Government support for coronavirus crisis

Craig Byron CPA

18 Mar 2020

Here’s our guide to the assistance available to small business as a result of the Coronavirus outbreak in Australia.  

The government has an assistance package to help keep cash flowing through the economy and people in their jobs.  While additional funds for health care and cash payments to those receiving income support payments and concession card holders are both welcome and essential, it’s the assistance being provided to businesses that we would like to focus on. 

The Federal Government has announced the following measures to assist Australian businesses:

An upfront deduction for asset purchases costing up to $150,000

From March 12, 2020 until 30 June 2020 the purchase of a single asset costing up to $150,000 will be immediately deductible in full in the 2019-20 financial year. To be eligible;

  • You must be in business
  • The asset must be used in a business
  • It can be purchased new or second hand
  • Business turnover must be less than $500 million
  • Asset must be installed and ready for use by 30 June 2020
  • If the asset have a private use component, the total cost of the asset must be under the $150,000 limit but you can only claim a deduction for the business use proportion.

There are two key differences with the existing rules. The old asset limit was only $30,000 (now $150,000) and the turnover threshold was $10 million (now $500 million).

For example, you decide to buy a new car to use in the business in April 2020.  The vehicle cost $50,000 and using a log book you find out the business use is 75%.  If the vehicle was delivered and in use before June 30, the asset qualifies for the immediate write off and the business claims a deduction tax deduction for $37,500 in the 2019/20 tax return.

An upfront deduction for 50% of the cost of an asset purchased

A similar initiative to the one above for assets purchased from March 12, 2020 through to 30 June 2021.  For eligible assets purchase during this time, a business can claim an upfront deduction for 50% of the cost and then depreciate the remaining value of the asset under using the normal depreciation rules.  This will run for 15months and to be eligible.

  • You must be in business
  • The asset must be used in a business
  • It can be purchased new or second hand
  • Business turnover must be less than $500 million
  • Asset must be installed and ready for use by 30 June 2021
  • There is no limit to the value of the asset

Cash flow assistance for employers

A tax free payment between $2,000 and $25,000 for businesses that employ staff will be made available for the March and June periods. 

To be eligible, business annual turnover for the prior year must be less than $50 million.

The amount an employer will receive will be 50% of what they have withheld from employee wages for the quarter.   It will be delivered as a credit on your March and June business activity statements. 

For example, if you have 10 employees and for the March quarter the tax amounts you withheld from their wages was $30,000, the ATO will provide you with a $15,000 credit.  If you withhold the same amount in the June quarter the ATO will provide you with a $10,000 credit as you have reached the $25,000 limit. 

If you do not withhold, or withhold below $4,000 then a business will receive a credit of $2,000 in their March quarter BAS.  But note that you still need to be paying wages.

The $2,000 would apply to an employer even if their staff are low income earners whose wages are too low to ahve to withhold tax.

If you are on a monthly PAYG withholding schedule your credit will be 150% of the withholding amount shown on your March monthly instalment notice to allow for a similar treatment to those on a quarterly lodgment cycle. That is, whether you’re quarterly or monthly cycle you effectively get support for 6 months.

For example, a business lodging monthly withholds $6,000 from employee wages in March.  The credit they receive will be for $9,000 upon lodgment of the March activity statement. They will then receive a credit for 50% of the amounts withheld in April, May and June up to $25,000.

ATO concession on tax instalments and tax debts

In addition, the ATO have announced the following measures to assist with cash flow for the remainder of the 2019/20 financial year;

  • You can apply to vary pay as you go tax instalments to nil for the March 2020 quarter
  • You can claim a refund of tax instalments paid in the September and December quarters
  • If your business has been impacted by the coronavirus, 

-The ATO will consider remitting all interest and penalties incurred after 23 January 2020

-You can ask for a low interest payment plan for existing and ongoing liabilities

You can find further information on the ATO website.

You can contact the ATO or get us, as tax agents, to help where your business is in severe hardship to discuss further assistance that the ATO can provide.

Support for businesses employing Apprentices and Trainees

To help businesses retain apprentices and trainees, employers can apply for a wage subsidy of 50% of the applicable wages paid during the 9 months from 1 January 2020 to 30 September 2020.

The maximum payment per apprentice/trainee will be $21,000 or $7,000 per quarter.

To be eligible;

  • The small business must have less than 20 employees
  • The apprentice/trainee must have been registered in training as at 1 March 2020
  • If you engage an “out of trade apprentice” you will be eligible for the subsidy
  • An eligibility assessment needs to be completed by an Australian Apprenticeship Support Network provider
  • Claims must be lodged by 31 December 2020.

Payments will be available from early April 2020.

Superannuation

There will be no relief from paying superannuation guarantee for your employees.  By law, the ATO cannot grant extensions or waive penalties in relation to super payments. 

This does not affect the recently legislated amnesty for unpaid super entitlements accrued before 31 March 2018.  You still have 6 months to rectify these payments and receive a tax deduction without penalty.

Additional assistance is being discussed and we will update our information when the Prime Minister and Treasurer announce it. 

Please make an appointment if you would like any further information or to discuss your personal circumstances at https://www.beyondaccountancy.com.au/tax-returns/