The Federal Government on 22 March 2020 announced the second round of assistance measures for businesses and individuals impacted by the coronavirus. The measures are either in addition to or an update on the first round announced on 12 March 2020.
The new assistance measures proposed are:
A. Boosting Cashflow for Employers (Increase to Cashflow Support Amount)
It was announced on 12 March 2020 that 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 cash flow support is tax-free and does not need to be repaid to the Government. The support amount has now increased significantly to between $20,000 to $100,000.
More employers will now be eligible. This now includes not-for-profit entities (including charities) whereas it was originally only for small and medium businesses.
To be eligible, the not for profit entities and small and medium businesses must all:
- • Employ staff;
- • Aggregated annual turnover of under $50 million (generally based on prior year turnover); and
- • Be an active eligible employer prior to 12 March 2020.
Payments will be made to eligible businesses by the ATO after the quarterly Business Activity Statements and/or monthly Instalment Activity Statements are lodged.
This is how we understand it will work:
• The amount of the payment received will now be calculated as 100% 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.
• This will apply for the activity statements lodged for the quarters ending 31 March 2020 through to 30 June 2020.
• The Federal Government will also extend this assistance and provide additional payments for the quarter ending 30 September 2020. It was previously limited to the 30 June 2020 quarter.
Businesses will receive the payments through the activity statements lodged for the quarters ending 31 March 2020 to 30 September 2020:
• If you lodge your activity statements quarterly, the business will receive the credits for the March 2020, June 2020, and September 2020 quarters. The March 2020 BAS is generally due on 28 April 2020, the June 2020 BAS is generally due on 28 July 2020 and the September 2020 BAS is generally due on 28 October 2020.
• For quarterly lodgers, the payment in the June 2020 and September 2020 quarters will be calculated at 50% of the initial payment received for the March 2020 quarter.
• If you lodge your activity statements monthly, the business will receive the credits on March 2020, April 2020, May 2020, June 2020, July 2020, August 2020, and September 2020 months. The payment will be calculated at three times the PAYG withholding tax declared (300%) in the March 2020 activity statement.
• For monthly lodgers, the additional payment for June 2020, July 2020, August 2020, and September 2020 months will be calculated at 25% of the initial payment received for the March to May 2020 months.
• Every eligible employer will receive at least the minimum $10,000 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 $10,000 (100% of $10,000).
• June 2020 quarter BAS – the payment/credit received will be $5,000 (50% of initial $10,000 credit in the March 2020 BAS).
• September 2020 quarter BAS – the payment/credit received will be $5,000 (50% of initial $10,000 credit in the March 2020 BAS).
• Total cashflow support received = $20,000.
For example, if you lodge monthly Instalment Activity Statements, the cashflow support received will be:
• If the business PAYG withholding tax for the March 2020 month is $15,008;
• March 2020 month – the payment/credit received will be $45,024 (300% of $15,008);
• April 2020 month – the payment/credit received will be $4,976 ($50,000 cap less $45,024 payment already received).
• May 2020 month – $NIL payment/credit received ($50,000 cap already used in prior months).
• June 2020 month – $12,500 (25% of total $50,000 already received).
• July 2020 month – $12,500 (25% of the total $50,000 already received).
• August 2020 month – $12,500 (25% of the total $50,000 already received).
• September 2020 month – $12,500 (25% of the total $50,000 already received).
• Total cashflow support received – $100,000.
Whilst the Federal Government has increased the amounts of assistance that will be provided and extended the support to the 30 September 2020 quarter, it appears that to qualify the business will need to report salary and wages in its activity statements.
B. Government-Backed Unsecured Loans for Businesses
The Federal Government will provide support to small and medium businesses with cashflow difficulties through a “Coronavirus SME Guarantee Scheme”. This will improve a business’ access to funding by enhancing a lenders’ willingness and ability to provide credit.
Small and medium businesses with a turnover of up to $50 million will be eligible to receive these loans.
The Federal Government will provide eligible lenders with a 50% guarantee for the loans with the below terms:
• Maximum size of loans of $250,000 per borrower;
• Loans will be up to 3 years with no repayments for the first 6 months; and
• Loans will be unsecured and borrowers do not have to provide an asset as security.
The loans will still be subject to a lenders’ credit assessment processes. The Scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020. A list of participating lenders nor the loan types and interest rates charged is not yet available.
C. Quick and Efficient Access to Credit for Small Business
The Federal Government is providing an exemption from responsible lending obligations for lenders providing credit to existing small business customers. This exemption is for 6 months and applies to any business credit (including new credit, increases to credit limits, credit variations, and restructures). It is anticipated that this measure will allow small businesses to access credit/lending quickly and efficiently.
D. Temporary Relief for Distressed Businesses
Many businesses will face financial distress during the coronavirus period. The Federal Government will introduce a temporary safety net to lessen the actions that could push a business into insolvency or forced wind up during this period.
The measures which will apply for 6 months include:
• Increase in the threshold from $2,000 to $20,000 whereby creditors can issue a statutory demand on a company to force a liquidation.
• Increase in the time frame for a company to respond to a creditor’s statutory demand from 21 days to 6 months.
• Increase in the threshold from $2,000 to $20,000 that creditors can initiate bankruptcy proceedings against an individual (the debtor).
• Increase in the timeframe for an individual (the debtor) to respond to a bankruptcy notice from 21 days to 6 months.
• When a debtor declares an intention to enter voluntary bankruptcy, they are protected from unsecured creditors taking further action to recover debts for a period of time. This period will be extended from 21 days to 6 months.
• Temporary relief of personal liability by directors from insolvent trading.
E. Increased Government Income Support for Individuals
The Federal Government will be easing eligibility requirements for certain income support payments and introducing a new Coronavirus supplement payment at $550 a fortnight. This will apply for 6 months commencing from 27 April 2020.
The income support payments eligible for the Coronavirus supplement are:
- • Jobseeker Payment
- • Youth Allowance Jobseeker
- • Parenting Payment (partnered & single)
- • Farm Household Allowance
- • Special Benefit recipients.
The eligibility requirements will be expanded and more individuals are potentially eligible:
• Jobseeker and Youth Allowance Jobseeker criteria will now include permanent employees who are stood down or lose employment, sole traders, self-employed, casual workers, and contract workers who meet the income tests;
• Asset testing for the Jobseeker, Youth Allowance Jobseeker, and Parenting Payment will be waived for the period of the Coronavirus supplement.
• Waiting periods for the Government income assistance payments will be waived or reduced.
• Jobseeker and Youth Allowance Jobseeker payments will not be granted if individuals are accessing employer entitlements (such as annual or personal leave) or Income Protection insurance. Ie. you can access these Government payments when your employer entitlements and insurance benefits are exhausted.
• Jobseeker payment recipients will need to actively look for work or build their skills and the requirements will depend on the individual and their circumstances.
F. Government Payments to Support Households
Two separate $750 payments will be made on 31 March 2020 and 13 July 2020 to:
- • Social security,
- • Veteran; and
- • Other income support recipients;
- • Eligible concession cardholders.
If you are entitled to the Coronavirus supplement mentioned in point C above, you will not be eligible for the second $750 payment on 13 July 2020.
G. Temporary Early Release of Superannuation
Individuals affected by the Coronavirus will be granted early access to their superannuation to support themselves. The superannuation withdrawn will not be taxable and will not affect their Centrelink or Veterans’ Affairs payments.
There are certain time frames and thresholds for early access to superannuation including:
• Up to $10,000 can be withdrawn during the year ending 30 June 2020; and
• Up to $10,000 can be withdrawn during the year ending 30 June 2021.
• The maximum that can be withdrawn is $20,000 from now to 30 June 2021.
H. Temporary Reduction in Superannuation Minimum Drawdown Rates
For the years ending 30 June 2020 and 30 June 2021, the minimum superannuation drawdown requirements for account-based pensions and other similar products will be reduced by 50%.
This will reduce the need for retirees to sell investment assets to fund minimum pension drawdown requirements.
The Federal Government announced these measures on 22 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 and details are 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.