March 30, 2020
COVID-19 is having a severe short-term economic impact on businesses in multiple sectors. Even if your organisation is not currently feeling the impact, be aware that your suppliers and/or customers could be impacted and so you should start to evaluate the risk that this evolving situation may have on your organisation.
The Federal Government has taken steps to stimulate the economy with the announcement of 3 separate packages, that at this stage combined are worth a combined $214 billion dollars or roughly 11% of GDP. To date, some of these measures include:
Cash Flow Assistance for Employers
Small and medium-sized businesses and not-for-profit entities with an aggregated turnover of below $50 million (usually based on their prior year's turnover) that employ people, may be eligible to receive a total payment (in the form of a refundable credit) of up to $100,000 (with a minimum total payment of $20,000), based on their PAYG withholding obligations in two stages:
Stage 1 Payment (Credit)
Commencing with the lodgement of activity statements from 28/04/2020, 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 be broadly calculated and paid by the ATO as an automatic credit to an employer, upon the lodgement of activity statements from 28/04/2020, with any resulting refund being paid to the employer. This means that:
- quarterly lodgers will be eligible to receive the payment for the quarters edning 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 lodgements.
Note that, the minimum payment of $10,000 will be applied to an entity's first activity statement lodgement (whether for the first month of March or the March quarter) from 28/04/2020.
Stage 2 payment (credit)
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 220 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 the 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).
Again, the ATO will automatically calculate and pay the additional (tax-free) payment as a credit upon an employer upon the lodgement of their activity statements from July 2020, with any resulting refund being paid to the employer.
Increasing the instant write-off thresshold for business assets for small to medium business entities (SBEs)
Broadly, the depreciating asset instant asset write-off threshold will be increased from $30,000 to $150,000.
The measure applies to both new and second-hand assets first used or installed ready for use in the period beginning 12 March 2020 (i.e., the date on which the measure was announced), 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 (i.e., an improvement to) a depreciating asset first used or installed ready to 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 generall small business pool (excluding current year depreciation) is less than $150,000 at the end of the 2020 income year, a deduction can be claimed for this balance.
- 2018/19 Year-end Individual Tax Return Checklist
- 2020/2021 Federal Budget
- ALP Key Tax Policies
- ATO warning regarding annual leave loading and OTE
- COVID 19 – Federal Government Support
- Deferred repayments. Is accrued interest on deferred loans tax deductible?
- Fast-tracking tax cuts for small and medium businesses
- Fraud risks in a COVID-19 environment
- How financial advisors can build trust
- How to apply for JobKeeper & Key Dates
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