- Our breakdown of the COVID-19 business stimulus package: what to know and how your business can benefit.
- Does your business pay salary or wages?
- Does your business hire apprentices?
- Instant asset write-off
- Accelerating depreciation deductions
- Is your business in an industry or region severely affected by the virus?
Our breakdown of the COVID-19 business stimulus package: what to know and how your business can benefit.
Pandemic, toilet paper hoarding and self-isolation – these were words and phrases we hadn’t heard before COVID-19 hit our shores.
With stock market speculation and the health system under enormous pressure, and changing conditions every day, COVID-19 is going to require you and your business to be responsive.
In uncertain times, we tell our clients to be diligent on risk management, put plans into place (even if they keep changing), stay focused and call us if you need help or a little boost.
The Federal and State governments have put several actions into place to shore up the economy. Its main aim is to keep employees in jobs, encourage and assist business investment as well as supporting industries and communities that are severely affected.
We will continue to update this article of any changes or additions to the economic stimulus packages as they occur.
The COVID-19 business stimulus plan
Mr Scott Morrison, the Australian prime minister, told a news conference, “This plan is about keeping Australians in jobs. This plan is about keeping a business in business, particularly small and medium-sized businesses and this plan is about ensuring the Australian economy bounces back stronger on the other side of this and, with that, the budget bounces back with it,”
Mr Josh Frydenberg, the Australian Treasurer, said the stimulus plan has three out of every four dollars being spent on small and medium business. The $6.7 billion is to boost cash flow for small and medium business operators, so they can pay wages, put on extra staff, invest or prepare for the downturn.
The Government will introduce the package of Bills to Parliament in the week beginning March 23 for these measures to come into effect.
These measures may not be applicable or suitable for your business, but we will go through the details of each one of them, and how they may benefit your business in general. You should seek independent advice.
Let’s take a look at what’s in the economic stimulus package for your business.
Does your business pay salary or wages?
Businesses will receive a grant to cover the costs of employee wages and salaries equal to 50 per cent of PAYG withheld for businesses that withhold tax, with a minimum of $2,000 and a maximum of $25,000 over six months.
Businesses that pay salary and wages but are not required to withhold tax will also receive the minimum payment of $2,000.
This payment is designed to help business manage cash flow when revenues may be reduced and retain their employees.
Are you eligible?
Eligible small and medium business entities with aggregated annual turnover under $50 million (based on prior year turnover) that employ workers will be eligible.
How do I apply for this grant?
No need to apply for this grant. This is a tax-free grant and will be issued automatically, after your business lodges its business activity statement or instalment activity statement from April 28, 2020.
When does my business receive the grant?
The payment will be delivered by the Australian Taxation Office (ATO) as a credit in the activity system.
Businesses that lodge on a quarterly basis will be eligible to receive the credit for the quarters ending March 2020 and June 2020. Monthly lodgers will be eligible to receive the credit for the March 2020, April 2020, May 2020 and June 2020 lodgements.
Should I hire more staff?
This may perhaps be an opportunity to hire that employee you were thinking about to increase sales or snap up that top talent to boost business profits and revenue. This could be the time to hire and train a new employee, so by the time the economy bounces back your business is set to take advantage. We recommend you assess your options carefully and complete a business case to calculate if this option is worthwhile.
Does your business hire apprentices?
Created to keep apprentices and trainees employed, a wage subsidy of 50 per cent is offered to businesses who hire apprentices or trainees for a period of nine months.
The subsidy of up to a maximum of $21,000 ($7,000 per quarter), will be available to businesses employing less than 20 full-time employees who retain an apprentice or trainee, or, where a small business is not able to retain an apprentice, the subsidy will be available to a new employer.
Is your business eligible for the apprentice subsidy?
The subsidy will be available to small businesses employing fewer than 20 full-time employees who retain an apprentice or trainee. The apprentice or trainee must have been in training with a small business as of 1 March 2020.
Employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will be eligible for the subsidy.
How do I apply for this grant?
Firstly, eligible employers must complete an eligibility assessment with an Australian Apprenticeship Support Network (AASN) provider.
Once this has been approved, employers can register for the subsidy from early-April 2020. Final claims for payment must be lodged by 31 December 2020.
Should I hire an apprentice?
Hiring an apprentice is a great way to help fill in any skills gap your organisation may have, as well as any technical skills your business may need in the future. With other government incentives offered to businesses, hiring apprentices, maybe the time to introduce new skills, cost-effectively.
Please note that the apprentice or trainee must have been employed as at 1 March 2020 and we highly recommend you assess your options carefully and complete a business case to understand if this option is worthwhile.
For more information, here is the government fact sheet on these stimulus measures including examples.
Instant asset write-off
For small and medium-sized businesses, the instant asset write-off threshold (rather than depreciating them over several years) has been increased to $150,000 until June 2020.
In addition, the size of the business that can access this concession has been increased to $500 million turnover.
This new threshold applies on a per asset basis, so eligible businesses can immediately write-off multiple assets.
Who is eligible for the instant asset write-off of $150,000?
Any Australian business with a turnover of $500 million.
How do I claim the instant asset write-off?
The instant asset write-off concession is a tax deduction, dependent on your current tax rate. You can claim this concession when completing your annual business tax return, however, the asset must be first used or installed before June 2020.
Should my business take advantage of the asset write-off incentive?
If your business was planning to undertake a business investment expenditure in the near future, this may be the time to bring it forward. You may also look at other investments that your business could purchase to increase its productivity, lower its running costs or enter a new market.
As you will read below, there are incentives for faster depreciation as well, so this may make the investment even more appealing and beneficial for your business. Double-check your asset purchase business case to see if the benefits to your business warrant the expense over the capital purchase.
Accelerating depreciation deductions
To encourage business investment, a 15-month accelerated depreciation deduction has been introduced. The asset purchase can be initially depreciated at 50% of its cost, with existing depreciation applying to the balance of the asset’s cost. It is in place until 30 June, 2021.
Who is eligible for the accelerated depreciation schedule?
It is available to businesses with an aggregated turnover below $500 million, who are purchasing certain new depreciable assets.
How does my business claim the accelerated depreciation?
You can claim the 50% depreciation in the year your business starts to use the new asset or when they have been installed ready for use. The accelerated depreciation is a tax deduction, claimed through your annual business tax return.
Should my business take advantage of the accelerated depreciation?
Accelerated depreciation allows your business to claim a higher deduction immediately. The higher depreciation today, lets you bring forward the deduction of a portion of the depreciation of the assets to reduce your current tax bill.
Accelerated depreciation can be beneficial for businesses with short term cashflow problems.
Would you like more information on the accelerated depreciation or the instant asset write-off? Here is Treasury’s fact sheet.
Is your business in an industry or region severely affected by the virus?
The government has also announced a $1 billion fund to support and target regions significantly affected by the coronavirus outbreak.
Businesses in these affected areas may be able to access grants similar to those provided to businesses in bushfire-affected regions.
Businesses extremely affected by the COVID-19 include those heavily reliant on industries such as tourism (in particular domestic tourism), agriculture and education.
These measures haven’t been fully itemised at time of writing but will include waiving fees for commonwealth national parks, and the Great Barrier Reef Marine Park.
There will also be additional assistance to help businesses identify alternative export markets or supply chains.
The Federal Government has committed an extra $100 million for aged care as part of its $2.4 billion coronavirus health care plan. It will include money for aged care centres to employ extra nurses and reduce the risk of the virus within homes.
ATO administrative relief
The Australian Taxation Office is providing administrative relief for some tax obligations for people affected by the coronavirus outbreak, on a case-by-case basis.
In addition, the ATO will consider ways to enhance its presence in other significantly affected regions, making it easier for people to apply for relief, such as setting up temporary shopfronts and face-to-face options.
Over the coming months, we envisage State and Territory Governments will be introducing their own economic stimulus plans. We will keep you up to date on all measures applicable for business.
This may be the time to employ more staff or hire an apprentice you have been meaning to bring on board or introduce measures to help you manage cash flow. We encourage you to investigate these subsidies and investment opportunities to see if they are appropriate for your business.
If you need a business advisor to go through the pros and cons, we are happy to help you analyse their implications. This may be a great opportunity to invest in your business, talk to a Penguin Management accountant today on 1300 319 870 or contact us here to make an appointment.
Business finance can be a powerful financial strategy for companies. How can your business use it to your benefit? What are the best finance options for my business? Read our business finance blog here.
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