Supporting Businesses through the Coronavirus Crisis: A Brief Summary of Key Federal Government Measures

This article was first published on 8 April 2020 and was current as at that date. The enactment of legislation relating to the matters referred to in this article since the date of publication means that this article is no longer current.

The Federal Government has passed a flurry of legislation over the last month aimed at keeping the economy afloat during the coronavirus crisis. These measures include those targeted at helping businesses to remain in operation and employees in jobs during these difficult times.

While it can be easy to feel overwhelmed by the Government’s seemingly constant recalibration of its fiscal response to the crisis, it is important for business owners to remain engaged and aware of what relief may be available to them at any one time.

On 12 March this year, the Federal Government announced its first support package in response to the growing threat of coronavirus on Australia’s economy. This was followed by a second support package announced on 22 March. Finally, and most recently, on 30 March, the Government announced its third support package: the JobKeeper payment.

While the three support packages together bring the Federal Government’s economic support to an estimated total of $319 billion, the Government no doubt has more fiscal firepower on reserve that it may choose to deploy over the next few months as circumstances change.

Some of the key features of the Government’s support packages for businesses to date are:

  • the cash flow boost;
  • relief for financially distressed businesses;
  • the small and medium enterprise (‘SME’) guarantee scheme;
  • increasing the instant asset write-off;
  • allowing a 50% accelerated depreciation deduction on acquisitions of eligible assets;
  • apprentice and trainee support; and
  • the JobKeeper payment (as yet unlegislated).

The table overleaf contains a brief summary of each of the above measures.

The devil is in the detail for each of the Government’s support measures and it is important to carefully examine the legislative criteria for accessing the relevant support and quantifying the benefits that it offers. It is also important to consider how the measures could potentially interact with one another (e.g. whether pay-as-you-go withholding amounts from JobKeeper payments count towards the calculations for the cash flow boost), the implications on other tax obligations (e.g. whether payments are taxable / deductible / attract the superannuation guarantee) and to be mindful of relevant integrity provisions.

If you would like help in navigating the Government’s support measures, please do not hesitate to reach out to me on 0426 353 397 or archana@archwaylegal.com.au.

Archana Manapakkam
Principal Lawyer
Archway Legal

Summary of Key Federal Government Support Measures for Businesses

 

Nature of support Brief description Eligibility
Cash flow boost Scheme to provide tax-free payments to eligible businesses (including not-for-profits, sole traders, partnerships, companies and trusts) of between $20,000 to $100,000 through the activity statement system to help employers retain employees and the self-employed through the crisis. Payments will be in the form of two sets of cash flow boosts to be delivered from 28 April 2020 on either a monthly or quarterly basis corresponding with the lodgment period for the relevant business.  

A business will be eligible to receive the cash flow boost if it:

  • held an ABN on 12 March 2020 and continues to be active; and
  • has an aggregated annual turnover under $50m (generally assessed on prior year turnover); and
  • made eligible payments that the business is required to withhold from e.g. salary and wages, director fees, eligible retirement or termination payments, compensation payments, voluntary withholding from payments to contractors; and
  • either:
    derived business income in the 2018-19 income year and lodged its 2019 tax return on or before 12 March 2020; or
  • made GST taxable, GST-free or input taxed sales in a previous tax period (since 1 July 2018) and lodged the relevant activity statement on or before 12 March 2020.

Note: Different eligibility requirements apply to not-for-profits and charities registered with the Australian Charities and Not-for-profits Commission.

Relief for financially distressed businesses

Measures to temporarily ease insolvency laws in favour of debtors and provision of administrative concessions by the ATO to assist those affected by the crisis.

The measures include:

  • lifting the threshold for the issue of statutory demands (from $2,000 to $20,000);
  • increasing the time frame that debtors have to respond to statutory demands (from 21 days to 6 months);
  • relief from directors’ personal liability for trading while insolvent; and
  • tailored solutions by the ATO for owners or directors struggling with the crisis (including reduction or deferral of payments and withholding of enforcement actions including director penalty notices and wind-ups).
Available to all debtors.
SME guarantee scheme

Scheme under which the Government will guarantee 50% of new loans by eligible lenders to SMEs to where the loans have the following terms:

  • maximum loan size of $250,000 per borrower;
  • loan term up to 3 years, with an initial 6 month repayment holiday; and
  • the loan is unsecured.

Businesses (including sole traders and not-for-profits) with an annual turnover of up to $50m.

Loans will remain subject to lenders’ credit assessment process.

Increasing the instant asset write-off Measures to temporarily enhance the ability to immediately deduct the purchase price of assets (until 30 June 2020).   An asset purchased by a business will be eligible for the instant asset write off if: the purchase price of the asset is $150,000 or less; and the business has an aggregated annual turnover of less than $500m (up from $50m).
Accelerated depreciation deductions Measures to provide a 15-month investment incentive (until 30 June 2021) by allowing a 50% accelerated depreciation deduction for eligible assets.

An asset purchased by a business will be eligible for the 50% accelerated depreciation if:

  • the asset is an ‘eligible asset’ (including those depreciable under the depreciation regime in Division 40 of the tax legislation); and
  • the asset was acquired after 12 March 2020 and first used or installed by 30 June 2021; and
  • the business has an aggregated turnover of $500m or less.
Apprentice and trainee support Wage subsidy of up to 50% of the wages of an apprentice or trainee over a 9-month period from 1 January 2020 to 30 September 2020, subject to a cap of $21,000 per eligible apprentice or trainee.

A business will be eligible for the subsidy if either:

  • the business has fewer than 20 employees and retains an apprentice or trainee who has been training with the business as of 1 March 2020; or
  • the business is an employer of any size or a Group Training Organisation that engages an out-of-trade apprentice or trainee.
JobKeeper payment

Wage subsidy available to employers (including not-for-profits), self-employed individuals (businesses without employees) and charities significantly impacted by the crisis.

Under the scheme, the Government will provide $1,500 per fortnight per employee or self-employed individual for up to 6 months.

An employer (including a not-for-profit) or self-employed individual will be eligible for the subsidy if:

  • either:
    its business has a turnover of less than $1 billion and its turnover has fallen by more than 30% (of at least a month); or
  • its business has a turnover of $1 billion or more and its turnover has fallen by more than 50% (of at least a month); and
  • the business is not subject to the Major Bank Levy.

Note: Charities registered with the Australian Charities and Not-for-profits Commission will be eligible for the subsidy if they estimate their turnover has fallen or will likely fall by 15% or more relative to a comparable period.