COVID-19 federal government response

24 March 2020

 

Following the suite of new measures announced by the Federal Government last night in response to the coronavirus, the consolidated support package comprising the first and second tranches now amounts to $189 billion and represents 9.7% of GDP.  These measures will provide welcome relief for impacted businesses and households.
This article provides a summary of the relevant measures including superannuation, tax, support payments as well as the ATO measures.
GOVERNMENT PACKAGE
1. Superannuation
Individuals affected by Coronavirus will be allowed to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21.  No tax is payable on the amounts released and the amounts withdrawn will not affect Centrelink or Veterans’ Affairs payments. (Refer to SUPERCentral news article on Temporary Early Access to Superannuation article for details of this measure).
Minimum drawdown requirements for account-based pensions and similar products to be reduced by 50% for 2019-20 and 2020-21.  
2. Social Security
The social security deeming rates will be reduced by a further 0.25 points, in addition to the 0.5% reduction announced on 12th March.  As of 1 May 2020, the upper deeming rates will be 2.25% and the lower deeming rates will be 0.25%.
3. Individuals and households
A time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight over the next six months to existing and new recipients of Jobseeker Payment, Youth Allowance, Parenting Payment, Farm Household Allowance and Special Benefit.
Two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders.  The first payment will be made from 31 March 2020 and the second payment will be made from 13 July 2020.  It is estimated that half of those that benefit will be pensioners.
4. Businesses
Distressed businesses:  The threshold at which creditors can issue a statutory demand on a company or initiate bankrupt proceedings against an individual will be increased. The time for companies/individuals to respond to statutory demands will be temporarily extended.  There will be temporary relief for directors from any personal liability while trading insolvent and targeted relief under the Corporations Act.
Instant asset write-off threshold increased to $150,000 (from $30,000) for businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.
A time limited 15 month (until 30 June 2021) accelerated depreciation deduction of 50% on cost of eligible asset for businesses with a turnover of less than $500 million. Existing depreciation rules apply to the balance of the asset’s cost. 
A temporary exemption from responsible lending obligations for lenders providing credit to existing small business customers.  
Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50% to SME lenders to support short-term unsecured loans for SMEs.
5. Employers (Boost Cash Flow for Employers Measure)
Provision of up to $100,000 to eligible small and medium-sized businesses (aggregated turnover under $50 million) and not-for profits organisations (aggregated annual turnover under $50 million) that employ people.
Employers will receive a payment equal to 100% of their salary and wages withheld, up to the maximum of $50,000 and minimum $10,000;
An additional payment to be introduced between the July – October 2020 period, equal to the total of the payments received by employers under this measure.
6. Apprentices and trainees
Eligible employers can apply for a wage subsidy of 50% of their apprentice’s or trainee’s wage for 9 months from 1 Jan 2020 to 30 Sep 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.  Employers will be reimbursed up to maximum of $21,000 per eligible apprentice or trainee.
ATO SUPPORT MEASURES
1.   Superannuation
Investment strategy:  In relation to the question of coronavirus market downturn impacting SMSF investments and investment strategies, the ATO has the following guidance response:
“Where the assets of an SMSF or the level of investment in those assets fall outside the scope of your investment strategy, you should take action to address that situation, which could involve adjustments to investments or updating your investment strategy.  We (the ATO) don’t consider that short term variations to your articulated investment approach, including specified asset allocations whilst you adjust your investments, constitute a variation from your investment strategy.”
This allows scope for SMSF trustees to update the strategy, adjust the investments without falling short of the investment strategy implementation requirement.  One of the key advantages of SMSFs is that trustees are in control of the investments and able to respond immediately to market volatilities. 
Superannuation guarantee obligations:  Where an employer cannot meet superannuation guarantee contribution payments by due date because of the coronavirus, the following actions can be taken:
- lodge a Super guarantee charge statement and pay the charge within a month and no penalties will be applied by the ATO;
- set up a payment plan with the ATO involving using the SG amnesty forms and a payment plan
Applications for temporary early release of superannuation will commence from mid-April 2020
2.  Other measures
Deferring by up to six months the payment date of amounts due through the business activity statement (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise.
Allow businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.
Allowing businesses to vary PAYG instalment amounts to zero for the March 2020 quarter.  Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the Sep 2019 and Dec 2019 quarters.
Remitting any interest and penalties, incurred on or after 23 Jan 2020, that have been applied to tax liabilities.
Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low interest payment plans and tailored support arrangements.
3.   ATO COVID-19 contacts
Email:  COVID-19Taxissues@ato.gov.au
Emergency Support Infoline:  1800 806 218
Large Business Service Team: (02) 9685 8735
Tax agents who represent public groups can continue to use their online services.
FURTHER ECONOMIC SUPPORT The Prime Minister Scott Morrison has pledged “more packages” and more “support” over the next few months to support the vulnerable, preserve businesses and supercharge the safety net.  It is anticipated that further economic responses would be handed down by the Government as the coronavirus situation unfolds and more stimulus are in the pipeline.

Following the suite of new measures announced by the Federal Government last night in response to the coronavirus, the consolidated support package comprising the first and second tranches now amounts to $189 billion and represents 9.7% of GDP.  These measures will provide welcome relief for impacted businesses and households.

This article provides a summary of the relevant measures including superannuation, tax, support payments as well as the ATO measures.

 

GOVERNMENT PACKAGE

1. Superannuation

  • Individuals affected by coronavirus will be allowed to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21.  No tax is payable on the amounts released and the amounts withdrawn will not affect Centrelink or Veterans’ Affairs payments. (Refer to SUPERCentral news article on Temporary Early Access to Superannuation for details of this measure.)
  • Minimum drawdown requirements for account-based pensions and similar products to be reduced by 50% for 2019-20 and 2020-21.  

 

2. Social security

The social security deeming rates will be reduced by a further 0.25 points, in addition to the 0.5% reduction announced on 12 March.  As of 1 May 2020, the upper deeming rates will be 2.25% and the lower deeming rates will be 0.25%.

 

3. Individuals and households

  • A time-limited coronavirus supplement to be paid at a rate of $550 per fortnight over the next six months to existing and new recipients of Jobseeker Payment, Youth Allowance, Parenting Payment, Farm Household Allowance and Special Benefit.
  • Two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders.  The first payment will be made from 31 March 2020 and the second payment will be made from 13 July 2020.  It is estimated that half of those that benefit will be pensioners.

 

4. Businesses

  • Distressed businesses:  the threshold at which creditors can issue a statutory demand on a company or initiate bankrupt proceedings against an individual will be increased. The time for companies/individuals to respond to statutory demands will be temporarily extended.  There will be temporary relief for directors from any personal liability while trading insolvent and targeted relief under the Corporations Act.
  • Instant asset write-off threshold increased to $150,000 (from $30,000) for businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.
  • A time limited 15 month (until 30 June 2021) accelerated depreciation deduction of 50% on cost of eligible asset for businesses with a turnover of less than $500 million. Existing depreciation rules apply to the balance of the asset’s cost.
  • A temporary exemption from responsible lending obligations for lenders providing credit to existing small business customers.  
  • Under the coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50% to SME lenders to support short-term unsecured loans for SMEs.

 

5. Employers (boost cash flow for employers measure)

Provision of up to $100,000 to eligible small and medium-sized businesses (aggregated turnover under $50 million) and not-for profit organisations (aggregated annual turnover under $50 million) that employ people.

  • Employers will receive a payment equal to 100% of their salary and wages withheld, up to the maximum of $50,000 and minimum $10,000;
  • An additional payment to be introduced between the July – October 2020 period, equal to the total of the payments received by employers under this measure.

 

6. Apprentices and trainees

Eligible employers can apply for a wage subsidy of 50% of their apprentice’s or trainee’s wage for nine 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.  Employers will be reimbursed up to maximum of $21,000 per eligible apprentice or trainee.

 

ATO SUPPORT MEASURES

1.   Superannuation

  • Investment strategy:  In relation to the question of coronavirus market downturn impacting SMSF investments and investment strategies, the ATO has the following guidance response:

“Where the assets of an SMSF or the level of investment in those assets fall outside the scope of your investment strategy, you should take action to address that situation, which could involve adjustments to investments or updating your investment strategy.  We (the ATO) don’t consider that short term variations to your articulated investment approach, including specified asset allocations whilst you adjust your investments, constitute a variation from your investment strategy.”

This allows scope for SMSF trustees to update the strategy, adjust the investments without falling short of the investment strategy implementation requirement.  One of the key advantages of SMSFs is that trustees are in control of the investments and able to respond immediately to market volatilities. 

  • Superannuation guarantee obligations:  where an employer cannot meet superannuation guarantee contribution payments by due date because of the coronavirus, the following actions can be taken:

- lodge a Super guarantee charge statement and pay the charge within a month and no penalties will be applied by the ATO;

- set up a payment plan with the ATO involving using the SG amnesty forms and a payment plan

  • Applications for temporary early release of superannuation will commence from mid-April 2020

 

2.  Other measures

  • Deferring by up to six months the payment date of amounts due through the business activity statement (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise.
  • Allow businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.
  • Allowing businesses to vary PAYG instalment amounts to zero for the March 2020 quarter.  Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
  • Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities.
  • Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low interest payment plans and tailored support arrangements.

 

3.   ATO COVID-19 contacts

 Email:  COVID-19Taxissues@ato.gov.au

 Emergency Support Infoline:  1800 806 218

 Large Business Service Team: (02) 9685 8735

 Tax agents who represent public groups can continue to use their online services.

 

FURTHER ECONOMIC SUPPORT The Prime Minister Scott Morrison has pledged “more packages” and more “support” over the next few months to support the vulnerable, preserve businesses and supercharge the safety net.  It is anticipated that further economic responses would be handed down by the Government as the coronavirus situation unfolds and more stimulus are in the pipeline.

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