On Sunday morning the Federal Government announced a further $66 billion in economic stimulus to fight the effect on the economy of the virus. This $66 billion adds to the initial $17.6 billion, the $90b from the RBA and $15b from the Federal Government to deliver support of close to 10% of GDP.
1. Business – Cashflow assistance via PAYG Withholding Tax
- In the normal course of business, employers report PAYG Withholding for employees on their monthly, quarterly or annual activity statements.
- This assistance for small, medium enterprises (SME) employers has increased from the initial package for SME (revenue under $50m), as detailed here.
- Employers will be credited 100% of tax paid (PAYG Withheld) on salary/wages up to $100,000. The first payment is capped at $50,000 payable after 28 April and the second at $50,000 payable after 28 July 2020.
- If you are registered for PAYG Withholding, you will be credited/paid a minimum of $20,000 whether or not PAYG tax is withheld.
- 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.
- This represents approximately $32b of the $65b support and will be the support most businesses will be entitled to.
To qualify and obtain this support:
- The business must have existed since 12 March 2020.
- Ensure your business is registered for PAYG Withholding
- File your Activity Statements and the credit/payment will flow automatically
- More details – Cash flow assistance for businesses
2. SME Loan Guarantee Scheme
- The Government commits to underwrite $20 billion worth of loans; a 50 per cent guarantee to support lending of up to $40 billion to SMEs from banks and non-bank lenders.
- Starting in early April, this will apply to eligible loans for businesses with annual turnovers of up to $50 million and will include an upfront six-month freeze on repayments.
- The loans will be unsecured but used only for working capital purposes and will apply to loans granted within six months from April 1, 2020. New and existing bank customers will be able to apply for loans up to $250,000 over three years.
- 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 small business can access capital.
- More details – Supporting the flow of credit
3. Solvency safety net
- Temporary increase to the threshold at which a creditor can take action to initiate insolvency or bankruptcy from $2,000 to $20,000 and giving companies and individuals six months instead of 21 days to respond.
- Relief for directors for personal liability when the company is trading while insolvent.
- The Corporations Act 2001 will be amended to provide temporary and targeted relief for companies to deal with unforeseen events that arise as a result of the coronavirus.
- This relief will be provided over the next six months.
- ASIC has also released guidance on AGMs and reporting for listed entities.
- It will be more important than ever for 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.
- More details: Temporary relief for financially distressed businesses
4. 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. More details:
5. Payments for households
In addition to the first $750, a second $750 payment to social security and veteran income support recipients and eligible concession card holders, except for those who are receiving an income support payment that is eligible to receive the coronavirus supplement. This second payment will be made automatically from 13 July 2020 and is estimated to cost $4b over the forward estimates period.
More details – Payments to support households
6. Corona virus supplement
- Temporary eligibility expansion to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight.
- This will be paid to both existing and new recipients of the JobSeeker Payment, Youth Allowance jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.
- The Corona virus supplement will be paid for the next 6 months. Eligible income support recipients will receive the full amount of the $550 Coronavirus supplement on top of their payment each fortnight.
- This measure is estimated to cost $14.1 billion over the forward estimates period.
- More details – Payments to support households
7. Early release of superannuation
- From April, individuals will be able to access their superannuation, capped at $10,000 this financial year and a further $10,000 next financial year. The withdrawals will be tax-free and will be made available to those eligible for the coronavirus supplement as well as sole traders who have seen that hours of work, or income fall, 20% of more as a result of the coronavirus.
- Eligible individuals will be able to apply online through MyGov for access of up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for another three months. They will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments. This measure is estimated to cost $1.2 billion over the forward estimates period.
- More details – Early access to superannuation
8. Superannuation minimum drawdown rates and social security deeming rates
- Temporary reduction to superannuation minimum drawdown requirements for account based pensions and similar products by 50 per cent for 2019-20 and 2020-21.
- Reduction of the deeming rates by a further 0.25 percentage points to reflect the latest rate reductions by the RBA. As of 1 May 2020, the lower deeming rate will be 0.25 per cent and the upper deeming rate will be 2.25 per cent. This measure is estimated to cost $876m over the forward estimates period.
- More details – Providing support for retirees
9. More information on the economic support:
For more information in the Australian Government’s Economic Response to the Coronavirus visit:
- Joint media release with The Hon. Scott Morrison MP Prime Minister
- Support for Businesses
- Supporting Individuals and Households
10. Other Considerations
1. Employees and Human Resources Management
- For specific guidance in this environment refer to Fair Work Australia for specific guidance in this environment and consider professional advice from a HR professional.
- Remote working; there are many transitioning to this and patience in the transition is paramount. There are many applications out there to assist with and manage remote working.
2. Payroll and State Taxes
- State Governments are supporting businesses in various ways including refunds or no payroll taxes, this varies from State to State
- For further advice consult with a legal practitioner (Accountants cannot legally advise on State Taxes)
More details:
3. Rental Relief
- If your business operates from a rental property, you need to negotiate directly with your landlord to seek rent relief during the COVID-19 outbreak.
- There is precedent for rent reduction or rental waiver in other countries during the outbreak. For example, many of the major Singapore retail landlords offered significant rent reductions/relief to their tenants during the close-down.
4. Insurance
- Unfortunately, most business continuity insurance policies exclude business interruptions or closures caused by pandemics, and COVID-19 is a listed disease under the Biosecurity Act (2015).
- You need to check the specific wording of your policy and talk with your insurance broker to see if there are any options with your policy, or any legal “wiggle room.” (e.g. some policies still refer to the Quarantine Act and not the Biosecurity Act)
5. Mortgages and Finance
- Contact your bank and/or look at their website or contact your finance broker.
- Each bank is different but may offer:
- Interest only payments for a period of time.
- To extend the length of your loan to reduce repayment amounts.
- To postpone or defer payments for a number of months.
- Time to sell your property/loan asset.
- Additional credit.
- Waiving of fees and charges.
- Early access to term deposits without penalty.
- Debt consolidation.
6. Cash flow forecasting
- In this changing environment a review and re-forecast may be appropriate to see where your business is heading.
- This exercise will give directors comfort in regard to their obligations to trading solvent to start with, though importantly for business strategy.
7. Regulations and regulators
- Many regulators are doing a lot of work at the moment to determine support for there industry, there have been some specific announcements though it is generally considered the regulators will be a little more relaxed and understanding.