BIG NEWS!
Nothing at m+h Private gets us more excited than a good ‘stimulus package’. The Government has announced a $17.6 billion stimulus package to combat the challenges the world is currently facing while dealing with the spread of corona virus (COVID-19). The package aims to help small to medium business by delivering support for investment and providing cash flow assistance.
At m+h we’re focused on you and your business, so let’s dive into the key points of the stimulus package.
Delivering support for business investment:
The government has increased the instant asset write-off threshold from $30,000 to $150,000 and expanded access to this write-off for businesses with up to $500 million in annual turnover (up from $50 million). The write-off period lasts until 30 June 2020 and can be taken advantage of immediately. Assets for these purposes include vehicles, plant & equipment, office equipment, furniture etc.
Additionally, the government is providing businesses with a turnover of less than $500 million an ‘investment incentive period’ whereby businesses can claim an additional deduction equal to 50 percent of the asset cost in the year of purchase. This is effective immediately and runs through until 30 June 2021.
Cash flow assistance for businesses
Businesses with a turnover of less than $50 million that employ staff between 1 January 2020 and 30 June 2020 will be eligible for a cashflow boost of up to $25,000 with a minimum payment of $2,000 (sole traders are not eligible).
For Quarterly Activity Statement lodgers
The refund is equal to 50% of the amount of PAYG withheld reported on your March 2020 and June 2020 quarter activity statements. The ATO will deliver the payment in the form of a credit on your Activity Statement account. Any refunds will be paid within 14 days if it puts your account in a credit position.
For Monthly Activity Statement lodgers
If you report on a monthly basis, you will be eligible for the refund on your activity statements lodged from March 2020 to June 2020 (due dates vary) and your March 2020 payment will be calculated at 3 times the normal PAYG amount. Don’t worry if you are not required to withhold tax, you will still be eligible for the minimum amount of $2,000 if you pay salary and wages. How good!
If you are still uncertain of how this works, the treasury.gov.au have provided these examples:
Sean’s Hairdresser Salon
Sean owns a hairdresser’s salon on the Gold Coast. He employs one apprentice who earns $37,970 per year and two stylists who both earn $44,260 per year. In the March and June 2020 quarterly BAS, Sean reports withholding of $4,570 for his employees. Under the Government’s changes, Sean will be eligible to receive the payment on lodgement of his BAS. Sean’s business will receive:
• A payment of $2,285 for the March quarter, equal to 50 per cent of his total withholding.
• A payment of $2,285 for the June quarter, equal to 50 per cent of his total withholding. Sean’s business will receive a total payment of $4,570. Sean may also benefit from the assistance for existing apprentices and trainees measure.
Sarah’s Construction Business
Sarah owns and runs a building business in South Australia and employs 8 construction workers on average full-time weekly earnings who each earn $89,730 per year. In the months of March - June for the 2019-20 income year, Sarah reports withholding of $15,008 for her employees on each Business Activity Statement (BAS).
Under the Government’s changes, Sarah will be eligible to receive the payment on lodgement of each of her BAS. Sarah’s business receives:
• A payment of $22,512 for the March period, equal to 150 per cent of her total withholding.
• A payment of $2,488 for the April period, before she reaches the $25,000 cap.
• No payment for the May period, as she has now reached the $25,000 cap.
• No payment for the June period, as she has now reached the $25,000 cap.
Tim’s Courier Run
Tim owns and runs a small paper delivery business in Melbourne and employs two casual employees who each earn $10,000 per year. In the March and June 2020 quarterly BAS, Tim reports withholding of $0 for his employees as they are under the tax-free threshold. Under the Government’s changes, Tim will be eligible to receive the payment on lodgement of his BAS. Tim’s business will receive:
• A payment of $2,000 for the March quarter, as he pays salary and wages but is not required to withhold tax.
• No payment for the June quarter, as he has already received the minimum payment and he has no withholding obligation. If Tim begins withholding tax for the June quarter, he would need to withhold more than $4,000 before he receives any additional payment.
Businesses who employ apprentices
The government also promises that if your business employs apprentices, you can apply for a wage subsidy of 50% (maximum amount of $21,000) of the apprentice’s wage for up to 9 months from 1 January 2020 to 30 September 2020.
Individuals
On a more personal note, the stimulus package will support growth to households by providing a one-off payment of $750 (tax free) to social security and other income support recipients. See linked fact sheet to check your eligibility.
The ATO
The ATO have also implemented temporary support measures to those affected by COVID-19. The support measures include:
Being able to defer the payment date up to four months of payments to do with your business activity statement (PAYG instalments), income tax assessments and fringe benefits tax assessments
Allowing businesses to change to monthly reporting in order to get access to GST refunds quicker
Allowing businesses to vary PAYG instalments to nil – businesses that vary their instalments can claim a refund on their instalment amount for the previous September and December 2019 quarters
Allowing a remission of any interest and penalties made on or after 23 January 2020
There’s a lot happening at the moment, and we’re here to help – get in touch with m+h Private Tax Specialists today on +61 3036 7174 to see how we can help deliver the best support to you and your business.
As always, the above is general in nature, please discuss with your trusted advisor.