The Morrison Government has announced its second Economic stimulus package (22 March 2020). A full version is attached for your benefit and a summary has been provided below following our summary of the key points.
Small Business Cash Flow Assistance
▪️ The previously announced tax-free payment of $25,000 for employers under $50m turnover (based on prior year) will be increased to $50,000.
▪️ The minimum payment will be increased from $2,000 to $10,000, and will include NFPs.
▪️ The payment will be based on 100% (instead of 50%) of the PAYGW amount reported in the activity statement from January to June 2020.
▪️ An additional payment equal to this amount will also be available from July to October 2020, taking the total available payments to $100,000 (minimum $20,000).
▪️ The payments will be automatically credited by the ATO through the activity statement system.
▪️ The payments will only be available to active eligible employers (other than charities) established prior to 12 March 2020.
An example of how the payments work
Sarah owns and runs a building business in South Australia and employs eight 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.
Under the government’s changes, Sarah will be eligible to receive the payment on lodgement 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.
Increased Director Protection
▪️ Treasurer Josh Frydenberg has announced the insolvency threshold will moved from $2000 to $20,000
▪️ Personal liability for trading insolvent has been removed for the next 6 months if a company trades while insolvent
Small Business Loan Guarantee Scheme
▪️ Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50 per cent to SME lenders to support new short-term unsecured loans to SMEs.
▪️ The Scheme will guarantee up to $40 billion of new lending. This will provide businesses with funding to meet cash flow needs, by further enhancing lenders’ willingness and ability to provide credit. This will assist otherwise viable businesses across the economy who are facing significant challenges due to disrupted cash flow to meet existing obligations.
▪️ The RBA announced a term funding facility for the banking system. Banks will have access to at least $90 billion in funding at a fixed interest rate of 0.25 per cent. The facility offers additional low-cost funding to banks if they expand their business lending, with particular incentives applying to new loans to SMEs
Tax-free early access to superannuation
▪️ Tax-free early access to superannuation, up to $10,000, from mid-April to before 1 July 2020. Up to a further $10,000 will be available from 1 July 2020 for approximately 3 months.
▪️ Must apply to the ATO. Separate arrangements will be made for SMSFs.
▪️ Following conditions apply:
- unemployed;
- eligible for a job seeker payment;
- or, on or after 1 January 2020 –
- made redundant
- reduction in working hours by 20% or more
- or if a sole trader — the business was suspended or reduction in turnover of 20% or more
Reduction in Minimum Pension Drawdown
▪️Halving of minimum pension drawdown requirements (i.e. 4% → 2%) for 2019–20 and 2020–21.
Payments to Income Support Recipients
▪️ The previously announced $750 payment for income support recipients and concession card holders will now be two separate payments: one from 31 March 2020 and the other from 13 July 2020.
▪️ There will also be a new time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight from 27 April for the next 6 months.
For further information, you can get in touch with your designated point of contact here at Myssy + Co.
As always, we will do all that we can to support you and your business in this difficult time.