The Australian Government today announced $66.1 bn second set of stimulus measures to support the Australian economy through the COVID-19 (Coronavirus) pandemic.
This additional support boosts the first round of stimulus measures, which were announced by the Government on 12 March 2020. Combined with the previous measures announced on 12 March 2020, the support now totals $189 billion across the forward estimates.
The Government is proposing to introduce relevant legislation this week, before the end of March, to provide further details on eligibility requirements for the relevant support.
Our comments below are based on the government’s announcements.
Cash flow assistance for business
- The Government will enhance the cash flow assistance measures for small to medium sized (SME) businesses, which includes not for profits and charities. Businesses (including not for profits and charities) with turnover of under $50 million that employ staff may now be eligible for up to $100,000 (increased from $25,000) in tax-free payments, with a minimum payment of $20,000 (up from $2,000).
- The mechanism for implementing this has now changed – with ‘initial payments’ and ‘additional payments’. The initial payments will be 100% (increased from 50%) of PAYG withholding from salary and wages (up to $50,000). This will be based on the PAYG withholding for the March quarter (or month of March if a monthly withholder) up to 30 June 2020. The payment will be credited by the ATO on lodgement of relevant Activity Statements from 28 April 2020 (for the March month/March quarter). The additional payment will be equal to the ‘initial payment’ (up to $50,000) and the payment will be credited over the Activity Statements for June to September. Even if a business is not required to withhold tax but pays salary and wages, the business may still be eligible for a minimum credit of $20,000 (in total).
Temporary relief for financially distressed businesses
- The Government is to introduce a number of temporary measures as a safety net to lessen the threat of actions that could unnecessarily push companies into insolvency and force the winding up of a business. This includes a temporary increase in the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive and temporary relief for directors from any personal liability for trading while insolvent.
Government loan subsidy – SME guarantee scheme
- The Government has announced a number of measures to support the flow of credit in the Australian economy, in particular for SMEs.
- This includes the Government providing a guarantee of 50% to SME lenders for new unsecured loans provided to SMEs (turnover up to $50 million) to be used for working capital. It will apply to new loans from early April to 30 September 2020. Loans will be up to three years, with an initial six month loan repayment holiday and with a limit of $250,000 per borrower.
Support for individuals and families
- Over the next six months, the government is temporarily expanding eligibility to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight.The Coronavirus Supplement will be paid for the next six months, costing the Government an estimated $14.1 billion.It’s partnered by an increase of up to 5,000 staff for Services Australia, with the aim of supporting the delivery of the new measures.
- The initial stimulus measures included a one-off payment of $750 to social security, veteran and other recipients of government support. The government has announced it will now provide two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders. The first payment will be made from 31 March 2020 and the second payment will be made from 13 July 2020.
Access to $10,000 of superannuation in 2019-20 and 2020-21
- The Government is allowing certain individuals affected by the Coronavirus to access up to $10,000 of their superannuation before 1 July 2020 and a further $10,000 in the following financial year (expected to be for approximately three months).
- The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for 2019-20 and 2020-21.
- The Government is reducing social security deeming rates.
For completeness, highlights from other measures announced in the Government’s first stimulus package, announced on 12 March 2020, are:
Delivering support for business investment
- Increase of the instant asset write-off threshold from $30,000 to $150,000. This is now be available for businesses with an aggregated turnover of less than $500 million (from $50 million). This is intended to apply immediately to all purchases to 30 June 2020.
- Businesses with an aggregated turnover of less than $500 million are now able to deduct 50% of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost. This is intended to apply immediately and to all purchases to 30 June 2021.
Cash flow assistance for business
- Business that employ apprentices and trainees will be offered a subsidy of 50% of an apprentice or trainee’s wage for nine months (1 January 2020 to 30 September 2020). To be eligible, the business must employ fewer than 20 full-time staff and retain an apprentice or trainee. Where a small business is not able to retain an apprentice, the subsidy will be available to the new employer.
Assistance to severely affected regions
- The Government has pledged $1 billion to support regions and communities that have been most significantly impacted by the economic impacts of the Coronavirus. This includes regions heavily reliant on industries such as tourism, agriculture and education.
- The stimulus also includes additional assistance to help businesses identify alternative export markets or supply chains.
- There are also targeted measures that will be announced to promote domestic tourism including waiving fees for tourism businesses that operate in the Great Barrier Reef Marine Park and other Commonwealth National Parks.
- The Government has announced that the ATO is providing administration relief on a case-by-case basis for people and businesses affected by the outbreak.
- The ATO is also considering ways to enhance its presence in significantly affected regions to make it easier for people and businesses to apply for the relief that they are entitled to.