Prime Minister Scott Morrison has now unveiled a second $66.1 billion support package after he announced an initial $17.6 billion package that included a supercharged instant asset write-off and this SME cash payments.
This second stimulus package provides increased support payments for PAYGW, temporary relief under the Corporations Act for distressed companies and a suite of credit support measures to provide finance to small to medium sized (SME) businesses.
Below, we look more closely at the measures to support businesses.
SME cash payments with extension of PAYGW support
Under the new proposal, eligible employers can now receive a payment equal to 100 per cent of their salary and wages withheld (up from 50 per cent), with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $10,000 for each Activity Statement.
An additional payment is also being introduced in the July – October 2020 period, where eligible entities will receive an additional payment equal to the total of all payments they have received. For example, a business that receives $30,000 for the period 12 March 2020 to 30 June 2020, will subsequently receive another $30,000 for the period up to September upon lodgement of their BAS. Accordingly, eligible businesses may now receive a total from $20,000 up to a total of $100,000.
An eligible employer is one established prior to 12 March 2020. The payment will be provided as an automatic credit in the activity statement system from 28 April 2020. Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld up to the maximum (i.e. $50,000 to 30 June 2020). The minimum will be equal to $10,000 per activity statement i.e to a total of $20,000 for two quarters, even if they are not required to withhold tax. To qualify for the additional payment, the entity must continue to be active.
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 are set to commence from 27 April.
Access to superannuation
Employees who have been made redundant, or those who have their working hours reduced by 20 per cent or more, or sole traders whose businesses have been suspended or see a reduction in turnover by 20 per cent or more will also now be allowed to access up to $20,000 of their superannuation.
Eligible individuals will be able to access up to $10,000 of their superannuation before 1 July 2020, and be able to access up to a further $10,000 from 1 July 2020 for approximately three months.
The criteria for accessing super earlier is that you must satisfy one of the following conditions.
- You are unemployed.
- You are eligible to receive a Jobseeker payment, Youth Allowance for jobseekers, Parenting Payment (which includes the single and partnered payments), special benefit or Farm Household Allowance.
- You were made redundant on or after 1 January 2020.
- Your working hours were reduced by 20 per cent or more on or after 1 January 2020.
- If you are a sole trader, your business was suspended or there was a reduction in your turnover of 20 per cent or more on or after 1 January 2020.
Individuals eligible for early release can apply directly to the ATO through the myGov website, where they will need to certify that the above eligibility criteria are satisfied.The Government will also reduce the minimum drawdown requirements for account-based pensions and similar products by 50 per cent for the 2019–20 and 2020–21 income years.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.Deeming rates for pensioners will also be reduced by another 0.25 of a percentage point.
Similar to the initial stimulus package, although the measures have a starting day of 12 of March 2020, the legislation still needs to pass through the Government, and to a certain extent, this second wave of measures will take a little longer than those introduced in the first package.
In the meantime, please do not hesitate to contact us to review your situation and determine what action is required. Once again, communication is the key, and as your trusted adviser, allow us to assist you with your queries now and over the following few months. We can be reached, as always on our office number (02) 4958 1829 or at firstname.lastname@example.org.
David O’Brien FIPA CTA FIFA NTAAF
Registered Tax Agent
Chartered Tax Advisor