The Government yesterday released a second, far reaching $66.1 bn stimulus package that boosts income support payments, introduces targeted changes to the superannuation rules, provides cash flow support of up to $100,000 for small business employers, and relaxes corporate insolvency laws. The stimulus measures are not yet legislated. Parliament will reconvene on Monday 23 March 2020.
The Prime Minister has warned that there are no “quick solutions” and that business should prepare for 6 months of disruption.
Like the airline masks, it's important in these times for small business owners to "put on their own mask first, so they can help others."
As business owners we need you to focus on your business in these challenging times. By ensuring your business can weather the
storm you're ensuring that long term, you can continue to trade, to employ others, supply to others, serve others.
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The Government has flagged that additional stimulus packages will be required.
SUPPORT FOR SMALL BUSINESS
The Government has increased the previously announced measures to provide cash flow support to business.
Now, eligible businesses with a turnover of less than $50 million will initially be able to access tax-free cash flow support, with the
minimum amount being increased to $10,000 and the maximum amount increased to $50,000 (previously $2,000 to $25,000). However, additional
support will be provided in the July – October 2020 period so that eligible entities will receive total minimum support of $20,000 and up to
In order for a business to qualify for this support it must have been established prior to 12 March 2020. The rules are more flexible for
charities because the Government recognises that new charities might be established in response to the pandemic.
The cash flow support measures will be provided in the form of a credit in the activity statement system. The support will be provided in two phases.
If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $10,000 will be made in the first phase and a further payment of $10,000 will be made in the second phase.
The credits are automatically calculated by the ATO and employers will need to lodge an activity statement to trigger the entitlement. If the credit puts the business in a refund position the excess amount will be refunded by the ATO within 14 days.
Businesses that lodge activity statements on a quarterly basis will be eligible to receive credits in the first phase for the quarters ending March 2020 and June 2020. Credits in the second phase will be available for the quarters ending June 2020 and September 2020. The minimum $10,000 payment will be applied to the first lodgement.
Business that lodge on a monthly basis will be eligible for the credits in the first phase for the March 2020, April 2020, May 2020 and June
2020 lodgements. Credits in the second phase will be available for the June 2020, July 2020, August 2020 and September lodgments. The
minimum $10,000 payment will be applied to the first lodgement.
Eligibility for the measure will be based on prior year turnover. We will have to wait for the legislation for the finer details.
Not-for-profit employers, including charities, with an aggregated turnover under $50 million will also be able to access the cash flow
READ MORE: Cash flow assistance for businesses
A safety net has been put in place to protect businesses in temporary financial distress as a result of the pandemic by lessening the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business. These include:
It will be more important than ever for business to stay on top of their debtors.
Debts incurred will still be payable by the business. Only those debts incurred in the ordinary course of the business will be subject to the safety net measures.
The Government has announced a Coronavirus
SME guarantee scheme
that will guarantee 50% of new loans to SMEs up to $20 billion. These loans are new short-term unsecured loans to SMEs.
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:
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.
This latest measure builds on the previous initiatives to ensure small business can access capital, including:
The eligibility criteria to access income support payments will be relaxed to enable the self-employed and sole traders whose income has
been reduced, to access support.
The Treasurer has been given a temporary instrument-making power to amend the Corporations Act to provide relief or modifications
to specific compliance obligations.
ASIC has announced measures for those companies with a 31 December financial year that need to hold their AGMs by 31 May 2020, providing a two month no action period and enabling hybrid virtual AGMs.
SUPPORT FOR INDIVIDUALS
From mid-April, individuals in financial distress will be able to access up to $10,000 of their superannuation in 2019-20, and a further $10,000 in 2020-21. The withdrawals will be tax free and will not affect Centrelink or Veterans’ Affairs payments.
To be eligible to access your superannuation you need to meet the following requirements:
For those eligible to access their superannuation, you can apply directly to the ATO through the myGov
website from mid-April.
READ MORE: Early access to superannuation
Superannuation minimum drawdown requirements for account-based pensions and similar products will be reduced by 50% in 2019-20 and 2020-21.
||Default minimum drawdown rates (%)
||Reduced rates by 50 per cent for the 2019-20 and 2020-21 income years (%)
|95 or more
The upper and lower social security deeming rates will be reduced further. As of 1 May 2020, the upper deeming rate will be 2.25% and the lower deeming rate 0.25%.
READ MORE: Providing support for retirees
For the next 6 months, the Government is introducing a new Coronavirus supplement to be paid at a rate of $550 per fortnight. This supplement will be paid to both existing and new recipients in the eligible payment categories.
The payment will be made to those receiving:
In addition, eligibility to income support payments will be expanded to:
The Government notes that these criteria could include those required to care for someone affected by the Coronavirus.
Asset testing has also been reduced and will be waived for 6 months. Income testing will still apply.
The payment is not available if you have access to any employer entitlements such as annual or sick leave or income protection insurance.
READ MORE: Income support for individuals
The Government is now providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders residing in Australia (see the full list here). The payment will be exempt from taxation and will not count as income for the purposes of Social Security, Farm Household Allowance and Veteran payments.
The payments will be made automatically to those that meet the criteria.
READ MORE: Payments to support households
A temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will increase from $5,000 to $20,000. In addition, the time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.
Where someone declares their intention to enter voluntary bankruptcy, the period of protection from unsecured creditors will be extended from 21 days to 6 months.
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