New stimulus package in response to COVID-19

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There have been some significant changes to the previously announced COVID-19 stimulus package from the federal government.  These packages build on the incentives to attempt to keep small businesses open and employing people for longer, but also provide assistance where individuals are unfortunately without work for the time being.

Boosting Cash For Employers

The previously announced credit to a small businesses ATO account capped at $25,000 has been increased.  Now stopping at $100,000 with a minimum payment of $20,000.

The calculation method for these payments has also changed.  For the March and the June Quarters the credit is calculated as 100% of the PAYG Withholding amounts up to the limit of $50,000 (being 50% of the current upper limit).  Then an additional payment is made in both the June and September Quarters evenly splitting the credit to date across those lodgements.

Monthly BAS lodgers will work the same way except their March BAS credit will be calculated as 300% of the March PAYGW, and the additional payments will be split across the 4 months (June, July, August & September).

Another way to present the method of calculation is as follows:

Quarterly Lodgers:

BAS Initial Payment Additional Payment
March 2020 100% of PAYGW (up to cumulative limit of $50,000) Nil
June 2020 100% of PAYGW  (up to cumulative limit of $50,000) 50% of total amount received under the initial payment calculation
September 2020 Nil 50% of total amount received under the initial payment calculation

 

Monthly Lodgers:

BAS Initial Payment Additional Payment
March 2020 300% of PAYGW (up to cumulative limit of $50,000) Nil
April 2020 100% of PAYGW  (up to cumulative limit of $50,000) Nil
May 2020 100% of PAYGW  (up to cumulative limit of $50,000) Nil
June 2020 100% of PAYGW  (up to cumulative limit of $50,000) 25% of total amount received under the initial payment calculation
July 2020 Nil 25% of total amount received under the initial payment calculation
August 2020 Nil 25% of total amount received under the initial payment calculation
September 2020 Nil 25% of total amount received under the initial payment calculation

 

The Treasury provides several clear examples on their fact sheet which outline the calculations quite well:

(Source: https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Cash_flow_assistance_for_businesses_0.pdf?fbclid=IwAR0_irvdxeSa4p0yECZTZZzz8_CWNUX-k6wvhGIfUrHsOlVJLL3kenySPgI)

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. 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.
  • 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 Boosting Cash Flow for Employers payments.
  • An additional payment of $12,500 for the July period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.
  • An additional payment of $12,500 for the August period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.
  • An additional payment of $12,500 for the September period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.

Under the previously announced Boosting Cash Flow for Employers measure, Sarah’s business would have received a maximum payment of $25,000. Under the Government’s enhanced Boosting Cash Flow for Employers measure, Sarah’s business will receive $100,000. This is an additional $75,000 to support her business and help her retain her staff.

 Sean’s Hairdresser Salon

Sean owns a hairdresser’s salon on the Gold Coast. He employs 12 hairdressers, with average salary of $50,000 per year. Sean reports withholding of $8,788 for his employees in each of his monthly BAS.

Under the Government’s changes, Sean will be eligible to receive the payments on lodgment of his relevant BAS.

Sean’s business will receive:

  • A credit of $26,364 for the March period, equal to 300 per cent of his total withholding.
  • A credit of $8,788 for the April period.
  • A credit of $8,788 for the May period.
  • A credit of $6,060 for the June period, before he reaches the $50,000 cap. Sean will also receive an additional payment of $12,500 for the June period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.
  • An additional payment of $12,500 for the July period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.
  • An additional payment of $12,500 for the August period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.
  • An additional payment of $12,500 for the September period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.

Under the previously announced Boosting Cash Flow for Employers measure, Sean’s business would have received a total payment of $25,000. Under the Government’s enhanced Boosting Cash Flow for Employers measure, Sean’s business will receive $100,000. This is an additional $75,000 to support his business.

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 his 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 lodgment of his BAS. Tim’s business will receive:

  • A credit of $10,000 for the March quarter, as he pays salary and wages but is not required to withhold tax.
  • An additional payment of $5,000 for the June quarter, equal to 50 per cent of his total Boosting Cash Flow for Employers payments.
  • An additional payment of $5,000 for the September quarter, equal to 50 per cent of his total Boosting Cash Flow for Employers payments.

If Tim begins withholding tax for the June quarter, he would need to withhold more than $10,000 before he receives any additional payment.

Under the previously announced Boosting Cash Flow for Employers measure, Tim’s business would have received a total payment of $2,000.

Under the Government’s enhanced Boosting Cash Flow for Employers measure, Tim’s business will receive $20,000. This is an additional $18,000 to support his business.

 

Access to superannuation

Employees who have been made redundant, or those who have their working hours reduced by 20 per cent or more, or sole traders whose businesses have been suspended or see a reduction in turnover by 20 per cent or more will also now be allowed to access up to $20,000 of their superannuation.

This limit is split across 2 financial years, being a $10,000 limit for the 2020 financial year and another $10,000 limit for the 2021 financial year, starting on 1 July 2020.

In addition, the government with also reduce the minimum drawdown requirements for account-based pensions by 50% for the 2019-20 and 2020-21 financial years.  This is an attempt to reduce the need to sell investment assets to fund minimum drawdown requirements.

Coronavirus supplement payment

The government has also provided additional support to those who do unfortunately find themselves without work during this crisis by establishing a $550 fortnightly coronavirus supplement payment.

Permanent employees who are stood down or lose their employment, sole traders, the self-employed, casual workers and contract workers will be able to access the new coronavirus supplement under expended access to the JobSeeker Payment, formerly known as Newstart.

The supplement will also be paid to both existing and new recipient of the JobSeeker Payment, Youth Allowance jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.

Banking sector support

The Australian Banking Association has announced that banks would suspend principal and interest loan repayments for distressed small-business customers for six months.

The four major banks have announced they will also extend this initiative to distressed home loan customers, enabling them to defer repayments for up to six months.

We have asked a number of questions about the logistics of this initiative and will post more information once this is uncovered.

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