With increasing cases of information overload being reported, it is not always easy to understand the stimulus measures and detail that are applicable to one’s own business situation. Below we review and specify some of the government assistance and incentives available for farmers in these confusing and uncertain times.
- Three-month instant asset write-off until 30th June 2020 - eligible depreciable business assets (new or used) with a purchase price up to $150,000 (GST exclusive) may be fully tax-deductible if the asset is installed and ready for use between 12th March 2020 and 30th June 2020 (note: the car cost limit of $57,581 does still apply).
- 15-month investment incentive until 30th June 2021 – eligible depreciable business assets (new only) acquired after 12th March 2020 may be 50% tax-deductible upfront, plus normal depreciation rules on the remaining 50%, if the asset is installed and ready for use by 30th June 2021. Therefore, a small business entity acquires a new tractor for $300,000 on 15th April 2020, may be able to claim a tax deduction of $172,500 in the 2019/20 financial year.
This may include most farm buildings acquired by the farming entity.
Please be aware that this is not a gift, there are no extra tax deductions available, only a timing difference where the business is able to claim a greater portion of the depreciation in the first year. The asset should be a necessary acquisition however, and the usual cash-flow and budgetary constraints must be considered.
Boosting Cash Flow for Employers
This is a really good one. Eligible employers will receive a minimum stage one cash boost of $10,000 tax-free, and potentially a lot more, based on their PAYG withholding tax they report on their business activity statement.
There is no application or registration process required for this measure, the wages paid on the lodgement of the March 2020 BAS will trigger the first credit, and eventual payment around May 2020. If you did not pay wages on the March BAS, but will be doing so in the June quarter, then the boost payment will be received following lodgement of the relevant subsequent BAS.
Employers with higher PAYG withholding obligations greater than $10,000 to 30th June 2020, will receive stage one boost payments equivalent to the PAYG withheld, up to a maximum of $50,000.
Stage two boost payments will occur July through to October and is calculated based on the stage one boost payments previously received. The total minimum cash flow boost for eligible employers will be $20,000, up to a maximum of $100,000, all tax-free.
It is recommended that when paying your BAS liability, you might consider deducting your cash flow boost payment from the BAS amount payable, to save the ATO the trouble of refunding it to you.
Again, this is a great initiative for eligible employers to retain eligible employees, and enable each to continue operating and working. The Government will subsidise employers an amount of $1,500 per fortnight per employee to pay them this amount, keep them working or at least remain connected.
The JobKeeper payment may apply to employees who were on the payroll at 1st March 2020, even those who may have been subsequently stood down. Eligible employees must be paid the minimum of $1,500 per fortnight (pre-tax) by the employer, even if their current wage is less. The JobKeeper payments received will be taxable income for the employer, of course, the payment of wages will be deductible.
Please be aware that the JobKeeper payment is not limited only to businesses directly impacted by the COVID-19 crisis as previously thought. All eligible businesses, including farmers, may enrol and nominate their eligible employees. Further, there is an opportunity for one non-employee business participant to receive the JobKeeper payment. This may include working owners who are sole traders, partners, beneficiaries or directors.
To be eligible for JobKeeper, the business must be able to:
- Substantiate a 30% decline in business turnover in a current period (month or quarter) with the comparable period in the previous year (eg. March 2020 being 30% less than March 2019)
- Complete an online enrolment form through the business portal from 20th April, in which you:-
- Identify the specific period to be assessed (once you’ve qualified, there is no further testing)
- Nominate all eligible employees (must have been employed as at 1st March 2020)
- Nominate one eligible business participant (if applicable) – eg. working business owner (partner)
- Report monthly to ATO (starting from 4th May) – business turnover and employees’ wages
JobKeeper runs from 30 March to 27 September 2020 and pays $1,500 per fortnight for each employee. The specific eligibility requirements both for turnover and employees can be rather complicated. There are some alternative eligibility tests for specific circumstances. Please seek our advice to discuss and consider your eligibility.
Other government stimulus announcements which may benefit farmers include:-
- 50% wage subsidies for apprentices and trainees up to a maximum of $21,000;
- Government guarantee support to SME’s for new unsecured loans up to $250,000;
- Payroll tax relief for businesses in all States, with changes to payment thresholds, and introduction of waivers, deferrals, refunds, and grants, depending on which State the business operates;
- JobSeeker payments through Centrelink, including sole traders – note the government have temporarily relaxed the spouse/partner income test for this;
- Early access to superannuation – with strict eligibility criteria;
- Opportunity to vary/reduce PAYG instalments for affected businesses; and
- Assistance to severely affected regions heavily reliant on essential services industries such as agriculture.
With all of the above stimulus measures, please be aware that the ATO have implemented sophisticated integrity measures to identify and deny anyone trying to manufacture a situation or scheme with the intent of increasing their entitlement to deductions, payments, relief, or support.
Clearly the best way to know and understand exactly how these stimulus measures may benefit you, and what options and opportunities you should consider, is to talk to your accountant in relation to your own specific business and farming operations. There are usually many other factors and implications to consider, and decisions should be made with appropriate consultation and understanding.