A lot can change in just 10 days! As the Coronavirus pandemic continues to infect global financial markets, our team has been hard at work tracking all the relevant Government responses that could impact you and your business.
In this special edition newsletter, we summarise all the key changes proposed by the Federal Government, the Reserve Bank of Australia (RBA) and the WA State Government over the last 14 days.
Draft legislation is now before Parliament and appears to have near universal support. This legislation is expected to pass without amendment.
Encouraging employment and easing business cashflow
Boosting cashflow for employers
Since our first newsletter, the Government has doubled down on its plan to encourage the continued employment of Australian workers. The Government is now proposing to offer small and medium sized businesses up to $100,000 in cash payments to retain workers. In order to be eligible, business will need to have turnover of less than $50 million.
Under the proposed measures, eligible employers will be entitled to a cash payment equal to 100% of their total PAYG withholding amount (that is the amount of tax they would ordinarily be required to withhold from their employee’s salary and pay to the ATO).
The payment will be delivered by the ATO as an automatic credit in the activity statement system from 28 April 2020. Entities will need to lodge their Business Activity statement (BAS) to be eligible but no new forms or applications are required. A maximum payment of $50,000 will be delivered over the next three months but an additional $50,000 will then be accessible for the June to September activity statements. Employers who have less than $10,000 in PAYG withholding will be entitled to a minimum of $10,000 over the next three months. An additional $10,000 will be accessible for the June to September activity statements, but is not linked to the level of PAYG Withholding as the Government recognise the circumstances may have changed and entities may no longer be making any payment subject to withholding. Any payment received by a business will be tax free.
This entitlement would disappear if eligible employers failed to lodge their IAS’s or BAS’s, or otherwise stopped paying wages prior to the end of the first cash boost payment. It is important that you continue to report and lodge your BAS’s on a timely basis.
This is a very generous incentive which should help to slash the cost of retaining employees for many businesses. With this in mind,eligibility for the cash flow boost is subject to a specific integrity rule to counteract artificial or contrived arrangements entered into in order to obtain the cash flow boost. Specifically, an entity will not be eligible for the cash flow boost if that entity, or an associate or agent of an entity, undertakes a scheme with the sole or dominant purpose of obtaining or increasing the amount of the cash flow boost in relation to a period. Amounts paid under the cash flow boost, where the entity was not entitled to that payment or was not entitled to the full amount of the payment, will need to be repaid to the Commissioner. The Commissioner may impose administrative penalties for fraudulent, false or misleading statements.
Supporting apprentices and trainees
The Government is also encouraging small businesses to retain their apprentices and trainees with eligible employers entitled to receive a 50% subsidy on all apprentice and trainee wages up to $7,000 each quarter per apprentice. The subsidy will be available for 9 months from 1 January 2020 to 30 September 2020.
The payment will only be made to employers who have less than 20 employees and in respect of apprentices or trainees who were with the business at 1 March 2020. Should an apprentice or employee of this nature be made redundant, any remaining entitlement will be available to an employer (regardless of size) who takes them on.
Employers can register for the subsidy from early April 2020 and all claims for payment will need to be lodged by 31 December 2020.
Promoting business investment
The Government’s proposed capital investment incentives outlined in our first newsletter on 13 May 2020 (insert link) have not changed. Broadly, these incentives will provide accelerated deprecation to thousands of Australian businesses with annual turnover of up to $500 million.
Those companies that have been considering capital investment should closely consider the benefits available under this scheme. Some well-placed entities may even consider bringing forward their capital investment plans.
Payroll tax concessions
The Western Australian State Government has recently announced a number of payroll tax concessions for entities with less than $7.5 million in Australian taxable wages.
The State Government has announced that it will fast track the increase in the payroll tax threshold (which will now be $1 million) to 1 July 2020. In addition, businesses with an annual payroll of between $1 million and $4 million will be eligible to receive a once-off grant of $17,500. Finally, businesses with less than $7.5 million in Australian taxable wages will be able to apply to the Office of State Revenue for a deferral of their payroll tax payment to 21 July 2020. Other States and Territories, including NSW, Queensland, Victoria and Tasmania, have announced similar measures. Businesses with operations in these regions are encouraged to contact Cooper Partners to discuss their specific circumstances.
Promoting lending and financial support for business
Improving access to credit for small businesses
In a bid to keep struggling small businesses afloat, the Federal Government has announced that it will support short- and medium-term lending solutions. Broadly, this scheme will allow entities with under $50 million in turnover to apply for loans of up to $250,000 to fund their working capital needs. The loans will be for a period of up to three years, with an initial six-month repayment holiday. Critically, borrowers will not need to provide any assets as security for the loan.
Entities wishing to access these loans will apply directly to their preferred bank or credit provider. Banks and credit providers will be encouraged to make these loans as the government will stand guarantor for 50% of any loan balance. In addition, the Government has proposed a relaxation of responsible lending obligations for lenders providing credit to small business entities, making it easier for these entities to access finance quickly.
On 19 March 2020, the RBA held an out of cycle meeting at which the official cash rate was cut to just 0.25%. In addition, the RBA announced that it would support banks, particularly those that lend to small business, by providing a $90 billion lending facility. Under this plan, the RBA will provide a three-year funding facility to authorised deposit taking institutions at a fixed interest rate of just 0.25%. The more an institution lends to small business, the more they will be able to loan from the RBA at this low rate. It is hoped that these combined measures will encourage lending to smaller businesses while reducing the cost of credit.
Responding to creditor demands
The Government has proposed a number of changes to the Corporations Act 2001 and the Bankruptcy Act 1966 to provide businesses and individuals with greater time to respond to creditors demands. The minimum threshold for creditors to issue a statutory demand on a company will be increased to $20,000 (up from $2,000) while the company will now have six months to reply to a demand (previously 21 days). In addition, the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against an individual will increase to $20,000 (previously $5,000). All these amendments will apply for six months.
Trading while insolvent- temporary relief from personal liability
Under current legislation, company directors are held personally liable for any debts incurred while a company they direct trades while insolvent. Proposed Government changes are looking to relax this law to provide company directors with the confidence required to continue trading and employing staff during the Coronavirus crisis.
Under these changes, company directors will be shielded from personal liability in respect of any debts incurred in the ordinary course of their company’s business. Directors will not be shielded for debts incurred outside of the ordinary course of their company’s business. These measures will apply for a limited period of just 6 months.
Supporting households and the vulnerable
Income support for individuals
The Government will implement a temporary fortnightly ‘Coronavirus supplement’ of $550 for recipients of Jobseeker, Youth Allowance Jobseeker and Parenting payments, Farm Household Allowance and Special Benefits payments. This supplement will be paid in addition to existing entitlements with the aim of reinforcing the social security safety net for any individual who loses their job.
Payments to low income households
The Government will also provide two separate payments of $750 to social security, veteran and other income support recipients and eligible concession card holders. These payments will not be made to individuals that can access the ‘Coronavirus supplement.’ They are scheduled to be made on 31 March 2020 and 13 July 2020.
Early access to superannuation
The Government has proposed to provide affected individuals with unprecedented early access to their retirement savings. Under this measure, certain individuals will be entitled to withdraw up to $10,000 from their superannuation fund during the 2020 financial year, with a further $10,000 able to be accessed in the 2021 financial year. Any amounts released will be free from taxation, and will not affect Centrelink payments.
To apply for early release an individual will need to satisfy one of the following requirements:
- Be unemployed; or
- Be eligible to receive a Jobseeker, Youth Allowance Jobseeker or Parenting payment, Farm Household Allowance or Special Benefits payment; or
- On or after 1 January 2020:
- Be made redundant; or
- Have their ordinary working hours reduced by 20% or more; or
- If they are a sole trader, have their business suspended or turnover reduced by 20% or more.
Individuals that wish to withdraw from their superannuation funds will need to apply to the ATO through their myGov account. The Government has indicated that separate arrangements will apply for members of a self-managed superannuation fund (SMSF) but have not yet indicated what this will entail. Accordingly, we caution SMSF Trustees against processing any withdrawals until the ATO releases further guidance.
Reduction of superannuation drawdown rates and social security deeming rates
In a bid to support pensioners impacted by stock market falls, the Government has proposed to reduce superannuation minimum drawdown requirements by 50%. This measure, which will apply for the 2020 and 2021 financial years, will stop pensioners from being forced to sell their superannuation funds assets in the current depleted market. In addition, the Government has announced a reduction in social security deeming rates which will provide some 565,000 Age Pensioners with increased entitlements under the Age Pension scheme.
Administrative concessions from the ATO
The ATO has indicated that they will implement a series of administrative measures designed to assist Australians who have been unduly impacted by the Coronavirus crisis. In particular, the ATO has indicated a willingness to provide tailored ‘support plans’ for businesses that get in touch. These support plans may include:
- The potential to defer payments due through BASs, income tax assessments, fringe benefits tax assessments and excise for up to six months;
- The ability to vary March 2020 quarter PAYG instalments to zero;
- The remittance of some interest and penalties accrued after 23 January 2020;
- The ability to switch to a monthly GST reporting cycle to gain quicker access to refunds; and
- The potential to enter low or no interest plans for existing and ongoing tax liabilities of affected entities.
Access to all these concessions will only be available where contact is made with the ATO. Should you wish to apply for any of these concessions, please contact your Cooper Partners representative who can speak with the ATO on your behalf.
Scott Morrison has indicated that there is still plenty of work to be done and has not ruled out a third round of stimulus measures. As further information comes to hand, we will be sure to keep you updated.
If you would like to discuss any of the above measures and how they may apply to you, please do not hesitate to contact your Cooper Partners representative.
We acknowledge the current commercial reality and are offering telephone conferences free of charge from 4:00pm to 5:00pm daily until we all get through these challenging times.
This newsletter is current as of 23 March 2020, however, please note that announcements and changes are being made by the Government and the ATO regularly, and we expect that the tax and business-related responses will continue to evolve. Please contact us to discuss.