The following is a broad summary of the key aspects of the Federal Government’s stimulus package set out by the Treasury and the NTAA.
1. Income support for individuals
1.1 Introducing a new Coronavirus supplement
The Government has introduced the payment of a new Coronavirus Supplement of $550 per fortnight to eligible individuals receiving certain income support payments which include;
- Jobseeker Payment;
- Youth Allowance; and
- Parenting Payment (Partnered and Single)
It appears that the supplement will be paid to eligible individuals along with their existing income support payments such as those set out above.
1.2 Expanded access to certain support payments
For eligible individuals, the government has expanded access to certain income support payments which will be available for the period that the Coronavirus supplement is paid (e.g., the Jobseeker Payment, the Youth Allowance Jobseeker and the Parenting Payment). For example:
- According to the Government, a new category of Jobseeker Payment and Youth Allowance Jobseeker will become available for individuals who have been impacted by the Coronavirus and satisfy certain requirements. These measures are stated to extend to permanent employees who are stood down from their jobs; sole traders; the self-employed; casual workers; and contract workers who meet the income tests, as a result of the economic downturn.
- It has also been stated that Asset Testing for the Jobseeker Payment, the Youth Allowance Jobseeker and the Parenting Payment, will be waived for the period of the Coronavirus supplement. However, it should be noted that Income Testing will still apply to their other payments.
The Government has also pledged to reduce waiting times waiving a number of traditional waiting periods.
TAX TIP – Introducing a faster and streamlined application process
- Applicants will be encouraged to claim through online and mobile channels, or over the phone where they do not have internet access. Also, certain existing requirements for accessing income support payments will be removed (e.g., the requirement for job seekers to make an appointment with an employment service provider). Based on feedback we have already received from clients; you may need to try one or more of the above methods as systems are currently under strain based on the amount of inquiries and applications currently being made.
1.3 Tax-free payments of $750 to eligible recipients
The Government will be providing two separate $750 tax-free payments to social security, veteran and other income support recipients, and to eligible concession card holders, as follows:
(a) The first $750 payment will be available to individuals who are residing in Australia and are:
- Existing applicants currently receiving an eligible Government payment or are an eligible concession card holder at any time from 12 March 2020 to 13 April 2020; or
- New applicants to one of the eligible payments or concession cards that do so at any time from 12 March to 13 April 2020 and have their claim granted.
This first payment is expected to be made automatically from 31 March 2020.
Eligible Government payments and concession cards comprise of the following which has been indicated by the Treasury.
|Age Pension||Austudy||Special Benefit|
|Disability Support Pension||Bereavement Allowance||Widow Allowance|
|Carer Payment||Newstart Allowance||Family Tax Benefit, including Double Orphan Pension|
|Parenting Payment||JobSeeker Payment||Wife Pension|
|Youth Allowance||Carer Allowance||Partner Allowance|
|Widow B Pension||Pensioner Concession Card (PCC) holders||Sickness Allowance|
|Veteran Gold Card holders||Farm Household Allowance||ABSTUDY (Living Allowance)|
Commonwealth Seniors Health Card holders
Veteran Service Pension; Veteran Income Support Supplement; Veteran Compensation payments, including lump sum payments; War Widow(er) Pension; Veteran Payment
DVA PCC holders; DVA Education Scheme recipients; Disability Pensioners at the temporary special rate; and DVA Income support pensioners at $0 rate
(b) The second payment will be available to individuals who are residing in Australia and are receiving one of the above eligible Government payments or are the holders of one of the above eligible concession cards, on 10 July 2020 (except for those receiving an income support payment that qualifies them to receive the $550 fortnightly Coronavirus supplement).
This payment will be made automatically to eligible individuals from 13 July 2020.
- Even though an individual can be eligible to receive the payments through multiple ways, only one payment of $750 will be received in each round of payments.
- Each payment will be exempt from income tax and will not count as income for the purposes of Social Security, Farm Household Allowance and Veteran payments.
Example: Receiving the first and second $750 tax-free payment
Arthur and Emma are a couple and are both Age Pension recipients as at 12 March 2020.
Under the Government’s stimulus package, Arthur and Emma will each receive a first payment of $750, resulting in a combined payment of $1,500. These payments to Arthur and Emma will be made automatically from 31 March 2020 and will be tax-free in their hands.
As Arthur and Emma remain Age Pension recipients on 10 July 2020, they will each be eligible for $750 as part of the second payment, resulting in a further combined payment of $1,500. These payments to Arthur and Emma will be made automatically from 13 July 2020 and will be tax-free in their hands.
2. Early access to superannuation benefits
Under the existing ‘compassionate grounds’ conditions of release, an individual can access their preserved superannuation benefits (as a lump sum), under certain circumstances such as where they need to pay for certain medical treatments, or to enable the individual to make a repayment on a home loan in order to prevent the mortgagee selling their home provided they meet all the cashing restrictions and satisfy all the relevant conditions.
The Government will introduce a new compassionate ground of release that will allow individuals to access their superannuation where it can be used to assist them in dealing with the economic effects of the Coronavirus.
To be eligible however, one or more of the following requirements need to be satisfied:
- The individual is unemployed.
- The individual is eligible to receive the Jobseeker 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:
- The individual was made redundant; or
- The individual’s working hours were reduced by at least 20%; or
- If the individual is a sole trader – their business was suspended or there was a reduction in the business’s turnover of at least 20%.
Under these conditions, eligible individuals will be able to access a lump sum of, up to $10,000 of their superannuation entitlements before 1 July 2020, and a further $10,000 from 1 July 2020 (but subject to the six-month time frame noted below).
Eligible individuals who are looking to access their superannuation entitlements under the above new ground of release will be able to apply directly to the ATO through the myGov website.
An individual will be able to apply for early release of their superannuation entitlements from mid-April 2020. However, note that no application may be made after the end of the period of six months from the day on which the new compassionate ground of release commences.
TAX TIP – Tax-free superannuation withdrawals
- Any withdrawals under this measure will be received tax-free and will not affect Centrelink or Veteran’s Affairs payments according to the Government.
3. Reducing the minimum drawdown amounts for superannuation pensions
There will be a temporary reduction of the superannuation minimum drawdown amounts for account-based pensions and similar products by 50% for the 2020 and 2021 income years.
This basically means that the total minimum withdrawal amount required of a superannuation fund that has an account-based pension will reduced by half for these two income years.
Under the superannuation rules, the total minimum pension amount that a superannuation fund is required to pay to a fund member receiving a pension (e.g., an account-based pension) from the fund in an income year is generally calculated by:
- Multiplying the member’s pension account balance at the beginning of the year, by the relevant drawdown percentage.
The current minimum drawdown percentages, together with the reductions for the 2020 and 2021 income years, are outlined in the following table.
|Recipient’s Age||Current Minimum Drawdown||Reduced Drawdown for the 2020 and 2021 Income Years|
|65 to 74||5%||2.50%|
|75 to 79||6%||3.00%|
|80 to 84||7%||3.50%|
|84 to 89||9%||4.50%|
|90 to 94||11%||5.50%|
|95 and above||14%||7.00%|
4. Cash flow assistance for businesses
The Government is providing cash flow assistance for eligible businesses (to manage cash flow challenges and to help businesses retain employees), in the form of:
- Credits or refunds to employers based on the amount of PAYG withheld from salary and wages paid to employees (and other similar payments – e.g., termination payments, director’s fees and payments to contractors that are subject to voluntary withholding arrangements); and
- Wage subsidies paid to eligible employers who retain an apprentice or trainee.
4.1 Boosting cash flow for employers
Small and medium-sized businesses and not-for-profit entities, with a total annual turnover of less than $50 million (usually based on their prior year’s turnover) that employ people, may be eligible to receive a total payment of up to $100,000 (with a minimum total payment of $20,000), based on their PAYG withholding obligations, in the following two stages:
- (a) Stage 1 payment – Commencing from the lodgment of activity statements from 28 April 2020, eligible employers that withhold PAYG tax on their employees’ salary and wages will receive a tax-free payment equal to 100% of the amount withheld, up to a maximum of $50,000. Eligible employers that pay salary and wages will receive a minimum (tax-free) payment of $10,000, even if they are not required to withhold PAYG tax.The tax-free payment will broadly be calculated and paid by the ATO as an automatic credit to an employer, upon the lodgment of activity statements from 28 April 2020, with any resulting refund being paid to the employer based on whether you lodge quarterly or monthly.
- Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020; and
- Monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgements. However, the payment for the March 2020 activity statement will be calculated as being three times the actual amount withheld.
Note that the minimum payment of $10,000 will be applied to an entity’s first activity statement lodgement (whether for the month of March or the March quarter) from 28 April 2020.
- (b) Stage 2 payment – For employers that continue to be active, an additional (tax-free) payment will be available in respect of the June to October 2020 period.
- Quarterly lodgers will be eligible to receive the additional payment for the quarters ending June 2020 and September 2020, with each payment being equal to 50% of their total Stage 1 payment (up to a maximum of $50,000).
- Monthly lodgers will be eligible to receive the additional payment for the June 2020, July 2020, August 2020 and September 2020 activity statement lodgements, with each additional payment being equal to a quarter of their total Stage 1 payment (up to a maximum of $50,000).
The ATO will automatically calculate and pay the additional (tax-free) payment as a credit to an employer upon the lodgement of their activity statements from July 2020, with any resulting refund being paid to the employer.
WARNING: – The Employer must be established before 12 March 2020
The above payments will only be available to active eligible employers (who held an ABN) as at 12 March 2020. However, charities that are registered with the Australian Charities and Not-for-profits Commission will be eligible regardless of when they were registered, subject to meeting other eligibility requirements. This recognises that new charities may be established in response to the Coronavirus pandemic.
Further, specific integrity rules will apply to exclude contrived arrangements implemented to access this measure where the dominant purpose is to obtain or increase any of the above payments to an employer.
4.2 Wages subsidies for apprentices and trainees
Employers with less than 20 full-time employees, who retain an apprentice or trainee who was in training with the employer as at 1 March 2020, may be entitled to Government funded wage subsidies equal to 50% of the apprentice’s or trainee’s wage paid during the nine months from 1 January 2020 to 30 September 2020. The maximum wage subsidy over the nine-month period will be $21,000 per eligible apprentice or trainee.
Employers can register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020. Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network (‘AASN’) provider.
5. Increasing the instant write-off threshold for business assets
Broadly, the depreciating asset instant asset write-off threshold will be increased from $30,000 (for businesses with an aggregated turnover of less than $50 million) to $150,000 (for businesses with an aggregated turnover of less than $500 million) until 30 June 2020.
This will apply to both new and second-hand assets first used or installed ready for use in the period beginning on 12 March 2020 (i.e., the date on which this measure was announced) and ending on 30 June 2020.
More specifically, the above measure will apply to apply to Small Business Entities and Medium Business Entities, as follows:
(a) Small Business Entities (‘SBEs’) – turnover of less than $10 million
SBEs will be able to claim an immediate deduction for depreciating assets that cost less than $150,000, provided the relevant asset is first acquired at or after 7.30 pm on 12 May 2015, and is first used or installed ready for use on or after 12 March 2020, but before 1 July 2020.
Additionally, SBEs will also be able to claim an immediate deduction for the following:
- An amount included in the second element of the cost of (i.e., an improvement to) a depreciating asset that was first used or installed ready for use in a previous income year. The amount of the second element cost must be less than $150,000 and the cost must be incurred on or after 12 March 2020, but before 1 July 2020.
- If the balance of an entity’s general small business pool (excluding current year depreciation) is less than $150,000 at the end of the 2020 income year, the SBE can claim a deduction for the entire balance of the pool.
(b) Medium Business Entities (‘MBEs’) – turnover of at least $10 million and less than $500 million
MBEs can immediately deduct the cost of an asset in an income year if the asset has a cost of less than $150,000 and it was first acquired in the period beginning at 7:30pm, on 2 April 2019 and ending on 30 June 2020, and used or installed ready for use for a taxable purpose in the period beginning on 12 March 2020 and ending on 30 June 2020.
Additionally, MBEs can also claim a deduction for certain amounts included in the second element of the cost of a depreciating asset, where the amount of the second element cost is less than $150,000, and is incurred on or after 12 March 2020 but before 1 July 2020.
Where a business is registered for GST, the threshold will generally be applied to the GST-exclusive cost of an eligible asset.
TAX TIP – Write off is applied to each individual asset
Importantly, this increased threshold also continues to operate on a ‘per asset’ basis, which means that eligible businesses can immediately write-off multiple assets (as long as each of the assets individually satisfy the relevant eligibility criteria).
Currently, the instant asset write-off threshold is due to revert to $1,000 for small businesses (i.e., those with an aggregated turnover of less than $10 million) from 1 July 2020.
6. Backing business investment – accelerating depreciation deductions for new assets
A new time-limited 15-month investment incentive (which will be available up until 30 June 2021) will also be introduced to accelerate certain depreciation deductions for businesses with an aggregated turnover below $500 million, in respect of eligible depreciating assets.
This incentive basically allows a deduction equal to 50% of the cost of an eligible asset, with existing depreciation rules applying to the balance of the asset’s cost.
Accordingly, an eligible entity that uses the general depreciation rules can deduct the following amounts from an eligible asset that is first used or installed ready for use;
- 50% of the cost of the asset on acquisition and
- The usual depreciation rate that would otherwise apply to an asset if it were calculated on the remaining cost of the asset.
Different rules will apply where an SBE is using the general small business pool (i.e., for assets that do not qualify for the instant asset write-off). In this case, the SBE may deduct an amount equal to 57.5% (rather than 15%) of the business-use portion of the cost of an eligible depreciating asset acquired by the entity in the year is it allocated to the pool.
6.1 Which depreciating assets are eligible assets?
An eligible asset is a new asset that can be depreciated under Division 40 of the ITAA 1997 (i.e., plant and equipment and specified intangible assets, such as patents), where the asset satisfies all of the following conditions:
- The asset is new and has not previously been held (and used or installed ready for use) by another entity (other than as trading stock or for testing and trialling purposes).
- No entity has claimed depreciation deductions (including under the instant asset write-off) in respect of the asset.
- The asset is first held, and first used or installed ready for use, for a taxable purpose, between 12 March 2020 and 30 June 2021 (inclusive).
Note that this measure will not apply to second-hand Division 40 assets, or buildings and other capital works that are depreciable under Division 43 of the ITAA 1997 (i.e., the building write-off).
This measure also does not apply to an asset if the asset’s depreciation is worked out under a low-value or software development pool, or in relation to primary production depreciating assets such as water facilities, horticultural plants, fodder storage assets and fencing assets.
A depreciating asset is also not an eligible asset where a commitment to acquire or construct the asset was entered into before 12 March 2020 or where the asset would not be in Australia.
7. Unsecured loans to small and medium businesses
Under this scheme, the Government will provide a guarantee of 50 per cent to eligible lenders for new unsecured loans to eligible businesses with turnover below $50 million.
These loans will be subject to the lender’s credit assessment process and will be along the following general terms:
- Maximum loan size of $250,000 per borrower
- Loan term of 3 years, with an initial six-month repayment holiday.
- Interest charged only on the draw down amount
Further measures have been taken to reduce the lead time involved with lenders assessments of whether the money borrowed meets the Responsible lending obligations it is subject to. Accordingly, the government has provided a temporary exemption from responsible lending obligations with the expectation that businesses will gain access to credit quickly and effectively.
It is expected that this scheme will commence by early April 2020 and will be available for new loans made by participating lenders until 30 September 2020.