ScoMo’s COVID-19 Economic Plan – What does it mean for you?
On 12 March and 22 March 2020, the Government released urgent economic measures to combat the economic crisis created by the COVID-19 pandemic. These measures will see $189 billion injected into the Australian economy, with the economic stimulus mainly targeting individuals, households, businesses and the flow of credit.
A short summary of some of these measures is outlined below.
Cash payment relief to individuals
- A temporary Coronavirus supplement of $550 per fortnight will be paid to existing and new income support payments for the period from 27 April 2020 to 20 October 2020.
- A payment of $750 will be paid to social security, veteran, other income support recipients and eligible concession cardholders on two occasions. The second payment will be denied to those eligible for the Coronavirus supplement.
- From 20 April 2020 individuals in financial hardship as a result of the Coronavirus are able to obtain a tax-free early release payment of up to $10,000 of their superannuation in the 2020 income year and a further $10,000 in the 2021 income year. This is a concession from the usual tax position where the taxable component of an early release superannuation payment is assessed to the recipient individual at their individual marginal rate of taxation.
- From 22 March 2020 the minimum pension draw down rates for account-based pensions and similar pension products are reduced by 50% for the 2020 and 2021 income years. This is helpful as many self funded retirees have seen their retirement investments buffeted in the financial markets and the reduced draw down rates prevent forced sales to meet pension minimums.
SME business relief
- Eligible small to medium sized enterprises (SMEs) and not-for-profit organization employers may be eligible to receive a tax-free cash payment of up to $100,000 ($50,000 for each of the 2020 and 2021 financial years). A minimum $20,000 payment will be made to assist businesses with their outgoings and staff retention. These payments will be delivered as a credit to an employer’s BAS starting from 28 April 2020.
- The instant asset write-off threshold is increased from $30,000 to $150,000 and is extended to include businesses with aggregated turnover of less than $500 million. This increased threshold applies to purchases of depreciating assets from 12 March 2020 until 30 June 2020.
- A business investment incentive allows businesses with an aggregated turnover below $500 million to claim a 50% accelerated depreciation in addition to the existing deprecation deduction. This incentive runs from 12 March 2020 to 30 June 2021.
Temporary Relief for Businesses in Distress
- For those financially distressed businesses, there is a temporary increase in the statutory demand threshold from $2,000 debt amount to a $20,000 debt amount. Additionally, the timeframe in which companies must respond to such demand has been extended from 21 days to 6 months. Similarly, the response time to respond to a bankruptcy notice is extended from 21 days to 6 months.
- The Government will provide a guarantee of 50% to SMEs lenders to support new short-term unsecured loans to SMEs, so that businesses have access to funding to meet cash flow needs.
- A temporary exemption from responsible lending obligations will be provided to existing small business customers seeking credit.
NSW Government Relief
The NSW Government has separately released COVID-19 stimulus measures which relevantly include:
- a waiver of payroll tax for businesses with payrolls of up to $10 million for the remaining 3 months of the 2020 income year;
- the payroll tax threshold limit will be raised to $1 million in the 2020 – 2021 income year;
- waiver of a range of fees and charges for small businesses, such as cafes, bars and restaurants.
If you require any assistance in relation to the COVID-19 Economic Plan, please do not hesitate to contact a lawyer in Coleman Greig’s Taxation Advice team.
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