Tax Incentives in response to Coronavirus

17 Mar

The Australian Federal Government has announced an economic stimulus package in response to the Coronavirus which includes tax relief for small businesses and employers.  The main measures that will be administered by the ATO are cash flow assistance for employers, increased instant asset write-off thresholds and accelerated depreciation deductions.  The Government will also provide a one-off $750 payment to social security, veteran and other income support recipients and eligible concession card holders, around half of which will be pensioners.

 

Boosting Cash Flow for Employers

 This measure will provide a minimum payment of $2,000 and a maximum payment of $25,000 to small and medium sized employers with aggregated annual turnover of less than $50 million.

Eligible businesses that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 50% of the amount withheld, up to a maximum payment of $25,000.  Eligible businesses that pay salary and wages will receive a minimum payment of $2,000, even if they are not required to withhold tax.  Directors, beneficiaries and shareholders who receive dividends or distributions as opposed to a salary may wish to review the treatment of their payments to maximise the benefit.

The payment will be delivered by the ATO as a credit upon lodgement of their activity statements.  Where this places the business in a refund position, the ATO will deliver the refund within 14 days.

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 lodgement months of March 2020, April 2020, May 2020 and June 2020.  To provide a similar treatment to quarterly lodgers, the payment will be calculated at three times the rate (150%) in the March 2020 activity statement.

The minimum payment will be applied to the business’ first lodgement from 28 April 2020, and the payment will be tax free.

There will also be additional support for small business to retain their apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.

 

Increased Instant Asset Write-Off up to 30 June 2020

The government is increasing the instant asset write-off threshold from $30,000 to $150,000 from 12 March 2020 until 30 June 2020, for new or second-hand assets first used or installed ready for use in this timeframe.

Businesses with aggregated annual turnover of less than $500 million are eligible. However, this will require legislative changes before it can take effect.

 

Backing Business Incentive

The government is introducing a 15-month accelerated depreciation deduction to support business investment and economic growth over the short-term.  A deduction of 50% of the cost of an eligible asset (eg plant, equipment and specified intangible assets, such as patents) for assets acquired after 12 March 2020 and first used or installed by 30 June 2021.  Existing depreciation rules will apply to the balance of the asset’s cost, and businesses with aggregated annual turnover of less than $500 million are eligible.

Note this will not apply to second-hand assets, or buildings and other capital works depreciable under Division 43.

For example, if an asset is purchased for more than $150,000 between 12 March 2020 and 30 June 2020, 50% of this cost will be deductible in the first year and the balance under the normal rules.  From 1 July 2020, any assets purchased for more than $30,000 will fall under this same treatment with 50% of the cost being deductible in the first year and the balance under the normal rules.

 

Refer to the below links for further information, or call your Stratogen accountant for further information.

https://www.ato.gov.au/General/New-legislation/The-Australian-Government-s-Economic-Response-to-Coronavirus/

https://treasury.gov.au/sites/default/files/2020-03/Overview-Economic_Response_to_the_Coronavirus.pdf