These are indeed trying times. Below are excerpts from our Better Business newsletter explaining the key stimulus measures from rounds one and two which are available for small businesses as a result of the COVID-19 pandemic. We will add to this post as the situation changes (last updated 31 March 2020).
Boosting cash flow for employers
All small-to-medium businesses which employ people will receive between $20,000 and $100,000 (up from $25,000) in the form of a tax-free payment from the ATO when you lodge your activity statements in the coming months. Your business needs to turnover less than $50 million to be eligible and this only applies to ‘active eligible employers established prior to 12 March 2020’ so no setting up new companies to take advantage!
The first payment, known as ‘boosting cash flow for employers’, will be paid as follows:
- Monthly activity statement lodgers will get a payment equal to 300% of the PAYGW lodged on the March 2020 BAS then 100% of the PAYGW lodged on the April, May and June activity statements subject to the $50,000 cap.
- Quarterly activity statement lodgers will get a payment equal to 100% of the PAYGW lodged on the March and June 2020 activity statements subject to the $50,000 cap.
The second payment, known as the ‘additional payment’, will be paid as follows for businesses that ‘continue to be active’:
- Monthly activity statement lodgers will get an additional payment when they lodge their June 2020, July 2020, August 2020 and September 2020 activity statement, each payment equal to 25% of the total received under the ‘boosting cash flow for employers’ payment.
- Quarterly activity statement lodgers will get an additional payment when they lodge their June 2020 BAS and September 2020 BAS, each payment equal to 50% of whatever payment they received under the ‘boosting cash flow for employers’ payment.
- The idea being that this ‘additional payment’ effectively doubles whatever the employer receives under the ‘boosting cash flow for employers payment’. Confusing, I agree.
Note the minimum payment eligible employers can expect to receive is $10,000 per financial year even if their PAYGW is less than that. The first minimum payment of $10,000 will be paid when you lodge the March 2020 BAS and the second minimum payment is split in two payments of $5,000, one for the June 2020 BAS and the other for the September 2020 BAS.
These payments are all triggered by the lodgement of your activity statements so I would encourage you to lodge these on time and then log into the Portal to see what payment is actually required once the ATO have applied the credit.
There is more detailed information available from Treasury here and it also includes information about benefits for anyone employing trainees or apprentices.
Boosting cash flow for employers (UPDATE)
We’re getting loads of questions about the $100,000 on offer for employers so I wanted to clarify a few things.
First, who is eligible? To be eligible for the first payment you must:
- Have held an ABN at 12 March 2020,
- Continue to be active,
- Made eligible payments that require withholding even if that withholding is $0 (e.g. wages and/or termination payments), and
- On or before 12 March 2020:
- have lodged your 2019 tax return which shows taxable business income, or
- have lodged an activity statement covering a period between 1 July 2018 and 31 December 2019 showing business income.
If you’re eligible for the first payment and you continue to be active you’ll be eligible for the second payment. This is my understanding, but please note the legislation is terribly written and the ATO guidance isn’t very detailed, so no guarantees here.
Important note: This stimulus measure is designed to help employers cover wages and keep people employed. It is aimed at businesses who have been trading and employing people, not for businesses which don’t normally pay wages suddenly recording a wage expense in order to claim the stimulus. This money is for businesses in need, trying to game the system will result in ATO audit and penalties as they are on the lookout for wage payments that don’t fit the normal pattern for the business or aren’t commercial in nature. The ATO have also indicated that a change in the nature of payments normally made could result in backdated liabilities (e.g. you normally pay people as contractors, then you move them to wages, this could mean you owe PAYG withholding back to whenever you first started paying that contractor).
ATO granting payment relief
The ATO are offering a range of payment relief measures, but all require you to ask, none are being automatically applied. These include:
- Payment deferrals of up to six months for tax payments (income tax, activity statement, instalments, FBT, excise tax), though note this means you need to have lodgements up to date otherwise there is nothing to defer.
- Low interest payment plans.
- No penalties associated with varying tax instalments incorrectly.
- Remittance of interest and penalties.
As always with the ATO it’s best to have your lodgements up to date and to call them as early as possible to ask for help. They are being very lenient at the moment. More info here.
Temporary relief for distressed businesses
- A creditor issuing a statutory demand on a company is a common way for a company to enter liquidation. The Government is temporarily increasing the current minimum threshold for creditors issuing a statutory demand on a company under the Corporations Act 2001 from $2,000 to $20,000. This will apply for six months. Not responding to a demand within the specified time creates a presumption that the company is insolvent. The statutory time frame for a company to respond to a statutory demand will be extended temporarily from 21 days to six months. This will apply for six months.
- Directors will be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business. This will relieve the director of personal liability that would otherwise be associated with the insolvent trading. It will apply for six months.
NSW Payroll Tax
It has just been announced that the NSW state government will be giving businesses with payroll of under $10million a 25% discount on their 2020FY Payroll Tax bill. Details are scant, but from what we can see it looks like anyone lodging annually (in July) will get a 25% reduction in their annual liability, and for anyone lodging monthly there will be no payment required for the March, April, or May lodgements and then there will be a reconciliation done at year end to ensure the discount received for the year is equal to 25%.
Please note this doesn’t mean you don’t need to lodge, it just gives relief from the need to pay.
They have also announced that from 1 July 2020 the tax-free threshold for Payroll Tax has been lifted ahead of schedule to $1million. Every dollar counts.
In addition to a 25% discount the NSW government is now offering a 6 month deferral on amounts payable. Limited detail is available, but they do say you “have the option” of deferring which would imply it isn’t automatic so you’ll need to ask for it to be applied.
More info here.
Increasing the instant asset write-off threshold
Over the years the government has changed this threshold more times than anyone can remember, but this one is a big one. Currently at $30,000 for businesses turning over up to $50 million, the threshold is going to be temporarily increased to $150,000 and include businesses turning over up to $500 million just until 30 June 2020. This means that anyone turning over under $500 million can claim a 100% deduction for assets acquired up to $150,000 by the end of the financial year (normally you’d need to claim the deduction over a few years).
We note that the threshold is due to revert to $1,000 as at 1 July 2020 (though if this eventuates I’ll be surprised).
There is also an increased depreciation rate for any assets over the write-off threshold – you’ll now get a 50% upfront deduction for assets acquired over $150,000 as long as your turnover is under $500 million.
More information on these incentives available from Treasury here.
Income support for individuals
For the next six months the government will be temporarily expanding eligibility for support payments as well as introducing a new, time-limited, Coronavirus payment of $550 a fortnight. All payments are managed by Services Australia.
Anyone receiving one of the following payments will be automatically eligible for the full $550 fortnightly payment from 27 April 2020:
- Jobseeker payment,
- Youth Allowance Jobseeker,
- Parenting payment,
- Farm household allowance,
- Special benefits recipients.
Getting access to the above payments has now been made easier. We’ll be focusing on the Jobseeker payment as that is the one most relevant to us here.
- Jobseeker available to permanent employees who are stood down or let go, sole traders, self-employed, casual workers and contract workers who meet the income test as a result of the economic downturn due to the Coronavirus,
- Asset test has been waived for Jobseeker applicants for the next six months,
- One week waiting period has been waived
Jobseeker payments vary from $565.70 to $790.10 a fortnight and are income tested meaning the more you earn the less you get. If you have a partner their income may also affect what you’re entitled to. By way of example, if you’re single without kids once you start earning $1,086.50 a fortnight you stop getting the payment. This table shows how the payment reduces as you earn more.
These payments are not available to people accessing employer payments (e.g. annual leave) or to anyone receiving income protection insurance payments. Claims for payments are to be made online via Services Australia and your MyGov account. During this registration process you may also be eligible for Rent Assistance.
Payment to support households
The government is providing two separate $750 payments to those receiving certain social security, veteran and other income support payment recipients. The payment is tax free and doesn’t count towards any income tests for government payments.
Anyone receiving one of the following benefits, or holding the following concession cards, at any time between 12 March 2020 and 13 April 2020 inclusive will be eligible for the first payment of $750 which will be paid automatically from 31 March 2020.
Age Pension, Disability Support Pension, Carer Payment, Parenting Payment, Wife Pension, Widow B Pension, ABSTUDY (Living Allowance), Austudy , Bereavement Allowance, Newstart Allowance, JobSeeker Payment, Youth Allowance, Partner Allowance, Sickness Allowance, Special Benefit, Widow Allowance, Family Tax Benefit, including Double Orphan Pension, Carer Allowance, Pensioner Concession Card (PCC) holders, Commonwealth Seniors Health Card holders, Veteran Service Pension; Veteran Income Support Supplement; Veteran Compensation payments, including lump sum payments; War Widow(er) Pension; and Veteran Payment., DVA PCC holders; DVA Education Scheme recipients; Disability Pensioners at the temporary special rate; DVA Income support pensioners at $0 rate., Veteran Gold Card holders, Farm Household Allowance.
For the second payment of $750 you must meet the same criteria as above, but if you’re eligible for the Coronavirus supplement (the $550 a fortnight mentioned above) you won’t be eligible for this second $750 payment, so that means no second payment to anyone on Jobseeker. At least that’s my reading of it, the Treasury guidance isn’t super clear!
More information from Treasury can be found here.
Early access to super
If you meet the eligibility criteria you’re able to apply with the ATO via your MyGov account to withdraw up to $10,000 of your superannuation savings before 1 July 2020 and another $10,000 after 1 July 2020. This measure is expected to last until September at this stage and the payments will be tax free.
To apply for early release of your super you must meet one of the following conditions:
- Be unemployed,
- Eligible to receive Jobseeker, Youth Allowance, Parenting Payment or Farm Household allowance,
- On or after 1 January 2020 you were made redundant, or had your working hours cut by 20% or more, or if you’re a sole trader your revenue has decreased by 20% or more.
Is this a good idea? In my opinion, it is not. Superannuation funds tend to be invested heavily in the share market which has fallen close to 30% here in Australia as a result of the pandemic. If you take money out you’re effectively locking in those losses. If you leave it in, in theory, it should go back up in value over time so that $20,000 you take out this year which was worth over $28,000 just a few months ago could be back to that level next year meaning it could be a very price $20,000. Food for thought.
More information can be found on the Treasury site here.