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Corona Virus

24.03.2020 19:29 Comment(s) By Prabh Sandhu

Government’s Stimulus Package in response to the Coronavirus

AdvisorCorp: What a changed world we are living in as we all try to navigate the challenges arising from the current Coronavirus Pandemic, including protecting the health and safety of our friends and family, and the viability of our businesses, employment and investments.

The purpose of this communication is to provide you with an update relating to the Government's Economic Stimulus Package in response to the Coronavirus.  Our office will continue to apply its available resources to assist and support you where we can through this uncertain period as we attempt to survive the ever changing restrictions we are all dealing with.

The following is a broad summary of the key aspects of the Federal Government’s stimulus package in response to the Coronavirus, as recently announced and enacted. 

These measures were implemented via various Bills introduced into Parliament, which very quickly received Royal Assent on 24 March 2020 (including the Coronavirus Economic Response Package Omnibus Bill 2020), so as to give effect to the Government’s stimulus package.   

Boosting Cash Flow For Employers
Income Support for Individuals
Temporary Early Access To Superannuation
JobKeeper Fortnightly Payment of $1,500
Child Care and Early Childhood Education Relief Package
Boosting Cash Flow For Employers

The Government is also providing cash flow assistance for eligible businesses in the form of two separate measures.

Boosting cash flow for employers

Small and medium-sized businesses and not-for-profit entities, with an aggregated 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 (in the form of a refundable credit) of up to $100,000 (with a minimum total payment of $20,000), based on their PAYG withholding obligations in two stages:

Stage 1 payment (credit)

Commencing with 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.  This means that:

  • 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 lodgments. 

Note that, the minimum payment of $10,000 will be applied to an entity’s first activity statement lodgment (whether for the month of March or the March quarter) from 28 April 2020.

Stage 2 payment (credit)

For employers that continue to be active, an additional (tax-free) payment will be available in respect of the June to October 2020 period, basically as follows:

  • 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 initial (or 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 initial (or Stage 1) payment (up to a maximum of $50,000).

Again, the ATO will automatically calculate and pay the additional (tax-free) payment as a credit to an employer upon the lodgment of their activity statements from July 2020, with any resulting refund being paid to the employer.

AdvisorCorp: It should be noted that eligibility for the above payments is subject to a specific integrity rule that is designed to stamp out artificial or contrived arrangements that are implemented to obtain access to this measure.  In particular, if an employer or an associate enters into a scheme with the sole or dominant purpose of obtaining or increasing any of the above payments for a particular employer, for a period, the employer will not be eligible for any such payments for the relevant period. 

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.

These will be 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.

 

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. 

The measure applies 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.

Small Business Entities (‘SBEs’)

AdvisorCorp:These are businesses with aggregated 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, by legal time in the ACT, and 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, a deduction can be claimed for this balance.

Medium Business Entities (‘MBEs’)

AdvisorCorp: These are businesses with 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, by legal time in the ACT, on 2 April 2019 and ending on 30 June 2020, and the taxpayer starts to use or have the asset 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.

The threshold will generally be applied to the GST-exclusive cost of an eligible asset (i.e., assuming the relevant business is entitled to an input tax credit for any GST included in the acquisition cost).

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.

Accelerating depreciation deductions for new assets

Broadly, a new time-limited 15-month investment incentive (available for eligible assets acquired from 12 March 2020 up until 30 June 2021) will also be introduced to accelerate certain depreciation deductions for businesses with an aggregated turnover below $500 million.

The amount that an eligible entity can deduct in the income year in which an eligible depreciating asset is first used or installed ready for use is:

  • 50% of the cost (or adjustable value where applicable) of the asset; and
  • the amount of the usual depreciation deduction that would otherwise apply (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 not qualifying for the instant asset write-off).  In this case, an 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 in the year is it allocated to the pool. 

Unless specifically excluded, 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 a depreciating asset is not an eligible asset where a commitment to acquire or construct the asset was entered into before 12 March 2020.

Income Support for Individuals

Income support for individuals

Various measures have been introduced so as to provide a 'safety net' for individuals who are financially impacted by the Coronavirus.

The new Coronavirus supplement

A new six-month 'Coronavirus supplement' of $550 per fortnight will be paid to individuals who are currently eligible for certain income support payments, including the:

  • Jobseeker Payment;
  • Youth Allowance; and 
  • Parenting Payment (Partnered and Single).

Furthermore, it appears that this new (additional) supplement will be paid to eligible individuals as part of their existing income support payments (e.g., Jobseeker Payment and Youth Allowance).

Expanding access (and eligibility) to certain income support payments

For the period that the Coronavirus supplement is paid, the Government will also expand access to certain income support payments (e.g., the Jobseeker Payment, the Youth Allowance Jobseeker and the Parenting Payment) for eligible individuals. 

For example, a new category of Jobseeker Payment and Youth Allowance Jobseeker will become available for eligible individuals financially impacted by the Coronavirus.

According to the Government, this could include, for example, permanent employees who are stood down or lose their employment; sole traders; the self-employed; casual workers; and contract workers who meet the income tests, as a result of the economic downturn due to the Coronavirus.

Additionally, asset testing for the JobSeeker Payment, the Youth Allowance Jobseeker and the Parenting Payment will be waived for the period of the Coronavirus supplement.  Income testing will still apply to the person’s other payments, consistent with current arrangements.

Tax-free payments of $750 to eligible recipients

The Government will be providing two separate $750 tax-free payments (referred to as ‘economic support payments’) to social security, veteran and other income support recipients and to eligible concession card holders.

The first $750 payment will be available to individuals who are residing in Australia and are receiving an eligible Government payment, or are the holders of an eligible concession card, at any time from 12 March 2020 to 13 April 2020 (inclusive).  This payment will be made automatically to eligible individuals from 31 March 2020.

The second $750 payment will be available to individuals who are residing in Australia and are receiving one of the eligible Government payments or are the holders of one of the 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.

Each of the $750 payments will be exempt from income tax and will not count as income for the purposes of Social Security, the Farm Household Allowance and Veteran payments.

Temporary Early Access To Superannuation

The Government will introduce a new compassionate ground of release that will allow individuals to access their superannuation entitlements where those benefits are required to assist them to deal with the adverse economic effects of the Coronavirus, but only where one or more of the following requirements are 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 either:

  –  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 this new compassionate ground of release, eligible individuals will be able to access (as a lump sum) up to $10,000 of their superannuation entitlements before 1 July 2020, and a further $10,000 from 1 July 2020 (subject to a six-month time frame).

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 (at www.my.gov.au) and certify that the relevant eligibility criteria is satisfied.

AdvisorCorp: Importantly, such lump sum superannuation withdrawals under this new compassionate ground of release will not be taxable to the recipient (i.e., they will be tax-free).  Also, according to the Government, the amount withdrawn will not affect Centrelink or Veteran’s Affairs payments.

Reducing the minimum drawdown amounts for superannuation pensions

The Government will be temporarily reducing the superannuation minimum drawdown amounts for account-based pensions and similar products by 50% for the 2020 and 2021 income years. 

AdvisorCorp: This basically means that the total minimum annual pension amount that a superannuation fund is otherwise required to pay to a member receiving a pension from the fund (e.g., an account-based pension) will be reduced by half for these two income years.       

Reducing social security deeming rates 

From 1 May 2020, the Government will be reducing both the upper and lower social security deeming rates by a further 0.25 percentage points.  This is in addition to the recent 0.5 percentage point reduction, resulting in an overall reduction to the social security deeming rates of 0.75 percentage points.

On this basis, as of 1 May 2020, the upper deeming rate will be reduced from 3% to 2.25%, and the lower deeming rate will be reduced from 1% to 0.25%. 

AdvisorCorp: These reductions reflect the low interest rate environment and its impact on the income from savings.  Broadly speaking, the social security deeming rates apply (for ‘income test’ purposes) to determine the amount of income that an individual is ‘deemed’ (or taken to) earn from financial investments (e.g., cash deposits and listed securities), irrespective of the actual amount of income (e.g., interest income and dividend income) earned by the individual.  In most cases, the deeming rates apply for the purposes of applying the Age Pension ‘income test’. 

JobKeeper Fortnightly Payment of $1,500

Under the JobKeeper Payment, businesses impacted by the coronavirus will be able to access a subsidy from the Government to continue paying their employees. Affected employers will be able to claim a fortnightly payment of $1,500 per eligible employee from 30 March 2020, for a maximum period of 6 months. 


Eligible employers

Employers will be eligible for the subsidy if:

  1. their business has a turnover of less than $1 billion, and their turnover will be reduced by more than 30 per cent relative to a comparable period a year ago (of at least a month), or
  2. their business has a turnover of $1 billion or more, and their turnover will be reduced by more than 50 per cent relative to a comparable period a year ago (of at least a month), and
  3. the business is not subject to the Major Bank Levy
  4. The employer must have been in an employment relationship with eligible employees as at 1 March 2020, and confirm that each eligible employee is currently engaged in order to receive JobKeeper Payments.
  5. Not-for-profit entities (including charities) and self-employed individuals (businesses without employees) that meet the turnover tests that apply for businesses are eligible to apply for JobKeeper Payments.

Eligible employees

Eligible employees are employees who:

  1. are currently employed by the eligible employer (including those stood down or re-hired);
  2. were employed by the employer at 1 March 2020
  3. are full-time, part-time, or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020)
  4. are at least 16 years of age
  5. are an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder
  6. are not in receipt of a JobKeeper Payment from another employer.

If your employees receive the JobKeeper Payment, this may affect their eligibility for payments from Services Australia as they must report their JobKeeper Payment as income.

Payment process

Eligible employers will be paid $1,500 per fortnight per eligible employee. Eligible employees will receive, at a minimum, $1,500 per fortnight, before tax, and employers are able to top-up the payment.

Where employers participate in the scheme, their employees will receive this payment as follows.

  1. If an employee ordinarily receives $1,500 or more in income per fortnight before tax, they will continue to receive their regular income according to their prevailing workplace arrangements. The JobKeeper Payment will assist their employer to continue operating by subsidising all or part of the income of their employee(s).
  2. If an employee ordinarily receives less than $1,500 in income per fortnight before tax, their employer must pay their employee, at a minimum, $1,500 per fortnight, before tax.
  3. If an employee has been stood down, their employer must pay their employee, at a minimum, $1,500 per fortnight, before tax.
  4. If an employee was employed on 1 March 2020, subsequently ceased employment with their employer, and then has been re-engaged by the same eligible employer, the employee will receive, at a minimum, $1,500 per fortnight, before tax.

It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment.

Payments will be made to the employer monthly in arrears by the ATO.

Timing

The subsidy will start on 30 March 2020, with the first payments to be received by employers in the first week of May. Businesses will be able to register their interest in participating in the Payment from 30 March 2020 on the ATO website.

How to apply

Businesses with employees

  1. Initially, employers can register their interest in applying for the JobKeeper Payment via The Australian Taxation Office (ATO) from 30 March 2020.
  2. Subsequently, eligible employers will be able to apply for the scheme by means of an online application. The first payment will be received by employers from the ATO in the first week of May.
  3. Eligible employers will need to identify eligible employees for JobKeeper Payments and must provide monthly updates to the ATO.
  4. Participating employers will be required to ensure eligible employees will receive, at a minimum, $1,500 per fortnight, before tax.
  5. It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment.
  6. Further details for businesses for employees will be provided on ato.gov.au.

Businesses without employees
    1. Businesses without employees, such as the self-employed, can register their interest in applying for JobKeeper Payment via The Australian Taxation Office (ATO) from 30 March 2020.
    2. Businesses without employees will need to provide an ABN for their business, nominate an individual to receive the payment and provide that individual’s Tax File Number and provide a declaration as to recent business activity.
    3. People who are self-employed will need to provide a monthly update to the ATO to declare their continued eligibility for the payments. Payment will be made monthly to the individual’s bank account.

    Child Care and Early Childhood Education Relief Package
    The Federal Government has just announced a relief package for the child care and early childhood education sector (‘child care sector’). The relief package is designed to:
    • provide free child care to around one million families; and
    • ensure that as many of the child care sector’s 13,000 child care and early learning services as possible keep their doors open for families that need to work and to support vulnerable children during the Coronavirus pandemic.

    Based on the Prime Minister’s Media Release of 2 April 2020, the relief package will involve additional funding for the child care sector, broadly as follows:
    1. The Government will pay 50% of the child care sector’s fee revenue (presumably, this would be paid to each eligible child care and early learning centre) up to the existing hourly rate cap.
    2. The additional funding will apply from 6 April 2020, based on the number of children who were in care during the fortnight leading into 2 March 2020, whether or not they were attending care.
    3. The additional funding will only be available as long as centres remain open and do not charge families for care.
    4. The payments made under the relief package will commence to be made at the end of next week and will be made in lieu of the Child Care and Additional Child Care Subsidy payments.
    5. Payments of higher amounts will be available in exceptional circumstances, such as where greater funding is required to meet the needs of emergency workers or vulnerable children.
    6. Until the payments are made, the Government will allow centres to waive gap fees for families who keep their children home, and families will be able to use the 20 extra absence days the Government has funded for Coronavirus-related reasons without giving up their place in a centre.
    7. The new funding arrangements will be reviewed after one month, with an extension to be considered after three months.

    The Prime Minister’s Media Release also advises that, families who have terminated any child’s enrolment since 17 February 2020 should get in contact with the relevant centre to re-start the child’s enrolment. Furthermore, re-starting a child’s enrolment:
    1. will not require families to send their children to child care;
    2. will not require families to pay a gap fee; and
    3. will hold the child’s place at the centre for the point in time when things start to normalise and families are ready to take their children back to their centre.
    In a separate media statement, the Minister for Education, Dan Tehan, also indicated that means testing arrangements to access the child care subsidy for those who are working during the six month Coronavirus pandemic will no longer be in place.

    Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should contact AdvisorCorp for professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

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