Government Cash Flow Boost for Employers


Tuesday 24th March, 2020 Blog, COVID-19

Summary

The new Boosting Cash Flow for Employers will provide up to $100,000 back to businesses in Perth and Australia, with a minimum payment of $20,000 for eligible businesses. The payment will provide temporary cash flow support to small and medium businesses that employ staff. The payment will be tax free.

Eligibility

Small and medium business entities with aggregated turnover under $50 million and that employ workers will be eligible.

  • The payment will be delivered by the ATO as a tax credit in the activity statement system for the quarter ending 31 March ,30 June 2020 and 30 September 2020 for quarterly lodgers and for the months ending 31 March 2020 to 30 September 2020 for monthly lodgers.
  • Eligible businesses that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100% of the amount withheld, up to a maximum payment of $100,000 by 30 September 2020.
  • Eligible businesses that pay salary and wages will receive a minimum payment of $20,000 by 30 September, even if they are not required to withhold tax.

Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020, June 2020 and 30 September 2020.

Monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020,June 2020, July 2020, August 2020 and September 2020 lodgements. To provide a similar financial treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate in the March 2020 activity statement.

Increasing the Instant Asset Write-off

The Government is increasing the instant asset write-off (IAWO) threshold from $30,000 to $150,000 and expanding access to include all businesses with aggregated annual business turnover of less than $500 million (up from $50 million until 30 June 2020.

The IAWO Threshold

 The higher IAWO threshold provides cash flow benefits for businesses that will be able to immediately deduct purchases of eligible assets each costing less than $150,000. The threshold applies on a per asset basis, so eligible businesses can write-off multiple assets.

The IAWO is due to revert to $1,000 for small businesses (turnover less than $10 million) from 01 July 2020.

Timing 

This financial proposal applies from announcement until 30 June 2020, for new or second-hand assets first used or installed ready for use in this timeframe.

Backing the Business Investment

Summary

The Government is introducing a time limited 15 month investment incentive to support business investment and economic growth over the short-term, by accelerating depreciation deductions.

The Key Features of the Incentive are:

  • benefit – deduction of 50% of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost;
  • eligible businessesbusinesses with aggregated turnover below; and
  • eligible assets – new assets that can be depreciated under Division 40 of the Income tax Assessment Act 1997 (i.e Plant, equipment and specified intangible assets, such as patents) acquired after announcement and first used or installed by 30 June 2021. Does not apply to second-hand Division 40 assets, or buildings and other capital works depreciable under Division 43)

Eligibility

Businesses with aggregated turnover below $500 million, purchasing certain new depreciable assets

Timing

Applies to eligible assets acquired after announcement and first used by 30 June 2021

Support for Workers and Households

The Government is temporarily expanding eligibility 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, parenting payment, Farm household Allowance and Special benefit.

The corona virus 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.

Early Release of Superannuation

The Government will allow individuals in financial stress as a result of the coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21.

Eligible individuals will be able to apply online through myGov for access up to $10,000 of their superannuation before 1 July 2020 for another three months. They will not need to pay tax on amounts released.

Coronavirus  SME Guarantee Scheme

The Government will establish the Coronavirus SME Guarantee Scheme which supports SMEs businesses to get access to working capital to help them through the financial impact of the coronavirus.

Under the Scheme, the Government will guarantee up to % of new loans issued by eligible lenders in Perth and Australia.

The Scheme will complement the announcement the Government has made to cut red-tape to allow SMEs to get access to credit faster. It also complements announcements made by Australian banks to support small businesses with their existing business loans.

M Consulting Advisors will eagerly be awaiting the details of the new measures when the Parliament returns tomorrow and we will provide further update to our clients on this.

 

Tax planning will be an important exercise for all our business clients to ensure that we maximise the generous benefits that the government is offering to boost cash flow for businesses. Please contact your M Consulting Client Advisor for any questions that you may have, about this or any matter concerning taxation or accounting.