THE FEDERAL GOVERNMENT'S ECONOMIC STIMULUS PACKAGE EXPLAINED
The Federal Government’s economic stimulus packages and State of Victoria concessions explained
Over the past two weeks the Government has announced two economic stimulus packages to cushion the economic impact of the Coronavirus.
A total of $189 billion is being injected into the economy by all arms of Government in order to keep Australians in work and businesses in business.
This includes $17.6 billion for the Government’s first economic stimulus package, $90 billion from the RBA and $15 billion from the Government to deliver easier access to finance, and $66.1 billion in yesterday’s economic support package.
There are some important superannuation measures that you should be aware of:
SME cash payments
The second stimulus package will now build on the initial tax-free cash payments to small and medium businesses, rising to up to $100,000, with a minimum payment of $20,000, up from the previously announced $25,000 and $2,000 limits.
The measure, which will be available to entities with aggregated annual turnover under $50 million that employ workers, has also now been extended to not-for-profits and charities.
The enhanced scheme will be delivered in two phases: Firstly, with employers set to receive a first payment equal to 100 per cent of their salary and wages withheld, up to a maximum of $50,000, when businesses lodge their activity statements for the 28 April and 28 July quarterly due dates.
Eligible businesses that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.
Secondly, an additional payment equal to the first payment will be made after businesses lodge their BAS by the 28 July and 28 October quarterly due dates.
For example, a business that receives $50,000 for the period up to June will subsequently receive another $50,000 for the period up to September upon lodgement of their BAS.
Monthly BAS lodgers will receive the first payment for the March 2020, April 2020, May 2020 and June 2020 lodgements, with a 300 per cent calculation in the March activity statement to provide the same treatment as quarterly lodgers.
The second payment for monthly BAS lodgers will be released once they lodge their June 2020, July 2020, August 2020 and September 2020 lodgments.
All entities are required to be active to receive the payment, with the measure set to benefit around 690,000 businesses employing around 7.8 million people, and around 30,000 NFPs.
The expanded scheme is estimated to cost $31.9 billion over the forward estimates period.
Temporary insolvency relief
Directors will now be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business, with the measure set to run for six months.
According to Treasury, egregious cases of dishonesty and fraud will still be subject to criminal penalties. Any debts incurred by the company will still be payable by the company.
Further, the government will increase the current minimum threshold for creditors issuing a statutory demand on a company under the Corporations Act 2001 from $2,000 to $20,000 for six months.
The statutory time frame for a company to respond to a statutory demand will also be extended temporarily from 21 days to six months.
Likewise, the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will temporarily increase from its current level of $5,000 to $20,000.
The time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.
Sole trader support
The government will establish a new $550 fortnightly coronavirus supplement payment.
Permanent employees who are stood down or lose their employment, sole traders, the self-employed, casual workers and contract workers will be able to access the new coronavirus supplement under expanded access to the JobSeeker Payment, formerly known as Newstart.
The supplement will also be paid to both existing and new recipients of the JobSeeker Payment, Youth Allowance jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.
The payments, set to commence from 27 April, are expected to cost the budget $14.1 billion.
Temporarily reduce superannuation minimum drawdown rates
The Government is temporarily reducing superannuation minimum drawdown requirements for account based pensions and similar products by 50 per cent for 2019-20 and 2020-21. This measure will benefit retirees by providing them with more flexibility as to how they manage their superannuation assets.
Individuals who have already taken their minimum pension amount for the 2019/20 financial year will not able to put that money back into his superannuation account under these changes.
The measure, similar to the approach taken in the 2008 global financial crisis, will benefit retirees by reducing the need to sell investment assets to fund minimum drawdown requirements.
Reducing social security deeming rates
As of 1 May 2020, the upper deeming rate will be 2.25 per cent and the lower deeming rate will be 0.25 per cent. The reductions reflect the low interest rate environment and its impact on the income from savings.
The change will benefit around 900,000 income support recipients, including around 565,000 people on the Age Pension who will, on average, receive around $105 more from the Age Pension in the first full year that the reduced rates apply.
The changes will be effective from 1 May 2020.
For example,
Leslie and Brian are an age pensioner couple. They have $550,000 worth of financial assets. They hold $300,000 in a superannuation account with a conservative investment strategy which returned around 5 per cent last year. They have invested $130,000 in a term deposit with an annual return of 1.5 per cent and hold the remainder in a cash transaction account earning a negligible rate of interest.
Under the former deeming rates, Leslie and Brian’s Age Pension would have been reduced by $65 each per fortnight. Under the new deeming rates, Leslie and Brian’s Age Pension will only be reduced by around $32 each per fortnight.
Early release of superannuation
While superannuation helps people save for retirement, the Government recognises that for those significantly financially affected by the Coronavirus, accessing some of their superannuation today may outweigh the benefits of maintaining those savings until retirement.
Eligible individuals will be able to apply online through myGov to access up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for approximately three months (exact timing will depend on the passage of the relevant legislation).
The exact eligibility requirements will be formed in the coming days but broadly to apply for early release you must satisfy any one or more of the following requirements:
you are unemployed; or
you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
on or after 1 January 2020:
you were made redundant; bro
your working hours were reduced by 20 per cent or more; or
if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more.
People accessing their superannuation will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
If you are eligible for this new ground of early release, you can apply directly to the ATO through the myGov website: https://my.gov.au/.
Separate arrangements will apply if you are a member of an SMSF.
You will be able to apply for early release of your superannuation from mid-April 2020.
Victoria takes charge with payroll tax refunds, waivers
Payroll tax paid up for the current financial year will now be refunded to Victorian small and medium businesses as the state government announces a $1.7 billion coronavirus support package.
Victoria Premier Daniel Andrews announced on Saturday that businesses with a payroll of less than $3 million will receive full payroll tax refunds for the 2019–20 financial year.
These businesses will also not have to pay any payroll tax for the rest of the financial year and will be allowed to defer any payroll tax for the first three months of the 2020–21 financial year.
The refund is estimated to see eligible Victorian businesses receive an average of $23,000, and up to $113,975 for some.
“We’ve listened to business and workers and now we’re taking unique and unprecedented action to help businesses and their workers through this crisis,” Mr Andrews said.
“This is not a tax cut. It is a refund back in the accounts of businesses in just a few days’ time; cash that will be critical to them being able to support their workers and in turn those workers being able to support their families.
“Cash is better in the hands of struggling businesses than in a government bank account right now — Victorian workers need us to step up to help get them through.”
The measure will support 24,000 businesses.
As part of the package, the state government will also provide $500 million to establish a Business Support Fund, aimed at supporting the hardest-hit sectors, including hospitality, tourism, accommodation, arts and entertainment, and retail.
The Victorian government will also pay all outstanding supplier invoices within five business days, a move estimated to see $750 million injected into the economy earlier.
Victoria’s economic package comes after similar announcements by the state governments of New South Wales, Queensland, Western Australia and Tasmania.
How can we help?
If you need assistance with understanding any of these recent announcements, please feel free to call Peter Landers, Matt Feehan, Steve Landers, Paul Briglia, Ian Thorn, Tracey Sinclair or Lavinia Pera on (03) 9088 4777, so that we can discuss your particular requirements in more detail.