Additional COVID-19 Stimulus package announced: $100K tax-free for employers, access to tax free Superannuation amounts and more

On 22 March 2020, the Australian Prime Minister and Treasurer released details of a second Federal Stimulus Package to help the Australian economy during the COVID-19 crisis.

The Government had earlier released an initial $17 Billion stimulus package plus a $15 Billion finance package, coupled with $90 billion from the Reserve Bank of Australia.

The crisis is worsening daily, as borders close, isolation restrictions increase and companies shut down, downsize, or suspend business operations. The Government has responded with a second stimulus package with a suggestion of more to come if required.

This article summarises the key areas of the second stimulus package announcement on 22 March 2020. At the time of writing this is just an announcement with no legislation released. A Bill is expected to be issued to Parliament for debate on 23 March 2020.

Key measures for Business

Tax-Free Payment of up to $100,000 for SME business employers

The initial stimulus package provided a tax-free payment to small and medium enterprise (SME) employers (up to $50 M turnover) of an amount equal to 50% of PAYG withholding (PAYGW) from March to June 2020, capped at $25,000, with a minimum of $2,000. The payments are paid as a credit to the employer’s Integrated Client Account as Business Activity Statements are lodged.

The second stimulus package:

  • increases the 50% of PAYGW to 100%
  • increases the $25,000 cap to $50,000
  • increases the minimum payment from $2,000 to $10,000.

These payments will be made after the March - June Business Activity Statements have been lodged.

In addition, further payments which equal the above payments will be made in the period July to October 2020. This will either be paid monthly, or twice (July and October). This means in total up to $100,000 tax-free will be provided to SME employers between March and October 2020.

These measures will be available to businesses that were registered with an ABN on 12 March 2020 and either:

i) had lodged 2019 income tax return disclosing business income; or

ii) had lodged activity statements during the period 1 July 2019 to 12 March 2020 disclosing taxable supplies.

It will also apply to all charities that employ people before and after that date.

Specific anti-avoidance measures will be enacted to stop businesses entering into schemes to either make the entity entitled to the cash flow boost, or increasing the amount they would otherwise be entitled to.”

If applicable, the tax-free payment will be credited to the employer’s tax account upon lodgement of their activity statement. If this results in a refund, it should be paid within 14 days.

Example:

Pharmaco Pty Ltd employs 20 people and has an annual turnover of $10 Million. It has a monthly PAYG Withholding of $10,000.

It should receive Stimulus credits when it lodges its BASs as follows:

Initial Payments

BAS Month

Lodgement Date

PAYGW

Stimulus Credit

March

21 April 2020

$10,000

$30,000 #

April

21 May 2020

$10,000

$10,000

May

21 June 2020

$10,000

$10,000

June

21 July 2020

$10,000

$0 *

# Note: March credit is calculated as 300% of the March withholding to account for PAYG withholding from January to March 2020

* No payment as $50,000 cap was reached in May.

Additional Payments

BAS Month

Lodgement Date

PAYGW

 Additional Credit

June

21 July 2020

$10,000

$12,500

July

21 August 2020

$10,000

$12,500

August

21 September 2020

$10,000

$12,500

September

21 October 2020

$10,000

$12,500

Financial Stressed Business Assistance

Temporary increase to thresholds to ease bankruptcy / insolvency threat

The Government will provide temporary increases (for 6 months) in thresholds related to bankruptcy and insolvency provisions:

  • Increase in the threshold required for a creditor to issue a statutory demand from $2,000 to $20,000;
  • Increase in response time for a statutory demand from 21 days to 6 months
  • Increase in the threshold required for a creditor to initiate bankruptcy proceedings from $5,000 to $20,000
  • Increase in response time to a bankruptcy notice from 21 days to 6 months
  • Where intention to voluntarily enter bankruptcy has been notified, bar to creditors action extended from 21  days to 6 months.
  • Temporary relief from director’s personal liability for insolvent trading
  • Temporary power for Treasurer to relieve ASIC requirements

These temporary increases should relieve financially stressed businesses from the fear of bankruptcy during this time.

Lending Assistance

SME Guarantee Scheme

The Government will provide a guarantee of 50% of unsecured loans to SMEs with the following criteria:

  • Maximum loan of $250,000
  • Maximum term of 3 years
  • 6 months repayment holiday

Relief from Responsible lending criteria

To assist the release of credit to the small business community, the Government will temporarily relief banks from responsible lending criteria

Key measures for Individuals

The Government will expand and ease access to social security payments for people who have lost jobs, had hours cut, or sole traders with reduced profits.

There will be a temporary Coronavirus Supplement provided to income support payments for job seekers. This will be $550 per fortnight and will be available for 6 months

A Further $750 tax-free payment will be made in July for households receiving Government support eg. age pensioners and veterans.

Early Tax-free release of superannuation

Certain individuals eligible for the Coronavirus supplement and sole traders with a fall in turnover of 20% will be able to access their superannuation. They can apply to access $10,000 in the 2020 financial year and a further $10,000 before September 2020 for the 2021 financial year. Any Coronavirus withdrawal will be treated as tax-free. Different arrangements will apply if you’re a member of an SMSF and we will provide better guidance as information comes to hand. 

Temporary Halving of Superannuation Pension withdrawal rate

Superannuation Funds have already been reduced due to the stock market’s negative reaction to the Coronavirus crisis. The Government is helping self-funded retirees to keep their money in superannuation by halving the minimum withdrawal rate in the 2019-2020 and 2020-2021 financial years.

For example, a 70-year-old would normally be required to withdraw 5% of their fund per year. This will be reduced to 2.5% for the next 2 years. Further information regarding this and the changes to social security deeming rates is available on the Government fact sheet which can be accessed here .

The next 6-12 months will be a stressful time for businesses. We recommend you keep your financial information up to date so that you can make fast decisions based on known facts. If you need to access new finance, consider staffing levels, review expenditure or just need general advice about how to cope with the challenges ahead, please contact your usual Mazars advisor.

We expect the next few months will cause significant issues for employers. We remind employers that the Fair Work Act, Awards and Agreements impose obligations which must be complied with. If you need advice in managing your employment obligations, please refer to the below article or contact our HR consulting team. 

https://www.mazars.com.au/Home/News/Latest-News/Coronavirus-COVID-19-and-employer-obligations

https://www.mazars.com.au/Home/Services/Human-Resources-Consulting

Alternatively, if you have queries in relation to this article please contact

Brisbane – Jamie Towers

Melbourne – Evan Beissel

Sydney – Gaibrielle Cleary

+61 7 3218 3900

+61 3 9252 0800

+61 2 9922 1166

The information in this article has been sourced from the Treasury information release.  The stimulus measures noted above are just announcements and are yet to be enacted.

Source:  https://treasury.gov.au/coronavirus

Please also refer to Mazars earlier releases about Federal and State Government Stimulus at https://www.mazars.com.au/Home/News/Latest-News

Published: 23/3/2020

Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.

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