COVID-19 Stimulus Package for Business
*Edited to include press release 22/03/2020
**Edited to include 'JobKeeper' allowance announced 30/03/2020
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.
An affected business will be able to access a wage subsidy of $1,500 per eligible employee to help keep their employee in a job for 6 months. This extends to sole traders without employees!
1. Turnover under $1 Billion (Every client reading this)
2. Turnover has reduced by 30% relative to a comparable period a year ago
* Update 01/04/2020 - "the Tax Commissioner will have the discretion to consider additional information that the business can provide to establish that they have been adversely affected by the impacts of the Coronavirus. The Tax Commissioner will also have the discretion to set out alternative tests that would establish eligibility in specific circumstances (e.g. eligibility may be established as soon as a business ceases or significantly curtails its operations). There will be some tolerance where employers, in good faith, estimate a greater than 30% fall in turnover but actually experience a slightly smaller fall."
The ATO released tests can be found HERE
1. Were employed on the books as at 01/03/2020
- For those thinking of backdating some payslips, they have indicated they plan to prefill information through Single Touch Payroll (STP) that has already been lodged. It would look highly unusual if a lot of reports were created backdating wages to 01/03/2020 or earlier. If you have a legitimate reason for doing so, be prepared to prove it during the application process.
2. Full-time, part-time & casual employees who have been employed for over 12 months are eligible along with employees who have since been stood down and then re-engaged.
- The example given in the treasury document suggests that re-engaged employees previously stood down will be eligible even whilst not working. Quote "If Miles chooses to be re-hired by the gym, under the JobKeeper payment he will receive $1,500 a fortnight before tax while he is stood down." You are required to report eligible employees on a monthly basis.
3. Self-employed individuals will be eligible to receive the JobKeeper Payment where they have suffered or expect to suffer a 30 percent decline in turnover relative to a comparable a period a year ago (of at least a month).
- $1,500 per fortnight per eligible employee, paid monthly.
- $1,500 is received even if the employee ordinarily earns less. If they earn less, the employer is not obliged to pay super on the difference.
- If an employee earns more, the employer will only be required to pay the difference. E.G If Bob earns $1,800 usually. The government subsidises $1,500 and the employer the additional $300.
- Subsidies will begin on 30/03/2020 with first payments for the month made in May 2020
- To Register for this please click HERE
Please note, that when the money is deposit into your account from the ATO you must allocate it as 'GST Free Income Received'. Whilst it is taxable, you are expected to fully pass it on so it in effect has a nil result on your income tax for your business.
We suggest, for those handling your own bookkeeping to create a separate income account to allocate these payments to.
For many, this will be a better alternative to the previously announced 'JobSeeker' paid through Centrelink as I have mentioned on my other blog HERE. It is both higher-paying and is coming straight from the employer so the method is easier and more transparent. It also gives slightly better security knowing that when this crisis begins to ease, you won't have to re-engage your employees and hope they haven't gone elsewhere.
It is important to note that any changes in payments need to be reported with Services Australia. Employees who wish to be paid via 'JobKeeper' will need to cease their applications with 'JobSeeker'. They could have picked names that didn't sound and look identical but this is Government we are talking about.
PAYG Relief (Employee wages tax)
The Government is providing up to $100,000 to eligible small and medium-sized businesses, and not-for-profits (including charities) that employ people, with a minimum payment of $20,000 paid if the entity remains active.
The rate of payment is equal to 100% of PAYG withheld for your staff, keeping in mind you will receive at least the minimum $20,000 should you not usually withhold over this amount.
This will be paid via credit to your activity statements over the next 3 BAS lodgements if you lodge quarterly or the next 7 lodgements if you lodge monthly.
Should the reductions take your account into credit you will be refunded the difference within 14 days of lodgement.
Please note, you are required to lodge as per usual. This will all happen automatically with no additional input required by you. Please do not otherwise alter your information you input into your BAS.
Example: January - March (BAS 3)
Gross Wages - $65,000
PAYG Withheld - $12,500
Reduction by 100% - $12,500
The amount Payable - $0
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 of 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? The recent release has advised that the lodgement of the March BAS will see an increase of the credit for this by 300% (If you lodge monthly) so in effect, you do get a reduction for lodgements already made.
4. I don't withhold anything on my BAS, do I get anything? The government has said the minimum payments will be $20,000. The first $10,000 will be credit in your January - March BAS followed by $10,000 in April - June BAS. This, however, appears to be only if you are not required to withhold. I suspect you still need to have paid actual wages. This happens when the staff earns a low income for a period.
Apprentice & Trainee relief
The subsidy will be available to small businesses employing fewer than 20 full-time employees who retain an apprentice or trainee. The apprentice or trainee must have been in training with a small business as of 1 March 2020.
Eligible employers can apply for a wage subsidy of 50% 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.
Employers can register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020.
Further information is available at:
• The Department of Education, Skills and Employment website at HERE
• Australian Apprenticeships website HERE
For further information on how to apply for the subsidy, including information on eligibility, contact an Australian Apprenticeship Support Network (AASN), provider.
1. Will this combine with the PAYG reduction? More than likely, yes. I have seen no indication that these can not overlap.
2. Will this combine with JobKeeper? No, it won't. You must choose one or the other.
Example: One Apprentice only as an employee
Gross Wage 6 months - $14,800 (50% subsidy $7,400)
PAYG 6 Months - $1,850 (100% reduction of $1,850)
Total relief - $9,250
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
Government-backed Lending to Business
The Government will provide eligible lenders with a guarantee for loans with the following terms:
• The maximum total size of loans of $250,000 per borrower.
• The loans will be up to three years, with an initial six month repayment holiday.
• The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.
We suggest you contact your bank to see how this can work for your business.
Payroll tax relief
The NSW Government have themselves delivered a stimulus package in the form of tax relief. Amongst other things, they are waiving payment for payroll tax until 30th June 2020. The details on this are very limited at this stage but it will likely be automatic and we suggest you continue to lodge as per usual.
NSW Small Business Grant - $10,000
The NSW State Government have also announced application have begun for a $10,000 grant to those businesses that have had a 75% reduction in turnover. Basically it is aimed at those fully shut down. Apply HERE
It is my view that the actual governance of these 3 stimulus packages will be sloppy at best. They are injecting north of $200 Billion into the Australian economy over the next few months. The expedience of this, along with the emergency nature of the situation means that there will be major issues at every stage. All of the measures mentioned in this blog have been put together in less than a month!
For perspective, in the Budget produced last year the government expected to spend just under $180 billion in Social Security and Welfare for 12 months. In less than a month's planning, they added over $200 billion to that figure.
The bushfires, that ravaged our nation in December/January and got celebrities from all over the world to donate to the victims. The relief package to help rebuild those communities was $2 billion. Not even 1% of this crisis from an economic standpoint.
The government, in December, touted a revised $5 billion budget 'surplus'. In simpler terms, it would take over 40 consecutive years of surplus to pay back the debt. More if you compound interest.
Stay tuned to this blog, I will be updating it each time they give out more free stuff!