“The government has announced a $17.6 billion stimulus package to protect the Australian economy impacted by Coronavirus pandemic”

We understand the current climate can be quite stressful and confusing for business owners. In this email, we have consolidated the recently announced government stimulus package to assist businesses in defence of the Coronavirus and navigating this difficult time.

The instant asset write off threshold has been increased from $30,000 to $150,000 for businesses with aggregated annual turnover of less than $500 million (up from $50 million). This applies to new or second hand assets first used or installed ready for use from 12 March until 30 June 2020.

Example

Owen owns a company, ON Point Farms Pty Ltd, through which he operates a farming business in the Central Wheat Belt of Western Australia. ON Point Farms Pty Ltd has an aggregated annual turnover of $25 million for the 2019-20 income year. On 1 May 2020, Owen purchases a second hand tractor for $140,000, exclusive of GST, for use in his business. Under the new $150,000 instant asset write-off, ON Point Farms Pty Ltd would claim an immediate deduction of $140,000 for the purchase of the tractor in the 2019-20 income year.

Businesses with a turnover of less than $500 million will be able to deduct an additional 50% of the cost in the year of purchase for the asset with normal depreciation rules applying to the balance of the cost. This applies to assets acquired on or after 12 March 2020 and first used or installed by 30 June 2021 and does not apply to second hand assets.

Example

J Construction Solutions Pty Ltd has an aggregated annual turnover of $200 million for the 2020-21 income year. On 1 July 2020, J Construction Solutions Pty Ltd installs a $1 million truck mounted concrete pump for use in the business. Under the new Backing business investment, J Construction Solutions Pty Ltd can claim a depreciation deduction of $650,000 in the 2020-21 income year. This consists of 50 per cent of the concrete pump’s value ($500,000) plus 30 per cent (based on the asset’s effective life of 6⅔ years) of the remaining $500,000 under existing depreciation rules ($150,000).

Businesses with aggregated annual turnover under $50 million will receive payments equal to 50% of PAYG withheld, with a minimum of $2,000 and a maximum of $25,000 over the wages from January to June 2020. This will be a tax free payment. Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020. Monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgments. To provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (150 %) in the March 2020 activity statement.

Example 1

Tim owns and runs a small paper delivery business in Melbourne, and employs two casual employees who each earn $10,000 per year. In the March and June 2020 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 payment of $2,000 for the March quarter, as he pays salary and wages but is not required to withhold tax.

– No payment for the June quarter, as he has already received the minimum payment and he has no withholding obligation.

If Tim begins withholding tax for the June quarter, he would need to withhold more than $4,000 before he receives any additional payment.

Example 2

Sean owns a hairdresser’s salon on the Gold Coast. He employs one apprentice who earns $37,970 per year and two stylists who both earn $44,260 per year. In the March and June 2020 quarterly BAS, Sean reports withholding of $4,570 for his employees. Under the Government’s changes, Sean will be eligible to receive the payment on lodgment of his BAS. Sean’s business will receive:

– A payment of $2,285 for the March quarter, equal to 50 per cent of his total withholding.

– A payment of $2,285 for the June quarter, equal to 50 per cent of his total withholding.

Sean’s business will receive a total payment of $4,570.

Example 3

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. In the months of March, April and June for the 2019-20 income year, Sarah reports withholding of $15,008 for her employees on each Business Activity Statement (BAS). Under the Government’s changes, Sarah will be eligible to receive the payment on lodgment of each of her BAS. Sarah’s business receives:

– A payment of $22,512 for the March period, equal to 150 per cent of her total withholding.

– A payment of $2,488 for the April period, before she reaches the $25,000 cap.

– No payment for the May period, as she has now reached the $25,000 cap.

– No payment for the June period, as she has now reached the $25,000 cap.

One-off payments of $750 will be paid to pensioners, eligible concession card holders and households with family tax benefits. The one-off payment will be paid from 31 March 2020.

Deferring by up to four months the payment date of amounts due through the business activity statement (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise.

Allow businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.

Allowing businesses to vary Pay As You Go (PAYG) instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.

Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities.

Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low interest payment plans.

Whilst the above announcement will come as good news for many businesses, it is vital to get the right advice before making any decisions. The impact to the Australian economy is going to be immense and it is critical your business has the right strategies in place to ensure you can weather the impact.

We have been working hard to address business issues in the interests of our clients. If there is anything we can help you, please do not hesitate to contact us.

As always, thank you for your continued trust! We can surely manage through this strange time together.

Today I miss those days boring but peaceful!