The $66.1 billion stimulus package - what you need to know
Our team of expert business advisers in tax and accounting are staying updated on the latest government announcements regarding the new stimulus packages. The latest stimulus package has significant benefits for eligible businesses that you need to be aware of. Please read the information below for a summary of how this might impact your business.
What you need to know about the stimulus package
As Covid-19 continues to disrupt our daily lives the Government yesterday passed a second, far reaching $66.1 billion stimulus package 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. Below is a summary of what this means for businesses and individuals.
Business:
Tax-free payments up to $100,000 for small business and not-for-profit employers. An increase in the previously announced initial tax-free payments for employers to a maximum of $50,000. In addition to this, a second round of payments will be made up to a maximum of $50,000, accessible from July 2020.
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.
Access to working capital – Introduction of a Coronavirus SME guarantee scheme protecting financial institutions by guaranteeing 50% of new loans to SMEs.
Sole traders and self-employed eligible for Jobseeker payment – the eligibility criteria to access income support relaxed for the self-employed and sole traders.
Temporary relief from some Corporations Act requirements
Individuals:
Early release of superannuation – individuals in financial distress 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.
Temporary reduction in minimum superannuation draw down rates – superannuation minimum drawdown requirements for account based pensions and similar products reduced by 50% in 2019-20 and 2020-21.
Deeming rates reduced – from 1 May, superannuation deeming rates reduced further to a lower rate of 0.25% and upper rate of 2.25%.
Supplements increased, access extended and eased – for 6 months from 27 April 2020:
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).
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).
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.
Waiting periods and assets tests temporarily waived.
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.
I have outlined below more detailed information from our network CPN at Pitcher Partners with regards to the tax free payments:
Extension of PAYGW support
One of the more significant measures, this is aimed to provide up to $100,000 in cash payments to a business. Under the new proposal, eligible employers can receive a payment equal to 100 per cent of their salary and wages withheld (up from 50 per cent), with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $10,000.
An additional payment is also being introduced in the July – October 2020 period, where eligible entities will receive an additional payment equal to the total of all payments they have received. Accordingly, eligible businesses may receive a total from $20,000 up to a total of $100,000.
This measure will apply to small and medium sized business (SME) entities and not-for-profits (NFP) with aggregated annual turnover under $50 million and that employ workers. An eligible employer is one established prior to 12 March 2020 (however, charities which are registered with the Australian Charities and Not-for-profits Commission will be eligible regardless of when they were registered, subject to meeting other eligibility requirements). Turnover thresholds will generally be based on prior year turnover.
The payment will be provided as an automatic credit in the activity statement system from 28 April 2020. Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld up to the maximum (i.e. $50,000). The minimum will be equal to $10,000 even if they are not required to withhold tax. To qualify for the additional payment, the entity must continue to be active.
Details of this measure remain scarce. While the payment is intended to be automatic, it is unclear how the ATO will access details pertaining to group turnover to automatically assess whether the group has aggregated turnover of less than $50 million. This is likely to affect a small proportion of employers that may be on the borderline of the threshold requirements.
Detailed information released by Treasury on these measures can be accessed here.
We are here to assist
If you need expert business advice (including tax and accounting) we can assist. Please do not hesitate to contact our Accounting team for further information on the services we can provide:
P: 1300 242 136 | e: accounting@abphillips.com.au