Assistance to our economy has been flowing thick and fast in the past week, see below for the latest initiatives from the Government and Banking sector. These are very detailed as we really wanted you to have as much information as possible in this complex period.
The Federal Government, ABA and State Government have announced stimulus measures to help people impacted by the Coronavirus outbreak.
They are pretty generous – but necessary.
We have summarized all of the measures below.
- Bank Concessions
The banks have been given extra support by the Government and the RBA to work with and provide extra help to business owners at this time.
I would encourage businesses to contact their bank to ask how they can support you at this time.
The type of assistance that will be offered by banks will depend on individual circumstances, but?can?include:?
- A deferral of scheduled loan repayments?(principal and interest)
- Waiving fees and charges?
- Interest free periods or no interest rate increases
- Debt consolidation to help make repayments more manageable
Six Month Deferral on Total Business Loan Repayments
The ABA announced on Friday it has put in measures that will support banks in providing business customers with the ability to delay all business loan repayments (principal and interest) for a period of 6 months.
This provision is available from Monday 23 March 2020.
If businesses would like to receive this benefit, they should contact their bank from Monday 23rd March 2020 onwards, and apply for this relief.
Six Month Deferral on Total Home Loan Repayments
The big four banks announced that in addition to the business loan deferrals, they would allow businesses with home loans to also defer the repayments (principal and interest) of their home loans for a period of six months.
If businesses would like to receive this benefit, they should contact their bank from Monday 23rd March 2020 onwards.
Update for other mortgage holders
For those without a business who have mortgage repayments, from announcements today, 3 of the big 4 banks are offering relief/moratoriums on repayments, i.e. they may be able to support you by putting your home loan repayments on hold for six months, with interest capitalized. Westpac had made no announcement on relief as of the time of writing.
Interest Rate Reduction
The Reserve Bank lowered their interest rates from 0.5% to 0.25% on Thursday last week.
We encourage you to make sure your bank has passed this rate reduction on to you.
- FEDERAL GOVERNMENT SUPPORT PACKAGE NO 2 (LATEST MEASURES ANNOUNCED 22 MARCH 2020)
- Income support for businesses
PAYGW refunds to 100% - increased from 50%
Small and medium sized business entities and not-for-profits (NFPs) with aggregated annual turnover under $50 million and that employ workers will now be eligible for refunds of up to 100% of PAYGW paid (up from the 50% only announced recently).
Eligibility will generally be based on prior year turnover being under $50 million.
These initiatives are:
• The payment will be delivered by the ATO as an automatic credit in the activity statement system from 28 April 2020 upon employers lodging eligible upcoming activity statements.
• Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld, up to a maximum payment of $50,000 (originally $25,000).
• Eligible employers that pay salary and wages will receive a minimum payment of $10,000 (was $2,000), even if they are not required to withhold tax.
• The payments will only be available to active eligible employers established prior to 12 March 2020.
- An additional payment is also being introduced in the July – October 2020 period – with a maximum of $100,000 of total PAYGW relief available
The zone for PAYGW relief is now extending into the 2021 tax year, i.e. September 2020 quarter.
Eligible entities will receive an additional payment equal to all of the Employers PAYGW payments they paid up to June 2020.
This means that over the whole period of PAYGW relief (i.e. 1 January 2020 to 30 September 2020) eligible entities will receive at least $20,000 (those that don’t pay PAYGW tax) and up to a maximum total of $100,000 (those that do employ and pay PAYGW tax) under both payments.
Refer our previous release (re the first tranche of these PAYGW payments for the six month period to 30 June 2020 – these were released prior to the enhancements noted above).
To qualify for the additional payment, the entity must continue to be active as an employer after 30 June 2020.
This is how the additional payment works:
For monthly activity statement lodgers, the additional payments will be delivered as an automatic credit in the activity statement system. Each additional payment will be equal to a quarter of their total initial Boosting Cash Flow (i.e. the total PAYGW credit paid to June 2020) for Employers in their June 2020, July 2020, August 2020 and September 2020 activity statements (up to a maximum total of $50,000).
Example
If the PAYGW tax credit received in the March 2020 BAS was $45,024, and then in the April BAS the credit received was $4,976 – up to the maximum of $50,000, for the next four monthly BAS’s, the following PAYGW credits would be received: June 2020 ($12,500), July 2020 ($12,500), August 2020 ($12,500) and September 2020 ($12,500) with a total additional payment being made of $50,000.
For quarterly activity statement lodgers, the additional payments will also be delivered as an automatic credit in the activity statement system. Each additional payment will be equal to half of their total initial Boosting Cash Flow (i.e. the total PAYGW credit paid to June 2020) for Employers following the lodgement of their June 2020 and September 2020 activity statements (up to a total of $50,000).
The cash flow boost provides a tax-free payment to employers and is automatically calculated by the Australian Taxation Office (ATO). There are no new forms required.
c)Cash-flow relief for financially distressed businesses
Tax Payments and Tax Compliance - Assistance
The Government is offering administrative relief for certain tax obligations, including deferring tax payments up to four months. This is similar to the relief provided following the bushfires for taxpayers affected by the coronavirus, on a case-by-case basis.
Creditors and Directors
The Government is temporarily increasing 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 (i.e. from $2,000 to $20,000). The package also includes temporary relief for directors from any personal liability for trading while insolvent, and providing temporary flexibility in the Corporations Act 2001 to provide temporary and targeted relief from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.
Coronavirus SME guarantee scheme – new business loans
Under a scheme titled, The Coronavirus SME (Small and Medium sized businesses) Guarantee Scheme, the Government will provide a guarantee of 50 per cent to SME lenders for new unsecured loans to be used for working capital.
This will enhance these lenders’ willingness and ability to provide credit, which will result in SMEs being able to access additional funding to help support businesses through the upcoming months.
SMEs with a turnover of up to $50 million will be eligible to receive these loans.
The Government will provide eligible lenders with a guarantee for loans with the following terms:
• Maximum total size of loans of $250,000 per borrower.
• The loans will be up to three years, with an initial six-month repayment holiday.
• The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.
Loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look through the cycle to sensibly take into account the uncertainty of the current economic conditions.
As part of the loan products available, the Government will encourage lenders to provide facilities to SMEs that only have to be drawn if needed by the SME.
This will mean that the SME will only incur interest on the amount they draw down. If they do not draw down any funds from the facility, no interest will be charged, but they will retain the flexibility to draw down in the future should they need to.
The Scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.
Quick and efficient access to credit for small businesses
The Government is providing an exemption from responsible lending obligations for lenders providing credit to existing small business customers.
This exemption is for six months, and applies to any credit for business purposes, including new credit, credit limit increases and credit variations and restructures.
Responsible lending obligations do not currently apply to lending which is predominantly for a business purpose, but it can take time and effort for lenders to be satisfied that the money borrowed meets this test. By providing a temporary exemption from responsible lending obligations, this reform will help small businesses get access to credit quickly and efficiently.
d) Income support for individuals
Over the next six months, the Government is temporarily expanding eligibility to income support payments.
A new, time-limited Coronavirus supplement will also 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 recipients.
Jobseeker Payment and Youth Allowance Jobseeker criteria will provide payment access for permanent employees who are stood down or lose their employment; sole traders; the self-employed; casual workers; and contract workers who meet the income tests as a result of the economic downturn due to the Coronavirus. This could also include a person required to care for someone who is affected by the Coronavirus.
Asset testing for the JobSeeker Payment, Youth Allowance Jobseeker and Parenting Payment will be waived for the period the Coronavirus supplement is being provided. Income testing will still apply to the person’s other payments, as per the current arrangements.
- Temporary early release of superannuation
The Government is allowing individuals affected by the Coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21.
These super payments are tax-free and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
To apply for this early release of super, you must satisfy any one or more of the following requirements:
• you are unemployed; or
• you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
• on or after 1 January 2020: you were made redundant; or
• your working hours were reduced by 20 per cent or more; or
• if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more.
If you are eligible for this new grounds for the early release of super, you can apply directly to the ATO through the myGov website: www.my.gov.au. You will need to certify that you meet the above eligibility criteria.
To ensure you receive your payment as soon as possible, you should contact your fund to check that they have your correct details, including your current bank account details and proof of identity documents.
- Temporarily reducing superannuation minimum drawdown rates – for accounts in pension phase
The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for the 2019-20 and 2020-21 income years.
The Government is also reducing both the upper and lower social security deeming rates by a further 0.25 percentage points in addition to the 0.5 percentage point reduction to both rates announced on 12 March 2020.
This measure will benefit retirees holding these products by reducing the need to sell investment assets to fund minimum drawdown requirements.
- Additional $750 stimulus payment
A second $750 stimulus payment will be made to pensioners, social security, veteran and other income support recipients and eligible concession card holders from 13 July 2020 (the payments will again be made progressively).
The payment will be tax free and will not count as income for Social Security, Farm Household Allowance and Veteran payments purposes.
There will be only one payment per eligible recipient (even if a person qualifies for a payment in multiple ways).
- VICTORIAN STATE GOVERNMEMT ASSISTANCE (ANNOUNCED 21 MARCH 2020)
For our Victorian clients, Daniel Andrews has announced the following:
- Any payroll tax that has been paid by eligible businesses in the first three quarters of this financial year will be handed back by the Government to provide a cash injection.
Any payroll tax that was payable in the last quarter will be waived.
Businesses will be able to access the cash refunds by Friday, March 27.
- The Government will pay all outstanding supplier invoices (money it owes to small businesses) within five business days – releasing up to $750 million into the economy earlier than usual.
The private sector is urged to do the same where possible.
- Commercial tenants in government buildings will also be able to apply for rent relief, a measure the Government is encouraging private landlords to offer as well.
We would encourage all small businesses to ask their landlords for this.
- 2020 land tax payments will be deferred for eligible small businesses.
- $500 million would be put into a fund for hardship payments, small grants and tailored support which will be distributed in consultation with the Victorian Chamber of Commerce and Industry, the Australian Hotels Association, the Australian Industry Group and other industry representatives.
This money will go towards sectors that "really are doing it tough" who may not pay payroll tax and require more tailored support to survive.
- The third component of the package, worth more than $600 million, included a range of measures such as the waiving of 12,500 venues' liquor licence fees due this month and worth a total of $30 million.
- The balance of the package will also support people who have lost their jobs.
Under the Working for Victoria Fund, displaced workers will be eligible to apply for different types of work.
Some displaced workers will have skills that can be readily transferred to new roles.
The Government can also assist skills development or help people in obtaining immediate accreditation to commence work.
The Government will work across the public sector, local government, the not-for-profit sector and key private sector employers to facilitate job matching.
Businesses that need workers can get in touch at business.vic.gov.au.
To register your interest in receiving more information, please provide your contact details here:
Prepared by:
MARIA COLEMAN CA, SENIOR TAX MANAGER
CARRAZZO CONSULTING PTY LTD
801 Glenferrie Road, Hawthorn, VIC, 3122
TEL: (03) 9982 1000
FAX: (03) 9329 8355
MOB: 0417 549 347
E-mail: paul.carrazzo@carrazzo.com.au or maria@carrazzo.com.au
Web Site: www.carrazzo.com.au
