Businesses may access the Federal Government tax relief and cashflow assistance to combat the economic slowdown from the coronavirus. The assistance measures proposed are:
A. Supporting Business Investment in Depreciating Assets
Businesses will be able to claim the “Instant Asset Write-Off” for eligible assets costing up to $150,000. The threshold was previously $30,000. This measure will apply for eligible new or second-hand depreciating assets purchased & used from the Federal Government announcement to on or before 30 June 2020
Businesses with annual aggregated turnover of below $500 million will be eligible for this measure.
From 1 July 2020, the threshold will drop back down to $30,000.
Rather than claiming the depreciation on the assets over the effective life (which may be a number of years), businesses will be able to claim the entire cost of the eligible depreciating assets in the year of purchase (where the criteria are met) and reduce the business tax liability.
B. Accelerating Depreciation Deductions
For depreciating assets that do not meet the “Instant Asset Write-Off” criteria in point A above, businesses will be able to claim accelerated depreciation at 50% of the asset’s cost. The accelerated depreciation will apply to assets installed & used from the Federal Government announcement to 30 June 2021. Businesses with aggregated annual turnover below $500 million will be eligible.
Eligible assets are:
– New depreciating tangible assets (such as plant & equipment, computers, furniture)
– New specified intangible assets (such as in-house software & patents);
– Second hand depreciating assets are ineligible; and
– Building and capital works are ineligible.
The higher accelerated depreciation tax deduction will reduce the business tax liability.
C. Boosting Cashflow for Employers
Small and medium businesses that employ staff will have access to cashflow support of between $2,000 to $25,000 from the Federal Government. This cashflow support is tax free and does not need to be repaid to the Government.
Eligible small and medium businesses are those with:
– Aggregated annual turnover of under $50 million (generally based on prior year turnover); and
– Must employ staff.
Payments will be made to eligible businesses by the ATO after the quarterly Business Activity Statements and/or monthly Instalment Activity Statements are lodged. Good incentive to lodge your activity statements promptly and on time! This is how we understand it will work:
– The amount of the payment received will be calculated as 50% of the PAYG withholding tax withheld on staff salary and wages.
– Eligible businesses will receive the payment as a credit on their activity statement and will reduce their activity statement liability.
– If the payment results in an overall refund on their activity statement, the ATO will have to refund it within 14 days.
Businesses will receive the payments through the activity statements lodged for the quarter ending 31 March 2020 to 30 June 2020:
– If you lodge your activity statements quarterly, the business will receive the credits for the March 2020 and June 2020 quarters. The March 2020 BAS is generally due on 28 April 2020 and the June 2020 BAS is generally due on 28 July 2020.
– If you lodge your activity statements monthly, the business will receive the credits on the March 2020, April 2020, May 2020 and June 2020 months. The payment will be calculated at three times the rate (150%) in the March 2020 activity statement.
– Every eligible business will receive at least the minimum $2,000 payment on the first activity statement lodged for the March 2020 quarter.
For example, if you lodge quarterly Business Activity Statements, the cashflow support received will be:
– PAYG withholding tax reported on the March 2020 quarter BAS is $10,000, the payment/credit received will be $5,000 (50% of $10,000).
– PAYG withholding tax reported on the June 2020 quarter BAS is $15,000, the payment/credit received will be $7,500 (50% of $15,000).
For example, if you lodge monthly Instalment Activity Statements, the cashflow support received will be:
– If the business PAYG withholding tax for each month in March, April, May and June 2020 is $15,008;
– March 2020 month – the payment/credit received will be $22,512 (150% of $15,008);
– April 2020 month – the payment/credit received will be $2,488 ($25,000 cap less $22,512 payment already received); and
– May & June 2020 months – $NIL payment/credit received ($25,000 cap already used in prior months).
D. Supporting Apprentices & Trainees
The Federal Government is supporting small businesses to keep their apprentices & trainees employed. Eligible employers can apply for a wage subsidy of 50% of the apprentice/trainee’s wage paid during 1 January 2020 to 30 September 2020.
Employers will be reimbursed up to a maximum of $21,000 per apprentice/trainee ($7,000 per quarter).
Criteria for eligible employers are:
– Small businesses employing fewer than 20 full-time employees;
– Must employ an apprentice or trainee;
– The apprentice/trainee must have been in training with a small business as at 1 March 2020;
– Must satisfy an eligibility assessment by an Australian Apprenticeship Support Network provider; and
– Employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice/trainee will also be eligible for the subsidy.
Employers can register for the subsidy from early April 2020 and final claims must be lodged by 31 December 2020.
The Federal Government announced these measures on 12 March 2020. The legislation has not been released nor passed. The situation is changing quickly and we will keep you updated as more information and the final legislation is released.
Please contact us to find out more. The team at EMspire Advisory are experienced accountants in Sydney and would like to help you create, grow and succeed in business.
Please note that this information is not specific and is general in nature and cannot be relied upon as advice. Please contact us for specific advice for you and your circumstances.