"Stimulus package" to help companies facing economic consequences of COVID-19

Australia's political authorities quickly put in place measures to deal with the economic consequences of the coronavirus outbreak.

The purpose of this memo is to inform you of the first concrete measures decided by both the federal government (including those proposed by the ATO) and the states.

This is a first set of measures. Others should follow. 

For some of them, the implementing rules will be published in the near future. It is important at this stage to make an inventory of them to inform you and, if you can benefit from them, to prepare the elements to accompany the applications.

We would like to draw your attention to the fact that most of these measures concern SMEs (with a turnover of less than $50 million) and that, of course, in order to benefit from them, you will have to justify the negative impact on your company's activity of the economic crisis generated by the Coronavirus epidemic.

We remind you that this limit of $50 million is defined as "aggregrate", i.e. an assessment at group level, that is, worldwide, and not only for the Australian company (or subsidiary), unless the definition changes. 

Similarly, branches of foreign companies, which by definition are not Australian companies, should not be able to benefit from these measures. However, we will make inquiries to ensure that they are not de facto excluded.

 

  • Measures put in place by the Federal Government

 

  1. Tax incentives for investment   

Immediate deduction of new investments (Instant asset write-off increased)

For new or used assets deployed for the first time or installed ready for use from March 12 to June 30, 2020, the immediate asset deduction limit will increase from $30,000 to $150,000 for businesses with cumulative annual sales of less than $500 million (against the current threshold of $50 million). The threshold applies per asset, so that eligible companies can immediately deduct several assets from the taxable result. The threshold will go back to $1000 for small businesses (turnover under $10 million) as of July 1st , 2020, but businesses that are not entitled to the immediate deduction of assets as of July 1st , 2020 may be entitled to the 50% investment incentive as described below.

Support for Backing business investment incentive

An investment incentive limited to 15 months (until June 30, 2021) is introduced to support business investment and economic growth in the short term by accelerating capital cost allowances. Businesses with cumulative annual sales of less than $500 million per year will be able to deduct 50% of the cost of an eligible asset, provided it was acquired after March 12, 2020 and first used or installed on June 30, 2021. There is no asset value threshold for this investment incentive.

Traditional depreciation rules continue to apply to the balance of the cost of the asset.

 

     2.  Financial support for companies

Boosting cash flow for employers

Small and medium-sized businesses with cumulative annual sales of less than $50 million and employing workers between January 1, 2020 and June 30, 2020 will be eligible for a tax credit capped at $25,000.

These companies will receive a tax credit of up to 50% of their PAYG in the form of a credit in their BAS from March to June 2020, with a minimum payment of $2,000 and up to a maximum of $25,000.

Supporting apprentices and trainees

Eligible small business employers will be able to apply for a wage subsidy of 50% of the apprentice's or trainee's wages (in training as of March 1, 2020) for a period of up to 9 months from January 1 to September 30, 2020, up to $21,000 per apprentice.

Grant applications may be submitted from the beginning of April 2020 until 31 December 2020.

 

     3. Non-tax measures

Stimulus payments

A one-time payment of $750 will be offered starting March 31, 2020 for social security recipients, veterans and other income support recipients and eligible concession cardholders, including retirees. There will be one payment per eligible recipient.

Assistance for severely affected regions

The government has set aside $1 billion to support regions and communities that have been disproportionately affected by the economic impacts of COVID-19, including those that rely heavily on industries such as tourism, agriculture and education.

 

The measures proposed by ATO

 

The Australian Taxation Office (ATO) has announced a series of administrative measures to assist businesses affected by COVID-19:

  •  delay by a maximum of 4 months the payment of the amounts of taxes due in respect of the BAS (including instalments), income taxes, FBT and excise duties of the companies concerned without penalties or GIC (default interest)
  •  allow businesses whose operations are impacted by the COVID-19 virus, and that report GST on a quarterly basis, to opt for monthly GST reporting to gain faster access to any GST refunds. This option may be retained for 12 months, with the option to revert to quarterly reporting;
  • allow companies whose activity is impacted by the COVID-19 virus to benefit from a payment waiver ("instalment to zero") for the 1st quarter of 2020 (i.e. to be paid at the end of April 2020). Companies whose PAYG varies during the fiscal year, can retroactively modify their BAS for the last quarter of 2019 and request a refund of the difference;
  • remitting interest and penalties incurred by affected companies after 23 January 2020
  • allow the companies affected to enter into low-interest payment plans for their existing and outstanding tax obligations

These measures proposed by ATO are not automatically applicable.  Firms will first have to contact the ATO to apply for assistance.

Of course, ATO reserves the right to adapt the assistance programme according to the needs of companies and their history.

In other words, the impact of the economic slowdown on the company's activity and cash flow must be justified.

 

The measures implemented by the Australian States

 

These announcements are recent (published on 16 March) and will be thereafter the subject of provisions for their implementation. We wish to recall that these measures only apply to companies (generally SMEs) affected by the coronavirus crisis.

  1. NSW
  •  Reduction of payroll tax up to $1 million for companies with a payroll of less than $10 million. A priori, the liable companies would be exempt from payment for the rest of the year.
  • Reduction of costs and expenses (the precise nature must be defined) for small enterprises operating in particularly affected sectors of activity (cafés, restaurants...the full list will be communicated later)

      2. WA

  • Price freeze (electricity, car registration, ...)
  • Subsidies for SMEs with a payroll between $1 million and $4 million, up to $17,500;
  • Reduction of the payroll tax to a certain extent (to be defined) and deferral of payments until July 21, 2020"

Source: Les Conseillers du Commerce Exterieur de la France (in French)

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