Over the weekend, the government announced more measures to assist both businesses and individuals due to the disruption caused by COVID-19.  These measures are expected to be legislated this week.  For more detail, or to discuss exactly how they will apply to you, please contact your accountant at Hoffman Kelly.  We remain open for business and ready to help.

ASSISTANCE FOR BUSINESS

Cash flow for Employers

Employers with aggregated annual turnovers of less than $50 million will receive tax-free payments / credits to their tax accounts of between $20,000 and $100,000.  This is significantly increased from the measure announced last week (with payments initially intended to be between $2,000 and $25,000) and now also applies to Not-For-Profits and charities that employ people.

The payment is made in two parts.  The first relates to the March – June 2020 lodgment period (amounts of between $10,000 and $50,000).  The second relates to the June – September 2020 lodgement period.  The second period payment will total the same amount as that which was paid in the first period.

Details of the scheme are:

  • Payments made to active employers that were established before 12 March 2020;
  • The amount will be a credit to the Activity Statement Account with the ATO in the amount of the withholding from wages (100% of the amount withheld), up to a maximum of $50,000, but with a minimum of $10,000 even if nothing is withheld as long as wages are paid.
  • If you lodge monthly, your initial period is March, April, May and June 2020. Your second period is June, July, August and September.  The March 2020 lodgment will pay 300% of the withholding amount, to make it consistent with those that lodge quarterly.  The second period payments will be one quarter of the initial period payments.
  • If you lodge quarterly, your initial period is Jan – March, and April – June. Your second period is April – June and July – September 2020.   The second period payments will be half of the initial period payments.

Example

Sarah’s Construction Business

Sarah owns and runs a building business and employs 8 construction workers who each earn $90,000 per year. Sarah reports withholding of $15,008 for her employees on each of her monthly Business Activity Statements (BAS).

Under the Government’s changes, Sarah will be eligible to receive the payment on lodgment of her BAS. Sarah’s business receives:

  • A credit of $45,024 for the March period, equal to 300 per cent of her total withholding for March.
  • A credit of $4,976 for the April period, before she reaches the $50,000 cap.
  • No payment for the May period, as she has now reached the $50,000 cap.
  • An additional payment of $12,500 for the June period, equal to 25 per cent of her total first period payment.
  • An additional payment of $12,500 for the July period equal to 25 per cent of her total first period payment.
  • An additional payment of $12,500 for the August period, equal to 25 per cent of her total first period payment.
  • An additional payment of $12,500 for the September period, equal to 25 per cent of her total first period payment.

In total, Sarah’s business will receive $100,000.

Previously Announced Measures Still Apply

There is no change to the measures announced regarding:

  • Increasing the Immediate depreciation write-offs threshold for eligible businesses up to $150,000 per eligible asset;
  • Providing an investment incentive to accelerate depreciation claims for eligible businesses where an immediate depreciation claim is not available;
  • Providing a wage subsidy of 50% for apprentice / trainee wages for eligible businesses.

ATO Deferrals

BASs for March – June 2020 are expected to be able to have payment automatically deferred until 13 July 2020.  No interest will be payable on the debt if paid by the new due date.  The lodgement should still be made on time and we believe you will need to apply for the deferral.

PAYG tax instalments are also able to be varied down for the March 2020 quarter.  The ATO advises that no penalty will apply, even if the instalments would have been due under normal circumstances.

Other payment arrangements can also be negotiated, either by the business owner or by Hoffman Kelly.

Payroll Tax Deferrals

Businesses required to make payroll tax instalments in Queensland can apply to delay these payments until 3 August 2020.  This applies to the March – June quarterly payments and you can apply online if you have been affected by COVID-19.  The tax is still payable at this stage, but the delay should assist with cash flow.

Access to Business Loans

The government will guarantee 50% of borrowings to support new short-term unsecured loans to SMEs (up to $40 billion of new lending).  The government is providing a temporary exemption to responsible lending obligations to make the process quick, and the major banks are working on their own loan packages to assist.  The RBA will also fund banks at low interest rates to ensure the credit is available.  Contact your bank to discuss the options they might have available.

FINANCIALLY DISTRESSED BUSINESSES

Statutory Demands & Bankruptcy Proceedings

For a creditor to issue a statutory demand (which can often force companies into liquidation) the debt owed will need to be at least $20,000 (up from normally $2,000) and the timeframe to respond will be increased to 6 months (up from 21 days).  This applies for 6 months.

Additionally, the minimum debt for a creditor to initiate bankruptcy proceedings will increase to $20,000 (up from $5,000) and the timeframe to respond will be increased to 6 months (up from 21 days).  This applies for 6 months.

Personal Liability for Insolvent Trading

Directors are relieved from personal liability for insolvent trading if they incur normal debts while continuing to trade in the ordinary course of business, for a period of 6 months.  Debts incurred by companies will still be payable by those companies.

Corporations Act Obligations

The Treasurer is being given power to temporarily amend the Corporations Act, to ensure companies can make quick decisions without being technically legally constrained by provisions of the Act.

ASSISTANCE FOR INDIVIDUALS

Early Access to Superannuation

Eligible individuals can apply through myGov to receive up to $10,000 of their superannuation before 30 June 2020, and a further $10,000 between 1 July 2020 and 30 September 2020.  To be eligible you must be:

  • Unemployed; OR
  • Eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (single or partnered), special benefit or household allowance; OR
  • On or after 1 January 2020:
    • You were made redundant;
    • Your working hours reduced by 20 per cent or more; OR
    • If you are a sole trader, your business was suspended or there was a reduction in your turnover of 20 per cent or more.

These payments will not be taxable and will not affect Centrelink payments.

Income Support Payments

Those who are receiving a job seeker payment, youth allowance for jobseekers, parenting payment (single or partnered), special benefit or household allowance will be eligible to receive a “Coronavirus Supplement”.  The supplement is $550 per fortnight and applies for 6 months commencing on 27 April.

Jobseeker Payment and Youth Allowance Jobseeker criteria expand to allow access for permanent employees who are stood down or lose their employment, sole traders, self-employed, casual workers and contract workers who meet income tests as a result of the economic downturn.  The one week waiting period is also waived.

Reduced Superannuation Minimums

The minimum account-based pension drawdown percentage is halved for the 2020 and 2021 financial years.  This should mean investments do not need to be sold at depressed values to fund pension payments.  For example, if you are 66 years old your normal pension drawdown minimum percentage is 5% of your account balance.  However, for the 2020 and 2021 years, the minimum will be 2.5% of the account balance.

Stimulus Payments

Two payments of $750 each will be paid to social security, veteran and other income support recipients and eligible concession card holders.  The first payment will be from 31 March 2020 and the second will be from 13 July 2020.

SEEK HELP

The situation is rapidly changing and everyone is trying to establish a new normal.  We know it is confusing and stressful to try to understand these measures whilst your normal life is totally disrupted.  We encourage our clients to pick up the phone and talk with us.  We would love to be able to help you at this time and to see you through to the other side of COVID-19.