Governments around the world have acted swiftly to support their economies. Australia, starting from a strong fiscal position has led the way, with important co-operation with State Governments. We have also seen the Reserve Bank of Australia (RBA) chime in by cutting interest rates and supporting liquidity with Quantitative Easing.
While some legislation has been passed, this week we expect to see the most significant policy, the JobKeeper legislation, introduced into parliament. While there is always scope for challenge, the current environment is driving unique co-operation amongst our politicians. There is still work to be done at a State parliamentary level to ensure some of the initiatives can be effective.
One thing seems certain, the Federal Government will continue to be nimble and introduce policy as needed to ensure our businesses and workforce are in reasonable shape as the restrictions are lifted.
The measures are focussed on supporting cash flow for workers and businesses, protecting jobs and ensuring the flow of credit. Below we summarise initiatives relevant to many businesses and employees.
Employer Cashflow Support
The Government will provide between $20,000 and $100,000 cashflow support for eligible businesses. This applies to employers with turnover of less than $50 million in the 2019 financial year. From now until 30 June an initial cashflow boost of 100% of the amount of tax withheld from wages (up to a maximum payment of $50,000, but with a minimum payment of $10,000) will be credited to the employer. Where this puts you into a refund position you should receive it within 14 days. From 1 July 2020 if your business remains active you will receive an additional credit, equal to your entitlement to 30 June, spread evenly over the first 4 months (if pay monthly) or first 6 months (if pay quarterly).
You don't need to do anything other than lodge your activity statements.
ATO administrative relief
On a case by case basis the ATO will provide administrative relief for certain tax obligations if affected by the coronavirus outbreak. This may include low interest payment plans or deferral of some payments or instalments if appropriate.
State Government Payroll Tax Concessions
The WA State Government announced that businesses with a wage bill of between $1 million to $4 million will receive a one-off payment of $17,500. This will be paid by cheque from July.
In addition, payroll tax will be waived for a four-month period between 1 March 2020 to 30 June 2020 for businesses with Australia-wide annual wages of less than $7.5 million. This waiver replaced the previously announced option to defer payroll tax until July.
The WA Government had previously announced that the threshold at which payroll tax is levied was to increase on 1 January 2021. They have decided to bring this change forward to 1 July 2020 providing further relief.
There is nothing you need to do to apply other than declare WA taxable wages as normal in Revenue Online.
For employers and sole traders (self-employed) with turnover of less than $1 billion, who have seen business turnover reduce by 30% (50% for businesses with turnover above $1 billion) relative to a comparable period a year ago (of at least one month) the Government will provide $1,500 per fortnight per eligible employee for a maximum of 6 months. Employees currently receiving income of less than $1,500 per fortnight will receive the full $1,500.
The payments are to the employer and are in arrears. They will only begin to be made by the government from 1 May 2020.
If you have or expect you will experience the required turnover decline you need to register your interest via the ATO: https://www.ato.gov.au/general/gen/JobKeeper-payment.
Employers will need to provide the ATO details of employee numbers and continue to provide information to the ATO monthly. Those who are self-employed will need to provide a monthly update declaring their continued eligibility for the payments.
Importantly, if an employee has been stood down, and remains engaged with employer, the employer will qualify to make this payment to them. We await further detail on exactly how this will be implemented once legislation is passed.
Assistance to help pay the wages of apprentices or trainees
Employers with apprentices or trainees can apply for a wage subsidy of 50% of those employees' wages paid from 1 January 2020 to 30 September 2020. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter). Employers can register for the subsidy from early April 2020.
Increased instant asset write-off
If you were planning to invest in business assets (individual assets each up to $150,000) then you could be able to instantly write off that asset if it is purchased, installed and ready for use before 30 June 2020.
Under normal circumstances, individual assets less than $30,000 are eligible for the instant asset write off. In addition the Government has also expanded access to now include businesses with turnover of up to $500 million.
Accelerated depreciation deduction arrangements
Businesses with a turnover of less than $500 million will be able to deduct 50% of the cost of an eligible asset, if it is acquired between 12 March 2020 through to 30 June 2021. The current depreciation rules will apply to the balance of the asset’s cost.
Bank lender support
The Federal Government, RBA and the banking regulator APRA have worked to provide support. The Government and APRA have temporarily relaxed bank capital requirements, responsible lending obligations to small business customers, provided cheap funding to the banks and introduced a 50% Government guarantee for some new small business loans.
In return, the banks will allow small businesses and individuals relief in the form of deferred loan repayments for up to six months. The business relief is primarily targeted at businesses with total debt of less than $10 million. Banks will also provide some commercial property landlords a six months repayment holiday where they provide an undertaking to not terminate leases or evict tenants for rent arrears.
To take advantage of these concessions, businesses and individuals will need to speak with their banker. The banks seem to be very accommodative. We encourage those with employees that will be affected to encourage them to reach out to their banks.
Repayments are simply being deferred and interest will be capitalised, increasing your loan balances.
Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee to lenders to small and medium enterprise (SME) with turnover up to $50 million for new unsecured loans used for working capital. This is designed to enhance banks willingness and ability to provide credit to SMEs.
The Government will provide banks with a guarantee for 50% of the loans with the following terms:
- Maximum total size of loans of $250,000 per borrower.
- The loans will be up to 3 years, with an initial 6 month repayment holiday.
- The loans will be in the form of unsecured finance.
The National Cabinet has agreed to a common set of principles that would be applied to rental tenancies in each of the States and Territories. This included a six month moratorium on eviction for non-payment of rent in commercial and residential tenancies affected by the coronavirus. There is a clear emphasis on the desire for tenants and landlords to privately agree upon rent relief which evenly spreads the economic losses between them.
The Prime Minister has indicated that a business is eligible to negotiate where they meet the turnover conditions required to be eligible for the JobKeeper payment, down 30% when compared to a prior corresponding period (50% for larger businesses). They also indicated that the rental reduction should be in line with the reduction in turnover.
Today it was announced that, where a reduction is agreed, at least 50% of the reduction must be a waiver and that rent deferrals must be covered over the balance of the lease term, and over no less period than 24 months.
At this stage the details are limited as, to have effect, this requires legislative change at a state level. WA is yet to announce any changes.
As noted above, the banks will provide support to landlords only where they are doing the right thing by tenants.
We have seen many residential landlords take a compassionate approach, working with their tenants.
We have spoken to a number of commercial landlords, who see this as an opportunity to work with their tenants. The have sought evidence from tenants that their income and balance sheets are impacted. They have asked tenants for their plans for actively cutting costs, ensuring that the burden is shared. In providing concessions landlords have negotiated lease extensions and other terms.
The ATO has also relaxed is position where a SMSF is leasing a property to a related party. They have stated that "they will not take action where an SMSF gives a related party a temporary rent reduction during this period". Before making changes, we encourage clients to first speak to us.
For commercial tenancies there remains the question of land tax, rates and other outgoings. While these are ordinarily on charged to the tenants, they are the responsibility of the landlord. We await some relief on rates and taxes from State and Local Governments.
While we are busy managing your portfolios, we are happy to assist you in exploring your eligibility for these initiatives. With many of these measures, the devil may be in the detail and may require specific advice on how to proceed, so please reach out if you need us to help facilitate this or to co-ordinate an approach with your accountant or banker.