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The Australian Government has  announced 2 Economic Stimulus packages to the sum of $189 billion thus far. Whilst it passed into law last night, we are still working through the details, particularly when it comes to how certain rebates are calculated and who is eligible.

Tip: If you prepare your own BAS return, you may wish to reach out to have Mukiwa review prior to lodging, to ensure any calculations are correct and you’re maximising any rebate opportunities.

The packages includes both cash and tax incentive measures, as followed:

Real Cash Money for Small Business Owners

i. 100% Cashback on PAYG Withholding, up to $100,000 in total

• Eligible small and medium-sized employers will be provided a 100% tax-free ‘cash back’ of up to $50,000 (and a minimum of $10,000) on your PAYG Withholding on wages between 1 January 2020 and 30 June 2020.
• A second tranche of tax-free, cash back payments of up to $50,000 (and a minimum of $10,000) on your PAYG Withholding on wages will also be paid for the period 30 June 2020 – September 2020.
• This second payment is calculated as the total cash back credit calculate in the first payment, split evenly over the June to September 2020 BAS/IAS lodgement period.

So, breaking this down:

Payment 1

• If you have spent more than $50k in PAYGW for the 6 month period between 1 January and 30 June 2020, you will receive $50,000 in cash from the Government for this period
• If you have spent $30k in PAYGW for the same period, you will get $30,000

Payment 2

• The same total benefit per Payment 1 is paid equally over your BAS/IAS lodgement period between 30 June 2020 and 30 September 2020

A couple of other points to note:

• If you take your ‘salary’ as a dividend or directors drawing and want to maximise your ‘cash back’, you could explore changing the treatment of your remuneration from drawings to salary.
• If you have an existing debt with the ATO this benefit will offset your existing liability.
• This credit will automatically be processed upon lodgement for your BAS and IAS. Your accountant and/or bookkeeper will process it for you.

We have created an excel worksheet that will assist you in calculating what you can expect in terms of this rebate. You can download this here.

ii. 50% subsidy on apprentice wages, up to $21,000

• Eligible employers can apply for a wage subsidy of 50% of apprentice or trainee wages for up to 9 months from 1 January 2020 to 30 September 2020 (up to a maximum of $21,000 per eligible apprentice or trainee).
• If a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.

NB The above payments will only be available to active eligible employers (who held an ABN) as at 12 March 2020. However, charities that are registered with the Australian Charities and Not-for-profits Commission will be eligible regardless of when they were registered, subject to meeting other eligibility requirements. This recognises that new charities may be established in response to the Coronavirus pandemic.

Furthermore, eligibility for the above payments is subject to a specific integrity rule that is designed to stamp out artificial or contrived arrangements that are implemented to obtain access to this measure. In particular, if an employer or an associate enters into a scheme with the sole or dominant purpose of obtaining or increasing any of the above payments for a particular employer, for a period, the employer will not be eligible for any such payments for the relevant period.

Tax Incentives for Small Business Owners

• The immediate tax deduction threshold has been increased from $30,000 to $150,000 for assets purchased between 1 July 2019 and 30 June 2020
• Assets over $150,000 will attract an additional 50 percent depreciation rate of the asset cost in the year of purchase for assets purchased between 1 July 2019 and 30 June 2021

A couple of other points on this:

• It’s important to note that these are tax incentives, not cash back incentives. In other words, you need to spend the money, and pay income tax in order to get the tax benefit.
• The tax benefits will be applicable for your FY20 and FY21 tax returns, which means you won’t see any benefit until you’ve lodged your 2020 and 2021 returns.
• This credit will be processed by your tax accountant upon preparation and lodgement for your 2020 and 2021 income tax returns.

Government Underwritten, Cash Flow Loans for SMEs

• The Government will provide a guarantee of 50% of new loans written by banks and SME lenders to support new short-term unsecured loans to SMEs.
• It means that the Government is providing a guarantee to banks and SME lenders to reduce their risk to provide unsecured loans to SMEs that need the cash for working cap

So what does this mean for me?

• Expect a new type of loan product issued by the banks and lenders, tailored for SMEs that have been directly disrupted by COVID-19

To apply, contact your bank/lending institution about this package. Refer to the respective banks ‘Coronavirus SME Guarantee Scheme’ and ask what new loan products are available to assist.

Assistance for Individuals

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.

Recognising that many Australians have saved over their lives to support themselves in retirement, the Government is implementing two measures to support retirees in managing the impact of recent volatility in financial markets and the impact of low interest rates on their retirement savings.

Temporary early release of superannuation

The Government will introduce a new compassionate ground of release that will allow individuals to access their superannuation entitlements where those benefits are required to assist them to deal with the adverse economic effects of the Coronavirus, but only where one or more of the following requirements are satisfied:

• The individual is unemployed.
• The individual is eligible to receive the Jobseeker Payment, Youth Allowance for jobseekers, Parenting Payment (which includes the single and partnered payments), Special Benefit or Farm Household Allowance.
• On or after 1 January 2020:
  • the individual was made redundant; or
  • the individual’s working hours were reduced by at least 20%; or
  • if the individual is a sole trader – their business was suspended or there was a reduction in the business’s turnover of at least 20%.

Under this new compassionate ground of release, eligible individuals will be able to access as a lump sum, up to $10,000 of their superannuation entitlements before 1 July 2020, and a further $10,000 from 1 July 2020 (but subject to the six-month time frame).

Eligible individuals who are looking to access their superannuation entitlements under the above new ground of release will be able to apply directly to the ATO through the myGov website (at www.my.gov.au) and certify that the above eligibility criteria is satisfied.

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 with account-based pensions and similar products by reducing the need to sell investment assets to fund minimum drawdown requirements.

Please contact us if you have any questions or we can assist you further