COVID-19 2nd Stimulus Package – Stage 1 Restrictions

2nd Stimulus Package Information

The Australian Government yesterday released a second stimulus package in response to the Coronavirus which included an increased cash boost for employers of between $20,000-$100,000, access to new short-term unsecured loans, increased income support to social welfare recipients, halving of the minimum pension requirement, early access to superannuation and many more measures.  In addition, the Victorian State Government has waived payroll tax for the 2019-20 financial year if your payroll is less than $3 million dollars, they are offering grants, waiving licence fees, offering rent relief etc.  The Australian Taxation Office is also providing a range of support.

We hope the attached information is of assistance to work out what support is available to you in this unprecedented time.  The amount of support available is continually changing and we will endeavour to keep you abreast of all the changes as we become aware of them.

Rest assured we will be here any time of the day or night should you need assistance or someone to talk to understand what you and your staff are going through and together we will endeavour to help you maximise the support available to you.

Times like this we need to all work together to support one another.  While social distancing is now in place, with phones, skype, facetime etc. we will find a way to communicate with you, pass on documents in a secure manner, digitally sign documents, attend to ATO lodgements etc.

The March 2020 Business Activity Statement will be important for many businesses as the first step in receiving some financial assistance.  You should discuss the stimulus package with us prior to lodgement of the Business Activity Statement to ensure any stimulus is maximised.  There are potentially various options available to you to help maximise your stimulus payment and we welcome the opportunity to discuss this with you and assist you at this time.

Please note each heading in the attachment will provide a link to a relevant Treasury Fact Sheet or website with further information regarding the support available.

With regards to Stage 1 restrictions on social gatherings, the Prime Minister has advised that we can continue to operate our business as normal unless you operate in the below industries.  Australians should expect these measures to be in place for at least 6 months.  Restrictions apply from midday on 23 March 2020.

  • Pubs, registered and licenced clubs (excluding bottle shops attached to these venues), hotels (excluding accommodation)
  • Gyms and indoor sporting venues
  • Cinemas, entertainment venues, casinos, and night clubs
  • Restaurants and cafes will be restricted to takeaway and/or home delivery

Other facilities are not impacted, but will be considered under stage 2 restrictions, if necessary.

These measures also apply to outdoor spaces associated with the above venues.

Leaders noted that these enhanced measures build on existing measures to slow the virus and save lives:

  • No non-essential gatherings of more than 500 people outside or more than 100 people inside.
  • All non-essential indoor gatherings of less than 100 people must have no more than one person per 4sqm. All Australians should expect their local businesses to be following this rule.
  • Where possible, keep 1.5 metres between yourself and others
  • Avoid non-essential travel
  • Restrictions on entering aged care homes to protect older Australians

Please do not hesitate to contact our office to discuss your business needs and help advise what assistance or support is available to you or discuss how COVID-19 is impacting your business.

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23 March 2020

COVID-19 ALERT – AUSTRALIAN GOVERNMENT SUPPORT, STATE GOVERNMENT SUPPORT, LOCAL GOVERNMENT SUPPORT, STAGE 1 RESTRICTIONS ON SOCIAL GATHERINGS

Australian Government Economic Response to the Coronavirus

The Government is acting decisively in the national interest to support households and businesses and address the significant economic consequences of the Coronavirus.

While the full economic effects from the virus remain uncertain, the outlook has deteriorated since the Government’s initial Economic Response announced on 12 March 2020.

The spread of the virus worldwide has broadened, and is expected to be more prolonged. Governments, both international and domestic, have announced stricter mitigation measures to slow the spread of the virus, which are having significant economic impacts.

The Government announced a second set of economic responses on 22 March 2020 which, combined with previous actions, total $189 billion across the forward estimates, representing 9.7 per cent of annual GDP.

These actions provide timely support to affected workers, businesses and the broader community.

The Government’s economic response targets three areas:

Support for Businesses

The Australian Government is supporting Australian businesses to manage cash flow challenges and retain employees. Assistance includes cash flow support to businesses and temporary measures to provide relief for financially distressed businesses.

  • Boosting cash flow for employers
  • Temporary relief for financially distressed businesses
  • Increasing the instant asset write-off
  • Backing business investment
  • Supporting apprentices and trainees

Boosting cash flow for employers

The Government is enhancing the Boosting Cash Flow for Employers measure it announced on 12 March 2020. The Government is providing up to $100,000 to eligible small and medium-sized businesses, and not for-profits (NFPs) that employ people, with a minimum payment of $20,000. These payments will help businesses and NFPs with their cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff.

This measure will benefit around 690,000 businesses employing around 7.8 million people, and around 30,000 NFPs (including charities).

Small and medium-sized business entities with aggregated annual turnover under $50 million and that employ workers are eligible. NFPs, including charities, with aggregated annual turnover under $50 million and that employ workers will now also be eligible. This will support employment at a time where NFPs are facing increasing demand for services.

Under the enhanced scheme, employers will receive a payment equal to 100 per cent of their salary and wages withheld (up from 50 per cent), with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $10,000.

An additional payment is also being introduced in the July – October 2020 period. Eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments they have received. This means that eligible entities will receive at least $20,000 up to a total of $100,000 under both payments.

Temporary relief for financially distressed businesses

The economic impacts of the Coronavirus and health measures to prevent its spread could see many otherwise profitable and viable businesses temporarily face financial distress. It is important that these businesses have a safety net to make sure that when the crisis has passed they can resume normal business operations. One element of that safety net is to lessen the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business.

The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive. The package also includes temporary relief for directors from any personal liability for trading while insolvent, and providing temporary flexibility in the Corporations Act 2001 to provide temporary and targeted relief from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.

The ATO will tailor solutions for owners or directors of business that are currently struggling due to the Coronavirus, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.

Increasing the instant asset write-off

The Government is increasing the instant asset write-off threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020. In 2017-18 there were more than 360,000 businesses that benefited from the current instant asset write-off, claiming deductions to the value of over $4 billion. This measure will support over 3.5 million businesses (over 99 per cent of businesses) employing more than 9.7 million employees.

Backing business investment

The Government is introducing a time limited 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. 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’s cost. This measure will support business investment and is estimated to lower taxes paid by Australian businesses by $6.7 billion over the next two years. This measure will support over 3.5 million businesses (over 99 per cent of businesses) employing more than 9.7 million employees.

Supporting apprentices and trainees

The Government is supporting small business to retain their apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for 9 months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).

Support will also be provided to the National Apprentice Employment Network, the peak national body representing Group Training Organisations, to co-ordinate the re-employment of displaced apprentices and trainees throughout their network of host employers across Australia.

This measure will support up to 70,000 small businesses, employing around 117,000 apprentices.

Support for Coronavirus-affected regions and communities

The Government will set aside $1 billion to support regions most significantly affected by the Coronavirus outbreak. These funds will be available to assist during the outbreak and the recovery. In addition, the Government is assisting our airline industry by providing relief from a number of taxes and Government charges estimated to total up to $715 million.

Coronavirus Business Liaison Unit

Coronavirus Business Liaison Unit has been established within The Treasury to engage with business on a regular basis and provide updates to government on crucial issues.

Supporting the Flow of Credit

The Government, the Reserve Bank of Australia and the Australian Prudential Regulation Authority have taken coordinated action to ensure the flow of credit in the Australian economy. Timely access to credit is vital for businesses to manage the impacts of the Coronavirus.

Support for immediate cash flow needs for SMEs

Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50 per cent to SME lenders to support new short-term unsecured loans to SMEs. The Scheme will guarantee up to $40 billion of new lending. This will provide businesses with funding to meet cash flow needs, by further enhancing lenders’ willingness and ability to provide credit. This will assist otherwise viable businesses across the economy who are facing significant challenges due to disrupted cash flow to meet existing obligations.

Quick and efficient access to credit for small business

The Government is cutting red tape by providing a temporary exemption from responsible lending obligations for lenders providing credit to existing small business customers. This reform will help small businesses get access to credit quickly and efficiently.

Reserve Bank of Australia – Supporting the flow and reducing the cost of credit

The Reserve Bank of Australia (RBA) announced a package on 19 March 2020 that will put downward pressure on borrowing costs for households and businesses. This will help mitigate the adverse consequences of the Coronavirus on businesses and support their day-to-day trading operations. The RBA is supporting small businesses as a particular priority.

The RBA announced a term funding facility for the banking system. Banks will have access to at least $90 billion in funding at a fixed interest rate of 0.25 per cent. This will reinforce the benefits of a low cash rate by reducing funding costs for banks, which in turn will help reduce interest rates for borrowers. To encourage lending to businesses, the facility offers additional low-cost funding to banks if they expand their business lending, with particular incentives applying to new loans to SMEs.

In addition, the RBA announced a further easing in monetary policy by reducing the cash rate to 0.25 per cent. It is also extending and complementing the interest rate cut by taking active steps to target a 0.25 per cent yield on 3-year Australian Government Securities.

Support for non-ADI and smaller ADI lenders in the securitisation market

The Government is providing the Australian Office of Financial Management (AOFM) with $15 billion to invest in structured finance markets used by smaller lenders, including non-Authorised Deposit-Taking Institutions (non-ADIs) and smaller Authorised Deposit-Taking Institutions (ADIs). This support will be provided by making direct investments in primary market securitisations by these lenders and in warehouse facilities.

Australian Prudential Regulation Authority – Ensuring banks are well placed to lend

The Australian Prudential Regulation Authority (APRA) has announced temporary changes to its expectations regarding bank capital ratios. The changes will support banks’ lending to customers, particularly if they wish to take advantage of the new facility being offered by the RBA.

Supporting Individuals and Households

Income support for individuals

Over the next six months, the Government is temporarily expanding eligibility to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight. This will be paid to both existing and new recipients of JobSeeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.

Payments to support households

The Government is providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders. The first payment will be made from 31 March 2020 and the second payment will be made from 13 July 2020. Around half of those that benefit are pensioners. This payment will help to support confidence and domestic demand in the economy. The second payment will not be made to those eligible for the Coronavirus supplement.

Temporary early release of superannuation

The Government is allowing individuals affected by the Coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21. Individuals will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.

Temporarily reducing superannuation minimum drawdown rates

The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for 2019-20 and 2020-21. This measure will benefit retirees holding these products by reducing the need to sell investment assets to fund minimum drawdown requirements.

Reducing social security deeming rates

On 12 March, the Government announced a 0.5 percentage point reduction in both the upper and lower social security deeming rates. The Government will now reduce these rates by another 0.25 percentage points.

As of 1 May 2020, the upper deeming rate will be 2.25 per cent and the lower deeming rate will be 0.25 per cent. The reductions reflect the low interest rate environment and its impact on the income from savings. The change will benefit around 900,000 income support recipients, including around 565,000 Age Pensioners who will, on average receive around $105 more of the Age Pension in the first full year the reduced rates apply.

Additional Support

In addition to the Federal Government, the State Governments are also providing their own stimulus packages.

Victorian State Government Business Survival Package

  • Thousands of Victorian businesses will have payroll tax payments refunded and waived for the 2019-20 financial year to help them survive coronavirus under a $1.7 billion support package.
  • $500 million will be put into a fund for hardship payments, small grants and tailored support which would be distributed in consultation with the Victorian Chamber of Commerce and Industry, the Australian Hotels Association, the Australian Industry Group and other industry representatives.
  • Waiving of 12,5000 venues’ liquor licence fees.
  • Commercial tenants in government buildings will also be able to apply for rent relief, a measure the Government is encouraging private landlords to offer as well.

Australian Taxation Office Support

The Australian Taxation is also providing a range of support in response to COVID-19.

  • Payment deferrals
  • Moving to monthly reporting to get quicker access to GST refunds
  • Varying PAYG instalments for March 2020 quarter
  • Remitting interest and penalties incurred after 23 January 2020
  • Low interest payment plans
  • You need to meet super guarantee obligations for your employees – by law the contribution due date or superannuation guarantee charge can’t be waived.

Local Government Support

City of Melbourne has announced a local economic stimulus package valued at more than $10 million to keep Melburnians in jobs and support city businesses affected by COVID-19 virus.

The amount of support available is continually changing and we will endeavour to keep you abreast of all the changes as we become aware of them.

Stage 1 Restrictions on Social Gatherings

With regards to Stage 1 restrictions on social gatherings, the Prime Minister has advised that we can continue to operate our business as normal unless you operate in the below industries.  Australians should expect these measures to be in place for at least 6 months.  Restrictions apply from midday on 23 March 2020.

  • Pubs, registered and licenced clubs (excluding bottle shops attached to these venues), hotels (excluding accommodation)
  • Gyms and indoor sporting venues
  • Cinemas, entertainment venues, casinos, and night clubs
  • Restaurants and cafes will be restricted to takeaway and/or home delivery

Other facilities are not impacted, but will be considered under stage 2 restrictions, if necessary.

These measures also apply to outdoor spaces associated with the above venues.

Leaders noted that these enhanced measures build on existing measures to slow the virus and save lives:

  • No non-essential gatherings of more than 500 people outside or more than 100 people inside.
  • All non-essential indoor gatherings of less than 100 people must have no more than one person per 4sqm. All Australians should expect their local businesses to be following this rule.
  • Where possible, keep 1.5 metres between yourself and others
  • Avoid non-essential travel
  • Restrictions on entering aged care homes to protect older Australians

Please do not hesitate to contact our office to discuss your business needs and help advise what assistance or support is available to you or discuss how COVID-19 is impacting your business.

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