We look at the Government’s economic stimulus package in response to coronavirus, and the measures that may be relevant to you.
The changes include accessing some of your super if you’re in financial stress and tax concessions for small businesses. Below is an overview of the initiatives and changes that may help you:
Early access to super
If you are under financial stress, you may be able to access up to $10,000 of your super before 1 July 2020 and another $10,000 after 1 July 2020, for a limited time. The ATO is likely to start accepting applications from mid-April and you may be eligible for early access to your super if you are:
You may also be eligible if (on or after 1 January 2020) you:
These payments are tax-free and not treated as income under the Centrelink income test.
For more information, please refer to the Treasury website.
Reduced Pension minimums
To help you if you’re a retiree, the minimum pension payments you are required to withdraw from your account-based pensions or similar product will be reduced by 50% as follows:
| Age | Default minimum drawdown rates | Reduced by 50% in 2019/20 and 2020/21 income years |
|---|---|---|
| (%) | (%) | |
| Under 65 | 4 | 2 |
| 65-74 | 5 | 2.5 |
| 75-79 | 6 | 3 |
| 80-84 | 7 | 3.5 |
| 85-89 | 9 | 4.5 |
| 90-94 | 11 | 5.5 |
| 95 and older | 14 | 7 |
Reduced deeming rates
From 1 May 2020, the upper deeming rate for income in excess of the income threshold will reduce from 3% to 2.25%, and the lower deeming rate from 1% to 0.25%.
| Deeming rate (1 May 2020) | Single | Pensioner couple (combined) |
|---|---|---|
| 0.25% | First $51,800 ($129.50) | First $86,200 ($215.50) |
| 2.25% | On amounts exceeding $51,800 | On amounts exceeding $86,200 |
These reductions reflect the low interest rate environment and its impact on the income from savings. Also, people who are currently receiving part pensions and less than the full rate of income support may receive increased entitlements.
Increasing the instant asset write-off threshold for small businesses
From 23 March 2020 until 30 June 2020, if you own a small business with aggregated annual turnover of less than $500 million (increased from $50 million) you may be eligible for an instant asset write-off on assets of up to the value of $150,000 (from $30,000).
From 1 July 2020, this threshold reduces to $1,000 (for businesses with less than $10 million turnover).
The measure applies to new or second-hand assets first used, or installed ready for use, between 12 March 2020 until 30 June 2020 (inclusive). Certain assets are excluded, for example, horticultural plants and capital works deductions.
The threshold applies on a per asset basis, so eligible businesses can immediately write-off multiple assets.
This initiative will mean an additional 5,300 businesses who employ around 1.9 million Australians will be able to access this concession for the first time.
ATO relief for tax obligations
The ATO will provide relief for certain tax obligations for taxpayers impacted by the coronavirus outbreak on a case-by-case basis. Please see your accountant for more information.
Boosting cash flow for employers
If you own an eligible small or medium business, the Government has announced a maximum payment of $100,000 and a minimum payment of $20,000, to help with cash flow in order to keep operating, pay bills and retain employees. Not-for-profit organisations and charities are also included.
The ATO will pay this as an automatic credit to the business upon lodgement of your business activity statement. If this means you are eligible for a tax refund, the ATO will pay the refund within 14 days. You don’t need to fill out any new forms and the payments are tax free.
Supporting apprentices and trainees
From 1 January 2020 to 30 September 2020, if you are an eligible employer you can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wage paid during the nine months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).
You can register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020.
Temporary relief for financially distressed businesses
For owners or directors of a business who are currently struggling payments or deferrals, or withholding enforcement actions i due to the Coronavirus, the ATO will tailor solutions for their circumstances, including temporary reduction of including Director Penalty Notices and wind-ups.
We believe these initiatives are well-considered by the Government and are for the wellbeing of all Australians and the Australian economy. If you are or your business is struggling during this unprecedented time or you have any questions, please contact us or your financial adviser.
