It is a crazy time that we are living in isn’t it? With the recent developments in the Coronavirus crisis, the Federal Government has responded with the first phase of its stimulus package targeting small and medium size businesses and welfare recipients. It is hoped that the stimulus package will provide relief to small businesses who are affected by the tightened economic conditions as a result of the virus, and inject some much needed funds into the economy. Below are some details of the first phase of the stimulus package. Please be aware that these proposals are not yet passed by parliament, although the proposed approval date is the 28th of March. There is also still quite a bit of information to be provided on some of these measures -
Small and Medium Sized Businesses
Cash stimulus to kick-start the economy
To assist small and medium sized businesses cover the costs of employee wages and salaries, all businesses that employ staff and have a turnover under $50 million will receive a 50% rebate on the PAYGW that is declared in their BAS’s and IAS’s from March2020 to June 2020. There is a minimum payment of $2,000 for eligible businesses, with payments being capped at $25,000. This payment is tax free and delivered to the business in the form of a credit in their BAS. The payment is designed to assist businesses manage cash flow challenges and help retain employees.
If you are a business owner, it goes without saying that you should consider increasing wages/bonuses to yourself during this time if you are looking at getting some extra money out of your business (instead of paying a dividend) and your business can afford it. If you are the only worker in your company or discretionary trust and do not currently draw a wage, it would be worth looking at paying yourself a wage to qualify for the rebates.
Supporting apprentices and trainees
To assist small businesses retain their apprentices and trainees, eligible employers can apply for a wage subsidy for 50% of the apprentices or trainee’s wage for up to 9 months from the 1st of January 2020 to the 30th of September 2020. This payment is capped at $21,000. The announcement is currently silent on the requirements to qualify for this rebate, but more information will come to hand in the following weeks.
Increase in business investment
The Government is increasing the instant asset write off threshold from $30,000 to $150,000 and also increasing the eligibility for this by including all businesses with a turnover of up to $500 million. This increase in the instant asset write off applies immediately until the 30th of June 2020 and will assist small businesses by providing extra incentive to purchase assets for their businesses that cost up to $150,000. Previously any assets purchased above $30,000 had to be depreciated over their useful life. These new measures allow an immediate deduction for assets up to $150,000. As it stands, there is still no guidance from the ATO as to how this works for the purchase of non-commercial vehicles (ie. cars), which currently have a depreciation and GST limit of $57,581.
Another measure taken to increase business investment is to offer businesses accelerated depreciation rates to assist with depreciation deductions when completing tax returns. This is limited to a 15 month investment incentive (through to 30th of June 2021). This measure applies to businesses with a turnover under $500 million and applies to assets purchased after the 12th of March 2020.
It must also be noted that both of these measures are not a cash stimulus as such, but will provide relief for business owners when they complete their 19/20 tax returns.
Stimulus payments in the form of a one-off $750 payment will be available from the 31st of March 2020 to social security, veteran and other income support recipients and eligible concession card holders. This is a tax free payment.
There is also a $1 billion support package for regions that are significantly affected by the coronavirus outbreak. This includes those heavily reliant on industries such as tourism, agriculture and education.
As previously mentioned, this is only the first phase of the governments stimulus package and information is still somewhat limited. We will advise our clients as more information comes to hand however, in the meantime, please don’t hesitate to contact us for further clarification.
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