31st
- Targeted regional and community support aimed at businesses and communities particularly affected by economic downturn due to coronavirus.
Tax (ATO) Relief
- Deferring up to 4 months the payment of tax amounts due
- Allowing affected businesses on a quarterly reporting cycle to opt into monthly GST reporting to get faster access to any GST refunds.
The second stimulus package builds on the measures announced within the previous package.
Support for Workers and Households
- The Australian 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 payment will be made to both new and existing recipients of the JobSeeker Payment, Youth Allowance jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.
- The Coronavirus supplement will be paid for the next 6 months. Eligible income support recipients will receive the full amount of the $550, as well as their payment each fortnight [ii].
Payments to Support Households
- In addition to the $750 stimulus payment announced on 12 March 2020, the Government will provide a further $750 payment to:
- Social security and veteran income support recipients
- Eligible concession card holders (except for those who are receiving an income support payment that is eligible to receive the Coronavirus supplement [ii].
Early Release of Superannuation
- Affected individuals will be able to withdraw up to $10,000 from their superannuation funds in 2019-2020 and a further $10,000 in 2020-2021.
- To apply for early release, a fund member must satisfy one or more of the following requirements:
- They are unemployed; or
- They are eligible to receive a Jobseeker Payment, Youth Allowance for Jobseekers, Parenting Payment (which includes the single and partnered payments), a special benefit or Farm Household Allowance; or,
- On or after 1 January 2020:
- They were made redundant; or
- Their working hours were reduced by 20 per cent or more; or if they are a sole trader — their business was suspended or there was a reduction in their turnover of 20 per cent or more [iv].
Temporarily Reduce Superannuation Minimum Drawdown Rates
- The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50% for 2019-2020 and 2020-2021.
- This will benefit retirees by providing them with greater flexibility in how they manage their superannuation assets [ii].
Assistance to Business to Keep in a Job
Boosting Cash Flow for Employers
- The Government is providing up to $100,000 to eligible small and medium sized businesses and not-for-profits (including charities) that employ people, with a minimum payment of $20,000.
- These payments will assist businesses’ and not-for-profits’ cash flow, so they can continue operating, pay rent, electricity and other bills, as well as, retain staff.
Regulatory Protection and Financial Support for Businesses to Stay in Business
Coronavirus SME Guarantee Scheme
- The Government will provide tax-free payments of up to $100,000 for eligible small and medium sized enterprise entities (SMEs). These are businesses with an aggregated annual turnover under $50 million that employ people with a minimum payment of $20,000.
- This will assist with cash flow so businesses can continue to operate, pay expenses and retain staff [iv].
Providing Temporary Relief for Financially Distressed Businesses
- The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands.
- Temporary relief will also be provided for directors from any personal liability for trading while insolvent.
- The Corporations Act 2001 will be amended to provide temporary and targeted relief for companies to deal with unforeseen events that occur as a result of COVID-19.
This concludes the summary of the important information regarding both stimulus packages in regard to COVID-19.
We hope this important information released by the Australian government can help your business in these hard times. Here at Horan & Bird, we are actively following all advice issued by the Australian Government, and ensuring all team members are supported with clear health and hygiene protocols. During this tough time, it is important to continue supporting local businesses. This is when they need your support the most.
It is understandable that during times like this, people may be feeling afraid, worried, anxious and overwhelmed. If you need someone to talk to, Lifeline are available 24hrs, 7 days a week.
To Contact Lifeline:
Phone: 13 11 14 (24hrs/7 days)
Text: 0477 131 114 (6pm – midnight AEDT, 7 nights)
Chat online: https://www.lifeline.org.au/crisis-chat (7pm-midnight, 7 nights)