Second set of Economic Responses to the Coronavirus

Second set of Economic Responses to the Coronavirus

While the full economic effects from the virus remain uncertain, the outlook has deteriorated since the Government’s initial Economic Response announced on 12 March 2020.

As a result, Prime Minister Scott Morrison & Treasurer Josh Frydenberg announced on 22 March 2020 an additional $66 billion in support targeted at businesses, households and the flow of credit.

 

 

 

Support for Businesses:

Boosting Cashflow for Employers:

The payments will only be available to active eligible employers established prior to 12 March 2020 with aggregated annual turnover under $50 million.

Under the enhanced scheme, employers will receive an initial tax-free payment equal to 100 per cent of their PAYG Tax 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.

Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020.

Monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgments.

To provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (300 per cent) in the March 2020 activity statement. The minimum payment will be applied to the entities’ first lodgment.

An additional payment (up to a total of $50,000) is also being introduced in the July – October 2020 period. To be eligible, the entity must continue to be active.

For monthly activity statement lodgers, the additional payments will be delivered as an automatic credit in the activity statement system. This will be equal to a quarter of their total initial tax-free payment (above) for Employers following the lodgment of their June 2020, July 2020, August 2020 and September 2020 activity statements.

For quarterly activity statement lodgers, the additional payments will be delivered as an automatic credit in the activity statement system. This will be equal to half of their total initial tax-free payment (above) for Employers following the lodgment of their June 2020 and September 2020 activity statements (up to a total of $50,000).

Temporary relief for financially distressed businesses:

A temporary increase to the threshold and response time that a creditor can take action to initiate insolvency or bankruptcy from $2,000 and 21 days to $20,000 and six months.

Increasing the instant asset write off and backing business investment:

There is no change on the initial announcement on 12 March 2020 being:

From 12 March 2020 until 30 June 2020 the Government is increasing the instant asset write off from $30,000 for businesses with a turnover of less than $50 million to $150,000 for businesses with a turnover of less than $500 million.

The instant asset write off is due to revert to $1,000 for small businesses (turnover less than $10 million) from 1 July 2020.

There is 15-month investment incentive through to 30 June 2021. This allows businesses with a turnover of less than $500 million to deduct 50 percent of the asset on installation with the remainder being deducted under existing depreciation rules.

Supporting Apprentices & Trainees:

There is no change on the initial announcement on 12 March 2020 being:

The subsidy will be available to small businesses employing fewer than 20 full-time employees who retain an apprentice or trainee. The apprentice or trainee must have been in training with a small business as at 1 March 2020.

Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage paid during the 9 months from 1 January 2020 to 30 September 2020. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).

Employers can register for the subsidy from early-April 2020. Final claims for payment must be lodged by 31 December 2020.

Assistance for severely affected regions:

There is no change on the initial announcement on 12 March 2020 being:

$1 billion allocation to support those regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on industries such as tourism, agriculture and education. The $1 billion will be provided through existing or newly established Government programs.

Support to Individuals and Households:

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. This will be paid to both existing and new recipients of JobSeeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.

This will provide payment access for permanent employees who are stood down or lose their employment; sole traders; the self-employed; casual workers; and contract workers who meet the income tests as a result of the economic downturn due to the Coronavirus.

Asset testing for JobSeeker Payment, Youth Allowance Jobseeker and Parenting Payment will be waived for the period of the Coronavirus supplement.

People will not be permitted, and will need to declare that they are not, accessing employer entitlements (such as annual leave and/or sick leave) or Income Protection Insurance, at the same time as receiving Jobseeker Payment and Youth Allowance Jobseeker under these arrangements.

Payments to support households:

The Government is providing two separate $750 tax-free payments to social security, veteran and other income support recipients and eligible concession card holders. Around half of those that benefit are pensioners.

The first payment (announced on 12 March 2020) will be available to people who are eligible payment recipients and concession card holders at any time from 12 March 2020 to 13 April 2020 inclusive.

The second payment will be available to people who are eligible payment recipients and concession card holders on 10 July 2020.

A person can be eligible to receive both a first and second support payment. However, they can only receive one $750 payment in each round of payments, even if they qualify in each round of the payments in multiple ways.

Temporary early release of superannuation:

Eligible individuals will be able to apply from April 2020 online through myGov to access 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 approximately three months (exact timing will depend on the passage of the relevant legislation).

To apply for early release, you must satisfy any one or more of the following requirements:

  • you are unemployed; or
  • you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
  • on or after 1 January 2020:
    • you were made redundant; or
    • your working hours were reduced by 20 per cent or more; or
    • if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more.

People accessing their superannuation will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.

Temporary Reduce 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.

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. Timely access to credit is vital for businesses to manage the impacts of the Coronavirus.

From April business with annual turnovers of up to $50 million will be eligible to the SME Guarantee scheme. The Government commits to secure $20 billion worth of working capital loans as a 50% guarantee to support lending of $40 billion from banks and non-bank lenders to SMEs. These loans are up to $250,000 over three years and will include an upfront six month freeze on repayments.

Scott Morrison made clear that this is not the second and final support package, whatever is necessary will follow.

Learn more from Treasury on how this will impact you or your business. Alternatively, please do not hesitate to contact our office on 02 6921 5444.

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