Coronavirus Special Update

Well, I never thought I would be sending out information of this nature during my lifetime. We certainly are in unchartered waters. What matters the most now is that we look after ourselves and each other – we absolutely are in this together.

The purpose of this communication is to provide you with a summarised update on the Government’s Economic Stimulus Package in response to the Coronavirus. Pacer Accountants will continue to apply its available resources to assist and support you where we can through this uncertain period as we attempt to survive the ever changing restrictions we are all dealing with.

Please reach out – we are here to help!

Stay safe and best wishes,
Evan

The following is a broad summary of the key aspects of the Federal Government’s stimulus package in response to the Coronavirus, as recently announced and enacted.

These measures were implemented via various Bills introduced into Parliament, which very quickly received Royal Assent on 24 March 2020 (including the Coronavirus Economic Response Package Omnibus Bill 2020), so as to give effect to the Government’s stimulus package.

Various measures have been introduced so as to provide a ‘safety net’ for individuals who are financially impacted by the Coronavirus.

The new Coronavirus supplement

A six-month ‘Coronavirus supplement’ of $550 per fortnight will be paid to both existing and new recipients deemed eligible for certain income support payments, including the:

• Jobseeker Payment;
• Youth Allowance;
• Parenting Payment (Partnered and Single);
• Farm household allowance; and
• Special benefits recipients.

Expanding access (and eligibility) to certain income support payments

The Government will also expand access to certain income support payments (e.g., the Jobseeker Payment, the Youth Allowance Jobseeker and the Parenting Payment) for eligible individuals such as:

• permanent employees who are stood down or lose their job;
• sole traders;
• the self-employed;
• casual workers; and
• contract workers who meet the income test.

Additionally, asset testing for the JobSeeker Payment, the Youth Allowance Jobseeker and the Parenting Payment will be waived for the period of the Coronavirus supplement. Income testing will still apply to the person’s other payments, consistent with current arrangements

Tax-free payments of $750 to eligible recipients

The Government will be providing two separate $750 tax-free payments (referred to as ‘economic support payments’) to social security, veteran and other income support recipients and to eligible concession card holders.

The first $750 payment will be available to individuals who are residing in Australia and are receiving an eligible Government payment, or are the holders of an eligible concession card, at any time from 12 March 2020 to 13 April 2020 (inclusive). This payment will be made automatically to eligible individuals from 31 March 2020.

The second $750 payment will be available to individuals who are residing in Australia and are receiving one of the eligible Government payments or are the holders of one of the eligible concession cards on 10 July 2020 (except for those receiving an income support payment that qualifies them to receive the $550 fortnightly Coronavirus supplement). This payment will be made automatically to eligible individuals from 13 July 2020.

Early release of superannuation benefits

The Government will introduce a new compassionate ground of release that will allow individuals who are suffering from the economic effects of the Coronavirus to access their superannuation tax-free. You will qualify if one or more of the following requirements are satisfied:

• You are unemployed.
• You are eligible to receive the Jobseeker Payment, Youth Allowance for jobseekers, Parenting Payment (which includes the single and partnered payments), Special Benefit or Farm Household Allowance.
• On or after 1 January 2020 either:
  ◦ you were made redundant; or
  ◦ your working hours were reduced by at least 20%; or
  ◦ if you are a sole trader – your business was suspended or there was a reduction in the business’s turnover of at least 20%.

Eligible individuals will be able to access (as a lump sum) up to $10,000 of their superannuation entitlements before 1 July 2020, and a further $10,000 from 1 July 2020 (subject to a six-month time frame).

Eligible individuals who are looking to access their superannuation will apply directly to the ATO through the myGov website (at www.my.gov.au) and certify that the relevant eligibility criteria is satisfied.

Reducing the minimum drawdown amounts for superannuation pensions

The Government will temporarily reduce the superannuation minimum drawdown amounts for account-based pensions and similar products by 50% for the 2020 and 2021 income years.

This basically means that the total minimum annual pension amount that a superannuation fund is otherwise required to pay to a member receiving a pension from the fund (e.g., an account-based pension) will be reduced by half for these two income years.

Reducing social security deeming rates

From 1 May 2020, the Government will be reducing both the upper and lower social security deeming rates by a further 0.25 percentage points. This is in addition to the recent 0.5 percentage point reduction, resulting in an overall reduction to the social security deeming rates of 0.75 percentage points.

On this basis, as of 1 May 2020, the upper deeming rate will be reduced from 3% to 2.25%, and the lower deeming rate will be reduced from 1% to 0.25%.

The social security deeming rates apply (for ‘income test’ purposes) to determine the amount of income that an individual is ‘deemed’ to earn from financial investments (e.g., cash deposits and listed securities), irrespective of the actual amount of income (e.g., interest income and dividend income) earned by the individual. In most cases, the deeming rates apply for the purposes of applying the Age Pension ‘income test’.

The Government is also providing cash flow assistance for eligible businesses in the form of two separate measures.

Boosting cash flow for employers

Small and medium-sized businesses and not-for-profit entities, with an aggregated annual turnover of less than $50 million that employ people, may be eligible to receive a total payment (in the form of a refundable credit) of up to $100,000 (with a minimum total payment of $20,000), based on their PAYG withholding obligations in two stages:

Stage 1 payment (credit)

Commencing with the lodgement of activity statements from 28 April 2020, eligible employers that withhold PAYG tax on their employees’ salary and wages will receive a tax-free payment equal to 100% of the amount withheld, up to a maximum of $50,000.

Eligible employers that pay salary and wages will receive a minimum (tax-free) payment of $10,000, even if they are not required to withhold PAYG tax.

The tax-free payment will be calculated and paid by the ATO as an automatic credit to the activity statement account from 28 April 2020, with any resulting refund being paid to the employer. This means that:

• quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020; and
• monthly lodgers will be eligible to receive the payment for the March 2020 (includes January and February), April 2020, May 2020 and June 2020 lodgements.

Note that, the minimum payment of $10,000 will be applied to an entity’s first activity statement lodgement (whether for the month of March or the March quarter) from 28 April 2020.

Stage 2 payment (credit)

For employers that continue to be active, an additional (tax-free) payment will be available in respect of the June to October 2020 period, basically as follows:

• Quarterly lodgers will be eligible to receive the additional payment for the quarters ending June 2020 and September 2020, with each payment being equal to 50% of their total initial (or Stage 1) payment (up to a maximum of $50,000).
• Monthly lodgers will be eligible to receive the additional payment for the June 2020, July 2020, August 2020 and September 2020 activity statement lodgements, with each additional payment being equal to a quarter of their total initial (or Stage 1) payment (up to a maximum of $50,000).

Again, the ATO will automatically calculate and pay the additional (tax-free) payment as a credit to the activity statement account upon the lodgement of activity statements from July 2020, with any resulting refund being paid to the employer.

Please note that eligibility for the above payments is subject to a specific integrity rule that is designed to stamp out artificial or contrived arrangements that are implemented to obtain access to this measure. In particular, if an employer enters into a scheme with the sole or dominant purpose of obtaining or increasing any of the above payments for a particular employer, for a period, the employer will not be eligible for any such payments for the relevant period. Essentially. If an employer attempts to abuse the system, they risk receiving nothing.

Wages subsidies for apprentices and trainees

Employers with less than 20 full-time employees, who retain an apprentice or trainee (who was in training with the employer as at 1 March 2020) may be entitled to Government funded wage subsidies.

These will be equal to 50% of the apprentice’s or trainee’s wage paid during the nine months from 1 January 2020 to 30 September 2020.

The maximum wage subsidy over the nine-month period will be $21,000 per eligible apprentice or trainee.

Employers can register for the subsidy from early April 2020.

Access to working capital

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 unsecured, meaning 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 sensibly take into account the uncertainty of the current economic conditions.

Increasing the instant write-off threshold for business assets

Broadly, the depreciating asset instant asset write-off threshold will be increased from $30,000 (for businesses with an aggregated turnover of less than $50 million) to $150,000 (for businesses with an aggregated turnover of less than $500 million) until 30 June 2020.

The measure applies to both new and second-hand assets first used or installed ready for use in the period beginning on 12 March 2020 (i.e., the date on which this measure was announced) and ending on 30 June 2020.

Importantly, this increased threshold also continues to operate on a ‘per asset’ basis, which means that eligible businesses can immediately write-off multiple assets (as long as each of the assets individually satisfy the relevant eligibility criteria).

Currently, the instant asset write-off threshold is due to revert to $1,000 for small businesses (i.e., those with an aggregated turnover of less than $10 million) from 1 July 2020.

Accelerating depreciation deductions for new assets

Broadly, a new time-limited 15-month investment incentive (available for eligible assets acquired from 12 March 2020 up until 30 June 2021) will also be introduced to accelerate certain depreciation deductions for businesses with an aggregated turnover below $500 million.

The amount that an eligible entity can deduct in the income year in which an eligible depreciating asset is first used or installed ready for use is:

• 50% of the cost of the asset; and
• the amount of the usual depreciation deduction that would otherwise apply (if it were calculated on the remaining cost of the asset).

Unless specifically excluded, an eligible asset is a new asset such as plant and equipment and specified intangible assets, such as patents.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.