COVID-19 economic response package: cashflow and income support for business

25 March 2020

On 23 March 2020, the Government introduced the Corona Virus Economic Response Package Omnibus Bill 2020 to implement the Government’s stimulus packages announced on 12 March 2020 and 22 March 2020 into Parliament. The Bill passed both Houses of Parliament on the same day.

This knowledge piece focuses on income support for businesses with the new measures and date of application set out below:

1. Enhancement of instant asset write-off

The Government will increase the cost threshold, below which small business entities can access the instant asset write-off, from $30,000 to $150,000. They will provide access to the instant asset write-off to entities with an aggregated turnover of $10 million or more but less than $500 million. The existing cap is $50 million.

Date of application: For assets acquired and first used or installed ready for use from 12 March 2020 to 30 June 2020. Unless other legislation is passed, when Parliament sits again on or after 11 August 2020, the instant asset write-off is due to revert to $1,000 from 1 July 2020, and only be available for small business entities (i.e. businesses with an aggregated turnover of less than $10 million).

2. Temporary 15-month accelerated depreciation incentive for businesses with aggregated turnovers of less than $500 million

Businesses with aggregated turnovers of less than $500 million in an income year that invest in new plant and equipment and other depreciating assets, qualify for accelerated depreciation on such assets of:

  • 50 per cent of the cost of the asset at installation. The balance of the asset’s cost (the remaining 50 per cent) will then be depreciable under existing depreciation rules. It will be treated as a separate asset, over the asset’s effective life for businesses that do not qualify for the simplified depreciation rules; or
  • 57.5 per cent (rather than 15 per cent) for businesses with aggregated turnover of less than $10 million that use the simplified depreciation rules.

Some of the main conditions to qualify for the accelerated depreciation rate are:

  • The asset purchased must be new and not have previously been used or installed ready for use by another entity (other than as trading stock or for testing and trialling purposes).
  • No other depreciation deductions or instant asset write-off must have previously been claimed on the asset.

Date of application: For assets acquired and first used or installed ready for use for a taxable purpose between 12 March 2020 to 30 June 2021 (inclusive).

3. Cashflow boost for businesses that employ people

The ATO will make two cashflow boost payments totalling a maximum $100,000 and with a minimum payment of $20,000, to businesses or not-for-profit entities with aggregated turnover of less than $50 million, provided such entities employ people (and the payment of salary or wages are subject to the PAYG withholding regime).

All such entities will receive a minimum cashflow boost payment of $10,000 in the first period for which they are eligible as well as further amounts, based on the amount withheld, up to a maximum total of $50,000. The second cash flow boost payment is equal to the amount of the first cash flow boost payment to which the entity is entitled.

Cashflows of employers can therefore be boosted by up to $100,000 (and minimum $20,000).

However, where the eligible employer is a monthly remitter, the employer is entitled to a payment of an amount equal to 300 per cent of the amount that has been withheld for the month of March 2020.

Date of application: 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 (300 per cent) in the March 2020 activity statement.

4. Support to retain apprentices and trainees

To support small business (who employ fewer than 20 full-time employees) to retain their apprentices and trainees, eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wages paid during the nine months from 1 January 2020 to 30 September 2020. The apprentice or trainee must have been in training with a small business as at 1 March 2020.

Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).

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

5. Support for businesses to stay in business in these tough times

The Government will establish a Coronavirus SME Guarantee Scheme whereby the Government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs – a move that will guarantee up to $40 billion of new lending.

Furthermore, to help prevent bankruptcies and insolvencies, the threshold at which creditors can initiate involuntary bankruptcy proceedings will be increased from $5,000 to $ 20,000, with the debtor receiving six months to respond to a bankruptcy notice.

There is also temporary relief from any personal liability for directors that have been trading while insolvent in the time of the COVID-19 crisis.

If you require more information or would like some support accessing any of the support measures announced, please contact the Findex Tax Advisory Team.

Findex has developed a Government Stimulus Health Check and free Business Wellbeing Toolkit to help businesses manage potential risks and take full advantage of eligible stimulus assistance. Book your Health Check here.