Australian Economic Stimulus Measures in Response to COVID-19

On 12 March 2020, the government has announced a $17.6 billion stimulus package, including a vastly expanded instant asset write off and tax-free cash payments to small and medium businesses. This is aimed at stimulating the economy during the outbreak of COVID-19.

Non-Tax Measures
There will be $750 cash payments to those already on welfare including pensioners, veterans, the unemployed and low-income households.

SME Cash Boost
The government will also roll out a measure that will see businesses with aggregated group turnover of less than $50 million receive payments of up to $25,000 tax-free, with a minimum payment of $2,000.

These payments will be benchmarked to 50 per cent of the amount withheld on employees’ salary and wages during the period 1 January 2020 to 30 June 2020, up to a maximum payment of $25,000.

Eligible businesses that pay salary and wages will receive a minimum payment of $2,000, even if they are not required to withhold tax.

The ATO will deliver the payment as a credit to the business upon lodgement of their activity statements (with the minimum payment applied to the first lodgement).

Employers who lodge the BAS on a quarterly basis will be eligible to receive the payment for the quarters ending March 2020 and June 2020.

Monthly BAS lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgements, with a 150 per cent calculation in the March activity statement to provide the same treatment as quarterly lodgers.

Instant Asset Write-Off Increased
Businesses with aggregated group annual turnover of less than $500 million (up from $50 million) will be able to immediately deduct for tax purposes new or second-hand assets purchased for up to $150,000 that were first used or installed ready for use from 12 March until 30 June 2020.

The threshold will revert to $1,000 for small businesses (turnover less than $10 million) from 1 July 2020.  From 1 July 2020, businesses that are not entitled to the instant asset write-off may be entitled to the 50% investment incentive.

50% Investment Incentive
Businesses with a turnover of less than $500 million will also now be able to deduct an additional 50 per cent of the asset cost in the year of purchase, as the government looks to introduce a time-limited 15-month investment incentive.

The incentive is set to run through to 30 June 2021. Unlike the instant asset write-off extension, this measure will be in place until 30 June 2021 and the value of the eligible asset is uncapped, meaning it could be very useful in encouraging investment in the post-crisis recovery.

Options available to assist businesses impacted by COVID-19 include:

•  Deferring by up to four months the payment date of amounts due through the business activity statement (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise.
• Allow businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.
• Allowing businesses to vary Pay As You Go (PAYG) instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
• Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities.
• Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low interest payment plans.

Important to note that employers will still need to meet their ongoing super guarantee obligations for their employees.

Outside of business, the ATO will also work with individuals experiencing financial hardship, and their tax agents, and will apply appropriate tax relief measures for serious and exceptional circumstances, such as where people cannot pay for food or accommodation.

If you have any concerns or would like more information on any of the above measures above, please speak to your MNH Advisory Services team member.

The information (including taxation) contained within this document is of a general nature only and neither represents nor is intended to be advice on any particular matter.