Covid -19 Federal Government Economic Response to the Coronavirus

Mar 25, 2020

COVID-19 Frequently Asked Questions

Small Business Cash Flow Boost –A refund of PAYG Withholding
What is the incentive?

The Australian Taxation Office (ATO) will assist business cash flows by issuing refunds for 100% (up from 50%) of the Pay As You Go (PAYG) withholding amounts for payments made between 1 January 2020 and 30 June 2020 up to a maximum of $50,000 (up from $25,000). In addition, there will be a minimum payment to all eligible businesses of $10,000 (up from $2,000). These incentives will be tax-free and will be paid within 14 days of lodging activity statements. These initial payments are known as the Boosting Cash Flows for Employers incentive.

The Government has bolstered this lifeline for businesses with a proposed additional payment to be received by businesses for wages paid between 1 July 2020 and 30 September 2020. This additional payment will be equal to the total of the Boosting Cash Flows for Employers payments received. Therefore, eligible employers will receive total payments of between $20,000 and $100,000 between April and October 2020 under this incentive.

Is my business eligible?

These refunds will apply to businesses and Not-for-Profit entities with aggregated turnovers not exceeding $50m and that employ staff (even if they are not required to withhold from wages paid).

Aggregated turnover comprises the entity’s turnover, together with the turnover of the entity’s affiliates and connected entities from the previous financial year.

In addition, these payments will only be available to active eligible employers established prior to 12 March 2020 (this requirement will not apply to Not-for-Profit entities). This suggests that registering an entity for PAYG withholding after 12 March will not give rise to eligibility for the incentive.

The legislation specifically includes anti-avoidance provisions denying access to those who have engaged in activities for the purpose of accessing payments that would not have otherwise been available.  In the era of Single Touch Payroll, these activities will not be very difficult for the ATO to detect.  Given any excess or ineligible payments will attract general interest charges from the time they are granted until repayment. We would caution against such moves.

To be eligible for the additional payment, the business must remain active employers.

How do I access this concession?

The ATO has advised that credits will be processed following the lodgements of activity statements from 28 April 2020. For quarterly lodgers, this means that the March and June BASs will attract the initial payment. Monthly lodgers will be eligible to receive the initial payment in relation to their BASs from March to June 2020, with the payment for March being calculated at 3 times the rate of withholding on that activity statement (as a catch-up) up to the $50,000 cap.

The legislation is drafted in a way that suggests the ATO is looking to assess eligibility based upon the tax rate applied in the tax return for the 2019 year such that eligibility is automatically assessed.  This does appear to have some issues given that some businesses that would be eligible for the stimulus payments will not have lodged their 2019 tax returns before the first payments are due, and some eligible businesses may not have been able to access the lower corporate tax rate in the 2019 year.  We expect some opt-in to still be required.

The payments will be made as follows:

For Quarterly lodgers; Following the lodgement of the March and June 2020 BASs.  

When Received: One-half of the initial payments will be received after lodgement of the following activity statements: ie June 2020 (50% of initial payments); September 2020 (50% of initial payments)

For Monthly lodgers; Following the lodgement of the activity statements from March to June 2020.

When Received: One-quarter of the initial payment will be received after lodgement of the following activity statements:

June 2020 (25% of initial payments)
July 2020 (25% of initial payments)
August 2020 (25% of initial payments)
September 2020 (25% of initial payments)

In short, the initial payments will front-end the benefit received by employers. For example, where a monthly withholder has more than $50,000 in PAYGW on their March Business Activity Statement (BAS), the full $50,000 will be credited to the entity’s Activity Statement Account following the lodgement of the activity statement.

Further, the explanatory documents make it clear that the “payments” will only be available as cash refunds if the full amount of the BAS has already been paid.  In other words, the amount will be applied to reduce debts owed to the ATO, rather than as a cash payment in most circumstances.  This is the case even if deferrals for payments have been granted.

Expanded depreciation deductions
What is the incentive?

The instant asset write-off will be expanded to assets costing up to $150,000 (up from $30,000) purchased and installed between 12 March until 30 June 2020.

In addition, a further “business investment incentive” that will accelerate depreciation deductions for assets of any cost. Businesses may deduct 50% of the cost of eligible assets on installation, with the remaining amount being depreciated as per the existing rules.

Is my business eligible?

These incentives apply to businesses with aggregated turnovers not exceeding $500 million, and to assets purchased from 12 March 2020.

Assets up to $150,000 must be installed before 30 June 2020 to obtain the instant tax deduction, while depreciating assets qualifying for the 50% investment incentive must be installed before 30 June 2021.

How do I access this concession?

These incentives will be factored in when preparing the income tax return for the 2020 and 2021 financial years.

We note that these announcements have not yet been legislated but it is intended that they will apply to assets purchased from 12 March 2020.

The ATO’s administrative concessions
What are the concessions?

The ATO intends to provide relief to businesses impacted by COVID-19 through the following measures:

Deferring payments relating to Activity Statements, Income Tax assessments and Fringe Benefits Tax assessments by up to four months;
Allowing businesses who report GST quarterly to swap to monthly reporting to access GST refunds faster than they would usually be able to;
Allowing businesses to vary down their Pay As You Go (PAYG) instalments to zero for the March 2020 quarter (monthly payers will need to contact the ATO to discuss further);
Allowing businesses to claim refunds for PAYG instalments paid during the September 2019 and December 2019 quarters;
Remitting interest and penalties incurred after 23 January 2020 which had been applied to tax liabilities; and
Allowing businesses to enter into low-interest payment plans for their existing and ongoing tax liabilities.

Our early experience with the ATO on these matters is that it is best to contact the ATO prior to lodging the relevant forms (e.g. Activity Statements and tax returns) when seeking a payment deferral.

The ATO have also made a point of mentioning that employers will still need to meet their ongoing Superannuation Guarantee obligations.

Is my business eligible?

A case-by-case assessment of individual circumstances and how your business is affected will be made by direct contact with the ATO. However, the ATO appears willing to be cooperate in this space due to the wide-ranging impacts of COVID-19.

How do I access this concession?

The proposed concessions will not be automatically applied to assist taxpayers. The ATO will need to be contacted (either directly or by Messenger Zerner as the registered tax agent) in order to request assistance which will be tailored to individual circumstances.

The deferrals relate to certain tax payments, not lodgements. Considering that Directors have personal obligations relating to GST and PAYG withholding in addition to superannuation, we recommend that all statements are lodged on time.

Federal Government support for SME loans
What are the concessions?

The Commonwealth Government will provide a guarantee of 50% for loans made to SMEs with turnover of up to $50 million. The maximum amount of the loans will be $250,000 per borrower with an initial 6 month repayment holiday and a term of up to 3 years.

Is my business eligible?

These loans will be unsecured, meaning that eligible borrowers (i.e. those with turnovers not exceeding $50 million) will not have to provide security for the loan.

How do I access this concession?

Loans will be provided through banks. Discussions regarding these Government-backed loans can take place with your lenders from today.

Temporary relief for distressed businesses
What is the concession?

The economic impacts of COVID-19 and health measures to prevent its spread could see many otherwise profitable and viable businesses temporarily face financial distress. It is important that these businesses have a safety net to make sure that when the crisis has passed they can resume normal business operations. One element of that safety net is to lessen the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business.

The Australian Government is implementing temporary measures (to apply for 6 months) to ease the ongoing payment deadlines for businesses to suppliers. These measures include:

Statutory demand limits increased to $20,000 (previously $2,000 for Corporate and $5,000 for Personal)
Statutory demand response periods increased to 6 months (previously 21 days). This will stave off creditors from taking action for unpaid liabilities.
Relieve directors of personal liability that would otherwise be associated with insolvent trading provided the debts are incurred in the ordinary course of the Company’s business.

The above measures provide businesses time to consider what options are best for them and give companies confidence to continue to trade through the crisis with the aim of returning to viability when the crisis has passed.

Small business banking relief
What is the concession?

The Australian Banking Association (“ABA”) has announced Australian banks will defer loan repayments for small businesses affected by COVID-19 for six months on application. Other forms of assistance differ between each bank with options including:

·  deferring loan payments;

·  waiving fees and charges;

·  debt consolidation;

·  waiving penalties for early withdrawal of a term deposit; or

·  deferring upcoming credit card payments and increasing emergency limits.

Businesses must be careful in choosing which option is correct for them. Options of deferrals generally cease mandatory repayments with interest continuing to accrue.  Times like these, cash is king, if you have the ability to endure without these measures that is almost always the best option.  If you have no choice, these are excellent options your business can utilise to stabilise in these tumultuous times.

Contact details for the majority of banks can be found here

The key is to communicate early and often with your financial institution, it is never too early.  If you need help to determine what is best for you, we can assist.

Early access to Superannuation for individuals
What is the concession?

The Government intends to allow individuals in financial distress due to COVID-19 access of up to $20,000 of their superannuation over the 2019 and 2020 financial years. These withdrawals are intended to be tax-free.

How do I apply?

Eligible individuals will be able to apply for the withdrawal through the myGov website.

Changes to minimum Superannuation withdrawals
What is the concession?

The government intends to temporarily reduce the minimum withdrawal requirements for account-based pensions from superannuation accounts. The minimum withdrawal rates will be reduced by 50% for the 2019-20 and 2020-21 financial years.

As an example, someone currently required to withdraw 5% from their superannuation account under an account based pension will only be required to withdraw 2.5% for this financial year and the next.

We are here to help

As you can see there is a significant amount to digest in these unprecedented times.  We remain committed to assist you through the course of these events and are contactable as your needs arise.  Please feel free to reach out so that we can apply this to your circumstances.

All News Articles