With the Covid-19 pandemic battering the global economy, the Government’s decision to provide financial assistance through a stimulus package and grants is a wave of relief among small and medium sized business owners, but how do they actually work for us?
Financial stimulus package
The stimulus package includes payroll tax changes, a tax-free increase from $900,000 to $1 million and a deferral of payroll tax for businesses with payrolls over $10 million for a period of 6 months.
- To help businesses stay active, a deferral of gaming tax for clubs, pubs and hotels, and lotteries tax for 6 months, conditional on these funds being used to retain staff was also introduced.
- Delay of the parking space levy for 6 months.
- Deferral of rents for commercial tenants with less than 20 employees in all Government-owned properties for 6 months.
JobKeeper Payment Program
Under this program, businesses that have been affected by covid-19 can register for a temporary Government subsidy that enables them to claim payments for employees when revenue has declined. Employees will receive a fortnightly payment of $1,500 per person from 30 March 2020, for period of up to 6 months.
However, do note that both employers and employees must also meet certain requirements to prove eligibility for Jobseeker Payment.
The JobKeeper Payment is also available to sole traders. People who are self-employed can register their interest in applying for JobKeeper Program via The Australian Taxation Office (ATO) from 30 March 2020.
Support for Small Business Apprentices and Trainees
Employers can now apply for a subsidy of 50 per cent of the apprentice’s or trainee’s wage paid from 1 January 2020 to 30 September 2020.
Support is also available via the National Apprentice Employment Network, who are in charge for coordinating the re‑employment of displaced apprentices and trainees.
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Backing Business Investment (BBI) – Economic support for growth
For a limited period of 15 months, businesses will receive an incentive to support investment and economic growth over a short term period. Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset cost.
Assets must be acquired from 12 March 2020 and first used or installed by 30 June 2021 to be eligible.
Relief for financially distressed businesses
The ATO will tailor financial relief for businesses that are currently struggling due to covid-19. This includes a temporary increase to the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands received.
This includes temporary relief from personal liability for trading while insolvent and temporary flexibility in the Corporations Act 2001 to provide relief from provisions of the Act.
*Businesses need not apply for these measures as they have already gone into effect for a period of 6 months.
SME Guarantee Scheme
For SMEs impacted by Covid-19, the Government will provide a guarantee of 50 per cent to SME lenders for new unsecured loans to be used for working capital. This will enable SMEs to access additional funding to support them through the upcoming months.
SMEs with a turnover of up to $50 million will be eligible to receive loans amounting up to $250,000 per borrower. The loans will be valid up to 3 years, with an initial 6 month reprieve on repayment.
Increasing the Instant Asset Write-off threshold from $30,000 to $150,000
This new relief measure will support over 3.5 million businesses, which is estimated to be over 99 per cent of businesses in Australia, and expected to decrease $2.5billion in taxes paid by businesses over the next two years. The eligibility criteria has been extended to cover businesses with an aggregated turnover of less than $500 million a year (an increase of $50 million).
How does it work?
The new write-off threshold provides cash flow benefits for businesses that will be able to deduct purchases of eligible assets each costing less than $150,000. The threshold applies on a per asset basis, so eligible businesses can immediately write‑off multiple assets.
- You can claim a tax deduction for the business portion of the purchase cost in the year the asset is first used or installed ready for use.
- New or second‑hand assets first used or installed in this timeframe can be included in the write-off.
- Assets like computer hardware, office fit-outs, furniture, website services and vehicles are amongst the potential assets, which can be written off.
The instant asset write-off goes into effect from 12th March 2020 until 30th June 2020.
Before applying for any of these relief measures, please check with your Accountant or Tax Advisor for more information on your individual circumstances and eligibility of your business.
The information in this article was compiled and sourced from www.business.gov.au/ a government website for the Australian business community.