What a changed world we are living in as we all try to navigate the challenges arising from the current Coronavirus Pandemic, including
protecting the health and safety of our friends and family, and the viability of our businesses, employment and investments.
The purpose of this communication is to provide you with an update relating to the Government's Economic Stimulus Package in response to the Coronavirus. Our office will continue to apply its available resources to assist and support you where we can through this uncertain period as we attempt to survive the ever changing restrictions we are all dealing with.
The following is a broad summary of the key aspects of the Federal Government’s stimulus package in response to the Coronavirus, as recently announced and enacted. These measures were implemented via various Bills introduced into Parliament, which very quickly received Royal Assent on 24 March 2020 (including the Coronavirus Economic Response Package Omnibus Bill 2020), to give effect to the Government’s stimulus package.
Various measures have been introduced to provide a 'safety net' for individuals who are financially impacted by the Coronavirus.
A new six-month 'Coronavirus supplement' of $550 per fortnight will be paid to individuals who are currently eligible for
certain income support
payments, including the:
Furthermore, it appears that this new (additional) supplement will be paid to eligible individuals as part of their existing income support
payments (e.g., Jobseeker Payment and Youth Allowance).
For the period that the Coronavirus supplement is paid, the Government will also expand access to certain income support payments (e.g., the Jobseeker Payment, the Youth Allowance Jobseeker and the Parenting Payment) for eligible individuals.
For example, a new category of Jobseeker Payment and Youth Allowance Jobseeker will become available for eligible individuals financially
by the Coronavirus.
According to the Government, this could include, for example, permanent employees who are stood down or lose their employment; sole traders; the self-employed; casual workers; and contract workers who meet the income tests, as a result of the economic downturn due to the Coronavirus.
Additionally, asset testing for the JobSeeker Payment, the Youth Allowance Jobseeker and the Parenting Payment will be waived for the period of the Coronavirus supplement. Income testing will still apply to the person’s other payments, consistent with current arrangements.
The Government will be providing two separate $750 tax-free payments (referred to as ‘economic support payments’) to social security,
other income support recipients and to eligible concession card holders.
The fist $750 payment will be available to individuals who are residing in Australia and are receiving an eligible
Government payment, or are the holders of an eligible concession card, at any time from 12 March 2020 to 13 April 2020 (inclusive). This
payment will be made automatically to eligible individuals from 31 March 2020.
The second $750 payment will be available to individuals who are residing in Australia and are receiving one of the eligible Government payments or are the holders of one of the eligible concession cards on 10 July 2020 (except for those receiving an income support payment that qualifies them to receive the $550 fortnightly Coronavirus supplement). This payment will be made automatically to eligible individuals from 13 July 2020.
Each of the $750 payments will be exempt from income tax and will not count as income for the purposes of Social Security, the Farm Household Allowance and Veteran payments.
The Government will be temporarily reducing the superannuation minimum drawdown amounts for account-based pensions and similar products
by 50% for the 2020 and 2021 income years.
This basically means that the total minimum annual pension amount that a superannuation fund is otherwise required to pay to a member receiving a pension from the fund (e.g., an account-based pension) will be reduced by half for these two income years
The Government will introduce a new compassionate ground of release that will allow individuals to access their superannuation entitlements where those benefis are required to assist them to deal with the adverse economic effects of the Coronavirus, but only where one or more of the following requirements are satisfied:
Under this new compassionate ground of release, eligible individuals will be able to access (as a lump sum) up to $10,000 of their superannuation entitlements before 1 July 2020, and a further $10,000 from 1 July 2020 (subject to a six-month time frame).
Eligible individuals who are looking to access their superannuation entitlements under the above new ground of release will be able to apply directly to the ATO through the myGov website (at www.my.gov.au) and certify that the relevant eligibility criteria is satisfied.
From 1 May 2020, the Government will be reducing both the upper and lower social security deeming rates by a further 0.25 percentage
points. This is in addition to the recent 0.5 percentage point reduction, resulting in an overall reduction to the social security deeming
rates of 0.75 percentage
On this basis, as of 1 May 2020, the upper deeming rate will be reduced from 3% to 2.25%, and the lower deeming rate will be reduced from 1% to 0.25%.
These reductions reflect the low interest rate environment and its impact on the income from savings. Broadly speaking, the social security deeming rates apply (for ‘income test’ purposes) to determine the amount of income that an individual is ‘deemed’ (or taken to) earn from financial investments (e.g., cash deposits and listed securities), irrespective of the actual amount of income (e.g., interest income and dividend income) earned by the individual. In most cases, the deeming rates apply for the purposes of applying the Age Pension ‘income test’.
The Government is also providing cash flow assistance for eligible businesses in the form of two separate measures.
Small and medium-sized businesses and not-for-profit entities, with an aggregated annual turnover of less than $50 million (usually based on their prior year’s turnover) that employ people, may be eligible to receive a total payment (in the form of a refundable credit) of up to $100,000 (with a minimum total payment of $20,000), based on their PAYG withholding obligations in two stages:Stage 1 payment (credit)
Note that, the minimum payment of $10,000 will be applied to an entity’s fist activity statement lodgment (whether for the month of March or
theMarch quarter) from 28 April 2020.
Stage 2 payment (credit)
For employers that continue to be active, and additional (tax-free) payment will be available in respect of the June to October 2020 period, basically as follows:
Again, the ATO will automatically calculate and pay the additional (tax-free) payment as a credit to an employer upon the lodgment of their activity statements from July 2020, with any resulting refund being paid to the employer.
Broadly, the depreciating asset instant asset write off threshold will be increased from $30,000 (for businesses with an aggregated turnover of less than $50 million) to $150,000 (for businesses with an aggregated turnover of less than $500 million) until 30 June 2020.
The measure applies to both new and secondhand assets fist used or installed ready for use in the period beginning on 12 March 2020 (i.e., the date on which this measure was announced) and ending on 30 June 2020.
These are businesses with aggregated turnover of less than $10 million.
SBEs will be able to claim an immediate deduction for depreciating assets that cost less than $150,000, provided the
relevant asset is fist acquired at or after 7.30 pm on 12 May 2015, by legal time in the ACT, and fist used or installed ready for use on
or after 12 March 2020, but before 1 July 2020.
Additionally, SBEs will also be able to claim an immediate deduction for the following:
These are businesses with turnover of at least $10 million and less than $500 million.
MBEs can immediately deduct the cost of an asset in an income year if the asset has a cost of less than $150,000 and it was fist acquired in the period beginning at 7:30pm, by legal time in the ACT, on 2 April 2019 and ending on 30 June 2020, and the taxpayer starts to use or have the asset installed ready for use for a taxable purpose in the period beginning on 12 March 2020 and ending on 30 June 2020.
Additionally, MBEs can also claim a deduction for certain amounts included in the second element of the cost of a depreciating asset,
where the amount of the second element cost is less than $150,000, and is incurred on or after 12 March 2020 but before
1 July 2020.
The threshold will generally be applied to the GST exclusive cost of an eligible asset (i.e., assuming the relevant business is entitled to an input tax
credit for any GST included in the acquisition cost).
Importantly, this increased threshold also continues to operate on a ‘per asset’ basis, which means that eligible businesses can
multiple assets (as long as each of the assets individually satisfy the relevant eligibility criteria).
Currently, the instant asset write-off threshold is due to revert to $1,000 for small businesses (i.e.,those with an aggregated turnover of less than $10 million) from 1 July 2020.
Broadly, a new time-limited 15-month investment incentive (available for eligible assets acquired from 12 March 2020 up until 30 June 2021)
be introduced to accelerate certain depreciation deductions for businesses with an aggregated turnover below $500 million.
The amount that an eligible entity can deduct in the income year in which an eligible depreciating asset is fist used or installed ready for use is:
Different rules will apply where an SBE is using the general small business pool (i.e., for assets not qualifying for the instant asset write-off). In this case, an SBE may deduct an amount equal to 57.5% (rather than 15%) of the business-use portion of the cost of an eligible depreciating asset in the year is it allocated to the pool.
Unless specifically excluded, an eligible asset is a new asset that can be depreciated under Division 40 of the ITAA 1997 (i.e., plant and equipment and specified intangible assets, such as patents), where the asset satisfies all the following conditions:
Note that a depreciating asset is not an eligible asset where a commitment to acquire or construct the asset was entered into before 12 March 2020.
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information's applicability to their particular circumstances.