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COVID-19: Second Round Federal stimulus

The Australian Government announced today the second round of stimulus measures worth A$66 billion designed to help businesses and households as a result of the COVID-19 pandemic.

At high level, the more significant measures included:

  • Increased funding to SME businesses up to $100,000 by way of PAYG withholding relief (up from 50% to 100%) with a minimum payment of $20,000.
  • A relaxing of insolvency actions and Director penalty actions by the ATO (for financially distressed businesses):
  • New SME loan scheme for working capital with a 50% guarantee by the Government
  • Temporary early release of superannuation with access to $10,000 in 2019/20 year and a further $10,000 in 2020/21 year; and
  • An additional $750 payment to eligible social security recipients. 

In detail, as follows:

Cash Flow Measures – Business

  • An increase for small and medium business and not-for-profit (including charities) employers with aggregated annual turnovers of under $50m will be eligible for tax-free payments of up to $100,000 per employer. The first payment (capped at $50,000) will be made after 28 April and the second payment (also capped at $50,000) after 28 July 2020. This is the single largest measure in this package and represents approximately $31.9billion.      Moreover, SMEs with aggregated annual turnovers of under $50m employers will now receive two payments equal to 100 per cent of their PAYG withheld on salary and wages with each maximum payment increased from $25,000 under the first package) to $50,000, for a total maximum payment of $100,000.
  • Eligible businesses that pay salary and wages but are not required to withhold tax will receive a minimum payment of $20,000, up from $2000 in the first package. The payment will be available from 28 April 2020 and, as stated in the previous stimulus update, will be paid as a credit to the business upon lodgement of their activity statements.
  • The payments are tax-free, there will be no new forms and payments will flow automatically through the ATO.
  • These payments will help businesses and NFPs with their cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff.

Coronavirus SME Guarantee Scheme (loans for working capital purposes)

  • The Government (under coordination with the Reserve Bank of Australia and APRA) commits to underwrite $20 billion worth of loans as a 50 per cent guarantee to support lending of up to $40 billion to SMEs from the bank and non-bank lenders.
  • Starting in early April, this will apply to eligible loans for businesses with annual turnovers of up to $50 million and will include an upfront six-month freeze on repayments.
  • The loans will be unsecured but used only for working capital purposes and will apply to loans granted within six months from April 1, 2020. New and existing bank customers will be able to apply for loans up to $250,000 over three years.

Providing temporary relief for financially distressed businesses

  • Temporary increase to the threshold at which a creditor can take action to initiate insolvency or bankruptcy from $2000 to $20,000 and giving companies and individuals six months instead of 21 days to respond.
  • Relief for directors for personal liability when the company is trading while insolvent.
  • The Corporations Act 2001 will be amended to provide temporary and targeted relief for companies to deal with unforeseen events that arise as a result of the coronavirus.
  • This relief will be provided over the next six months.
  • The ATO will tailor solutions for owners or directors of business that are currently struggling due to the Coronavirus, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.

Households

Additional payment

  • A further $750 payment to social security and veteran income support recipients and eligible concession card holders, except for those who are receiving an income support payment that is eligible to receive the coronavirus supplement. This second payment will be made automatically from 13 July 2020 and is estimated to cost $4b over the forward estimates period.

Coronavirus supplement

  • Temporary eligibility expansion to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight.
  • This will be paid to both existing and new recipients of the JobSeeker Payment, Youth Allowance jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.
  • The Coronavirus supplement will be paid for the next 6 months. Eligible income support recipients will receive the full amount of the $550 Coronavirus supplement on top of their payment each fortnight.
  • This measure is estimated to cost $14.1 billion over the forward estimates period.

Early release of superannuation

  • From April, individuals will be able to access their superannuation, capped at $10,000 this financial year and a further $10,000 next financial year. The withdrawals will be tax-free and will be made available to those eligible for the coronavirus supplement as well as sole traders who have seen that hours of work, or income fall, 20% of more as a result of the coronavirus.
  • Eligible individuals will be able to apply online through myGov for access of up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for another three months. They will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments. This measure is estimated to cost $1.2 billion over the forward estimates period.

Superannuation minimum drawdown rates and social security deeming rates

  • Temporary reduction to superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for 2019-20 and 2020-21.
  • Reduction of the deeming rates by a further 0.25 percentage points to reflect the latest rate reductions by the RBA. As of 1 May 2020, the lower deeming rate will be 0.25 per cent and the upper deeming rate will be 2.25 per cent. This measure is estimated to cost $876m over the forward estimates period.

Please contact us should you have any questions concerning the above, during these uncertain and challenging times.  We would be only too pleased to assist.

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

Cameron Allen

Cameron, Office Managing Director, and Founding Partner of Andersen Australia is a seasoned tax expert with 25+ years’ global experience. He excels in corporate and international tax, guiding clients through mergers, acquisitions, and restructures. Cameron serves a diverse range of clients and holds multiple board positions.

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