On the morning of Sunday 22 of March, our prime minster Scott Morrison unveiled a second stimulus package totalling $66 billion. I’m going to be running through these updated incentives, particularly those that directly affect Australian small business.
Now I’ve been a little bit slow in covering these off, with the main reasons being:
- We’ve been waiting for the package to be passed through as law. This didn’t happen until Monday evening after the package was announced on Sunday morning.
- There were some grey areas which we tax professionals were still waiting for guidance on.
- I’ve been very busy this week guiding my clients through these new measures, so it’s been a busy week of phone calls, emails and Zoom meetings!
Now as I write this blog, there are already talks about a third stimulus package, so will eventually cover those off in the future. But seriously, things are moving so quickly!
The package has three parts:
- Supporting individuals and households
- Support for businesses
- Supporting flow of credit
Small to medium-sized businesses: between $20,000 and $100,000 to help with cashflow
Remember in my last video I spoke about a ‘cashflow’ incentives between $2k to $25k. The government has bumped this up between $20 to $100k for eligible businesses. 100% of PAYG withholding obligations aka tax on employee wages will be reduced. This increased from the original 50% to now ALL of PAYGW! This incentive is particularly relevant for a number of my clients.
Again this isn’t going to be ‘magic cash’ in the bank as such – it’s much more complicated than that. It’s going to be reducing ATO payment obligations as part of your BAS with potentially cash incentive after the application of X, Y, Z. I hate when the media uses the term ‘cash payment’. It implies some sort of instant government money of $X – THIS IS NOT THE CASE!
This depends on a number of things like tax on wages amount, any GST payable, existing ATO BAS debt. It’s actually applied over a number of months so the cash flows through an extended period to keep the wheels on our economy rolling. So, if you lodge a monthly or quarterly activity statements and have employees, speak to your tax professional to find out what you are entitled to as they will do the nitty gritty calculations.
Welfare recipients: second $750 payment & additional $550 per fortnight
In my first stimulus package blog I spoke about the $750 cash payment that was being dished out to people on Jobseeker Payment, Youth Allowance, Parenting Payment, Farm Household Allowance and Special Benefit recipients on 31 March 2020. A second $750 is going out on the 13 July 2020.
The government will temporarily double Jobseeker payment, providing people with an additional $550 a fortnight. The payment will be available to sole traders and casual workers, provided they meet income tests. However, the assets test and waiting period waived.
This $550 increase in time limited and will be applied for a period of 6 months. There’s no doubt we are going to see more and more people losing jobs and needing access to government welfare. This will also apply to, for example, sole traders who have found their work has dried up due to the coronavirus. For more specific details the new welfare payments, contact Centrelink…that’s even if you can get through…
Access to superannuation up to $10k for 2020 & 2021 financial year
In a totally unprecedented move, the government is allowing people to access up to $10k from their superannuation in this financial year and 2021 financial year. The withdrawal will be tax free and designed to assist those if financial hardship. So that’s up to $10k in 2020 and another $10k in 2021.
I am reluctant say any more on this as professionally I can’t provide super advice. Just know that there is an option to withdraw from super if you meet the eligibility conditions and please seek further professional advice if you have questions. The decision to withdraw for super should not be taken lightly, especially if you are young, like me.
Small business loans of up to $250k
The Commonwealth is offering to guarantee low interest loans of up to $250k for up to 10 years. This includes no repayments or interest charged for the first year. I’m not going to run through this is detail, but main eligibility requirements include:
- Be an eligible business which holds and ABN and is registered for GST, or an incorporated non-profit organisation;
- Have one or more equivalent full-time employees in Queensland;
- Have operated the business or non-profit organisation since 1 July 2017;
- Have suffered loss of income as a result of COVID-19
The loan applications are open until 25 September 2020 or until funding is fully committed, do it sounds like a first come, first served basis. It’s important to have you books up to date to even be able to apply for funding, so reach out to your bookkeeper or accountant to get updated ASAP!
For more details on this visit Queensland Rural and Industry Development Authority website:
Increased flexibility in insolvency & bankruptcy law
This includes increasing the threshold at which a creditor can pursue insolvency proceedings – from $2,000 to $20,000 – and giving people up to six months to respond, over the current 21 days. Most significantly, businesses will be able to trade while insolvent.
In summary, look after each other. Stay safe and keep positive. We are all in this together.