What does the Government’s stimulus package mean for my business?

The woman is a waitress in an apron, the owner of the cafe stands at the door with a sign Open waiting for customers. Small business concept, cafes and restaurants

What does the Government’s stimulus package mean for my business?

You have most likely heard about the Government’s stimulus package announcement by now and might be wondering what that means for you. According to the March 12 Media Release by Prime Minister Scott Morrison the incentives that are most likely to assist small and medium businesses are:

Increase in the instant asset write off threshold

“An increase the instant asset write off threshold from $30,000 to $150,000 and access will be expanded to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.

“What this means is that, subject to the above threshold, you will be able to claim a deduction for the asset right away rather than spreading it out over the life of the asset. For example, if a transport company purchased a truck for $100,000 it will get a tax deduction right away rather than spreading it over 15 years.

“Please note that this will apply to depreciable items such as equipment, machinery, vehicles and tools. It will not apply to capital works such as buildings and structural improvements and earthworks. If you’re not sure if what you’re intending to purchase will qualify it is always wise to check with your tax advisor.

“However, please be mindful that an asset purchase should be a business decision and should depend on the benefit or return the business would get from that purchase rather than just the timing of the deduction. Furthermore, using the truck example above, an immediate deduction would mean the company gets $27,500 cash back from the tax office when it lodges its tax return, and would still have to find the other $72,500 itself – so it will have to consider how it will finance that.”

Payments to employers

“A cash flow boost 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.

“Businesses will receive payments of 50% of their Business Activity Statements or Instalment Activity Statement from 28 April with refunds to then be paid within 14 days. (We suspect this would depend on the PAYG withholding amount reported, but there aren’t enough details yet).”

Support for employers with apprentices or trainees

“Eligible employers can apply for a wage subsidy of 50% 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.”

Support for sectors, regions and communities affected by the Coronavirus

“$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.

“The Government is also offering, on a case-by-case basis, administrative relief for certain tax obligations, including deferring tax payments up to four months.”

Side note

The Government has also announced that it will provide one-off payments of $750 to pensioners, Newstart and certain other income support recipients with the hope of boosting the economy by getting people

spending (or at least getting a segment of the population spending). This may have an indirect impact on your business.

Further Measures Announced Since March 12

Temporary relief for financially distressed businesses
Increasing thresholds and time frames that creditors can make statutory demands or issue bankruptcy proceedings and giving debtors more time to respond to the same, as well as temporary relief from personal liability for directors for trading while insolvent.

Supporting the flow of credit
The Government will provide a guarantee of 50 per cent to eligible lenders to support new short-term unsecured loans to SMEs. There are various other measures being introduced to make it easier for businesses to borrow from lenders in order to meet short term cash flow needs.

Helpful Resources:

Please find some flow charts below to help clarify how the incentives work:


Disclaimer

The information contained herein is of a general nature only and is not intended to be relied upon nor is it a substitute for appropriate professional advice. Whilst all care has been taken in the preparation of the material, it is not guaranteed to be accurate. Individual circumstances are different and as such, require specific examination. Asparq cannot accept liability for any loss or damage of any kind arising out of the use of or reliance upon all or any part of this material. Additional information may be made available upon request.

Need Assistance?

Contact Asparq Today