Navigating Economic Challenges: Understanding the Australian Government's COVID-19 Stimulus Package
On 22 March 2020, the Australian Government announced an additional $66 billion stimulus package to support the Australian economy through the challenge of coronavirus (COVID-19). This is in addition to the $17.6 billion package announced on 12 March. These packages are designed to sustain small businesses through this challenging period and keep employees at work.
The government has stated that the measures are temporary, targeted and scalable. The main areas of support relevant to small businesses are:
Expanded eligibility for job seeker payment for sole traders (announced 22 March)
Eligible sole traders will be granted access to the job seeker allowance, which now includes an additional coronavirus supplement of $550 per fortnight for the next six months. The standard waiting periods and asset tests will be waived to allow quicker access to these payments. Individuals will still be able to keep operating their businesses and earn up to $1,075 per fortnight before their payments are affected.
Who is eligible?
Sole traders that meet the job seeker allowance income test.
When will it be received?
After your application has been approved via the Services Australia website.
Early access to superannuation (updated 22 March)
The Government is also allowing sole traders who have seen their hours of work or income fall by 20 per cent or more as a result of the pandemic to access their superannuation. This is capped at $10,000 this financial year and a further $10,000 next financial year. The withdrawals will be tax-free.
Who is eligible?
Individuals whose income has fallen by 20 per cent or more.
When will it be received?
On successful application via the myGov website when applications open in April 2020.
Additional payments for employers to retain staff (announced 22 March)
Not-for-profits and small businesses with a turnover under $50 million will receive a tax-free cash payment of from $20,000 up to $100,000 to help them retain staff and continue operating. Eligible entities will receive an additional payment equal to the total of all of the ‘boosting cash flow for employers’ payments received. The Government expects 690,000 businesses employing 7.8 million people and 30,000 not-for-profits will be eligible for measures in the stimulus package. The payments are tax-free, there will be no new forms and payments will flow automatically through the ATO.
Who is eligible?
Small and medium business entities with an aggregated annual turnover of less than $50 million and that employ workers are eligible.
When will it be received?
The payment will be available from 28 April 2020. An additional payment is also being made from 28 July 2020.
Greater leniency for insolvency and bankruptcy (announced 22 March)
The threshold at which a creditor can take action against a small business has increased from $2,000 to $20,000. The mandatory response time has also increased from 21 days to 6 months. Temporary relief for directors from any personal liability for trading while insolvent has also been announced.
Who is eligible?
All small businesses facing insolvency or bankruptcy as a result of the coronavirus.
When will it be received?
N/A
Cash flow payment for employers (announced 12 March, increased 22 March)
Eligible small businesses that withhold income tax from employee salaries and wages and pay it to the Australian Taxation Office can receive a payment equal to 100 per cent of the amount withheld, up to a maximum payment of $50,000. A minimum payment of $10,000 may be available to businesses that pay wages but are not required to pay tax.
Who is eligible?
Businesses with a turnover of less than $50 million that employ staff between 1 January 2020 and 30 June 2020.
When will it be received?
Eligible businesses will automatically receive payments of up to 100 per cent of the amount withheld via their business activity statements (BAS) or instalment activity statement (for PAYG) from 28 April 2020, with refunds to be paid within 14 days after that date.
SME Guarantee Scheme (updated 22 March)
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 for small to medium businesses, to enable them to access additional funding to help support them through the upcoming months. Businesses with a turnover of up to $50 million will be eligible to receive these loans, up to $250,000 per borrower. The loans will be up to three years, with an initial six-month repayment holiday and will be in the form of unsecured finance.
Who is eligible?
Businesses with a turnover of up to $50 million that pass the lenders’ credit assessment processes.
When will it be received?
The scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.
Wage subsidy for apprentices and trainees (announced 12 March)
Eligible employers can apply for a wage subsidy of 50 per cent of an apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020. Businesses can be reimbursed up to a maximum of $21,000 per eligible apprentice, (which is $7,000 per quarter for the first three quarters of 2020).
Who is eligible?
Small businesses with fewer than 20 full-time employees who retain an apprentice or trainee. The apprentice must have been in training with the small business as of 1 March 2020.
When will it be received?
You will be able to register for the subsidy in early April 2020. For more information on how to apply, including eligibility criteria, contact an Australian Apprenticeship Support Network (AASN) provider.
Please note: Claims for this subsidy must be lodged by 31 December 2020.
Increase in the instant asset write-off threshold (announced 12 March)
The instant asset write-off threshold will be increased from $30,000 to $150,000. The higher threshold is in place from 12 March until 30 June 2020 and applies to new or second-hand assets installed in businesses during these dates.
Who is eligible?
Businesses with an aggregated annual turnover of less than $500 million (up from $50 million).
When will it be received?
The instant asset write-off is generally claimed back via your business tax return. At this stage, no specific details have been announced on how to access this incentive. We will update this information when more details are announced by the federal government.
Accelerated depreciation for investments (announced 12 March)
Businesses will be able to deduct an additional 50 per cent of an asset cost in the year of purchase from 12 March 2020 until 30 June 2021. This is designed to support business investment and economic growth over the short term.
Who is eligible?
Businesses with a turnover of less than $500 million are purchasing new depreciable assets. Eligible assets covered are new assets that can be depreciated under Division 40 of the Income Tax Assessment Act 1997.
Please note: Second-hand assets are not eligible for this initiative.
When will it be received?
Depreciation is generally claimed back via your business tax return. At this stage, no specific details have been announced on how to access this incentive earlier. We will update this information when more details are announced by the federal government.
Tax relief
The Australian Tax Office (ATO) will also consider relief for certain tax obligations to eligible businesses, including deferring tax payments for up to four months. If disruption to your business operations causes you to fall behind with your tax and super obligations, read the ATO’s information on COVID-19, call them on 1800 806 218 or speak to your tax professional so that they can work with you to find a solution.
