The Federal Government has announced a $17.6 bn economic stimulus package proposed to support businesses, keep Australians in jobs and support households.
The stimulus package will take effect immediately, however as legislation is required to introduce the measures, Australian businesses and individuals who are proposed to benefit from the changes have to wait until legislation has been introduced and passed by both Houses of Parliament before they will be able to access the benefits. Parliament does not sit again until 23 – 26 March.
The package includes:
Support for Business Investment
- An increase in the instant asset write-off threshold from $30,000 to $150,000 (ex GST). The measure will be extended to include businesses with aggregated turnover of less than $500m. The increase in the instant asset write off threshold will only be available until 30 June 2020 leaving limited time for eligible businesses to utilise the measure.
- The introduction of a limited time 15-month investment incentive. The incentive will run through to 30 June 2021 and will enable businesses with a turnover of less than $500m to deduct an additional 50% of the cost of an eligible asset in the year of purchase. We assume this measure applies to assets that are not eligible for the instant asset write off. The introduction of this measure indicates the Government may not be intending to extend the instant asset write off beyond 30 June 2020, replacing it instead with an accelerated depreciation measure. We will need to confirm this is the case once legislation has been introduced to Parliament.
Cash flow Assistance for Business
- Eligible small to medium-sized businesses will receive a cash boost of a minimum $2,000 up to a maximum of $25,000. The payment will only be available to businesses with a turnover of less than $50m who employ staff between 1 January 2020 and 30 June 2020. The payment will be tax free. The Government has indicated the payments will be processed as a ‘refund’ of 50% their Business Activity Statement (‘BAS’) or Instalment Activity Statement (‘IAS’) from 28 April 2020. We assume the 50% relates to PAYG withholding reported in the BAS/IAS, refunds will be processed within 14 days. We also assume the cash boost, which is connected to the lodgement of the BAS or IAS will be refunded directly to employers and not offset against ATO liabilities.
- Eligible employers can apply for a wage subsidy of 50% of their apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020. Where small business is unable to retain an apprentice, the subsidy will be available to a new employer that employs the apprentice.
Stimulus Payments to Certain Households
- Pensioners, social security, veteran and other income support recipients and eligible concession cardholders will be eligible for a one-off $750 stimulus payment.
Assistance for severely affected regions
- $1 bn will be available to support certain targeted measures designed to assist those sectors, regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus. This is expected to include those heavily reliant on industries such as tourism, agriculture and education.
ATO Administrative Relief
- The Commissioner of Taxation has also announced the ATO will be using its administrative powers to assist taxpayers impacted by the Coronavirus.
We summarise below the key ATO administrative concessions announced for individuals and businesses impacted by the outbreak.
Key ATO administration concessions for businesses impacted by COVID-19 include:
- Deferring by up to four months the payment date of amounts due through the Business Activity Statement (including PAYG Instalments), Income Tax assessments, Fringe Benefits Tax (FBT) assessments and excise
- Allow businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to. Changing your GST reporting cycle does not mean you have to change your PAYG Withholding reporting cycle. However, once you choose to report and pay GST monthly you must keep reporting monthly for 12 months before you can elect to revert to quarterly reporting
- Allowing businesses to vary Pay-As-You-Go (PAYG) Instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG Instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters. Please note that where you lodge a variation that underestimates your PAYG Instalment amount, income or rate interest and penalties may apply where the varied instalments are less than 85% of the total tax payable on your instalment income for the financial year
- Remitting any interest and penalties, incurred on or after 23 January 2020, that have applied to tax liabilities
- Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low-interest payment plans.
However, employers will still need to meet their ongoing super guarantee obligations for their employees.
The ATO have announced that they will work with individuals experiencing financial hardship, and their tax agents, and will apply appropriate tax relief measures for serious and exceptional circumstances, such as where people cannot pay for food or accommodation. Individuals impacted by COVID-19 are advised to contact the ATO to request assistance on the ATO Emergency Support Infoline on 1800 806 218 to discuss their situation. We recommend that any clients impacted by the COVID-19 outbreak to contact their RSM advisor to negotiate relief options with the ATO.
Whilst the stimulus measures are welcomed, businesses experiencing the impact of reduced cashflow from the flow-on effects of Coronavirus, bushfires and flooding from extreme weather conditions, are unlikely to have the cash available to utilise the increased instant asset threshold between now and 30 June 2020. The measure is also unlikely to provide any immediate benefit to businesses with current year or carried forward losses.
Businesses are cautioned the instant asset threshold is likely to apply to assets installed and ready for use by 30 June 2020 and this may leave a very short time frame for order, delivery and installation particularly where assets are purchased from offshore suppliers.
The stimulus package does not provide any incentives to employers to assist in retaining casual staff who may be impacted by Coronavirus.
RSM will provide an update on the proposed measures once legislation has been released by Treasury. If you require any further information, please contact your local RSM office.