The COVID-19 Stimulus & Support Measures

 
Please click on this link to access a comprehensive downloadable PDF document that contains everything we currently know about the COVID-19 Stimulus & Support Measures.

In addition to the information contained in the document, the NSW Government has announced $10,000 grants for eligible businesses. To be eligible, businesses will need to:

  • Have between 1-19 employees and a turnover of more than $75,000;
  • A payroll below the NSW Government 2019-20 payroll tax threshold of $900,000;
  • Have an Australian Business Number as at 1 March 2020, be based in NSW and employ staff as at 1 March 2020;
  • Be highly impacted by the Public Health (COVID-19 Restrictions on Gathering and Movement) Order 2020 issued on 30 March 2020;
  • Use the funding for unavoidable business costs such as utilities, overheads, legal costs and financial advice;
  • Provide appropriate documentation upon application.

Applications for a small business grant of up to $10,000 will be available through Service NSW within a fortnight and remain open until 1 June 2020.

Please do not hesitate to contact us if you require any help or clarification in relation to any of the stimulus measures.
 

JobKeeper Payment

 
The $1,500 JobKeeper Payment

The Australian Government announced the JobKeeper Payment last night to help employers keep their employees. As with all announcements at the moment, there is some information available but there are too many gaps to properly advise all of our clients. We have attempted to provide a relevant summary of the information that we do know so far.
 

What is the JobKeeper Payment?

 
A subsidy of $1,500 per fortnight per employee, administered by the ATO, will be paid to businesses that have experienced a downturn of more than 30% (50% for businesses over $1bn).

If an employer receives the subsidy, they will be required to ensure that the full amount is passed on to the employee. See the example below.
 

Eligibility

 
There are two levels of eligibility; for employers and employees.

Eligible employers are those with:

  • Turnover below $1bn that have experienced a reduction in turnover of more than 30% relative to a comparable period 12 months ago (of at least a month); or
  • Turnover of $1bn or more that have experienced a reduction in turnover of more than 50% relative to a comparable period 12 months ago (of at least a month); and
  • Are not subject to the Major Bank Levy.
 
Sole traders and the self-employed with an ABN, and not-for-profits (including charities) that meet the turnover tests are eligible for the JobKeeper payment.

Refer to the notes at the end if you are self-employed.

Eligible employees are those who:

  • Were employed by the relevant employer at 1 March 2020; and
  • Are currently employed by the employer (including those who have been stood down or re-hired); and
  • Are full time, part-time, or long term casuals (a casual employee employed on a regular basis for 12 months as at 1 March); and
  • Are at least 16 years of age; and
  • Are an Australian citizen, hold a permanent visa, are a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder; and
  • Are not in receipt of a JobKeeper Payment from another employer.
 

How the support is calculated

 
The ATO will administer this program and will make the $1,500 payments based on payroll information. The payments will be made monthly in arrears, so it is essential that you ensure your business and your employees continually meet the eligibility criteria.

We anticipate this will mean that employers that have not yet registered for Single Touch Payroll (STP) because of the exemptions that have been in place (such as being a closely held employer or a micro employer) will need to get registered and start reporting their employee salary and wages using STP as soon as possible. This is likely to be the ATO’s preferred (and possibly only) method of keeping track of employees included on the payroll of an employer but we are not sure about this yet.

The business will continue to receive the payments for eligible employees while they are eligible for the payments. While the program is expected to run for 6 months, payments will stop if the employee is no longer employed by the relevant employer.

Please note that the JobSeeker Payment will be paid in arrears to employers. This means that you will need to fund the salary and wage payments to your employees and then be reimbursed later by the ATO. This will no doubt have an impact on cashflow for affected businesses.
 

How the support is provided

 
If you want to manage the process yourself, you must:

  • Register
    • Applications are not yet open. However, you should register your intent to apply for the JobKeeper subsidy with the ATO (here). The ATO will provide you with regular updates and advise you when you can lodge your application.
  • Assess turnover
    • Ensure you have an accurate record of your revenue for the 2018-19 income year and for the 2019-20 year to date;
    • Ensure you keep an accurate record of revenue from March 2020 onwards;
    • Compare your revenue for the whole of March 2019 with the whole of March 2020;
    • Measure the % decline in your revenue and ensure it has declined by more than 30%;
    • If you are not eligible in March, you may become eligible in another month.
  • Identify eligible employees
    • Nominate the employees eligible for the JobKeeper payments – you will need to provide this information to the ATO and keep that information up to date each month. The ATO will use Single Touch Payroll (STP) to prepopulate the information in most cases. If you are not using STP, we are not sure how this information will be kept up to date with the ATO;
    • Notify all eligible employees that they are receiving a JobKeeper payment. Employees can only be registered with one employer;
    • Pay eligible employees at least $1,500 per fortnight (before tax). If an employee normally receives $1,500 or more per fortnight before tax the employee should continue to receive their regular income;
    • Pay superannuation guarantee on normal salary and wages amounts paid to employees. If the employee normally receives less than $1,500 per fortnight before tax, the employer can decide whether to pay superannuation on the additional amount that is paid as a result of the JobKeeper program.

If you would like our assistance with the above process, please contact us. We can help you with the process but we will need to work together to compile the information required to manage the process.
 
Notes for those that are self-employed

While it appears that businesses without employees can potentially qualify for JobKeeper Payments, it is not clear at this stage what conditions will need to be satisfied. The information available at the moment indicates that sole traders and the self-employed can register their interest in applying for the JobKeeper payment with the ATO. These businesses will need to provide an ABN for the business, nominate an individual to receive the payment, provide the individual’s TFN and declare their continued eligibility for the payments. Payments will be monthly to the individual’s bank account.

The information at the moment continues to refer to “self-employed” but it does not clarify if you are self-employed if you operate your business as a partnership or through a company or trust.

If you are of the opinion that you meet all of the other criteria (i.e. the reduction in turnover), then we recommend that you register your intent to claim the payment regardless of your business structure. We are hopeful that some clarity will be provided over the coming weeks for those businesses.

Similarly, we are not sure what this means for the proprietors of businesses that do have some employees but are self employed (e.g. if you operate as a partnership and have an employee). Will you receive the JobSeeker Payment for your employee and also yourself? Again, we are hoping to receive some clarity around this issue soon.
 

Example

 
Adam owns a real estate business with two employees. The business is still operating at this stage but Adam expects that turnover will decline by more than 30% in in the coming months. The employees are:
 
 
Employee
 
Anne
Nick
 
 
 
Employment type
 
Full-time
Part-time
 
 
 
Salary per fortnight (before tax)
 
$3,000
$1,000
 
 
 
 
Both Anne and Nick are still working in the business.

Adam registers his interest in the JobKeeper scheme (from 30 March 2020), then applies to the ATO providing details of his eligible employees. Adam also advises Anne and Nick that he has nominated them as eligible employees to receive the payment. Adam will provide information to the ATO on a monthly basis and receive the payment monthly in arrears.

Adam’s business is eligible to receive the JobKeeper Payment for each employee.

For Anne, the business will:

· Continue to pay Anne her full-time salary of $3,000 per fortnight before tax,

· Receive $1,500 per fortnight from the JobKeeper Payment

· Pay superannuation guarantee on Anne’s salary

For Nick, the business will:

· Continue to pay Nick $1,000 per fortnight before tax salary

· Pay Nick an additional $500 per fortnight before tax (totalling $1,500)

· Receive $1,500 per fortnight from the JobKeeper Payment

· Pay superannuation guarantee on Nick’s wage of $1,000 per fortnight (but can choose to pay SG on the full $1,500)

Adapted from Treasury fact sheet: JobKeeper payment — information for employers
 
Further Information

Link to ATO to register your interest – JobKeeper Payment

https://www.ato.gov.au/Job-keeper-payment/

Link to information for employers – JobKeeper Payment

https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet_Info_for_Employers_0.pdf

Link to information for employees – JobKeeper Payment

https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet_Info_for_Employees_0.pdf
 

The Second $66.1bn Stimulus Package: What You Need to Know

 
On Sunday, 22nd March, the Government released a second, far reaching $66.1 bn 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.

The stimulus measures are not yet legislated. Parliament will reconvene on Monday 23 March.

The Prime Minister has warned that there are no “quick solutions” and that business should prepare for 6 months of disruption.
 

 

In Summary

 
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.
 
The Government has flagged that additional stimulus packages will be required.
 

 

In detail

 
Support for business
Tax-free payments up to $100,000 for employers
 
  • From: 28 April 2020
  • Eligibility: Small and medium business entity employers and not-for-profit entities, with an aggregated annual turnover under $50 million.
 
The Government has increased the previously announced measures to provide cash flow support to business.
Now, eligible businesses with a turnover of less than $50 million will initially be able to access tax-free cash flow support, with the minimum amount being increased to $10,000 and the maximum amount increased to $50,000 (previously $2,000 to $25,000). However, additional support will be provided in the July – October 2020 period so that eligible entities will receive total minimum support of $20,000 and up to $100,000.

In order for a business to qualify for this support it must have been established prior to 12 March 2020. The rules are more flexible for charities because the Government recognises that new charities might be established in response to the pandemic.

The cash flow support measures will be provided in the form of a credit in the activity statement system. The support will be provided in two phases.
 
  • The first phase ensures that eligible employers receive a credit equal to 100% of the PAYG amounts withheld from salary and wages paid to employees during the relevant period, up to the maximum amount of $50,000.
  • The second phase ensures that eligible employers receive another series of credits, equal to the credits that were received under the first phase. For example, if a business received $40,000 of credits in the first phase it will receive a further $40,000 of credits in the second phase. These additional credits will be spread over two or four activity statement periods, depending on whether the employer lodges on a quarterly or monthly basis.
 
If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $10,000 will be made in the first phase and a further payment of $10,000 will be made in the second phase.

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.
 
Businesses that lodge activity statements on a quarterly basis will be eligible to receive credits in the first phase for the quarters ending March 2020 and June 2020. Credits in the second phase will be available for the quarters ending June 2020 and September 2020. The minimum $10,000 payment will be applied to the first lodgement.

Business that lodge on a monthly basis will be eligible for the credits in the first phase for the March 2020, April 2020, May 2020 and June 2020 lodgements. Credits in the second phase will be available for the June 2020, July 2020, August 2020 and September lodgments. The minimum $10,000 payment will be applied to the first lodgement.

Eligibility for the measure will be based on prior year turnover. We will have to wait for the legislation for the finer details.

Not-for-profit employers, including charities, with an aggregated turnover under $50 million will also be able to access the cash flow support.

 
Solvency safety net
 
A safety net has been put in place to protect businesses in temporary financial distress as a result of the pandemic by lessening the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business. These include:

  • A temporary 6 month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000.
  • The time a company has to respond to statutory demands will increase from 21 days to 6 months.
  • For 6 months, directors will be provided with temporary relief from personal liability for trading while insolvent.
  • See also bankruptcy safety net below
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.

 
Access to working capital for SMEs – supporting lenders
 
The Government has announced a Coronavirus SME guarantee scheme that will guarantee 50% of new loans to SMEs up to $20 billion. These loans are new short-term unsecured loans to SMEs.

SMEs with a turnover of up to $50 million will be eligible to receive these loans.

The Government will provide eligible lenders with a guarantee for loans with the following terms:
  • Maximum total size of loans of $250,000 per borrower.
  • The loans will be up to three years, with an initial six month repayment holiday.
  • The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.
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, including:
 
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:
 
Temporary relief from Corporations Act requirements
 
The Treasurer has been given a temporary instrument-making power to amend the Corporations Act to provide relief or modifications to specific compliance obligations.

ASIC has announced measures for those companies with a 31 December financial year that need to hold their AGMs by 31 May 2020, providing a two month no action period and enabling hybrid virtual AGMs.
 

Individuals

 
Early release of superannuation
 
From mid-April, individuals in financial distress will be 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.

To be eligible to access your superannuation you need to meet 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% or more; or
    • if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20% or more.

For those eligible to access their superannuation, you can apply directly to the ATO through the myGov website from mid-April.

More:
 
Temporary reduction in minimum superannuation draw down rates
 
Superannuation minimum drawdown requirements for account-based pensions and similar products will be reduced by 50% in 2019-20 and 2020-21.
 
 
Age
 
Under 65
65-74
75-79
80-84
85-89
90-94
95 or more
 
 
 
Default minimum drawdown rates (%)
 
4
5
6
7
9
11
14
 
 
 
Reduced rates by 50 per cent for the 2019-20 and 2020-21 income years (%)
 
2
2.5
3
3.5
4.5
5.5
7
 
 
 
 
The upper and lower social security deeming rates will be reduced further. As of 1 May 2020, the upper deeming rate will be 2.25% and the lower deeming rate 0.25%.

More: Providing support for retirees
 
Time limited fortnightly $550 ‘coronavirus supplement’
 
For the next 6 months, the Government is introducing a new Coronavirus supplement to be paid at a rate of $550 per fortnight. This supplement will be paid to both existing and new recipients in the eligible payment categories.

The payment will be made to those receiving:
  • Jobseeker payment (and those transitioning to the jobseeker payment)
  • Youth allowance jobseeker
  • Parenting payment
  • Farm household allowance
  • Special benefits recipients
In addition, eligibility to income support payments will be expanded to:
  • Permanent employees who are stood down or lose their job
  • Casual workers
  • Sole traders
  • The self-employed
  • Contract workers who meet the income test

The Government notes that these criteria could include those required to care for someone affected by the Coronavirus.

Asset testing has also been reduced and will be waived for 6 months. Income testing will still apply.

The payment is not available if you have access to any employer entitlements such as annual or sick leave or income protection insurance.

More:
 
Second $750 payment to households
 
The Government is now providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders residing in Australia (see the full list here). The payment will be exempt from taxation and will not count as income for the purposes of Social Security, Farm Household Allowance and Veteran payments.

  • Payment 1 from 31 March 2020 (previously announced on 12 March): Available to people who are eligible payment recipients and concession card holders at any time between 12 March 2020 to 13 April 2020;
  • Payment 2 from 13 July 2020: Available to people who are eligible payment recipients and concession card holders on 10 July 2020.

The payments will be made automatically to those that meet the criteria.

More:

Payments to support households
 
Bankruptcy safety net
 
A temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will increase from $5,000 to $20,000. In addition, the time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.

Where someone declares their intention to enter voluntary bankruptcy, the period of protection from unsecured creditors will be extended from 21 days to 6 months.

More:
 
More information:
 

NSW Payroll Tax relief

 
Businesses paying NSW payroll tax whose total grouped Australian wages for the 2019/20 financial year are no more than $10 million will have their annual tax liability reduced by 25% when they lodge their annual reconciliation, which is due on 28 July.
For those businesses who lodge and pay monthly and whose total Australian wages will be no more than $10 million for the current financial year, no payment for the months of March, April or May 2020 will be required.

When lodging your annual reconciliation, you will still need to provide wage details paid in these months and will receive the benefit of a 25% reduction in the amount of tax you would have had to pay for 2019/20.

Additionally, the tax-free threshold will increase from $900,000 to $1 million for the financial year commencing on 1 July 2020.
 

Wage subsidy of up to 50% of an apprentice or trainee wage

 
Eligible employers can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020. The payments are accessible to businesses with less than 20 employees. Employers will receive up to $21,000 per apprentice ($7,000 per quarter).

Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.

In order to qualify for this payment the apprentice or trainee must have been in training with the business as at 1 March 2020. Employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will also be eligible for the subsidy.

It is expected that employers will be able to register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020.
 

Tax-free payments up to $25,000 for employers

 
Tax-free cash flow support between $2,000 and $25,000 will be available to eligible businesses with a turnover of less than $50 million that employ staff between 1 January 2020 and 30 June 2020.

This is not a direct cash payment but a credit equal to 50% of the PAYG amounts withheld from salary and wages paid to employees. The employer 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.

If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $2,000 will still be made.

Businesses that lodge activity statements on a quarterly basis will be eligible to receive the credit for the quarters ending March 2020 and June 2020. Businesses that lodge on a monthly basis will be eligible for the credit for the March 2020, April 2020, May 2020 and June 2020 lodgements. The minimum $2,000 payment will be applied to the first lodgement.
Eligibility for the measure will be based on prior year turnover.
 

Increase and extension of the instant asset write-off

 
From 12 March 2020, the instant asset write-off threshold will increase from $30,000 to $150,000 for depreciable business assets.

Assets will need to be used or installed ready for use from between 12 March 2020, when the changes were announced, and 30 June 2020 to qualify for the higher threshold. Anything previously purchased does not qualify and anything purchased but not installed ready for use by 30 June 2020 will not qualify.

If your business is likely to make a tax loss for the year, then the instant asset write-off is unlikely to provide a short-term benefit to you.

There are some assets that don’t qualify such as horticultural plants, capital works (building construction costs etc.), assets leased to another party on a depreciating asset lease, etc.

What businesses can access the instant asset write-off
To access the instant asset write-off, your business needs to be a trading business (the entity buying the assets needs to carry on a business in its own right). It also needs to have an aggregated turnover under $500 million.

Accelerated depreciation deductions
In addition to the increased instant asset write-off rules, accelerated depreciation deductions will apply from 12 March 2020 until 30 June 2021. This will bring forward deductions that would otherwise be claimed in later years.

Businesses with a turnover of less than $500 million will be able to deduct 50% of the cost of the asset in the year of purchase. They can also claim a further deduction in that year by applying the normal depreciation rules to the balance of the asset’s cost.

The accelerated depreciation deductions will presumably only be relevant if the business cannot already claim an immediate deduction for the full cost of the asset.

For example, let’s assume that a business purchases a new truck for $250,000 (exclusive of GST) in July 2020. In the 2021 tax return the business would claim an upfront deduction of $125,000. The business would also claim a further deduction for the depreciation that would have arisen on the balance of the cost. If the business is a small business entity and using the simplified depreciation rules, this would mean an additional deduction of $18,750 (i.e., 15% x $125,000). The total deduction in the 2021 tax return would be $143,750. Without the introduction of this investment incentive the business would have claimed a deduction of $37,500 (i.e., 15% x $250,000).

This incentive will only be available in relation to new assets that are acquired after 12 March 2020 and are first used or installed ready for use by 30 June 2021. It will not apply to second-hand assets or buildings and other capital works expenditure.
 

The Super Guarantee timing trap for employers

 
How employers are being caught out by the timing of superannuation guarantee payments

Employers can generally only claim a deduction for superannuation contributions in the income year in which the contribution is made. Super contributions are made when the payments are received by the trustee of a complying superannuation fund.

It’s not uncommon for employers to be caught out by timing problems, many in the belief that the contribution has been made at the point the payment is made rather than when it is credited to the superannuation fund provider’s account. Many forms of electronic transfer however are not guaranteed to be automatic or next day. BPay for example may take up to 2 days, a delay that is often not factored in.

A new practice statement from the ATO highlights the problem created by the use of clearing houses.

There is a specific element of the law that enables payments made to the Government’s Small Business Superannuation Clearing House (SBSCH) to be accepted as contributions when the clearing house receives them, rather than when the trustee of the superannuation fund has received the contribution. The SBSCH is only available to small businesses with 19 or fewer employees, or with an annual aggregated turnover of less than $10 million.

Private clearing houses are treated differently and as such, employers need to allow sufficient time for their superannuation contributions to be received, processed and paid by the clearing house to the superannuation fund, before their SG obligation is discharged.