Economic Stimulus Package - Part Two
Yesterday, the Prime Minister, Scott Morrison announced new stimulus measures to help keep the economy afloat. These measures include:
A. Tax-Free Payments: Employers with aggregated annual turnovers of under $50m will be eligible for tax-free payments of up to $100,000 per employer.
The first payment (capped at $50,000) will be made after 28th April and the second payment (also capped at $50,000) after 28 July 2020.
Employers will receive two payments equal to 100 per cent of their PAYG withheld on salary and wages, each with a maximum payment of $50,000, for a total of $100,000.
Eligible businesses that pay wages but are not required to withhold tax will receive a minimum payment of $20,000, up from $2000 in the first package. The payment will be available from 28 April 2020 and, as stated in the previous stimulus update, will be paid as a credit to the business upon lodgement of their activity statements.
The payments are tax free, there will be no new forms and payments will flow automatically through the ATO.
B. Loan Guarantee Scheme to SMEs: The Government will underwrite50% of loans used only for working capital purposes, granted within six months from April 1, 2020. New and existing bank customers will be able to apply for loans up to $250,000 over three years.
C. Temporary relief for financially distressed businesses: Temporary increase to the threshold at which a creditor can take action to initiate insolvency or bankruptcy from $2000 to $20,000 and giving companies and individuals six months instead of 21 days to respond.
Relief for directors for personal liability when the company is trading while insolvent.
The Corporations Act 2001 will be amended to provide temporary and targeted relief for companies to deal with unforeseen events that arise as a result of the coronavirus. This relief will be provided over the next six months.
D. Payments for households: A further $750 payment to social security and veteran income support recipients and eligible concession card holders, except for those who are receiving an income support payment that is eligible to receive the coronavirus supplement.
E. Coronavirus supplement: Temporary eligibility expansion to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight.
This will be paid to both existing and new recipients of the Job-Seeker Payment, Youth Allowance jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.
The Coronavirus supplement will be paid for the next 6 months. Eligible income support recipients will receive the full amount of the $550 Coronavirus supplement on top of their payment each fortnight.
F. Early release of superannuation: From April, individuals will be able to access their superannuation, capped at $10,000 this financial year and a further $10,000 next financial year. The withdrawals will be tax-free and will be made available to those eligible for the coronavirus supplement as well as sole traders who have seen that hours of work, or income fall, 20% of more as a result of the coronavirus.
Eligible individuals will be able to apply online through myGov for access of up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for another three months. They will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments. This measure is estimated to cost $1.2 billion over the forward estimates period.
G. Superannuation minimum drawdown rates and social security deeming rates
Temporary reduction to superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for 2019-20 and 2020-21.
Reduction of the deeming rates by a further 0.25 percentage points to reflect the latest rate reductions by the RBA. As of 1 May 2020, the lower deeming rate will be 0.25 per cent and the upper deeming rate will be 2.25 per cent.
Warnocks gratefully acknowledges Treasury.gov.au and Grant Thornton Australia for providing the data from which this newsletter is sourced.
Please contact us if you have any questions regarding anything mentioned above.