The Australian Federal Government has announced a $17.6 billion stimulus package to counter any economic downfall that may be caused by COVID-19 (coronavirus), which is expected to be passed through parliament next week.
The measures have the potential to provide significant cash flow to business taxpayers in the short term, funded predominantly through the tax system. The package includes:
1.) AN INSTANT ASSET WRITE-OFF EXTENSION;
From 12 March 2020, the Federal Government will increase the instant asset write-off threshold for depreciating assets from $30,000 to $150,000. While the deduction was previously limited to small and medium sized businesses (being those businesses with a aggregated annual turnover of less than $50 million), the revised limit will be extended to businesses with an aggregated turnover of less than $500 million. The increased asset and turnover thresholds will apply immediately until 30 June 2020. The announcement is currently silent on whether the measure applies to assets acquired from 12 March 2020, or assets installed ready for use from that day if acquired earlier.
2.) A 50% ASSET INVESTMENT INCENTIVE;
The Federal Government announced that, from 12 March 2020, it would introduce an investment incentive, being effectively an accelerated depreciation allowance on eligible assets. The measure will allow businesses with turnover of less than $500 million to immediately deduct 50 per cent of the cost of an eligible asset. Existing depreciation rules would continue to apply to the balance of the asset’s cost. The incentive will be available until 30 June 2021, to support business investment and economic growth through the short term. The announcement is silent on whether turnover would constitute aggregated turnover. Furthermore, the Prime Minister’s announcement and the Treasurer’s announcement differ on the start time – the former states the measure will apply to asset based on “purchase” time, while the latter states it is based on “installation” time.
3.) CASH PAYMENT TO EMPLOYERS OF BETWEEN $2,000 TO $25,000;
The Federal Government has announced up to a $25,000 tax-free payment to small and medium sized businesses with aggregated annual turnover of less than $50 million that employ workers, between 1 January 2020 and 30 June 2020. These eligible businesses will receive a payment equal to 50% of their PAYG withheld, delivered as a credit in their BAS from March to June 2020, with a minimum $2,000 payment and up to a cap of $25,000. It is not clear how the Australian Taxation Office (ATO) will be able to assess whether the employer meets the $50 million turnover test. Such businesses, whether companies, trusts, partnerships or sole traders can receive payments.
4.) 50% WAGE SUBSIDY FOR APPRENTICE’S OR TRAINEE’S WAGES;
Eligible small business employers will be able to apply for a wage subsidy of up to 50% of the apprentice’s or trainee’s (in training as at 1 March 2020) wage for up to 9 months from 1 January to 30 September 2020, up to $21,000 per apprentice. The announcement is silent on the meaning of the term “small business”. Presumably, it applies to those that meet the definition in the Income Tax Act, being an entity with an aggregated turnover of less than $10 million. The subsidy is stated to be available to new employers who retain apprentices of another small business where that other small business could not. It is not clear whether the new employer also needs to be a small business themselves. Employers can register for the subsidy from early April 2020 with final claims for payment due by 31 December 2020. For further information on how to apply for the subsidy, including information on eligibility, contact an Australian Apprenticeship Support Network provider.
5.) SUPPORT TO REGIONS AND COMMUNITIES IMPACTED BY THE CORONAVIRUS, INCLUDING ATO PAYMENT SUPPORT;
The Federal Government has set aside $1 billion to support regions and communities disproportionately affected by the economic impacts of the Coronavirus. This includes those heavily reliant on industries such as tourism, agriculture and education. The measure will include the waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and the waiver of entry fees for Commonwealth National Parks. It will also aid with identifying alternative export markets or supply chains, with targeted measures to further promote domestic tourism. On a case-by-case basis, the ATO will look to provide administrative relief for some tax obligations for people affected by the Coronavirus outbreak.
6.) ONE OFF $750 PAYMENT TO CERTAIN CONCESSIONAL RECIPIENTS;
The Federal Government will provide a one-off $750 payment from 31 March 2020 to social security, veteran and other income support recipients and eligible concession card holders, with around half being pensioners. Eligible recipients will be entitled to a single tax-free payment which will not count as income for Social Security, Farm Household Allowance and Veteran payments. There will be one payment per eligible recipient.
We will continue to keep you up to date with more information as we receive it. If you have any questions regarding the Stimulus package please contact our office.