Stimulus package update

Stimulus package update

Today the Government announced further measures to provide financial assistance to individuals and households and businesses at this difficult time.  At the time of writing, Federal Parliament plans to meet tomorrow (23 March) to pass the necessary legislation to incorporate these changes.
 

Support for individuals and households

The announcements for individuals, retirees and households include: 
  • Temporary early release of superannuation for those in need
  • Reducing the minimum drawdown rates for superannuation income streams for the 2019/20 and 2020/21 years
  • Reducing the deeming rates by a further 0.25%
  • An additional $750 lump sum for pensioners and concession card holders
  • Additional income support payments for the unemployed
Early access to superannuation

Individuals affected by the Coronavirus will have the opportunity to access up to $10,000 from their superannuation between now and 1 July 2020 with a further $10,000 available if needed from 1 July 2020 for approximately three months (date to be confirmed).
 
Eligibility: One of the following requirements must be satisfied for the early release of super: 
  • You are unemployed; or
  • You are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment, special benefit or farm household allowance; or
  • On or after 1 January 2020:
    • You 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 a reduction in your turnover of 20 per cent or more.
If eligible, individuals can apply directly to the ATO via MyGov (www.my.gov.au) and will be required to certify that they meet the eligibility criteria. The ATO will then issue a determination and contact the super fund directly to release the money.
 
It is anticipated that payments will be available from mid-April. Payments will be received tax free and will have no impact on existing income support payments. 
 
Reduction of minimum pension drawdown requirements

As we saw in the Global Financial Crisis (GFC), a temporary reduction to the minimum payment rules will apply for superannuation income streams to assist retirees who would otherwise be forced to sell down assets to meet their minimum pension.
 
For the 2019/20 and 2020/21 financial years, the minimum drawdown rates will be:


 
Reduction in deeming rates

Further to the recent decrease in deeming rates announced earlier this month, the Government will reduce deeming rates by another 0.25% from 1 May 2020. The new rates are provided in the table below.



 
Additional $750 lump sum payment

Two separate lump sum payments will now be available to eligible social security, veteran and other income support recipients and eligible concession card holders as follows:
 
Payment one – available to those eligible income support recipients and concession card holders at any time between 12 March 2020 and 12 April 2020.
 
Payment two – available to eligible payment recipients and concession card holders on 10 July 2020.
 
The two lump sum payments will be received tax free and will not impact existing income support payments.
 
For payment one, the qualifying payments and concession cards are as follows:



To be eligible for payment two, the same list applies EXCEPT if you are entitled to the Coronavirus Supplement (explained below).
 
Additional income support for the unemployed and faster access

The Government will introduce the Coronavirus Supplement, a $550 per fortnight payment available for the next six months to eligible payment recipients. Additionally, access to income support will be expanded and the claims process accelerated to ensure timely payments for those in need.
 
Eligibility: The payment categories eligible to receive the Coronavirus Supplement are:
  • Jobseeker Payment (including all the payments that are currently moving to Jobseeker Payment)
  • Youth Allowance Jobseeker
  • Parenting Payment
  • Farm Household Allowance
  • Special Benefit recipients
While the Coronavirus Supplement is available (temporary measure for approximately six months), the Government will expand access to income support (such as Jobseeker Payment) to:
  • Permanent employees who are stood down/lose their job
  • Sole traders/self employed
  • Casual workers
  • Contract workers
The standard allowance income test must be met however the assets test that normally applies to allowances (ie $1 over the asset test threshold results in no payment) will be waived for the Coronavirus Supplement period.
 
Some waiting periods will also be reduced or waived. The standard one week Ordinary Waiting Period, the Liquid Assets Waiting Period (LAWP) and the Seasonal Work Preclusion Period will all be waived.
 
How to apply: The Government is encouraging all applications to be made online or over the phone if internet access is not available. Measures have been adopted to accelerate the claims process such as removing the requirement for Employment Separation Certificates and the need to make appointments with an employment service.
 
The commencement date for the Coronavirus Supplement and the expanded access to income support is 27 April 2020.
 

Support for businesses

The support announced for businesses includes:
  • Boosting cash flow for employers
  • Supporting apprentices and trainees
  • Temporary relief for financially distressed businesses
  • Increasing the instant asset write-off and backing business investment
  • Supporting the flow of credit
Boosting cashflow for employers
 
This assistance will support businesses to manage cash flow challenges and help them retain their employees including apprentices and trainees. The measure will provide up to $100,000 back to businesses (including not-for profits and charities) that employ people. The payment will be tax free.
 
In summary:
  • Employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld, up to a maximum payment of $50,000.
  • Eligible businesses that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.
  • In the July – October 2020 period, an additional payment equivalent to the total of all of the Boosting Cash flow for Employers payments that have been received will be available but only if the business continues to be active.
  • Small and medium business entities with aggregated annual turnover under $50 million and who employ workers will be eligible (based on the prior year’s turnover).
  • The payment will be delivered by the Australian Taxation Office (ATO) as a credit in the activity statement system starting from 28 April 2020.    
Visit https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Cash_flow_assistance_for_businesses_0.pdf for further information.

Supporting apprentices and trainees
 
To retain apprentices and trainees, employers may be eligible for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage in the 9 months from 1 January 2020 to 30 September 2020.
 
The maximum reimbursement is $21,000 per eligible apprentice or trainee and employers will be able to register for the subsidy from early April 2020.
 
The subsidy is available to small businesses employing fewer than 20 full-time employees, who retain a trainee or apprentice (noting they must have been training as at 1 March 2020).  
 
Temporary relief for financially distressed businesses
 
Many profitable and viable businesses are currently experiencing financial distress due to the Coronavirus. To support them through the crisis so they can remain in business into the future, the Government will provide temporary relief from actions that may otherwise result in insolvency or forced closure.
 
The package includes:
  • A temporary increase in the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000 for the next six months. Additionally, the timeframe for a company to respond to the demand (noting that no response within the timeframe creates a presumption that the business is insolvent) will increase from 21 days to six months.
  • A temporary increase in a range of thresholds and time periods relating to creditors initiating bankruptcy proceedings.
  • Temporary relief for directors from any personal liability for trading while insolvent.
  • Providing targeted relief for companies from certain provisions under the Corporations Act.
Visit https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_temporary_relief_for_financially_distressed_businesses.pdf for more information

Increasing the instant asset write-off and backing business investment
 
The Instant Asset Write-off (IAWO) threshold will increase from $30,000 to $150,000 allowing businesses to immediately deduct each eligible asset purchased for less than $150,000 until 30 June 2020.
 
The Government will also allow businesses to accelerate depreciation deductions with 50 per cent of the cost of eligible assets deductible on installation where the asset is first used or installed by 30 June 2021.
 
Businesses with aggregated annual turnover of less than $500 million will be eligible for both the Instant Asset Write-off (IAWO) threshold increase and the Backing Business Investment proposal.
 
Visit https://treasury.gov.au/sites/default/files/2020-03/Fact_Sheet-Delivering_support_for_business_investment.pdf for more information.
 
Supporting the flow of credit
 
Clients who own small to medium businesses (SME’s) may need additional access to short term funding.  This is being addressed by several measures in the Government’s Supporting the Flow of Credit package.
 
Coronavirus SME Guarantee Scheme encourages lenders to provide loans to businesses with turnover of up to $50 million (SME) which are otherwise viable who are experiencing, or anticipating, cashflow disruption. 
 
Benefits of the loans include:
  • Can apply for up to $250,000 unsecured loan
  • Interest to be charged only on the amount drawn, so businesses do not have to use the entire facility
  • Term of up to 3 years, with initial 6 month repayment holiday
  • Government will guarantee 50% of the loan to the lender to encourage new loans
  • Applications can be made from early April for new loans made by participating lenders up to 30 September 2020.
More information

For more information on these measures and other announcements made by the Australian Government visit treasury.gov.au/coronavirus or speak with your Business Development Manager.