COVID-19 STIMULUS PACKAGE: WHAT, WHEN, HOW
The COVID-19 crisis is still ongoing, and to support and safeguard the Australian economy during this unprecedented time, the federal government has introduced a range of measures to support the people and Australian businesses.
As the country’s lockdown continues, with only essential industries and services in physical operation, the federal, state and territory governments have all taken action to strengthen the Australian economy and support individuals and small businesses, putting together various business stimulus packages.
As of the current date of publication, the government has committed economic support worth $320 billion to keep Australians in work and businesses in business—with potentially more funding to come.
All businesses, including sole traders and small-to-medium business owners, can find financial support from the various stimulus packages laid out, whether to weather the current waves of uncertainty or to invest in the eventual recovery.
We unpack some of the stimulus package measures for you.
Increased instant asset write-off threshold
The federal government has increased the instant asset write-off (IAWO) threshold, raising it to $150,000. Access to this has also been expanded to include businesses with an aggregated annual turnover of less than $500 million (up from $50 million). This applies from 12 March 2020 until 31 December 2020, for new or second‑hand assets first used or installed ready for use in this timeframe.
Under normal, pre-COVID-19 circumstances, only individual assets less than $30,000 are eligible for increased IAWO. With the increased IAWO, eligible assets acquired and first used or installed by 31 December 2020 are able to be immediately deducted. This results in less tax paid on these eligible assets, improving cash flow.
Eligible assets include capital equipment, such as trucks and cars. Assets not eligible under the increased IAWO scheme can be found here.
Backing Business Investment
Another federal government tax relief scheme for businesses is the Backing Business Investment (BBI) initiative.
This accelerates depreciation deductions and is a time-limited, 15-month investment incentive to support business investment and economic growth over the short term. This applies to eligible assets acquired from 12 March 2020 and first used or installed by 30 June 2021. The BBI is available to businesses with a turnover of less than $500 million.
Under the BBI scheme, eligible businesses will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.
The BBI scheme is different from the IAWO in a number of ways, especially regarding eligibility of businesses and assets.
Under BBI, for the depreciating asset to be eligible, it must:
- be new and not previously held by another entity (other than as trading stock);
- not be an asset to which an entity has applied depreciation deductions or the instant asset write-off rules;
- be first held on or after 12 March 2020;
- first used or first installed ready for use for a taxable purpose on or after 12 March 2020 until 30 June 2021.
Under the measures, different rules apply depending on whether or not an entity is using the simplified rules for capital allowances for small businesses. More information on BBI can be found here.
Coronavirus SME Guarantee Scheme
To support credit flow in the Australia economy, and in particular for small and medium enterprises (SMEs), the federal government is putting in place the Coronavirus SME Guarantee Scheme. This sees the federal government, Reserve Bank of Australia and the Australian Prudential Regulation Authority working together to extend loans to businesses with a turnover of up to $50 million.
The scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.
Under this scheme, the federal government will provide a guarantee of 50 per cent to lenders for new unsecured loans to be used for working capital. This will result in SMEs being able to access additional funding to help support them through the upcoming months.
Of course, terms and conditions apply, as follows:
- Maximum total size of loans of $250,000 per borrower
- The loans will be up to 3 years, with an initial 6-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
For more information on this and where to apply, see here.
JobKeeper Payment for employers and employees
The federal government has announced a wage subsidy program for businesses impacted by COVID-19, offering a fortnightly payment of $1,500 per employee until 27 September 2020.
Employer eligibility for this subsidy is subject to the following requirements:
- the business has a aggregated turnover of less than $1 billion (for income tax purposes) and they estimate their turnover has fallen by more than 30 per cent or more; or
- the business has an annual turnover of $1 billion or more (for income tax purposes) and they estimate their turnover has fallen or will likely fall by more than 50 per cent; and
- the business is not subject to the Major Bank Levy.
Additionally, the employer must have been in an employment relationship with eligible employees as at 1 March 2020, and can confirm that each eligible employee is currently engaged in order to receive JobKeeper Payments.
For more details and JobKeeper Payment for employers and employees, and how to apply, see here.
JobKeeper Payment is also available to sole traders and self-employed individuals. For more details, see here.
Boosting cash flow for employers
The federal government is providing temporary cash flow support to small and medium businesses that employ staff during the COVID-19–led economic downturn.
According to the government, this measure will be done through two sets of cash flow boosts—delivered from 28 April 2020 to support employers to retain employees.
Through the Australian Taxation Office (ATO), the Government will provide tax-free cash flow boosts of between $20,000 and $100,000 to eligible businesses, delivered through credits in the activity statement system, when eligible businesses lodge their activity statements.
This is intended to help businesses retain staff. Through the Australian Taxation Office (ATO), the Government will provide tax-free cash flow boosts of between $20,000 and $100,000 to eligible businesses.
There are several parameters surrounding eligibility of businesses and types of payments. More information on this can be found here.
One other thing to note is that there’s no need to apply for this—the cash flow boosts will be delivered when eligible businesses lodge their activity statements. The cash flow boost is a tax free payment to employers and is automatically calculated by the Australian Taxation Office.
Supporting apprentices and trainees
Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage paid from 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).
The subsidy will be available to small businesses employing fewer than 20 employees who retain an apprentice or trainee. Employers of any size, and Group Training Organisations that re‑engage an eligible out‑of‑trade apprentice or trainee, will be eligible for the subsidy. Additionally, the apprentice or trainee must have been in training with a small business as at 1 March 2020. For more eligibility criteria, read here.
Employers can register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020. To find out how to apply, contact an Australian Apprenticeship Support Network (AASN) provider.
In such an unprecedented time, uncertainties abound not just for businesses, but particularly for individuals and families. There is additional government financial assistance available for vulnerable individuals and households. More information can be found here.
There are likely to be more changes to the different federal, state and territory governments’ stimulus packages, and the latest information can be found on the respective governments’ websites, as outlined above.
For general federal government stimulus package information, see: www.business.gov.au/risk-management/emergency-management/coronavirus-information-and-support-for-business
In the meantime, stay safe with safe work practices for truckies in the time of COVID-19.
For updates on Isuzu Australia Limited’s operations during COVID-19, please see here.