Additional 2020 Economic Stimulus Package
2020 SUMMARY OF THE ECONOMIC RESPONSE FROM THE GOVERNMENT
The Coronavirus economic Response
Package Bills (No.1) & (No.2) 2019-2020 passed both houses on
23 March 2020. In these bills there are:
- Support for individuals and households
- Support for businesses
- Support for access to credit
1. INDIVIDUALS & HOUSEHOLDS
Individuals/Sole Traders – if you have lost your job or had your hours or income reduced you may apply for the Jobseeker payment through Centrelink. In order to do this, you must have a MyGov account. If you have never registered with Centrelink before there are new faster claim process. You can call via phone to obtain the following:
- Centrelink Reference Number (CRN)
- Verify 100 points of ID – reference numbers of birth certificates, passports, drivers’ licence etc
- Request a Linking-code
With your linking code you will then be able to link Centrelink to your MyGov account and apply for benefits online without the need to attend a Centrelink office.
Over the next six months the Government is temporarily expanding eligibility to income support payments and establishing a new time-limited Coronavirus supplements to be paid at a rate of $550 per fortnight in addition to the regular fortnight payment amount. This will be paid to both existing & new recipients of:
- Jobseeker Payment (and all progressively transitioning to JobSeeking, partner allowance, widow allowance, sickness allowance and wife pension)
- Youth allowance jobseeker
- Parenting payment (partnered and single)
- Farm household allowance and
- Special benefits
Sole traders and casuals still working on reduced wages will be eligible if they meet the income test. Asset test limits are being waived for new claims from 25 March 2020 to 24 September 2020.
Targeted stimulus payment
The Government is providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders.
- First payment will be available to people who were eligible at any time from 12 March 2020 to 13 April 2020 inclusive. If you had an application submitted by that date you will also be eligible
- Second payment will be available to people who are eligible payment recipients and concession card holders on 10 July 2020. Except for those who are receiving an income support payment that is eligible to receive the Coronavirus supplement as mentioned above
The payments will be exempt from tax and are based on a per person basis. To be eligible for either payment you must be residing in Australia and receiving a social security, farm household allowance or veteran payment or hold concession card.
Tax-free superannuation withdrawal
The Federal Government is allowing individuals affected by the economic impacts of COVID-19 to access up to $10,000 of their superannuation savings in 2019-20 and a further $10,000 in 2020-21. These withdrawals will be tax free and will not affect Centrelink or Veteran’s Affairs payments.
To apply for early release a fund member must satisfy any one of the following requirements:
- They are unemployed; or
- They are eligible for Jobseeker payment, youth allowance, parenting payment, Farm household allowance or special benefit; or
- On or after 1 January 2020:
- They were made redundant; or
- Their working hours were reduced by 20% or more; or
- If Sole Trader – business was suspended or turnover was reduced by 20% or more
Self-funded retirees – changes to minimum pension requirements
The Government is temporarily reducing the minimum pension withdrawal requirements by 50% for next two financial years 2019-20 and 2020-21. This measure is intended to provide retirees with greater flexibility in how they manage their superannuation savings.
The main support for businesses is to help them retain their employees through boosting cash-flow. If you do not currently employ any staff within your business other assistance measure issued by the ATO include:
- Deferring by up to 4 months the payment of tax amounts due through the BAS (including PAYG instalments), income tax assessments, FBT assessments and excise by affected businesses;
- Allowing affected businesses on a quarterly reporting cycle to opt into monthly GST reporting to get quicker access to any GST refunds;
- Allowing affected businesses to vary PAYG instalment amounts to zero for the April 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters;
- Remitting any interest and penalties, incurred by affected businesses on or after 23 January 2020, that have been applied to tax liabilities; and
- Allowing affected businesses to enter into low-interest payment plans for their existing and ongoing tax liabilities
Boosting Cash-flow for Employers
The Government is providing up to $100,000 to eligible small and medium sized business and not-for-profits (NFPs) (including charities) that employ people with a minimum payment of $20,000. These payments are to help businesses and NFPs cashflow so they can keep operating, pay their rent, electricity and other bills and retain staff.
The payment will be equal to the lesser of 100% of PAYGW on employees salary and wages or $50,000. Eligible businesses that are not required to withhold tax will receive a minimum payment of $20,000 over the March and June quarters.
To be eligible for the payment small and medium businesses need to employ workers and have an aggregated annual turnover under $50 million.
The ATO will deliver this payment
as a credit in the BAS for the period ending 31 March 2020 and
30 June 2020.
Supporting Apprentices and Trainees
The Government is supporting the continuing employment of apprentices and trainees within the small business community by allowing eligible small businesses to apply to receive wage assistance from 1 January 2020 to 30 September 2020. This assistance will provide a reimbursement a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).
Employers that employ fewer than 20 full-time employees who retain an apprentice or trainee can register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020.
Increasing the instant asset write-off
Eligible businesses will be able to immediately deduct purchases of eligible assets costing less than $150,000. Access to the instant asset write-off will be expanded to include all businesses with aggregated turnover of less than $500 million (up from $50 million) until 30 June 2020. The asset threshold applies on a per asset basis, which would enable businesses to immediately write-off multiple assets. The benefit will also apply to both new and second hand assets first used or installed ready for use in this timeframe.
A temporary business investment allowance for businesses with aggregated turnover below $500 million purchasing certain new depreciable assets acquired after 12 March 2020 and first used or installed by
30 June 2021. This measure will allow a 50 per cent accelerated depreciation deduction in addition to the existing depreciation deduction. Eligible assets include those depreciable under Division 40 of the Income Tax Assessment Act 1997. It does not apply to second hand Division 40 assets, or buildings and other capital works depreciable under Division 43.
3. SUPPORTING THE ACCESS TO CREDIT
Across the economy many otherwise viable small and medium sized businesses are facing significant challenges due to disrupted cash flow. At the same time, businesses still have fixed obligations including rent, utilities and employee expenses.
Coronavirus SME Guarantee Scheme
The Coronavirus Small and Medium
enterprises (SME) Guarantee Scheme will provide support for these businesses.
Under the Scheme, the Government will provide a guarantee of 50% to SME lenders
for new unsecured loans to be used for working capital. 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 in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan
The Scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.
Quick & Efficient Access to credit for small business
The Government is providing an exemption from responsible lending obligations for lenders providing credit to existing small business customers. This exemption is for six months, and applies to any credit for business purposes, including new credit, credit limit increases and credit variations and restructures. By providing a temporary exemption from responsible lending obligations, this reform will help small businesses to get access to credit quickly and efficiently.
Support the flow & reducing the cost of credit – Reserve Bank of Australia
The Reserve Bank of Australia (RBA) has announced a package on 19 March 2020 that will put downward pressure on borrowing costs for households and businesses. This will help with the consequences of the Coronavirus on businesses and support their day-to-day trading operations. The RBA is supporting small businesses as a priority. RBA has also announced that they have reduced the cash rate to .25%. It is also extending and complementing the interest rate cut by taking active steps to target a .25% yield on 3-year Australian Government Securities.
Ensuring banks are well placed to lend
The Australian Prudential Regulation Authority (APRA) has announced temporary changes to its expectations regarding bank capital ratios. The changes will support banks’ lending to customers, particularly if they wish to take advantage of the new facility being offered by the RBA.
Exchange settlement balances at the RBA to be remunerated at 10 basis points, rather than zero as would have been the case under the previous arrangements. This is intended to mitigate the cost associated with the large increase in settlement balances with the RBA as a result of the proposals.
Below please find an easy to navigate summary of what benefits you may be entitled to under the 2020 Economic COVID-19 stimulus:
Small business will be able to claim up to $100,000 to help pay employees and maybe eligible for loans up to $250,000.
SOLE TRADERS, CASUALS & INDIVIDUALS EXPERIENCE HARDSHIP
Will be able to get early access to their superannuation and withdraw up to $20,000 over two financial years which will be tax free.
LOSS OF JOB
Could be entitled to additional supplement of $550/fn on top of the usual welfare payments for jobseeker or Newstart payment over the next six months.
SOLE TRADERS AND CASUALS
Supplement of $550/fn will be availability to sole traders and casuals who met the income test.
Asset test assessment of the family home will be waived.
OTHER WELFARE RECIPIENTS
Two payments of $750 – age pension, carers allowance, family tax benefits and commonwealth seniors health care card.
Two payments of $750 for those students on AUStudy, AUBStudy or Youth Allowance student payments. Also eligible for supplement of $550/fn.
SELF FUNDED RETIREES
Temporary reduction to minimum pension withdrawal requirements of 50% for next two financial years 2019-20 and 2020-21.
If tested under income test, reduction to the deeming rates by 0.5 % resulting in approximately an additional $105 more in the first full year the reduced rates apply.
KEY BENEFITS AND TIMING OF BENEFIT PAYMENTS: