COVID-19 – Government Incentives

The Australian government  has announced a range of economic stimulus measures, in response to the current challenges faced by the Small and Medium enterprise sector.

This comes at a total cost to the Government of $189 Billion and is broken into a combination of grants, tax breaks and assistance packages, particularly incentivising Investment and Employment. 

Businesses with turnover levels up to $500 Million are set to benefit from these measures. 

The Australian Government has also joined with the financial institutions to assist small businesses with access to capital for Investment and expansion, along with working capital requirements.

Our objective is to centralise information relating to each of these initiatives as they become available, making it easy to access general information along with information relating to eligibility.

 

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1) Federal Government (available to all SMEs)

The Australian Government has so far announced two Economic Stimulus packages to the sum of $189 billion.

The package includes both cash and tax incentive measures, as follows;

 

Cash Incentive – Small Business Employers

 

100% Cashback on PAYG Withholding, up to $100,000 in total

 

  • Eligible small and medium-sized employers will be provided a 100% tax-free ‘cash back’ of up to $50,000 (and a minimum of $10,000) on PAYG Withhheld on wages between 1 January 2020 and 30 June 2020.
  • A second tranche of tax-free, cash payments of up to $50,000 (and a minimum of $10,000), will also be paid relating to  PAYG Withheld from wages, for the period 30 June 2020 – September 2020.
  • This second payment is calculated as the total cash back credit calculated in the first payment, split evenly over the June-20 to September 20 BAS/IAS lodgement period.
  • So to summarise – the cash back is now calculated on 100% of PAYGW of your wages, paid in 2 separate calculation periods:

 

So, breaking this down:

  • Payment 1
    • If you have spent more than $50k in PAYGW for the 6 month period between 1 January and 30 June 2020, you will receive $50,000 in cash from the Government for this period.
    • If you have spent $30k in PAYGW for the same period, you will get $30,000
  • Regarding the Additional Payment (Payment 2):
    • The same total benefit per Payment 1 is paid equally over your BAS/IAS lodgement period between 30 June 2020 and 30 September 2020

 

  • Please note that If you have an existing debt with the ATO, this benefit will offset your existing liability.

 

Info How do i apply?

This credit will automatically be processed upon lodgement for your BAS and IAS. Your accountant and/or bookkeeper will process it for you.

 

 

50% subsidy on apprentice wages, up to $21,000

 

  • Eligible employers can apply for a wage subsidy of 50% of apprentice or trainee wages for up to 9 months from 1 January 2020 to 30 September 2020 (up to a maximum of $21,000 per eligible apprentice or trainee).
  • If a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.

 

 

Tax incentives for Small Business Owners

 

  • The immediate tax deduction for eligible Assets, has been increased from $30,000 to $150,000 for assets purchased between 12 March 2019 and 30 June 2020
  • For Assets over $150,000, depreciation of  50 percent of the asset cost can be claimed  in the year of purchase for assets acquired and installed ready for use between 12 March 2019 and 30 June 2021. The remaining 50% of the Asset value is added to the general Small business Asset pool and depreciated.

A couple of other points on this:

  • It’s important to note that these are tax incentives/deductions, not cash back incentives. In other words, you need to spend the money, and to have otherwise been paying  income tax in order to get this tax benefit.
  • The tax benefits will be applicable for your FY20 and FY21 tax returns, which means you won’t see any benefit until you’ve lodged your 2020 and 2021 returns.

Info How to apply?

  • This credit will be processed by your tax accountant upon preparation and lodgement for your 2020 and 2021 income tax returns.

 

 

Tax Payment Deferrals

 

The ATO is providing SMEs payment deferral concessions for businesses directly impacted by the current crisis.

These are summarised as follows:

  • Deferring by up to 4 months the payment date of amounts due through the business activity statement (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise.
  • Allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting, in order to get faster access to GST refunds they may be entitled to.
  • Allowing businesses to vary Pay As You Go (PAYG) instalment amounts to zero for the March 2020 quarter. Businesses that vary PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
  • Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities.
  • Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low interest payment plans.

There is however a couple of important items to note:

  • You will still need to pay Superannuation –
  • These relief provisions are not automatically applied. You or your accountant will need to contact the ATO to make any of the above requests for assistance.

Info  How to apply?

  • Businesses can call the ATO’s Emergency Support Infoline on 1800 806 218 to discuss relief options based on their needs and circumstances.

 

 

Government underwritten, Cash flow loans for SMEs

 

  • The Government will provide a guarantee of 50% of new loans written by banks and SME lenders to support new short-term unsecured loans to SMEs.
  • Please note – this does not mean the Federal Government is issuing loans directly to SME Businesses.
  • It means that the Government is providing a guarantee to banks and SME lenders to reduce their risk to provide unsecured loans to SMEs that need the cash for working capital.

So what does this mean for me?

  • Expect a new type of loan product issued by the banks and lenders, tailored for SMEs that have been directly disrupted by the Coronavirus crisis.

Info  How to apply?

  • Contact your bank/lending institution about this package.
  • Refer to the ‘Coronavirus SME Guarantee Scheme’ and ask what new loan products are available to assist.

 

 

$1,500 JobKeeper subsidy to keep staff employed

 

Date

·        From 30 March 2020 for six months

·        For employees employed at and from 1 March 2020

·        First payments in first week of May 2020

 

Applies to

Based on comparable periods:

·        Employers <$1 bn that have experienced a downturn of more than 30%

·        Employers >$1bn that have experienced a downturn of more than 50%

Info  How to apply?

 

 

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2) State Government

i) NSW

Payroll Tax Concessions

For businesses whose total grouped Australian wages for the 2019/20 financial year is less than $10M:

  • will have their annual tax liability reduced by 25% when they lodge their annual reconciliation, which is due on 28 July.
  • For customers who lodge and pay monthly, there will have no payment required for the months of March, April or May 2020.The payroll tax is completely waived
  • When lodging your annual reconciliation, you will still need to provide wage details paid in these months and will receive the benefit of a 25% reduction in the amount of tax you would have had to pay for 2019-20.

Info How to apply?

  • This will be automatically applied for the payroll tax returns covering above mentioned periods.

 

ii) VIC

Payroll Tax Concessions

  • Businesses with annual taxable wages up to $3 million will have their payroll tax for the 2019-20 financial year waived.
  • Eligible businesses must continue to lodge returns but do not need to make further payments for the 2020 financial year.
  • The State Revenue Office will directly contact eligible businesses in relation to reimbursement for payroll tax already paid in the financial year.

Info  How to apply?

  • The State Revenue Office will directly contact eligible businesses in relation to reimbursement for payroll tax already paid in the financial year.
  • Expect an email from them!

 

iii) QLD

Interest Free State Government Loans

  • The QLD Government will offer $500m in loans to eligible businesses to retain employees and maintain operations. Details are:
    • Loans up to $250,000
    • First 12 months interest free
    • Currently taking expressions of interest before rolling the concessional loans out

Info How to apply?

 

Payroll Tax Concessions

  • Deferred payroll tax returns until 31 July 2020

Info  How to apply?

 

iv) WA

Payroll Tax Concessions

  • The payroll tax threshold will be increased to $1 million on 1 July 2020. This brings the increase forward from the planned date of 1 January 2021 and will result in approximately an additional 300 businesses no longer being liable for payroll tax. The threshold increase will be reflected in Revenue Online when it comes into effect.
  • Employers, or groups of employers, who pay $7.5 million or less in Australian taxable wages and have been directly or indirectly impacted by COVID-19 can apply to defer their monthly payroll tax payments until 21 July 2020.
  • A one-off grant of $17,500 will be available for employers, or groups of employers, whose annual Australian taxable wages are more than $1 million and up to $4 million. For a group of employers, a single grant will be payable to the designated group employer. You do not need to apply for the grant. Grants will automatically be paid by cheque from July but there will be delays for taxpayers whose tax status changed in 2018-19 or who became liable for payroll tax during the 2018-19 or 2019-20 assessment year. Eligible taxpayers should log in to Revenue Online to ensure their postal address is correct.

 

v) TAS

Interest Free State Government Loans

  • $20 million in interest-free loans available to small businesses in the hospitality, tourism, seafood production and export sectors.
  • Businesses with turnover of less than $5 million will be eligible, and the loans are intended to be used for purchasing of equipment, or for restructuring business operations.
  • Loans will be offered interest-free for three years. Details on how to apply have not yet been released.

Payroll Tax Concessions

  • Payroll tax waiver will be available to businesses in the hospitality, tourism and seafood industries, and will apply for the last four months of the 2019-20 financial year.
  • Other businesses with payrolls of up to $5 million will also be able to apply for a waiver, but eligibility will be based on how significantly the virus has affected business.
  • Further details on this criteria have not yet been released.

 

vi) NT

[TBA]

 

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3) Banks and Lending Institutions

Specific COVID-19 concessions have been announced by the following banks:

 

i) CBA

  • Deferring repayments on a variety of business loan and overdraft products, for 6-months.
  • Reducing commercial interest rates by 0.25
  • Waiving merchant terminal fees for impacted customers with CBA payment terminals, for 90 days.
  • Waiving early redraw fees on business term deposit accounts (including Farm Management Deposit accounts).
  • Waiving establishment fees and excess interest on Temporary Excess products.
  • Deferring repayments on vehicle and equipment finance loans, and providing tailored restructuring options that meet individual customer needs.

Info  How to apply?

 

 

ii) ANZ

  • Suspending interest repayments
  • Deferral of business loan repayments for up to 6 months, assessed on a case-by-case basis
  • Providing early access to term deposits without incurring break fees
  • Providing access to additional credit subject to approval

Info  How to apply?

  • Contact ANZ or your relationship manager.

 

 

iii) NAB

  • Deferral of business loan repayments for up to 6 months, assessed on a case-by-case basis
  • Extension of a business loan term by a period of up to three months, where individual circumstances warrant
  • Support to restructure existing business loans, including equipment finance
  • Business credit card deferred repayments.

Info  How to apply?

  • Contact NAB or your relationship manager
  • 1300 769 650 (Monday to Friday 8am-6pm AEST/AEDT)

 

 

iv) Westpac

  • Continuing it’s hardship assistance program
  • Deferral of business loan repayments for up to 6 months, assessed on a case-by-case basis

Info How to apply?

  • Contact Westpac or your relationship manager

 

 

v) Bendigo

  • Home Loan and Business Loan customers can apply for relief on loans for up to three months
  • Waiver of fees for the restructuring or consolidation of loans
  • Credit card customers can apply for an emergency credit card limit increase
  • Discounted interest rates on new personal loans taken out by existing Bendigo Bank customers
  • Waiver of interest rate reduction for early withdrawals on term deposits prior to maturity
  • Deferral of payments and extensions for Equipment Finance on a case by case basis

Info  How to apply?

  • Contact Bendigo or your relationship manager

 

Quantum Advisory is a business accounting and advisory firm that empowers family businesses to step up, scale up and sell up. Visit www.qagroup.com.au or call 1300 700 711 and start the journey.