The Federal government on Sunday released a second increased stimulus package.
The new $66.1 billion economic plan is in addition to the first $17.6 billion round announced about 10 days ago. It has been stated as a means to help small businesses stay afloat, and keep people employed, until the coronavirus-related economic downturn has passed.
The Government appears to be leaving further options open, suggesting there could be yet more room for yet more expansion to these economic measures and we certainly hope this is the case for those businesses caught by the latest forced closures.
$100,000 PAYG Withholding Grants
The government’s first stimulus package, released on March 12, introduced “cash-back” grants of up to $25,000 for eligible small and medium businesses that have employees.
The latest stimulus package has increased the upper limit of those grants to $50,000. Businesses will now also receive the grants twice, meaning businesses could be eligible to receive up to $100,000.
This booster still applies to businesses with an aggregated annual turnover of less than $50 million, and that have employees. The size of the grant is based on tax withheld on employees’ wages and calculated automatically from businesses’ BAS lodgements by the ATO.
Previously, businesses would have been able to reclaim 50% of PAYG tax withheld. That has now been increased to 100%, to a maximum of $50,000 per payment. The minimum payment has also increased from $2,000 to $10,000 per payment.
So, for example, if a business pays $2,000 in PAYG tax on employee wages, it will receive a grant of $10,000 twice, for a total of $20,000.
If the business pays $50,000 or more in PAYG, it will receive the maximum grant of $50,000 for the current period, and again in October, for a total of $100,000.
Monthly BAS lodgers will receive the first payment for the March 2020, April 2020, May 2020 and June 2020 lodgements, with a 300 per cent calculation in the March activity statement to provide the same treatment as quarterly lodgers.
Please remember these are not cash payments back to your business, they will be a credit to your Integrated Client Account with the ATO to be used as an offset for the amount payable on your BAS liability.
However, if the tax credit for a quarter (or month for monthly PAYG lodgers) results in a refund position for your business then the ATO have undertaken to send the cash refund within 14 days.
Instant asset write-off
The instant asset write-off scheme increased threshold from $30,000 to $150,000 and including businesses with an aggregated annual turnover of less than $500 million remains unchanged from the original package announcement.
Access to Credit
RBA and federal bank funding
Last week, the RBA announced a $90 billion term funding facility for banks, with the directive that banks should use it to lend to SMEs.
The amount banks are eligible to borrow will depend on how much they lend out to businesses. For every $1 they lend to small business customers, they will be eligible for an additional $5 in funding themselves. At the same time, the federal government announced its own $15 billion funding facility for non-bank lenders, also intended to encourage lending to small businesses.
SME guarantee scheme
Under a new SME coronavirus guarantee scheme, the government has pledged to guarantee 50% of new short-term, unsecured loans to small and medium businesses.
The government will guarantee up to $40 billion in new lending, in a bid to further encourage new credit to SMEs.
In addition, for lenders providing credit to SMEs, the government is providing a temporary exemption from responsible lending obligations, meaning small business owners could access cash more quickly and efficiently but that remains to be seen if the banks actually make the application and credit assessment process any less complex.
Pause on small business loan repayments
There is also relief for small businesses already repaying loans. On Friday, the Australian Banking Association announced Aussie banks are pressing pause on repayments for small business loans.
Again, remember, this is only a pause in loan repayments. The banks will still require those repayments to be caught up after the moratorium ends.
The federal government has temporarily raised the threshold for creditors to issue a statutory demand on a company from $2,000 to $20,000, for six months and increased the time allowed for a company to respond to statutory demands from 21 days to six months.
For individuals, the threshold for initiating bankruptcy proceedings has increased from $5,000 to $20,000, and the time allowed for an individual to respond has increased from 21 days to six months and offering temporary relief for directors from personal liability for trading while insolvent, for six months.
The measures are designed for businesses dealing forced closures and the inevitable increase in business closures as a result of the COVID-19 outbreak.
The ATO has said it will offer tax relief to small businesses affected by the outbreak.
Options include deferrals of payments, temporary reduction of payments, PAYG Instalment variations, new extended payment arrangements and withholding of enforcement actions .
Apprentices and trainees
The apprentices and trainees wage subsidy of 50% of their wages for the nine months from January 1 to September 30, 2020 previously announced remains unchanged.
Eligible businesses will be able to claim up to a maximum of $21,000 per apprentice, or $7,000 per quarter.
Support for Affected Regions
The federal government has also set aside $1 billion to support businesses in regions that have been worst affected by the coronavirus crisis.
Funding will be available during the outbreak, and in the recovery period. However, it is unclear which businesses will be eligible for funding, or how they can apply for it.
According to a government release, assistance for this measure will be available “as soon as practicable”.
Income Support for Individuals
Individual cash payments
Finally, the government has implemented a number of income support measures in a bid to get money into people’s pockets and encourage consumers to keep spending.
The Treasurer noted these measures will apply to sole traders and casual workers who earn under a certain amount, fortnightly. However, it is currently unclear what the eligibility threshold is although mention has been made for Sole Traders a drop in turnover of 20% or more
This is for both new and existing income support recipients, as of 27thApril 2020.
People will receive their usual fortnightly payment, plus $550, for a six month period.
The Coronavirus Supplement will be provided to people receiving:
- JobSeeker Payment
- Sickness Allowance
- Youth Allowance for jobseekers
- Parenting Payment Partnered
- Parenting Payment Single
- Partner Allowance
- Sickness Allowance
- Farm Household Allowance.
Recipients of social security, veteran support and income support, and various other concession card holders, will also receive a one-off cash payment of $750 each. Payments will start being made from March 31.
A second payment will also be made to these recipients, starting from July 13. However, the second payment will not be available to those eligible for the $550 coronavirus supplement.
Access to Superannuation
Individuals affected by the coronavirus will be able to access up to $10,000 of their superannuation before the end of the financial year, and another $10,000 in the coming financial year, i.e. after July 2020.
Money withdrawn will not be taxed and can be in addition to Centrelink or Veterans’ Affairs payments.
Applications for early withdrawals are expected to open in mid-April.