COVID-19 Update: Prioritising our clients' and associates' health

Australian Government's Economic Response to Coronavirus

15 min read

The Government’s economic response to support households and business through the period ahead is designed to support businesses in managing short-term cash flow challenges, provide support to individuals, severely affected communities and regions, to ensure the continued flow of credit in the Australian economy and to ensure that employers can maintain connections with employees during this difficult period.

1. Support for Businesses

JobKeeper Payment

On 30 March 2020, the Government announced the JobKeeper Payment for eligible businesses, which may include sole traders, whose turnover had reduced by more than 30 per cent if they have a turnover of less than $1 billion or by more than 50 per cent if they have a turnover of more than $1 billion. Businesses subject to the Major Bank Levy will not be eligible.

Following registration by the eligible business, the Government will provide $1,500 per fortnight per eligible employee for a maximum of 6 months. This will support employers to maintain their connection with employees. To register your interest for the Jobkeeper payment updates from Government go to https://www.ato.gov.au/general/gen/JobKeeper-payment/

Boosting Cash Flow for Employers

The Government is providing temporary cash flow support to small and medium businesses and not for profit (NFP) organisations that employ staff during the economic downturn associated with COVID-19 (novel coronavirus). This will be done through two sets of cash flow boosts delivered from 28 April 2020 to support employers to retain employees.

The Government will provide tax-free cash flow boosts of between $20,000 and $100,000 to eligible businesses, delivered through credits in the activity statement system, when eligible businesses lodge their activity statements; including:

  • Small and medium-sized business entities with aggregated annual turnover under $50 million and that employ workers are eligible.
  • NFPs, including charities, with aggregated annual turnover under $50 million and that employ workers are also eligible.

Eligible businesses will receive initial payments in the March to July 2020 period. These payments will be equal to 100 per cent of their employees’ salary and wages withheld. The minimum initial payment is $10,000 and the maximum initial payment is $50,000.

Businesses who received initial cash flow boosts will receive additional cash flow boosts for the periods June to September 2020, equal to the total amount of initial cash flow boosts received. This means that eligible businesses that employ people will receive at least $20,000 up to a total of $100,000 under both payments. This additional payment continues cash flow support over a longer period, increasing confidence, helping employers to retain staff and helping businesses to keep operating.

Temporary relief for financially distressed businesses

The economic impacts of the Coronavirus and health measures to prevent its spread will see many otherwise profitable and viable businesses temporarily face financial distress. It is important that these businesses have a safety net to make sure that when the crisis has passed they can resume normal business operations. One element of that safety net is to lessen the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business.

The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and to initiate bankrupt proceedings against an individual as well as temporarily increasing the time companies and individuals have to respond to statutory demands they receive. The package also includes temporary relief for directors from any personal liability for trading while insolvent, and providing temporary flexibility in the Corporations Act 2001 to provide targeted relief from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.

The ATO will tailor solutions for owners or directors of business that are currently struggling due to the Coronavirus, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.

Increasing the instant asset write-off

The Government is increasing the instant asset write-off threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020. In 2017-18 there were more than 360,000 businesses that benefited from the current instant asset write-off, claiming deductions to the value of over $4 billion. This measure will support over 3.5 million businesses (over 99 per cent of businesses) employing more than 9.7 million employees.

Backing business investment

The Government is introducing a time-limited 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost. This measure will support business investment and is estimated to lower taxes paid by Australian businesses by $6.7 billion over the next two years. This measure will support over 3.5 million businesses (over 99 per cent of businesses) employing more than 9.7 million employees.

Supporting apprentices and trainees

The Government is supporting small business to retain their apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for 9 months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).

Support will also be provided to the National Apprentice Employment Network, the peak national body representing Group Training Organisations, to co-ordinate the re-employment of displaced apprentices and trainees throughout their network of host employers across Australia. This measure will support up to 70,000 small businesses, employing around 117,000 apprentices.

To find out more about how to apply, information on eligibility, go to the Australian Apprenticeship Support Network (AASN) Provider at. https://www.australianapprenticeships.gov.au/

2. Support for individuals and households financial assistance

The Government is providing financial assistance to Australians to support them through the economic impact of the Coronavirus. This assistance includes the JobKeeper Payment income support payments, payments to support households and temporary early releases of superannuation.

JobKeeper Payment

The JobKeeper Payment is aimed to help businesses significantly impacted by the Coronavirus cover the costs of their employees’ wages, so more Australians can retain their jobs and continue to earn an income.

Employers are to notify employees if they are claiming the fortnightly payment of $1,500.

Income support for individuals

Over the next six months, the Government is temporarily expanding eligibility to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight on top of their existing income support payment. This will be paid to both existing and new recipients of Jobseeker Payment, Youth Allowance, Parenting Payment, Austudy, ABSTUDY Living Allowance, Farm Household Allowance and Special Benefit. The Government is also temporarily expanding access for the JobSeeker Payment by relaxing the partner income test.

Payments to support households

The Government is providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders. The first payment will be made from 31 March 2020 and the second payment will be made from 13 July 2020. Around half of those that benefit are pensioners. These payments will help to support confidence and domestic demand in the economy. The second payment will not be made to those eligible for the Coronavirus supplement.

Temporary early release of superannuation

Recognising that many Australians have saved over their lives to support themselves in retirement, the Government is implementing two measures to support retirees in managing the impact of recent volatility in financial markets and the impact of low interest rates on their retirement savings.

The Government is allowing individuals affected by the Coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21. Individuals will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.

Temporarily reducing superannuation minimum drawdown rates

The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for 2019-20 and 2020-21. This measure will benefit retirees with account-based pensions and similar products by reducing the need to sell investment assets to fund minimum drawdown requirements.

Reducing social security deeming rates

On 12 March, the Government announced a 0.5 percentage point reduction in both the upper and lower social security deeming rates. The Government will now reduce these rates by another 0.25 percentage points. As of 1 May 2020, the upper deeming rate will be 2.25 per cent and the lower deeming rate will be 0.25 per cent. The reductions reflect the low interest rate environment and its impact on the income from savings. The change will benefit around 900,000 income support recipients, including around 565,000 Age Pensioners who will, on average receive around $105 more of the Age Pension in the first full year the reduced rates apply

3. Supporting the flow of credit

The Government, the Reserve Bank of Australia and the Australian Prudential Regulatory Authority have taken coordinated action to ensure the flow of credit in the Australian economy, to provide timely access to credit to businesses to manage the impacts of the Coronavirus.

Support for immediate cash flow needs for SMEs

Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50 per cent to SME lenders to support new short-term unsecured loans to SMEs. The Scheme will guarantee up to $40 billion of new lending. This will provide businesses with funding to meet cash flow needs, by further enhancing lenders’ willingness and ability to provide credit. This will assist otherwise viable businesses across the economy who are facing significant challenges due to disrupted cash flow to meet existing obligations.

Quick and efficient access to credit for small business

The Government is cutting red tape by providing a temporary exemption from responsible lending obligations for lenders providing credit to existing small business customers, with the aim of providing help for small businesses to get access to credit quickly and efficiently.

4. Timing of Assistance

Availability

Support

Immediately, with deductions to be included in 2019-20 tax returns

Increased instant asset write off

Immediately

Temporarily reduced minimum drawdown rates for superannuation

Immediately, with deductions to be included in 2019-20 tax returns

Backing business investment — accelerated depreciation

As soon as practicable

Support for Coronavirus-affected regions and communities

From 30 March 2020

Register interest for JobKeeper Payment

From 31 March 2020

First round of $750 payments to support households

Applications from early-April

Assistance for existing apprentices and trainees

Applications from mid-April 2020

Temporary early release of superannuation

From 27 April 2020

Income support and a Coronavirus supplement

From 28 April 2020

First phase of Boosting Cash Flow for Employers

From 1 May 2020

Increased transfer payments from reduced deeming rates

First week of May

Initial JobKeeper Payments received by employers

From 13 July 2020

Second round of $750 payments to support households

From 21 July 2020

Second phase of Boosting Cash Flow for Employers

5. Australian Tax Office Support

The Australian Tax Office (ATO) is providing relief for some tax obligations for businesses affected by the outbreak, on a case-by-case basis. You can contact the ATO’s Emergency Support Infoline for businesses on 1800 806 218 to request this help. For more information click here

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