The outbreak of coronavirus (COVID-19) has presented a rapidly evolving challenge that not only has a significant health impact on society but a potentially considerable economic consequence. In response to this, on 12 March 2020, the Federal Government announced a comprehensive stimulus package of AUD17.6 billion to protect the Australian community by ‘maintaining confidence, supporting investments and keeping people in jobs’. From a tax perspective, this includes significant concessions for capital investment in the form of tax write-offs for depreciable assets, as well as cash flow assistance to small and medium-sized businesses.
The Government’s economic response targets the following key areas:
Delivering support for business investments
Cash flow assistance for employers
Stimulus payments to households to support growth
Assistance for severely affected regions
ATO payment concessions for affected businesses
Payroll tax exemptions
Cash flow assistance for businesses – PAYG withholding credit
Boosting cash flow for employers by helping small and medium-sized businesses cover the costs of employee wages and salaries (50 per cent of PAYG withheld, with a minimum AUD2,000 payment and up to a cap of AUD25,000 over 6 months between January and June 2020). This will be delivered automatically through the tax system as a credit applied upon businesses lodging their next activity statement. We will provide more information in relation to the potential credit you should expect when we complete the upcoming activity statement lodgements.
Small and medium business entities with aggregated annual turnover under AUD50 million and that employ workers will be eligible. Eligibility will generally be based on prior year turnover. There will be a minimum payment of AUD2,000 to eligible businesses even if they are not required to withhold tax. In order to be eligible for the maximum amount you must withhold PAYGW of AUD50,000 from employee salaries between January and June 2020.
The minimum payment will be applied to the business’ first lodgement.
Type of Lodger
Lodgement due date
Quarter 3 (January, February and March 2020)
28 April 2020 / 25 May 2020 if lodged by C&J
Quarter 4 (April, May and June 2020)
28 July 2020
21 April 2020
21 May 2020
22 June 2020
21 July 2020
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 lodgements. To provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (150 per cent) in the March 2020 activity statement.
Supporting apprentices and trainees with wage assistance to help small businesses to keep their apprentices and trainees. The government will provide a wages subsidy to eligible employers calculated at 50 per cent of the apprentice’s or trainee’s wage paid during the nine months from 1 January 2020 to 30 September 2020, up to a maximum of AUD21,000 per eligible apprentice or trainee.
The subsidy will be available to small businesses employing fewer than 20 full-time employees who retain an apprentice or trainee. The trainee or apprentice must have been in training with a small 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 be eligible for the subsidy. We are waiting on more information in regards to the application process for this subsidy. We will contact eligible clients when this is made available.
Delivering support for business investment – accelerated depreciation for businesses with turnover of under AUD500 million
Increasing the instant asset write-off by lifting the threshold to AUD150,000 (from AUD30,000) and making more businesses eligible to use it. This provides an immediate tax deduction for the cost of a depreciating asset, whether new or second-hand, that is first used or installed ready for use from 12 March 2020 up until 30 June 2020.
Backing business investment by offering businesses a time-limited incentive to invest, by accelerating depreciation deductions. This is relevant for assets acquired between 12 March 2020 and 30 June 2020 with a cost of AUD150,000 or more which are not eligible for the instant asset write-off. This does not apply to second-hand assets and will provide an immediate tax deduction of 50 per cent of the cost of an eligible asset on installation. There is no limit to the cost of a depreciating asset that can qualify for this concession.
Faster tax write-offs on depreciable assets have the effect of reducing taxable income and tax payable much quicker, with the tax benefit of such measures realised through the existing income tax return and payment system.
HaVing regard to potential global supply chain disruptions, a practical challenge for businesses seeking to rely on the concessions, particularly the expanded instant asset write-off, may be the ability to source relevant depreciating assets, and have them first used or installed ready for use before the deadline expires.
The ATO have released preliminary guidelines for the assistance that will be made available to affected tax payers, this includes:
Payments deferrals for up to 4 months for tax / BAS liabilities
Remission of interest and penalties that have been applied since 23 January 2020
Low interest payment plans
Varying PAYG instalments and reclaiming instalments included on September and December BAS’s
These relief options will not be automatically applied, so you need to contact us to discuss them.
NSW Payroll Tax Waiver
The NSW government have indicated that they will waive payroll tax liabilities for the next three months. This will apply for businesses with a payroll of up to AUD10 million per annum. This is a recently announced measure and information is currently quite limited as to how this will be administered. When more information is available, we will contact eligible clients.
This is a rapidly evolving space and there is renewed calls for additional stimulus funds to be made available to businesses hardest hit by the pandemic. We will continue to provide information on potential benefits as they become available. If you wish to discuss any of the above please contact your C&J adviser.