By Peter Kelly, Retirement Strategies and Solutions, Centrepoint Alliance
Over recent weeks, sharemarkets around the world have tumbled as the impact of the COVID-19 (coronavirus) pandemic bites home.
To support households and businesses during this difficult time, and to bolster a slowing economy, the Australian government announced a $17.6bn stimulus package on 12 March 2020.
And, to all accounts they will be moving very quickly to inject cash, and hopefully confidence, into the economy.
The stimulus package comprises of four key elements:
- Support for business investment,
- Cash flow support for small to medium businesses to help them remain viable and retain staff,
- Targeted support to regions and sectors specifically affected by the crisis, and
- Household stimulus payments that will benefit 6.5m Australians.
Importantly, the measures are temporary in nature.
Specific measures include:
- The current instant asset tax write off available for small to medium businesses will be extended. The threshold will be increased from $30,000 to $150,000 for assets purchased up until 30 June 2020. Furthermore, the write off will be available for businesses with a turn-over of less than $500 million, up from the current threshold of $50 million.
- A 15 month investment incentive (to June 2021) allowing accelerated depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct an additional 50% of the asset cost in the year of purchase.
- Businesses with a turnover of less than $50 million that employ staff in the first six months of 2020, will receive a cash payment of between $2,000 and $25,000.
- Businesses employing apprentices and trainees can apply for a wage subsidy of 50% of their apprentice or trainees wage for up to nine months from 1 January to 30 September 2020.
- Regions, and industry sectors disproportionately affected by the economic impact of coronavirus will receive $1 billion in support. Beneficiaries are expected to include the tourism, agriculture and education sectors.
- Stimulus payments to households. Pensioners, social security, veteran and other income support recipients and eligible concession card holders will receive a one-off tax free $750 stimulus payment. Payments will commence to be made from 31 March 2020, with the majority of payments expected to be made over the following fortnight. Clearly, the government is hoping this money will be spent by recipients, and not saved, thereby delivering stimulus to the border economy. What actually happens remains to be seen.
The stimulus package is designed to give the economy an injection and stave off the threat of recession.
With many Australian small to medium businesses, and individuals expected to benefit in one way or another, only time will tell if the measures have been sufficient to achieve their intended objective.
The Australian Government is supporting Australian businesses to manage cash flow challenges and retain employees during the Coronavirus health crisis. Assistance includes:
Boosting cash flow for employers
Helping small and medium businesses with aggregated annual turnover under $50 million to cover the costs of employee wages and salaries equal to 50 per cent of PAYG withheld for businesses that withhold tax, with a minimum of $2,000 and a maximum of $25,000 over six months. Businesses that pay salary and wages but are not required to withhold tax will also receive the minimum payment of $2,000. This will be a tax free payment, benefiting around 690,000 businesses employing 7.8 million people.
Supporting apprentices and trainees
Helping businesses retain apprentices and trainees by offering a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for nine months. The subsidy of up to a maximum of $21,000, will be available to businesses employing fewer than 20 full-time employees who retain an apprentice or trainee, or, where a small business is not able to retain an apprentice, the subsidy will be available to a new employer. This will support up to 70,000 small businesses employing around 117,000 apprentices.2. Delivering support business investment
The Australian Government is supporting Australian businesses by providing investment measures to 3.5 million businesses in response to the economic impacts of the Coronavirus.
These measures will help businesses plan, build and maintain operations during this time. This also benefits the 9.7 million Australians employed by these businesses.
Enhancing the instant asset write-off
Lifting the threshold to $150,000 (from $30,000) and expanding access to businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020. The threshold applies on per asset basis, so eligible businesses can immediately write-off multiple assets.
Backing business investment
Offering businesses a 15 month investment incentive to support their business, by accelerating depreciation deductions.
Key features of the incentive include:
- Deduction of 50 per cent of the cost of an asset, with existing depreciation applying to the balance of the asset’s cost.
- Available to businesses with aggregated turnover below $500 million, purchasing certain new depreciable assets.
3. Stimulus payments to households to support growth
The Australian Government will provide financial assistance to around 6.5 million lower-income Australians in response to the Coronavirus.
One-off payments of $750 will be paid to around 6.5 million lower-income Australians, including pensioners, other social security and veteran income support recipients and eligible concession card holders. This is to help them through this uncertain time and support economic activity.
The one-off payment will be paid from 31 March 2020.
4. Assistance for severely affected regions
The Government has set aside an initial $1 billion allocation to support those regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on industries such as tourism, agriculture and education.
The $1 billion will be available for distribution through existing or newly established mechanisms as soon as practicable.
The Australian Tax Office (ATO) will also provide administrative relief for certain tax obligations (similar to relief provided following the bushfires) for taxpayers affected by the Coronavirus outbreak, on a case by case basis.
The ATO will look at ways to enhance its presence in significantly affected regions to make it easier for people to apply for relief.