The government announced a package of temporary measures worth $17.6 billion to support the Australian economy in the wake of the impact of the coronavirus. The measures mostly target small and medium-sized businesses, and come in four parts. Whilst they apply either from now or retrospectively from 1 January 2020, the measures will require legislative change.
For depreciable assets acquired from 12 March 2020 until 30 June 2020, the instant asset write-off threshold will increase from $30,000 to $150,000. Further, it will be available for businesses with group-wide annual turnover below $500 million (up from $50 million). This allows a full deduction for the cost to acquire the asset (new or second-hand), rather than deducting over a number of years, where the asset’s cost is less than the threshold. The threshold is net of any GST credit. For example, a machine costing $165,000, including $15,000 of GST for which you are entitled to a GST credit, netting to $150,000 will not qualify – the net-of-GST-credit cost must be less than $150,000.
For depreciable assets acquired from 12 March 2020 until 30 June 2021, depreciation deductions will be accelerated for businesses with group-wide annual turnover below $500 million. An additional deduction will be allowed of 50% of the asset’s cost in the year of purchase (in addition to the normal amount of depreciation deduction). This is merely a bringing forward of deducting half the asset’s cost, resulting in the asset’s cost being deducted over a shorter period than normal. Presumably, this applies to assets that are not subject to the above instant asset write-off (ie, it applies to assets costing $150,000+ until 30 June 2020, and $1,000+ for 1 July 2020 to 30 June 2021).
Employers with group-wide annual business turnover below $50 million will receive one or more payments totalling to between $2,000 (minimum) and $25,000 (maximum). It’s for businesses who employee staff between 1 January and 30 June 2020, and is tax free.
The payments will be 50% of the PAYG withholding amount on your March and June quarterly BASs. For monthly lodgers, it applies to the March-June BASs (with March’s withholding amount multiplied by 3, then 50%, to make up for January and February). This will be done until you reach the $25,000 limit. It will be delivered as a credit in the activity statement system, and so you can factor it into a reduced amount paid upon lodgement. (For example, if your March quarter PAYG withholding is over $50,000, you can simply pay $25,000 less than the overall net amount payable on your BAS, and the subsequent credit will match the difference.) If your credit amount would put you into a refund position, payments of refunds will commence after 28 April 2020.
Tip: If you don’t pay wages for principals, and you wouldn’t get the full $25,000 benefit, pay some PAYG withholding for principals for March to June – get 50% of it back as a tax-free windfall.
Eligible employers employing fewer than 20 employees can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wage for up to nine months from 1 January to 30 September 2020. Limited to $21,000 ($7,000 per quarter).
A one-off $750 payment will be made to pensioners, social security, veteran and other income support recipients. It will be tax free, and not count as income for certain means-tested benefits. Payments will commence from 31 March.
Sectors and regions disproportionately affected by the coronavirus, such as tourism, agriculture and education, will receive targeted support. This includes a waiver of certain fees, and assistance to identify alternative export markets or supply chains, and further promote domestic tourism. The government will also offer administrative relief for certain tax obligations, including deferral of tax payments by up to four months. However, this administrative relief will be provided on a case-by-case basis, and businesses will need to apply. We expect more details will follow on eligibility and the application process.
The bulk of the measures are intended to support small-to-medium business employers, in turn supporting jobs. For parts 1 and 3 above, eligible businesses and people do not need to do anything, although the purpose of part 1 is to encourage businesses to bring forward the purchase of depreciable assets to this side of 30 June 2020, and to a lesser extent, this side of 30 June 2021.
For part 2, the sooner eligible businesses lodge their BASs and/or IASs, the sooner they’ll receive any refund due. We expect further details in due course for part 4.
The measures will require the necessary legislation to be passed by Parliament, but is expected to pass. Some State/Territory governments have announced their own measures.
Talk to your trusted Nexia Edwards Marshall Advisor about how the government’s Economic stimulus package will affect you.
The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall Adviser.