Over the past six months, Australians has faced devastating natural disasters including drought, fires, floods, and now, the outbreak of coronavirus (COVID-19). Governments, businesses and communities all around the world are facing unprecedented challenges.

In the midst of these difficult times and to keep the cash flowing through the economy, the central Government has released stimulus package’s that boosts income support payments, introduces targeted changes to the superannuation rules, provides cash flow support of up to $100,000 for small business employers, and relaxes corporate insolvency laws. The first stimulus package was released on 12th March 2020. It also released a job keeper subsidy program on 30th March 2020

All the state governments have also provided various relief measures from waving of payroll tax for certain businesses, to land tax deferrals & waving of liquor license fees in Victoria. We have created a separated article on the various relief measures announced by the State Governments and concessions by the banks.

Summary

Businesses:

1. Job Keeper Payment: Businesses severely impacted by COVID-19 outbreak will be able to access a subsidy from the government to pay the employees.
2. Tax-free payments up to $100,000 for small business and not-for-profit employers. The scheme will be delivered in two phases: Firstly, with employers set to receive a first payment equal to 100 per cent of their salary and wages withheld, up to a maximum of $50,000, when businesses lodge their activity statements for the 28 April and 28 July quarterly due dates. Eligible businesses that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax. In the second phase, an additional payment equal to the first payment will be made after businesses lodge their BAS by the 28 July and 28 October quarterly due dates. Use our calculator to work it out
3. Access to working capital – Introduction of a Coronavirus SME guarantee scheme protecting financial institutions by guaranteeing 50% of new loans to SMEs.
4. Solvency safety net – temporary 6-month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000, and an increase in the time companies have to respond from 21 days to 6 months. Directors also are provided with temporary relief from personal liability for trading while insolvent for 6 months.
5. Sole traders and self-employed eligible for Jobseeker payment – the eligibility criteria to access income support relaxed for the self-employed and sole traders.
6. Temporary relief from some Corporations Acts requirements.
7. Business Investment: Increase extension of the instant asset write off and accelerate depreciation deductions.
8. Wage subsidy of up to 50% of an apprentice or trainee wage.
9. Targeted support for severely affected sectors, regions and communities.

Individuals:

1. Employees who have been made redundant, or those who have their working hours reduced by 20 per cent or more, or sole traders whose businesses have been suspended or see a reduction in turnover by 20 per cent or more will also now be allowed to access up to $20,000 of their superannuation.
2. The government will also reduce the minimum drawdown requirements for account-based pensions and similar products by 50 per cent for the 2019–20 and 2020–21 income years.
3. Bankruptcy safety net – temporary 6-month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor from $5,000 to $20,000.
4. Supplements increased, access extended and eased – for 6 months from 27 April 2020:
   1. A temporary coronavirus supplement of $550 will be paid to existing income support recipients (people will receive their normal payment plus $550 each fortnight for 6 months).
   2. A second one-off stimulus payment of $750 will be paid automatically from 13 June 2020 to certain income support recipients (in addition to the payment made from 31 March 2020).
   3. Eligibility for access to income support eased to include sole traders and the self-employed, and to those caring for someone infected or in isolation.
5. Deeming rates reduced – from 1 May, superannuation deeming rates reduced further to a lower rate of 0.25% and upper rate of 2.25%.

Australian Tax Office

Apart from this ATO is also supporting businesses by

• deferring payments (such as Income tax, Fringe benefits tax, Activity statement, Exercise payments and Pay as you go) up to 6 months,
• varying PAYG instalments,
• remitting of interest & penalties incurred after 23rd Jan 2020,
• changing reporting cycle from quarterly to monthly for businesses that may be entitled for GST refund and
• by offering low-interest plans to businesses for tax liabilities.

These measures are not applied automatically so you will have to contact ATO on 1800 806 218 to discuss relief measures. For more information, please refer to ATO Covid-19

Superannuation guarantee still needs to be paid on time or SGC statement needs to be completed.

Business- In Detail

Job Keeper Subsidy

• Under the JobKeeper Payment, businesses impacted by the Coronavirus will be able to access a subsidy from the Government to continue paying their employees.
• Affected employers will be able to claim a fortnightly payment of $1,500 per eligible employee from 30 March 2020, for a maximum period of 6 months.

Employers will be eligible for the subsidy if:

•  their business has a turnover of less than $1 billion and their turnover will be reduced by more than 30 per cent relative to a comparable period a year ago (of at least a month), or
• their business has a turnover of $1 billion or more and their turnover will be reduced by more than 50 per cent relative to a comparable period a year ago (of at least a month); and • the business is not subject to the Major Bank Levy.
• The employer must have been in an employment relationship with eligible employees as at 1 March 2020, and confirm that each eligible employee is currently engaged in order to receive JobKeeper Payments. Not-for-profit entities (including charities) and self-employed individuals/sole traders (businesses without employees),  that meet the turnover tests that apply for businesses are eligible to apply for JobKeeper Payments.

Eligible employees are those who:

• Were employed by the relevant employer on 1 March 2020; and
• Are currently employed by the employer (including those who have been stood down or re-hired); and
• Are full time, part-time, or long term casuals (a casual employee employed on a regular basis for 12 months as at 1 March); and
• Are at least 16 years of age; and
• Are an Australian citizen, hold a permanent visa, are a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder; and

Are not in receipt of a JobKeeper Payment from another employer.

Tax-free payments up to $100,000 for employers

• From: 28 April 2020
• Eligibility: Small and medium business entity employers and not-for-profit entities, with an aggregated annual turnover under $50 million.

The Government has increased the previously announced measures to provide cash flow support to the business.

Now, eligible businesses with a turnover of less than $50 million will initially be able to access tax-free cash flow support, with the minimum amount being increased to $10,000 and the maximum amount increased to $50,000 (previously $2,000 to $25,000). However, additional support will be provided in the July – October 2020 period so that eligible entities will receive total minimum support of $20,000 and up to $100,000.

In order for a business to qualify for this support, it must have been established prior to 12 March 2020. The rules are more flexible for charities because the Government recognises that new charities might be established in response to the pandemic.

The cash flow support measures will be provided in the form of a credit in the activity statement system. The support will be provided in two phases.

• The first phase ensures that eligible employers receive a credit equal to 100% of the PAYG amounts withheld from salary and wages paid to employees during the relevant period, up to the maximum amount of $50,000.
• The second phase ensures that eligible employers receive another series of credits, equal to the credits that were received under the first phase. For example, if a business received $40,000 of credits in the first phase it will receive a further $40,000 of credits in the second phase. These additional credits will be spread over two or four activity statement periods, depending on whether the employer lodges on a quarterly or monthly basis.

You can use our calculator to work out how much cash flow benefit.

If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $10,000 will be made in the first phase and a further payment of $10,000 will be made in the second phase.

The credits are automatically calculated by the ATO and employers will need to lodge an activity statement to trigger the entitlement. If the credit puts the business in a refund position the excess amount will be refunded by the ATO within 14 days.

Businesses that lodge activity statements on a quarterly basis will be eligible to receive credits in the first phase for the quarters ending March 2020 and June 2020. Credits in the second phase will be available for the quarters ending June 2020 and September 2020. The minimum $10,000 payment will be applied to the first lodgement.

Businesses that lodge on a monthly basis will be eligible for the credits in the first phase for the March 2020, April 2020, May 2020 and June 2020 lodgements. Credits in the second phase will be available for the June 2020, July 2020, August 2020 and September lodgments. The minimum $10,000 payment will be applied to the first lodgement.

Eligibility for the measure will be based on prior year turnover. We will have to wait for the legislation for the finer details.

Not-for-profit employers, including charities, with an aggregated turnover under $50 million will also be able to access the cash flow support.

• See: Cash flow assistance for businesses

Solvency Safety Net

A safety net has been put in place to protect businesses in temporary financial distress as a result of the pandemic by lessening the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business. These include:

• A temporary 6 month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000.
• The time a company has to respond to statutory demands will increase from 21 days to 6 months.
• For 6 months, directors will be provided with temporary relief from personal liability for trading while insolvent.
• See also bankruptcy safety net below

It will be more important than ever for a business to stay on top of their debtors.

Debts incurred will still be payable by the business. Only those debts incurred in the ordinary course of the business will be subject to the safety net measures.

• See: Temporary relief for financially distressed businesses

Access to working capital for SMEs – supporting lenders

The Government has announced a Coronavirus SME guarantee scheme that will guarantee 50% of new loans to SMEs up to $20 billion. These loans are new short-term unsecured loans to SMEs.

SMEs with a turnover of up to $50 million will be eligible to receive these loans.

The Government will provide eligible lenders with a guarantee for loans with the following terms:

• The maximum total size of loans of $250,000 per borrower.
• The loans will be up to three years, with an initial six month repayment holiday.
• The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.

Loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look

through the cycle to sensibly take into account the uncertainty of the current economic conditions.

This latest measure builds on the previous initiatives to ensure the small business can access capital, including:

• An exemption to the responsible lending obligations to enable financial institutions to provide new credit, credit limit increases, and credit variations and restructures,
• $15bn to the Australian Office of Financial Management to invest in wholesale funding markets used by small banks and non-banks to enable these lenders to support SMEs, and
• Australian Banking Association members will defer loan repayments for 6 months for small businesses (affected small businesses will need to apply for relief).

Sole traders and self-employed eligible for Jobseeker payment

The eligibility criteria to access income support payments will be relaxed to enable the self-employed and sole traders whose income has been reduced, to access support. Jobseeker Payment and Youth Allowance Jobseeker criteria will provide payment access for permanent employees who are stood down or lose their employment.  The expanded eligibility applies to Sole traders, Self-employed, casual workers and contract workers. for more info, please refer to this

More:

• Income support for individuals
• More financial support for coronavirus affected job seekers
• Increased and accelerated income support(refer to the example)

How to claim?

Centrelink has encouraged new applicants to claim through online and mobile channels. You will have to setup a Mygov account and then register for a centrelink account. To open an account, please click here.

Temporary relief from Corporations Act requirements

The Treasurer has been given a temporary instrument-making power to amend the Corporations Act to provide relief or modifications to specific compliance obligations.

ASIC has announced measures for those companies with a 31 December financial year that need to hold their AGMs by 31 May 2020, providing a two month no action period and enabling hybrid virtual AGMs.

For more info on Increase and extension of the instant asset write-off and wage subsidy, please refer to the First stimulus announced on 12th March.

Individual- In detail

Early release of superannuation

From mid-April, individuals in financial distress will be able to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21. The withdrawals will be tax-free and will not affect Centrelink or Veterans’ Affairs payments.

To be eligible to access your superannuation you need to meet the following requirements:

• you are unemployed; or
• you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
• on or after 1 January 2020:
  • you were made redundant; or
  • your working hours were reduced by 20% or more; or
  • if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20% or more.

For those eligible to access their superannuation, you can apply directly to the ATO through the myGov website from mid-April.

More:

• Early access to superannuation

Temporary reduction in minimum superannuation drawdown rates

Superannuation minimum drawdown requirements for account-based pensions and similar products will be reduced by 50% in 2019-20 and 2020-21.

The upper and lower social security deeming rates will be reduced further. As of 1 May 2020, the upper deeming rate will be 2.25% and the lower deeming rate of 0.25%.

More: Providing support for retirees

Time-limited fortnightly $550 ‘coronavirus supplement’

For the next 6 months, the Government is introducing a new Coronavirus supplement to be paid at a rate of $550 per fortnight. This supplement will be paid to both existing and new recipients in the eligible payment categories.

The payment will be made to those receiving:

• Jobseeker payment (and those transitioning to the jobseeker payment)
• Youth allowance jobseeker
• Parenting payment
• Farm household allowance
• Special benefits recipients

In addition, eligibility to income support payments will be expanded to:

• Permanent employees who are stood down or lose their job
• Casual workers
• Sole traders
• The self-employed
• Contract workers who meet the income test

The Government notes that these criteria could include those required to care for someone affected by the Coronavirus.

Asset testing has also been reduced and will be waived for 6 months. Income testing will still apply.

The payment is not available if you have access to any employer entitlements such as annual or sick leave or income protection insurance.

More:

• Income support for individuals

Second $750 payment to households

The Government is now providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders residing in Australia (see the full list here). The payment will be exempt from taxation and will not count as income for the purposes of Social Security, Farm Household Allowance and Veteran payments.

• Payment 1 from 31 March 2020 (previously announced on 12 March): Available to people who are eligible payment recipients and concession cardholders at any time between 12 March 2020 to 13 April 2020;
• Payment 2 from 13 July 2020: Available to people who are eligible payment recipients and concession card holders on 10 July 2020.

The payments will be made automatically to those that meet the criteria.

More:

Payments to support households

Bankruptcy safety net

A temporary 6-month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will increase from $5,000 to $20,000. In addition, the time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.

Where someone declares their intention to enter voluntary bankruptcy, the period of protection from unsecured creditors will be extended from 21 days to 6 months.

More:

• Temporary relief for financially distressed businesses

ATO

We’ll bring you more details as soon as they become available. Please contact us if you have any questions or book a free consultation.

ThinkWiser is a boutique Accounting firm and Tax Agents based in South Morang, Victoria. We provide Accounting, Bookkeeping, Tax compliance services to small businesses and individuals throughout Australia through video-conferencing. We provide Mobile Accounting & Tax Services to the following suburbs: Mernda, Doreen, Yarrambat, Mill Park, Bundoora, Plenty, Craigieburn, South Morang & Melbourne. For any queries, please call us on 03 9005 6762 or email us at [email protected]