What the various economic stimulus packages include for Australian Small Businesses

The Federal Government recently announced an economic stimulus package which has a particular focus on supporting small businesses. Since the Federal announcement, state governments have also announced stimulus packages which look to support small business owners to be able to battle the current climate.

Mentored has summarised a few of the recent announcements to give you a better understanding of the current situation for Australian SMEs.

Federal Stimulus Package:

The Federal government package is worth $17.6bn and is “front loaded” to allow as much money to flow into the economy in as little time as possible. The Guardian reported that $11bn of the Federal Government’s package will be “out the door by June”.

There are four components of the package with the Prime Minister announcing that more will be done if needed.

Delivering support for business investment

The government has allocated $3.9bn in investment incentives to encourage businesses to spend.

The goal with these incentives is to encourage businesses to buy things like machinery and equipment.

They announced:

“$700 million to increase the instant asset write off threshold from $30,000 to $150,000 and expand access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020. For example, assets that may be able to be immediately written off are a concrete tank for a builder, a tractor for a farming business, and a truck for a delivery business.
$3.2 billion to back business investment by providing a time limited 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct an additional 50 per cent of the asset cost in the year of purchase.”

These measures started as of March 12 and will support over 3.5 million businesses (over 99% of businesses) employing more than 9.7 million employees or 3 in every 4 workers. The Government said in it’s statement, “The measures are designed to support business sticking with investment they had planned, and encouraging them to bring investment forward to support economic growth over the short term.”

Cash flow assistance for businesses:

SMEs will receive up to $25,000 to cover the costs of employee wages and salaries.

The Government announced:

“$6.7 billion to Boost Cash Flow for Employers by up to $25,000 with a minimum payment of $2,000 for eligible small and medium-sized businesses. The payment will provide cash flow support to businesses with a turnover of less than $50 million that employ staff, between 1 January 2020 and 30 June 2020. The payment will be tax free. This measure will benefit around 690,000 businesses employing around 7.8 million people. Businesses will receive payments of 50 per cent of their Business Activity Statements or Instalment Activity Statement from 28 April with refunds to then be paid within 14 days.
$1.3 billion to support small businesses to support the jobs of around 120,000 apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for up to 9 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.”
Sole traders who don’t employ anyone have not been the target of any federal stimulus as of yet, with the government claiming those not employing others will indirectly benefit from money flowing to low-income earners from other parts of their stimulus package.

Assistance for severely-affected regions

The government announced a $1bn fund to support regions “disproportionately affected” by the COVID-19 outbreak, with areas heavily reliant on tourism, agriculture and education to be offered administrative relief for certain tax obligations. This will materialise in deferred tax payments for up to four months, determined on a case by case basis.

The Government said, “the ATO will set up a temporary shop front in Cairns within the next few weeks with dedicated staff specialising in assisting small businesses. In addition, the ATO will consider ways to enhance its presence in other significantly affected regions to make it easier for people to apply for relief, including considering further temporary shop fronts and face-to-face options.”

The Government further announced:

“$1 billion to support those sectors, regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on industries such as tourism, agriculture and education. This will include the waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and Commonwealth National Parks. It will also include additional assistance to help businesses identify alternative export markets or supply chains. Targeted measures will also be developed to further promote domestic tourism. Further plans and measures to support recovery will be designed and delivered in partnership with the affected industries and communities.”

NSW Government Stimulus Package:

NSW Premier Gladys Berejiklian announced a state stimulus package to support what was offered in the Federal Government stimulus.

There are certain elements of the state package that focus on supporting NSW Health. The elements relevant to business owners include:

Payroll tax waived

$450 million for the waiver of payroll tax for businesses with payrolls of up to $10 million for three months. This means these businesses will save a quarter of their annual payroll tax bill in 2019-20.
The finer details are yet to be confirmed, but exemptions are expected to be applied automatically.
$56 million to bring forward the next round of payroll tax cuts by raising the threshold limit to $1 million in 2020-21.

Fees waived for vulnerable business sectors

$80 million to waive a range of fees and charges for small businesses including bars, cafes, restaurants and tradies

It is not entirely set in stone how these measures will roll out, but we will continue to update you as announcements are made.

Further encouragement for employment

$250 million to employ additional cleaners of public infrastructure such as transport assets, schools and other public buildings.
more than $250 million to bring forward maintenance on public assets including social housing and crown land fencing.
$500 million to bring forward capital works and maintenance.

ATO to offer support for businesses affected by COVID-19

If you’ve got a significant reduction in trading due to recent global events, the ATO is implementing a “series of administrative measures to assist Australians experiencing financial difficulty as a result of the COVID-19 outbreak.

The Commissioner of Taxation Chris Jordan is encouraging businesses impacted by the coronavirus to get in touch with the ATO to discuss relief options.

“We know that many businesses and communities are being heavily affected by the challenging economic conditions created by the outbreak of COVID-19,” he said.

“The ATO will work shoulder-to-shoulder with businesses to assist them through this difficult period and do what we can to ease the pressure.

“Once you contact us, we’ll tailor a support plan for your needs and circumstances.

“Support measures could include deferral of some payments, quicker access to GST refunds, and options to enter low interest payment plans for existing or future tax debts.”

The current assistance measures offered by the ATO are not like the bushfire relief measures which applied automatically to certain geographical locations. Assistance measures for those facing difficulties as a result by COVID-19 will be implemented on a case-to-case basis.

The ATO have listed the following as measures to decrease pressure on businesses:

“Deferring by up to four 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 Pay As You Go (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.”

For other state government announcements, please see the below:

Let Mark Bouris show you his framework for running a successful business – Click Here

Post