For those who are not subscribed to our newsletter, here is a summary of important information in relation to the economic stimulus package and ways to help navigate through the current economic climate.
1. Cash Flow Boost to employers
The stimulus package that the federal government announced includes withholding tax credits equal to 100% of the reported withholding tax and capped at $50,000 for the period Jan-June 2020, and an additional credit available for wages reported from Jul-Sep 2020, bringing the maximum available credits to $100,000.
What do I need to do to get the credit?
You need to lodge a BAS for the period January-March 2020, April-June 2020, July-October 2020, or any monthly income activity statement where wages are reported over this period. Your BAS will need to include wages (W1) and witholding tax (W2). You will still need to pay GST but you will not need to pay the withholding tax.
Employers have an obligation to withhold tax at marginal rates using ATO-issued tax tables (or software that supports these rates). Employers will not be able to claim disproportionate withholding tax as this will not meet their legal obligations.
Eligible employers will receive a minimum of $10,000 even if they are not required to withhold tax (due to the reported wages being below the tax-free threshold).
Is my business eligible?
All business (regardless of corporate structure) will be eligible to receive the cash flow boost as long as they held an ABN on 12th March and continue to be active, have an aggregate turnover of less than $50 million, and made eligible payments that are required to have tax withheld on them (even if the withholding tax is NIL). Generally, the business should already have been registered for withholding tax prior to 12th March 2020.
ATO also requires that your business tax return was lodged by 12th March 2020, in order to determine your assessable income and eligibility. However, if you have not lodged a prior year return, you may still be eligible if ATO are satisfied, based on other information they hold, that you are in business and would have an aggregated annual turnover under $50 million. We may be able to assist you in this regard if ATO is suspending the credit due to a late lodgement of 2019 tax return.
The ATO are frequently updating their Covid-19 related pages with new information, and here is the latest update on the eligibility for the cash boost (the bolded information was not available when we sent out the newsletter).
In addition, you must also have either:
derived business income in the 2018–19 income year and lodged your 2019 tax return on or before 12 March 2020
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.
Schemes
ATO is going to be targeting people who start reporting higher salaries in order to take advantage of the cash boost. ATO have specifically outlined what they deem to be a scheme:
"This may include restructuring your business or the way you usually pay your workers to fall within the eligibility criteria, as well as increasing wages paid in a particular month to maximise the cash flow boost amount.
Any sudden changes to the characterisation of payments made may cause us to investigate whether the payments are in fact wages. If the payments are wages, we may consider the characterisation of past payments, including whether they should have been subject to PAYGW and whether super guarantee contributions should have been made. You may also have FBT obligations that have not yet been met."
You can read more about the cash boost here, which provides working examples under "calculating the cash flow boost".
2. Increasing the instant-asset write-off threshold to $150,000
Assets installed and ready to use from 12th March 2020 until 30th June 2020 will be eligible for an instant write-off if the cost of the asset was up to $150,000 and the business had an aggregate turnover of less than $500 million.
From 1st July 2020 the instant asset write-off threshold will reduce to $1,000.
3. Early release of superannuation
The government is allowing individuals affected by COVID-19 to access up to $10,000 of their superannuation in 2019–20 and a further $10,000 in 2020–21. Individuals will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
From mid-April eligible individuals will be able to apply online through myGov to access up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 until 24 September 2020.
Who is eligible?
To apply for early release, you must satisfy any one or more of the following requirements:
You are unemployed.
You are 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.
On or after 1 January 2020, either
you were made redundant
your working hours were reduced by 20% or more
if you are a sole trader, your business was suspended or there was a reduction in your turnover of 20% or more.
Is this something you should be doing?
Our financial planner, Antoinette Mullins advises the following -
"Superannuation is meant to provide for your retirement. For some, being allowed access to $20,000 now when they need it, is certainly a welcome lifeline. But please really consider if withdrawing all of the $20,000 is truly needed.
Leaving just $5,000 or $10,000 extra in super and allowing it to grow over the next 5,10 or 20 years, could make a big difference to whether you can meet expenses in retirement too. This is because of compound interest, where, over time, you earn interest on your interest, on your interest...like a snowball rolling down a hill.
Explore all other options before going this route. But if you do withdraw from super, make a plan to add extra contributions in the future to make up the missing funds. Seek advice from a professional like a certified financial planner and work with your accountant to plan your best way forward & learn how to close the gap in your retirement savings in the most tax effective way."
4. Supporting apprentices and trainees
If your business employs apprentices and trainees, you may be entitled to wage assistance under the government’s economic stimulus package.
Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage paid during the 9 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).
Eligibility
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. Employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will be eligible for the subsidy. Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network (AASN) provider. This measure will support up to 70,000 small businesses, employing around 117,000 apprentices.
Timing
Employers can register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020. Further information is available at:
• The Department of Education, Skills and Employment website at: www.dese.gov.au
• Australian Apprenticeships website at: www.australianapprenticeships.gov.au
For further information on how to apply for the subsidy, including information on eligibility, contact an Australian Apprenticeship Support Network (AASN) provider.
5. Centrelink Support
You may be eligible for a number of individual and household cash payments that have been announced as part of the stimulus package, including
Expanded eligibility for income support payments, including the coronavirus supplement
Two Household support payment of $750 each ($1500 total) - eligibility criteria applies
Temporary reduction of mimimum drawdown payments from superannuation funds for pension-based accounts, allowing them to hold onto their super without the need to sell assets to meet minimum pension requirements
Check the links on this page for more information
6. NSW Government Stimulus Package
The NSW Government will waive payroll tax for all employers on wages reported between now and 30th June. From 1st July, the payroll tax wage threshold will be increased to $1 million. QLD Government has also waived payroll tax for this period. You should check with your relevant state government to see what additional support is available for your business.
The NSW Government have also announced that they will be waiving a range of fees and charges for small businesses including bars, cafes, restaurants and tradies.
Read more about the stimulus package here, which includes extra funding for NSW health, bringing forward major capital works and expenditure, and millions towards employment of additional cleaners of public infrastructure such as transport assets, schools and other public buildings.
The NSW Government has also just announced changes to workplace legislation, in particular, changes to long service leave which will create greater flexibility for employers and employees to access leave during the COVID-19 crisis.
If you are an employer and are wondering what your legal obligations are during this period of time, please contact Sean Melbourne who is an employment law specialist from Source Legal. You can also connect with him on LinkedIn as he has been sharing incredibly useful information, particularly for the hospitality industry.
7. Other considerations
Banks are now offering unsecured loans to eligible businesses of up to $250,000 to help with cash flow. This is part of the government's commitment to support the flow of credit to businesses during the pandemic.
The Coronavirus SME Guarantee Scheme will provide support for these businesses. Under the Scheme, the Government will provide a guarantee of 50 per cent to small and medium enterprise (SME) lenders for new unsecured loans to be used for working capital. This will enhance these lenders’ willingness and ability to provide credit, which will result in SMEs being able to access additional funding to help support them through the upcoming months.
SMEs with a turnover of up to $50 million will be eligible to receive these loans.
The Government will provide eligible lenders with a guarantee for loans with 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.
The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.
Loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look through the cycle to sensibly take into account the uncertainty of the current economic conditions.
As part of the loan products available, the Government will encourage lenders to provide facilities to SMEs that only have to be drawn if needed by the SME. This will mean that the SME will only incur interest on the amount they draw down. If they do not draw down any funds from the facility, no interest will be charged, but they will retain the flexibility to draw down in the future should they need to.
Financial Assistance for individuals
You can apply to your current home lender to postpone loan repayments and/or capitalise interest for 3-6 months. Contact your lender, mortgage broker and/or financial adviser ASAP. If you are renting, speak to your landlord about allowing you to pay a reduced rent for the time being and accumulate arrears to pay at a later time.
Extending Credit Terms
Contact all your utility providers, contractors, suppliers etc to see if they will allow you to postpone bill payments or extend their credit terms.
If you are a business yourself, consider extending your credit terms (offering longer to make a payment, or facilitating a payment plan) to your customers or business tenants. It is better to help them now with their cash flow rather than lose them as a client/tenant/business partner all together. Remember that this virus will eventually go away, and the economy will go back to normal in time. Retaining business relationships is crucial to long term prosperity.
Make sure any agreements are in writing. Speak to a corporate lawyer if you want to know what your rights and obligations are.
Lastly..
Remember that we are all in this together.