Federal Government's $66 billion economic lifeline

The Federal Government yesterday announced a raft of additional and enhanced measures to help keep businesses afloat and workers employed amid a looming coronavirus lockdown. 

This second stimulus package builds on the measures included in the first $17.6 billion economic stimulus package announced just over a week ago.

The key measures are highlighted below.

Support for Businesses  

Enhanced Measures:

  1. Cash-flow boost to employers – covers taxes withheld from wages between 1 January- 30 June 2020 and 1 July 2020 – 31 October 2020

Businesses and Non-For-Profit entities (including charities) who employ staff and have turnover of less than $50m in FY19, the tax free amount will now be 100% of the amount withheld from wages (up from 50%) with a $10,000 minimum (up from $2,000) to a maximum of $50,000 (up from $25,000).

An additional payment of between $10,000 - $50,000 will be provided in respect of the 1 July 2020 – 31 October 2020 period equal to the amount received in relation to the March and June quarters. 

Therefore, the total tax-free payments can be between $20,000 - $100,000.

The payments will be delivered as credits to relevant Quarterly or Monthly activity statements of eligible businesses and NFPs. 

New Measure: SME Loan Guarantee Scheme

  • Federal Government to guarantee 50% of new unsecured working capital loans by “eligible lenders” to businesses with turnover of up to $50m.
  • Loan conditions: unsecure, maximum loan size of $250,000 & repayable up to 3 years with a 6-month repayment holiday.
  • Will apply to loans made between early April – 30 September 2020.

New Measures: Corporations & Bankruptcy Laws

  • Increasing (for 6 months) creditors’ ability to issue a statutory demand threshold from $2,000 to $20,000;
  • Increasing (for 6 months) the required response time to a statutory demand from 21 days to 6 months;
  • Increasing (for 6 months) the minimum amount required to initiate bankruptcy proceedings against a debtor from $5,000 to $20,000;
  • Increasing (for 6 months) the time required for a debtor to respond to a bankruptcy notice from 21 days to 6 months; and
  • Relief (for 6 months) of Directors’ personal liability for company debts while trading insolvent for debts incurred in the ordinary course of business.

Unchanged Measures:

1. Instant asset write-off  - effective immediately, until 30 June 2020

Depreciating assets costing up to $150,000 (up from $30,000) purchased between 12 March 2020 – 30 June 2020 will be fully deductible in the year ended 30 June 2020.  This measure applies to both new and second-hand depreciating assets.

Car write-offs may still be subject to the luxury car limit ($57,581).

Businesses with turnover of up to $500m are eligible (previously applied to businesses with turnover of up to $50m)

2. Accelerated Depreciation - effective immediately, until 30 June 2021

All other new (but not second-hand) depreciating assets purchased between 12 March 2020 – 30 June 2021 will be eligible for a 50% upfront deduction and the remaining 50% will be depreciated at existing rates.

Unlike the instant asset write-off, there is no cap on the expenditure eligible for this measure.

Businesses with turnover of up to $500m are eligible. This is an entirely new concession.

3. Wage subsidy for employing apprentices

A wage subsidy of 50% of apprentice/trainee wages for up to 9 months between 1 January 2020 – 30 September 2020.

To be capped at $21,000 ($7,000 per quarter) per eligible apprentice or trainee and only available to small businesses with fewer than 20 full-time employees. 

Businesses will need to register for the subsidy with the Department of Educations, Skills & Employment starting early April 2020 and lodge their claims by 31 December 2020.

Support for Individuals

New Measures:

  • Existing & new recipients of JobSeeker, Youth Allowance JobSeeker, Parenting (Partnered & Single), Farm Household and Special Benefit payments will receive an additional $550 per fortnight (on top of their existing payment) for the next 6 months.  Also, significant reduction in the eligibility criteria for such payments.
  • Tax-free early access to $10,000 of Superannuation in each of FY20 and FY21 (total $20,000) for:
    • anyone who is unemployed;
    • a recipient of any of the Payments listed above; or
    • persons who after 1 January 2020 were made redundant, had hours reduced by 20% or more and sole traders whose business has been suspended or turnover has been reduced by 20% or more.

This measure will require an ATO application.

Enhanced Measures:

  • Tax-free once-off payment of $750 to recipients of social security, veteran and other income support. Paid from 31 March 2020.
  • Additional tax-free payment of $750 to the same type of recipients (both new and those previously eligible) from 13 July 2020.

In announcing Sunday's package, Mr Morrison himself warned that it would not be his “last visit to these podiums”. "There will be more issues that even now have not presented themselves or could not even be conceived at this point." So expect more measures in the future.

If you have any questions regarding the above, please contact your Prosperity Adviser.

The team at Prosperity have made all the necessary arrangements to continue to assist you through this crisis. Our full team have work from home capability. Our offices currently remain open and we will continue to monitor Government advice and directives.

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