In response to the effect on Australian businesses, the Australian Government unveiled their econmonic response measures to the Coronavirus on Thursday 12th March.
How will this stimulus package help your business keep going through these uncertain times? We've analysed what's being offered, and how it might apply to your business and the benefits it might bring.
What kind of support is being offered?
The Australian governments response targets four key areas of the economy but only two relate to business. These are;
- Cash flow assistance to employers
Up to $25k back to employers
Apprentice & Trainee employer assistance
- Support for business investement
Increase to instant asset writeoff
Backing Business Investment
Full details including assistance to welfare recipients can be found here;
Cashflow assistance to employers
This measure provides cash back to employers; from a minimum of $2,000 to a maximum of $25,000.
It will be delivered by the ATO as a 50% refund on PAYG withheld from employees as reported on the March & June quarter Business Activity Statements.
For employers reporting monthly (IAS) to ensure they don't miss out, 150% of their monthly March PAYG withheld will be refunded, and then 50% of their April, May & June activity statement amounts.
- The payment will be tax free.
- It will be automatically applied to the business' integrated client account (ICA) and offset any GST liabilities that may be reported.
- Must employ workers
- If this results in the overall ICA being in a credit state, the ATO will refund this electronically to the business bank account in 10 working days.
- Eligible businesses will receive the minimum $2k payment even if they're not required to withhold tax.
This is a great incentive to lodge your BAS and IAS on time. If you need assistance with this, contact us to help bring your lodgements up to date.
EG: If your business withholds an average of $4,000 PAYGW from employees each month.
- March - 150% of $4,000 = $6,000 credit
- April - 50% of $4,000 = $2,000 credit
- May - 50% of $4,000 = $2,000 credit
- June - 50% of $4,000 = $2,000 credit
- TOTAL = $12,000 credit/refund from the ATO
We expect the provisions will include prohibition of fraud or constructed arrangements.
Supporting Apprentices and Trainees
In assisting apprentices and trainees, the government is supporting employers by offering a 50% wage subsidy on wages paid for the 9 months; January 2020 to September 2020.
Employers will be reimbursed a maximum of $21,000 per eligible apprentice or trainee.
- The apprentice or trainee must have been in training with a small business as at 1 Mar 2020
- Eligible to businesses employing fewer than 20 full-time employees who retain an apprentice or trainee
- Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network (AASN) provider
- Employers can register for the subsidy from early April 2020, and final claims for payment must be lodged by 31 Dec 2020
If you employ an apprentice or trainee, reach out to us for assistance and we'll work with you to ensure you're properly registered and able to claim this reimbursement.
Increasing the Instant Asset Write-off
To help with business investment, the instant asset write-off scheme will raise the asset threshold from $30,000 to $150,000 and will also expand to include businesses with a turnover less than $500 million (previously $50 million).
- Threshold applies on a per asset basis - businesses can immediately write-off multiple assets
- Applies from the announcement (12 March 2020) until 30 Jun 2020, for new or second hand assets first used or installed ready for use in this timeframe
As per our previous advice on the instant asset write-off scheme, please consider carefully your business cashflow position in relation to purchasing an asset. The write-off scheme does NOT mean you will receive a tax refund, instead it means your business taxable position will be reduced by 100% of the asset value purchased this financial year instead of multiple years. Please contact your accountant or ourselves to discuss the cashflow implications.
Backing Business Investment
This measure introduces a time limited 15 month investment incentive by offering an accelerated depreciation deduction.
- A deduction of 50% of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the assets cost.
- Eligible to businesses with an aggregated turnover below $500 million
- Eligible assets are new assets that can be depreciated under Division 40 of the Income Tax Assessment Act 1997, acquired after the announcement (12 March 2020) and first used or installed by 30 Jun 2020.
- Does not apply to second hand Division 40 assets, or buildings and other capital works depreciable under Division 43.
We strongly recommend you speak with your Tax Agent prior to purchasing any assets to seek specific advice to your business to ensure the asset being purchased is eligible.
ATO Support Measure
Following the federal governments announcement, the ATO released a statement in support of business as well. Full details can be found here; but in summary;
- Deferral of payment dates for activity statements, income tax assessments, FBT assessments and excise
- Option to change from quarterly to monthly reporting to access GST refunds faster
- Option to vary PAYGI to nil for the March quarter BAS and claim a refund for any instalments made for Sep and Dec 2019 quarters
- Remission of interest and penalties incurred on or after 23 Jan 2020
- Availability to enter into low interest payment plans.
Eye on Books and Your Business Continuity
Social distancing and other community strategies to slow the spread of COVID-19 has already impacted many businesses in a major way, and is (hopefully) a once in a lifetime occurance.
At Eye on Books we remain committed to ensuring your business continues through these difficult times. If you have any questions in relation to these stimulus measures, need help with cashflow or staff standown provisions, or just need a sympathetic supportive ear, we're here to help you.