Coronavirus economic stimulus package

Yesterday the Federal Government announced an economic stimulus package designed to protect our economy from the impact of the
Coronavirus by maintaining confidence, supporting investment and keeping people in jobs.

Please find below a summary of these measures and how they may apply to you and your business.  Please call us to discuss how
these specific measures may impact on you.

We also urge you to contact us immediately if you are experiencing financial hardship.  We will help to address your concerns, assess
the situation and put in place an action plan to mitigate further loss.

Immediate deduction for assets costing < $150,000
(Applies: 12 March 2020 to 30 June 2020)

Currently, eligible businesses can claim an immediate tax deduction for the purchase of assets up to $30,000.  Under the stimulus
package, this threshold will be immediately increased to $150,000 until 30 June 2020. This applies to the acquisition of new or
second-hand assets.

50% upfront deduction for new assets
(Applies: 12 March 2020 to 30 June 2021)

Where eligible businesses can’t claim an immediate deduction for an asset (either it cost more than $150,000 or it was purchased after 30 June 2020), they may be eligible for an upfront deduction of 50% of the cost of the asset (with existing depreciation rules applying
to the balance).  This measure only applies to the acquisition of new assets and does not apply to second-hand assets or buildings.

Who will benefit?

Businesses that are looking to buy plant and equipment within the next 15 months.

Effect of measure

It will bring forward a tax deduction for the cost of the asset (or part of the cost of the asset).For most companies, this will bring
forward tax relief equal to 27.5% of the cost.   

Example

On 1 May 2020, a company buys a second-hand tractor for $140,000 (excluding GST) for use in its business.

Under the existing rules, in the 2019/20 financial year the company could claim a tax deduction of $3,899 (assuming the tractor had a
12 year life and the business used the diminishing value method of depreciation).  This is a tax benefit of $1,072 in the 2019/20
financial year (assuming a tax rate of 27.5%).

Under the stimulus package, in the current financial year the company could immediately claim the full $140,000 as a tax deduction. 
This is a tax benefit of $38,500 in the 2019/20 financial year.

Consequently, the company will pay $37,428 less tax in the 2019/20 financial year.

Businesses that withhold tax on employees’ salary and wages will receive a payment equal to 50 per cent of the tax withheld on wages up to a maximum payment of $25,000.  The minimum payment an employer will receive is $2,000 (even if they are not required to
withhold tax on employee wages).

The “payment” from the Government will be recorded initially as a credit to the business upon lodgement of their activity statement.  If
this places the business in a refund position, the ATO will deliver the refund within 14 days.

Quarterly BAS lodger – example

If you lodge your BAS quarterly, and you employ staff, you will be eligible for a credit against your March 2020 and June 2020 BAS
equal to half of your PAYG withholding obligations (up to a total of $25,000).

For example, if you reported PAYG withholding of $4,570 in your March 2020 BAS and $5,000 in your June 2020 BAS, you will receive a credit of $2,285 against your March 2020 BAS (50% x $4,570) and $2,500 against your June 2020 BAS (50% x $5,000).

Alternatively, if you reported PAYG withholding of $57,000 in your March 2020 BAS and $55,000 in your June 2020 BAS, you will
receive a credit of $25,000 against your March 2020 BAS (although 50% of your PAYG withholding for the March quarter is $28,500
you can only claim a maximum credit of $25,000).  In the June 2020 BAS you will not be entitled to any credit as you reached the
$25,000 cap in the March 2020 quarter.

Monthly BAS lodger – example

If you lodge your BAS monthly, and you employ staff, you will be eligible for a credit against your March 2020, April 2020, May 2020
and June 2020 BAS.  To ensure monthly lodgers receive the same benefit as the quarterly lodgers, the March 2020 BAS will be
multiplied by 3 and then half of this will be credited.

For example, if you withhold $5,000 per month for your employees, in March, you will be eligible for a credit of $7,500 ($5,000 per
month x 3 months x 50%).  In April, May and June, you will be eligible for a credit of $2,500 per month.

Employers without PAYG withholding

Some employers do not need to withhold tax for their employees as they are below the tax-free threshold.  That is, the employer is
required to lodge a BAS and report their gross wages but do not have any PAYG withholding.  In this situation, the employer will still
receive a minimum payment from the Government of $2,000. 

Eligible employers can apply for a wage subsidy of 50% of an apprentice’s or trainee’s wage paid between 1 January 2020 and 30
September 2020 (up to a maximum of $21,000 per eligible apprentice or trainee – that is, $7,000 per quarter).

Eligibility

The subsidy will only apply where the following conditions are met:

• the small business employs fewer than 20 full-time employees
• the small business has apprentices or trainees
• the apprentice or trainee must have been in training with a small business as at 1 March 2020.

A one-off $750 payment will be made to around 6.5 million eligible recipients.  The payment will be exempt from tax and will not count as income for social security purposes. The one-off payment will be made automatically from 31 March 2020. Over 90 per cent of the
payments will be made by mid-April 2020.

Eligibility

To be eligible, you must be residing in Australia and be receiving one of the following payments or hold one of the following concession
cards as at 12 March 2020:

The Federal Government has set aside an initial $1 billion to support the regions and communities that have been disproportionately
affected by the economic impacts of Coronavirus. In particular, it will include those areas heavily reliant on tourism, agriculture and
education.

Some of these initial measures include: