26 Mar Coronavirus – Business Support Package (Federal)
The Federal Government passed the legislation backing their Stimulus Package on the 23rd March 2020.
Boosting cash flow for employers
WARNING: Employers must be established before 12 March 2020 (with an ABN) to be eligible for the following payments. The payments are also subject to specific integrity rules and must not be scheme that has been enabled just to get the payments. See the ATO position HERE. Note the accounting bodies are lobbying very hard against this stance by the ATO for a business that usually pays distributions or dividends and instead switch to paying wages. Please chat to us for more details if you are going to apply to register for PAYG Withholding.
Small and medium-sized businesses and not-for-profit entities, with an aggregated annual turnover of less than $50 million (usually based on their prior year’s turnover) that employ people, may be eligible to receive a total payment of up to $100,000 (with a minimum total payment of $20,000), based on their PAYG withholding obligations, in the following two stages:
(a) Stage 1 payment – Commencing from the lodgment of activity statements from 28 April 2020, eligible employers that withhold PAYG tax on their employees’ salary and wages will receive a tax-free payment equal to 100% of the amount withheld, up to a maximum of $50,000. Eligible employers that pay salary and wages will receive a minimum (tax-free) payment of$10,000, even if they are not required to withhold PAYG tax.
The tax-free payment will broadly be calculated and paid by the ATO as an automatic credit to an employer, upon the lodgment of activity statements from 28 April 2020, with any resulting refund being paid to the employer. This means that:
• quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020; and
• monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgments. However, the payment for the March 2020 activity statement will be calculated as being three times the actual amount withheld.
Note that, the minimum payment of $10,000 will be applied to an entity’s first activity statement lodgment (whether for the month of March or the March quarter) from 28 April 2020.
(b) Stage 2 payment – For employers that continue to be active, an additional (tax-free) payment will be available in respect of the June to October 2020 period, basically as follows:
• Quarterly lodgers will be eligible to receive the additional payment for the quarters ending June 2020 and September 2020, with each payment being equal to 50% of their total initial (or Stage 1) payment (up to a maximum of $50,000).
• Monthly lodgers will be eligible to receive the additional payment for June 2020, July 2020, August 2020 and September 2020 activity statement lodgements, with each additional payment being equal to a quarter of their total initial (or Stage 1) payment (up to a maximum of $50,000).
The ATO will automatically calculate and pay the additional (tax-free) payment as a credit to an employer upon the lodgment of their activity statements from July 2020, with any resulting refund being paid to the employer.
Wages subsidies for apprentices and trainees
Employers with less than 20 full-time employees, who retain an apprentice or trainee who was in training with the employer as at 1 March 2020, may be entitled to Government-funded wage subsidies equal to 50% of the apprentice’s or trainee’s wage paid during the nine months from 1
January 2020 to 30 September 2020. The maximum wage subsidy over the nine-month period will be $21,000 per eligible apprentice or trainee.
Employers can register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020. Employers will be able to access the subsidy after an eligibility
assessment is undertaken by an Australian Apprenticeship Support Network (‘AASN’) provider.
Increasing the instant write-off threshold for business assets
Broadly, the depreciating asset instant asset write-off threshold will be increased from $30,000 (for businesses with an aggregated turnover of less than $50 million) to $150,000 (for businesses with an aggregated turnover of less than $500 million) until 30 June 2020.
The measure applies to both new and second-hand assets first used or installed ready for use in the period beginning on 12 March 2020 (i.e., the date on which this measure was announced) and ending on 30 June 2020.
More specifically, the above measure will apply to apply to Small Business Entities and Medium Business Entities, as follows:
(a) Small Business Entities (‘SBEs’) (i.e., with a turnover of less than $10 million). SBEs will be able to claim an immediate deduction for depreciating assets that cost less than $150,000, provided the relevant asset is first acquired at or after 7.30 pm (by legal time in the
Australian Capital Territory) on 12 May 2015, and first used or installed ready for use on or after 12 March 2020, but before 1 July 2020.
Additionally, SBEs will also be able to claim an immediate deduction for the following:
• An amount included in the second element of the cost of (i.e., an improvement too) a depreciating asset that was first used or installed ready for use in a previous income year. The amount of the second element cost must be less than $150,000 and the cost must be incurred on or after 12 March 2020 but before 1 July 2020.
• If the balance of an entity’s general small business pool (excluding current year depreciation) is less than $150,000 at the end of the 2020 income year, the SBE can claim a deduction for the entire balance of the pool.
(b) Medium Business Entities (‘MBEs’) (i.e., with a turnover of at least $10 million and less than $500 million).
MBEs can immediately deduct the cost of an asset in an income year if the asset has a cost of less than $150,000 and it was first acquired in the period beginning at 7:30 pm, by legal time in the ACT, on 2 April 2019 and ending on 30 June 2020, and used or installed ready for use for a taxable purpose in the period beginning on 12 March 2020 and ending on 30 June 2020.
Additionally, MBEs can also claim a deduction for certain amounts included in the second element of the cost of a depreciating asset, where the amount of the second element cost is less than $150,000 and is incurred on or after 12 March 2020 but before 1 July 2020.
As with the current instant asset write-off concession, the threshold will generally be applied to the GST-exclusive cost of an eligible asset (i.e., assuming the relevant business is entitled to an input tax credit for any GST included in the acquisition cost of the asset).
Importantly, this increased threshold also continues to operate on a ‘per asset’ basis, which means that eligible businesses can immediately write-off multiple assets (as long as each of the assets individually satisfies the relevant eligibility criteria).
Currently, the instant asset write-off threshold is due to revert to $1,000 for small businesses (i.e., those with an aggregated turnover of less than $10 million) from 1 July 2020.
Backing business investment – accelerating depreciation deductions for new assets
Broadly, a new time-limited 15-month investment incentive (which will be available up until 30 June 2021) will also be introduced to accelerate certain depreciation deductions for businesses with an aggregated turnover below $500 million, in respect of eligible depreciating assets.
This incentive basically allows a deduction equal to 50% of the cost of an eligible asset, with existing depreciation rules applying to the balance of the asset’s cost.
More specifically, the amount that an eligible entity (other than an SBE that is depreciating assets in its general small business pool) can deduct in the income year in which an eligible depreciating asset is first used or installed ready for use for a taxable purpose is:
• 50% of the cost (or adjustable value where applicable) of the asset; and
• the amount of the usual depreciation deduction that would otherwise apply (if it were calculated on the remaining cost of the asset).
Different rules will apply where an SBE is using the general small business pool (i.e., for assets that do not qualify for the instant asset write-off). In this case, the SBE may deduct an amount equal to 57.5% (rather than 15%) of the business-use portion of the cost of an eligible depreciating
asset acquired by the entity in the year is it allocated to the pool.
Which depreciating assets are eligible assets?
An eligible asset is a new asset that can be depreciated under Division 40 of the ITAA 1997 (i.e., plant and equipment and specified intangible assets, such as patents), where the asset satisfies all of the following conditions:
• The asset is new and has not previously been held (and used or installed ready for use) by another entity (other than as trading stock or for testing and trialling purposes).
• No entity has claimed depreciation deductions (including under the instant asset write-off) in respect of the asset.
• The asset is first held, and first used or installed ready for use, for a taxable purpose, between 12 March 2020 and 30 June 2021 (inclusive).
Note that this measure will not apply to second-hand Division 40 assets, or buildings and other capital works that are depreciable under Division 43 of the ITAA 1997 (i.e., the building write-off).
This measure also does not apply to an asset if the asset’s depreciation is worked out under a low value or software development pool, or in relation to primary production depreciating assets such as water facilities, horticultural plants, fodder storage assets and fencing assets.
A depreciating asset is also not an eligible asset where a commitment to acquire or construct the asset was entered into before 12 March 2020 or where the asset would not be in Australia.
This has been taken from the NTAA document entitled “NTAA Stimulus Package”