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COVID-19 – Government financial assistance for businesses and employees

Both the Federal and respective State Governments have announced measures to support businesses and employees as a result of the COVID-19 health crisis. The following is our summary of those measures that businesses should be considering as a priority to understand access the relief that is being made available to assist with business interruption, continuity and retention of employees.

Federal Government Measures

The Federal Government has put together a range of measures to support both businesses and affected individuals as COVID-19 continues to impact the Australian economy. Here’s a summary of tranches 1 and 2 of the measures so far announced to Monday, 23 March 2020.

With a total government economic support bill of $189 billion, including two major economic rescue packages worth $83.6 billion and over $100 billion in emergency banking measures, businesses have a range of support to help them during the coming weeks and months.

What is the government doing for businesses?

The Federal Government has announced two waves of stimulus to support businesses in their efforts to continue trading and hold on to employees. The second stimulus measure, announced on Sunday 22 March, added $66 billion worth of total support to the economy.

  • Cash flow assistance for small-to-medium businesses
    The government has beefed up its Boosting Cash Flow for Employers support scheme which is designed to assist small and medium businesses (with aggregated annual turnover under $50 million and that employ workers) to manage cash flow challenges and retain their employees. It will provide up to $100,000 to these businesses (now including not-for-profits and charities), with a minimum payment for all these businesses of $20,000. The cash flow assistance includes a payment equal to 100 per cent of a business’ salary and wages withheld to a maximum of $50,000, with a minimum payment of $10,000. An additional payment during July-October 2020 will match the total of all payments that an employer has received, meaning eligible entities will receive at least $20,000 and up to a total of $100,000 when both payments are taken together. For more detail, click here.
  • Backing for loans taken out by SMEs
    The government has moved to guarantee 50 per cent of eligible loans (from participating banks and non-bank lenders) up to a total of $40 billion to support lending to businesses with a turnover of less than $50 million. Under the ‘coronavirus SME guarantee scheme’ the unsecured loans can be used for working capital purposes and will be available for the six months beginning on 1 April 2020. Businesses will not be required to repay the loans for six months. This comes in addition to the Small Business Relief Package announced by Australia’s banks through the Australian Banking Association, which will allow small businesses hit by COVID-19 impacts to defer their loan payments for six months.
  • Relief for financially distressed businesses
    To keep normally healthy businesses afloat the Government has increased the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive. There will also be other measures to give businesses temporary breathing space from the Corporations Act 2001. The Australian Taxation Office (ATO) has been given a directive to tailor solutions for owners or directors of business currently struggling with COVID-19, with the possibility of reductions of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.
  • Increasing the instant asset write-off
    The instant asset write-off threshold has been increased to $150,000. The government has also made moves to expand access to a wider range of businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020. The measure is expected to apply to over 99 per cent of all businesses operating in Australia.
  • Business investment incentives
    A time-limited 15-month investment incentive has been announced to support business investment and economic growth by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost. The measure is currently slated to run through until 30 June 2021.
  • Apprenticeship and trainee support
    To keep apprentices and trainees in work the government is offering eligible employers (who must be small businesses with fewer than 20 full-time employees) a wage subsidy of 50 per cent of any apprentice or trainee’s wages for the 9 months to 30 September 2020 up to a maximum of $21,000 (or $7,000 per quarter). This is available to either their current employer if they retain the apprentice or trainee, or any eligible employer that hires an apprentice or trainee that has been let go by another small business.

State government support for businesses

State governments have also come to the party with the support being provided at a Federal level. With a range of measures targeting small to medium businesses in particular, one of the central planks has been a move to cut payroll tax to relieve cashflow pressure in coming months.

  • NSW
    In NSW $2.3 billion has been set aside to support health and stimulate business. The measures include:
  • $450 million for the waiver of payroll tax for businesses with payrolls of up to $10 million for
    three months (the rest of 2019-20). This means these businesses will save a quarter of their
    annual payroll tax bill in 2019-20
  • $56 million to bring forward the next round of payroll tax cuts by raising the threshold limit to $1 million in 2020-21
  • $80 million to waive a range of fees and charges for small businesses including bars, cafes, restaurants and tradies
  • Victoria
    Victoria has announced a $1.7 billion economic stimulus package. This includes a commitment to repay the payroll tax already paid by small businesses with a payroll of less than $3 million in the 2019-20 financial year (worth approximately $550 million). Businesses will also be able to put off payroll tax payments that will be due in the first three months of the 2020-2021 financial year, up until January 2021.

For more information, click here.

  • Other States and Territories
    Other states and territories around Australia have also moved to offer relief and stimulus for
    businesses. For example, WA has waived payroll tax for small businesses and provided a one-off
    $17,500 payment to all businesses that pay payroll tax, and Queensland joins Victoria in refunding
    payroll tax and providing payroll tax holiday and deferrals. For the latest information on measures in
    your jurisdiction visit your relevant state government website.

What is the government doing for individual employees?

Individuals are expected to be hard hit during COVID-19, with many employers already having begun to shed their non essential workers. The government is attempting to support those employees whose employers are not able to maintain their employment.

  • Income support expanded during COVID-19
    The government has announced a special time-limited COVID-19 income support supplement of
    $550 per fortnight to be paid in addition to regular unemployment assistance. Available to both
    existing and future jobseekers on the Newstart payment and others on the youth jobseeker
    allowance, parenting payment, farm household allowance and special benefit, it effectively doubles
    the assistance available to jobseekers on Newstart. The government is accelerating rollout by
    waiving asset tests and waiting periods. Two one-off $750 payments are also available to eligible
    low-income earners in the next year.
  • Limited access to superannuation
    Individuals who find themselves in financial stress will be given leave to access their superannuation
    balances up to a maximum of $10,000 in 2019-20 and $10,000 in 2020-21. This option will be open
    to those employees who have been made redundant or had their working hours reduced by 20 per
    cent or more or those who are on government income support payments. Those affected will apply
    for access through MyGov.
  • Additional measures for affected individuals
    There are a range of additional measures for niche affected groups of the population. For example, sole traders and self-employed individuals who are impacted will be granted access to the jobseeker payment and Coronavirus supplement payments.

For more information on support for businesses visit The Treasury website’s dedicated information page. More information on support for individual employees and households can be found here.

For any enquiries related to this update, contact us today.

Shenny Yee

Shenny Yee, Tax Manager of Corporate & International Tax at Andersen Australia, leverages 15+ years of global experience in Singapore and Malaysia. She applies analytical skills to deliver tailored solutions in corporate tax, GST reporting, PE risks analysis, and more.

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