On 12 March 2020, the Australian Government responded to the economic threat of coronavirus (COVID-19) – the ATO also responded by releasing a series of administrative concessions for taxpayers.
Business Investment Tax Incentives
Increased instant asset write-off
From March 12 to June 30, 2020, a $30,000 to $150,000 increase of the instant asset write-off threshold for entities with combined annual turnover of less than $500 million, increased from the current $50 million threshold; for new or 2nd hand assets, first used or installed ready for use from. Entitled businesses can instantaneously write-off multiple assets since the threshold is applicable on a per asset basis. From July 1, 2020 the threshold for small businesses with turnover of less than $10 million will return to $1,000. Nevertheless, entities who are not entitled to the instant asset write-off, will be eligible for the 50% investment incentive from July 1, 2020 as stated below.
Backing business investment incentive
To support business investment and economic growth over a short term, the government is introducing a time limited 15-month investment incentive through June 30, 2021, by accelerating depreciation deductions. Private entities with accumulated yearly income of less than $500 million per year, will be able to withhold 50% of the cost of an eligible asset upon installation, given that it was acquired after March 12, 2020 and first used or installed by June 30, 2020. For this 50% investment incentive, there will be no asset value threshold. Prevailing devaluation rules applying to the balance of asset’s cost.
Businesses’ Cash Flow Assistance
Boosting cash flow for employers
Between January 1, 2020 and June 30, 2020, up to $25,000 tax-free payment will be given to small and medium-sized businesses that employ workers with less than $50 million aggregated annual income. The payment for these qualified entities will be 50% of their PAYG withheld, distributed as a credit in their BAS from March to June 2020, with a minimum $2,000 and up to $25,000 payment.
Apprentice and trainee support
A wage subsidy of up to 50% of the apprentice’s or trainees wage, given that the apprentice or trainee started as of March 1, 2020, can be applied for by qualified small business employers for up to 9 months starting 1 January to 30 September 2020. Maximum subsidy amounting to $21,000 per apprentice. Registration for the said subsidy can be done as early as April 2020 with final claims of payment due by the end of December 2020.
From March 31, 2020 a one-off $750 payment will be available to social security, veteran and other income support recipients and qualified concession cardholders including pensioners. There will be one payment per qualified recipient.
Severely affected regions assistance
The government has allocated a budget of $1 billion to support communities and regions, which have been extremely affected by the economic impacts of COVD-19. These include those communities and regions which are heavily reliant on the agriculture, education and tourism industry.
Australian Taxation Office Relief
The ATO has announced on Thursday, 12 March 2020, a series of administrative concessions to aid businesses affected by COVID-19. These concessions include:
- conceding by up to 4 months the payment of tax amounts due through the BAS (including PAYG instalments), income tax assessments, FBT assessments and excise by affected businesses;
- permitting affected businesses on a quarterly reporting cycle to change into monthly GST reporting to get faster access to any GST refunds;
- allowing affected companies to differ PAYG instalment amounts to zero for the March 2020 quarter. Companies 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, acquired by affected companies on or after 23 January 2020, that have been applied to tax liabilities; and
- allowing affected entities to enter into low-interest payment plans for their existing and ongoing tax liabilities.
Initially, taxpayers need to contact the ATO to request assistance, since this assistance is not automatic. If deemed qualified, the ATO will tailor the assistance package to the relevant taxpayer.
While increasing the instant asset write-off will lead to tax deductions for the cost of depreciating assets and stimulate spending by lucrative companies on additional equipment, it will not provide instant support to businesses that are losing profit.
It is vital to design the PAYG withholding measure wisely since it will not be as favorable as predicted if private entities have to pay the full amount of PAYG withholding and then wait for the payment, which will most likely take weeks. What’s ideal is if the payment was able to counterbalance against the amount of PAYG due on the BAS.
Legislation that will provide effect to these methods will be introduced on March 23, 2020 when Parliament resumes. It is assumed that this will be a priority and it will be passed immediately. Since some of the incentives included in the economic package will only be available in short term, it is advisable for businesses to take action as soon as it take effect. State Councils are also predicted to provide their own economic stimulus packages in the coming weeks.
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