Federal Government
The federal government announced a range of updated proposed measures yesterday to assist businesses with the current Covid-19 crisis.
Cash flow for businesses
The government is providing up to $100,000 to eligible small and medium sized businesses, and not-for-profits (including charities) who employ people, with a minimum payment of $20,000. These payments will help businesses’ and not-for-profits’ cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff.
Under the enhanced scheme, employers will receive a payment equal to 100 per cent of the PAYGW on their salary and wages withheld (up from 50 cent), 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.
An additional payment is also being introduced in the July – October 2020 period. Eligible entities will receive an additional payment equal to the total of all Boosting Cash Flow for Employer payments they have received. This means eligible entities will receive at least $20,000 up to a total of $100,000 under both payments. This additional payment continues cash flow support over a longer period, increasing confidence, helping employers to retain staff and helping entities to keep operating.
In simple terms the system will work like this (if you report and pay Payg W monthly):
XYZ Pty Ltd employs 10 staff. It pays on average $15,000 per month in PAYGW. Therefore, by the end of March it will have withheld $45,000 in PAYGW. The Government will grant XYZ Pty Ltd this amount as a credit in its March BAS. If that credit is greater than what the company owes on the BAS, then they will receive a net refund. If the company owes more, it will pay the difference.
The company will then get a credit for the remaining $5,000 in its April IAS.
The company will get no credit in May as it has reached its $50,000 limit.
It will however, receive credits of up to $12,500 for June, July, August and September.
If your business pays less than $10,000 in PAYGW in the first quarter the government will grant your business a credit of $10,000 in the first quarter. Your business will then receive an additional payment of $5,000 for the June quarter, and an additional payment of $5,000 for the September quarter.
Apprentices and Trainees Support
Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage paid during the 9 months of 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer.
Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter.
Eligibility
The subsidy is only available to businesses with less than 20 employees who retain their apprentices and trainees.
The apprentice must have been in training as at 1 March 2020.
Employers must register for the subsidy for early April 2020. Information can be found at www.dese.gov.au
SME Guarantee Scheme
The government will provide a guarantee of 50 per cent to SME lenders for new unsecured loans to be used for working capital.
SME’s with a turnover of up to $50 million are eligible to receive these loans. The terms will be
- Maximum total loan size $250,000.
- Loans up to 3 years with an initial 6-month repayment holiday.
- The loans will be unsecured.
The government will encourage lenders to provide facilities to SME’s and SME’s will only incur interest on the amount drawn down.
Early Access to Superannuation
If you are unemployed, eligible to receive a job seeker payment, youth allowance for job seekers, parenting payment, special benefit or farm household allowance or, on or after 1 January 2020:
were made redundant; or
your working hours were reduced by 20 per cent or more, or
if you are a sole trader – your business was suspended or there was suspended or there was a reduction in your turnover of 20 per cent or more.
People accessing their superannuation will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
You will be eligible to apply for early release of up to $10,000 for your superannuation fund on or before 30 June 2020.
Some examples include:
Ed the bartender Ed works in a popular bar in Melbourne. As a result of the Coronavirus, Ed has had his work hours reduced from 40 hours on average in the second half of 2019 to 20 hours per week on average in May 2020. As a result, Ed determines that his hours over the last month have reduced by more than 20 per cent compared to the average of his hours over the last six months of 2019.
Ed decides to apply for the early release of $8,000 of his superannuation in May 2020 to help pay his rent and other living expenses. Ed self-certifies that he is eligible for early release on myGov. He could have applied for up to $10,000, but chose not to. Ed cannot seek any further early release of superannuation in 2019-20 on the grounds that he has been affected by the adverse economic effects of the Coronavirus.
However, Ed finds after 1 July 2020 that his hours continue to be reduced by more than 20 per cent compared to the average of his hours in the last six months of 2019. Ed decides to make a second application and self-certifies through myGov that he is eligible for early release. He is able to apply again for a release of up to $10,000 of his superannuation. Ed submits a second application for the full amount of $10,000 this time.
For each application, the ATO approves Ed’s early release and notifies both him and his superannuation fund. Ed has received a total of $18,000 of his superannuation in two separate payments. He will not be taxed on this amount and is free to spend this money on anything he chooses, or save it for future expenses. He is also free to recontribute any unused amounts to his superannuation in the future (within his contribution caps).
Rachel the sole trader
Rachel is a sole trader with a catering business. At the end of July 2020, Rachel seeks to apply for an early release from her superannuation for the 2020-21 financial year.
Due to the economic effects of the coronavirus, Rachel’s turnover for July is $5,000 compared to $10,000 on average per month for the second half of 2019. Rachel therefore determines that her turnover has reduced by more than 20 per cent compared to her average turnover over the last six months of 2019.
Rachel self-certifies that she is eligible for early release and applies to have $10,000 released from her superannuation.
Support for Retirees
The government has temporarily adjusted the minimum draw down requirements for account-based pensions by 50 per cent for both the 2019-20 and 2020-21 years.
The table below shows the new rates.
|
Age
|
Default minimum drawdown rates (%) |
Reduced rates by 50 per cent for the 2019-20 and 2020-21-income years (%) |
| Under 65 |
4 |
2 |
| 65-74 |
5 |
2.5 |
| 75-79 |
6 |
3 |
| 80-84 |
7 |
3.5 |
| 85-89 |
9 |
4.5 |
| 90-94 |
11 |
5.5 |
| 95 or more |
14 |
7 |
This measure will have no impact on the underlying cash balance for 2019-20 and a negligible impact on 2020-21.
State government Initiatives
Payroll tax
All states are offering businesses significant payroll tax rebates and reductions.
In Victoria all businesses with a total payroll inclusive of superannuation of less than $3 million will receive a full refund of their payroll tax which they have paid to date. The assistance is a refund not a loan.
Eligible businesses must continue to lodge returns but do not need to make further payments for this financial year.
The State Revenue Office will directly contact eligible businesses in relation to reimbursement for payroll tax already paid in the financial year.
SRO Victoria will begin making reimbursements from 27 March 2020 and will endeavour to make all reimbursements as soon as possible.
These businesses will also be able to defer any payroll tax for the months of July, August and September 2020.
Business Support Fund
The government will establish a business support fund to support the hardest hit sectors such as tourism, hospitality, accommodation, arts, entertainment and retail.
We are waiting on details as to how this will be administered.
Bank Loans
Most banks, have announced a 3-month deferral on all loan repayments without incurring establishment fees or break costs. They are also allowing customers to extend their term by up to 3 months.
Each bank has slightly different policies so it would be sensible to ring your bank and discuss with them how they can assist you.
If you need help, please contact us
