As it happened…
Over the weekend the Federal Government announced an additional $66bn in government assistance, in addition to the initial $17.6 billion Coronavirus stimulus package and subsequent $105bn injection from the RBA, covered in my previous blog posts. This takes total government support to $189bn, or 9.7% of GDP.
More support has already been foreshadowed, with the government signalling a third package will most likely be needed to rescue the economy.
Boosting cash flow for employers
The Boosting Cash Flow for Employers package, initially up to $25,000, has been increased to a cap of $100,000, to assist businesses to improve cash flow and thereby retain their employees. The package has also been extended to now include not-for-profits and charities.
There has also been an increase in the minimum payment, up from $2,000 to now $20,000, to businesses who employ staff between 1 January and 30 June 2020.
The cash benefits are still based on a multiple of the company’s monthly PAYG withholding, however the benefits have been divided and extended to provide support until September 2020. We have included a worked example below.
Criteria remains the same meaning businesses with turnover of up to $50 million and who employ staff will be eligible.
How it works
Like the initial scheme, payouts will be issued automatically to eligible employers based on lodgement of Business Activity Statements (BAS) and/or Instalment Activity Statements (IAS).
Under the enhanced scheme, eligible businesses will receive a payment equal to 100 per cent of their PAYG withheld on salaries (up from 50 per cent) during March quarter, with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $10,000.
Also, an additional payment is being introduced in the July to October 2020 period. Eligible businesses will receive an additional payment equal to the total of all Boosting Cash Flow for Employers payments they received up to 30 June. This means that eligible entities will receive at least $20,000 up to a total of $100,000 under both payments. Payments will be delivered evenly across the 4 months to 31 October 2020.
Entities who lodge their BAS monthly will be entitled to claim up to three times their PAYG withheld, in order to receive a similar treatment to quarterly lodgers.
The cash flow boost remains a tax-free payment to employers and is automatically calculated by the ATO – no new forms are required.
Cheap, government-guaranteed loans
Also announced was a $40 billion loan facility for small and medium businesses, funded equally by government and the banks (but administered by the banks). This complements an announcement by the Big 4 banks on Friday that they would freeze repayments on business loans for six months.
Under the Coronavirus SME Guarantee Scheme, banks will provide unsecured loans of up to $250,000, which will be interest free for the first six months. The loans will have a maximum term of three years.
The Commonwealth government will guarantee 50% of each loan.
Changes to insolvency laws
Additionally, the Corporations Act is being temporary amended to protect corporates from potential collapse. Key measures include:
- Statutory demands: Increasing threshold from $2,000 to $20,000 a creditor can issue a statutory demand to wind up a company. Companies will have 6 months to respond to such a demand (previously 21 days);
- Bankruptcy proceedings: Increasing threshold a creditor can initiate bankruptcy proceedings from $5,000 to $20,000;
- Insolvent trading: Relief for directors from personal liability when the company is trading whilst insolvent; and
- ATO: Will be more flexible with clients including temporary reductions/deferrals of payments or withholding enforcement actions including Director Penalty Notices and wind-ups.
Increased support for individuals & households
Additional temporary financial assistance has been released for individuals and households, including income support payments, temporary early releases of superannuation and reduced superannuation minimum drawdown rates as well as the initial $750 payment to those eligible income support recipients.
Temporary early release of superannuation
The Government is allowing individuals affected by the Coronavirus to access up to $10,000 of their superannuation before 30 June, and a further $10,000 on 1 July 2020. n 2020-21. Tax will not need to be paid on amounts released and the money withdrawn with not affect payments from Centrelink or Veterans’ Affairs.
Eligibility individuals will be able to apply online through myGov.
To apply for early release, an individual must satisfy any one or more of the following requirements:
• You are unemployed; or
• You are eligible to receive a job seeker payment, youth allowance for job seekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
• On or after 1 January 2020: you were made redundant; or your working hours were reduced by 20% or more; or if you are a sole trader, your business was suspended or there was a reduction in your turnover of 20% or more.
Increased and accelerated income support
A new, time-limited Coronavirus supplement of $550 per fortnight will be paid to both existing income support recipients as well as an expanded recipient base.
Permanent employees who are stood down or lose their employment, sole traders, self-employed, casual workers and contract workers who meet the income tests as a result of the economic downturn due to Coronavirus, will be eligible to apply for support payments.
Those already receiving payments under the Jobseeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefits Allowance will receive the supplement payment.
Temporarily reducing superannuation minimum drawdown ratesTo help retirees manage the impact of market volatility on their savings, the Government is temporarily reducing superannuation minimum drawdown requirements by 50% for the 2019-20 and 2020-21 income years.
Over the coming days we will be prioritising support of our clients during these unprecedented times. We will be proactively reaching out to all eligible clients to formulate an appropriate plan which maximises the various forms of support currently being provided across the various channels i.e. government stimulus, ATO administrative support, bank mortgage relief and state level stimulus.
Of course, if you have any queries in the meantime, do not hesitate to contact me personally.