COVID-19 Stimulus Package
In response to the ongoing pandemic, the government has announced plans of an economic stimulus to be rolled out over the next few months. I will outline below as best as I can on how it may affect you. Please note that right now, the information about exactly how this is to be implemented is very vague and open to a multitude of questions. My explanation below may be subject to change as the situation unfolds.
PAYG Relief (Employee wages tax)
Period - 01/01/2020 - 30/06/2020
Business that employ staff, will get a 50% reduction in their PAYG to a maximum of $25,000 for the period mentioned above. This will happen automatically when you lodge your BAS or IAS and will happen from 31/03/2020. Please note that it is NOT a cash payment, it is simply a REDUCTION to your BAS or IAS tax obligations.
Example: January - March (BAS 3)
Gross Wages - $48,000
PAYG Withheld - $9,500
Reduction by 50% - $4,750
Amount payable - $4,750
1. I am the only employee of my company, do I get a reduction? Yes, you will still get a reduction if you withhold tax on your BAS or IAS only for yourself.
2. Can I withhold more than usual on my next two BAS' to get the most benefit? I have already been asked this question. In my opinion, as I am unsure on exactly how this would play out, it would look highly unusual if you suddenly had a spike in PAYG withheld for the period. An auditor would find this highly suspicious and you should avoid trying to take advantage of the situation.
3. I have already lodged my January & February IAS, will I get a reduction on those? I can't answer this right now as there is no guidance on it. There is a possibility that you may get credits in your March lodgement for January & February but you may also not.
4. I don't withhold anything on my BAS, do I get anything? Apparently, you will get at least $2,000, possibly on first lodgement or over 6 months. I would imagine that if you owe GST, it would get credit against this. There is a chance you could receive it in cash via a refund. This will be tax free.
5. I am a sole trader, do I get anything? Nope, sole traders are out of luck here. I thought perhaps a reduction in your OWN PAYG might have been given but guidance so far does not indicate that.
Apprentice & Trainee relief
Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for up to 9 months and a maximum of $21,000 from 1 January 2020 to 30 September 2020.
1. Will this combine with the 50% PAYG reduction? More than likely, yes. I have seen no indication that these can not overlap.
Example: One Apprentice only as an employee
Gross Wage 6 months - $14,800 (50% subsidy $7,400)
PAYG 6 Months - $1,850 (50% reduction of $925)
Total relief - $8,325
Instant asset write-off
Previously, the limit on an asset write-off was $30,000. This is now being lifted to $150,000 for assets purchased before 30/06/2020. You can refer to my previous post on the rules of this HERE
$750 household payment
From 31/03/2020 until mid-to-late April, the government will be paying a one off $750 to people on all types of social security payments, including the age pension and if you receive a Family Tax Benefit.
A detailed list can be found on this document HERE
1. I get my Family Tax Benefit paid in a lump sum at the end of the year, will I get it? Yes, it has been indicated that this $750 will be paid at the same time you usually get your lump sum payment. That is after completing your annual tax returns.
2. What if this is the FIRST year that I get a LUMP sum payment for the Family Tax Benefit? This is a great question because its actually my own. I am recently a father and we have opted for a lump sum but right now there is no guidance on whether a family in a situation like mine will receive the $750 payment.
1. How do I get the full $25,000 deduction for PAYG or $21,000 for an apprentice? This is the MAXIMUM limit that a small business will receive. Unless you are paying roughly over $500k a year in wages, you will not get the full benefit.
3. How do I get these benefits? For the most part they happen automatically. However, it seems that you'll need to at least register for the apprentice incentive. As of now, this registration has been set for 02/04/2020.
The situation is quickly unfolding itself and there will be changes to this in the coming weeks. I will endeavour to keep our clients updated as more information is presented.