The Australian Government has thus far announced 2 Economic Stimulus packages to the sum of $189 billion.

The package includes both cash and tax incentive measures for small business owners.

Tax Alert March 2020

The ATO is providing taxpayers in bushfire areas with more time to get their tax affairs in order, but at the same time it’s getting tough on employee car parking benefits and investigating lifestyle assets owned by wealthy taxpayers.

Here’s a roundup of some of the latest developments when it comes to tax:

Deferrals for taxpayers affected by bushfires

In the wake of this summer’s devastating bushfires, the ATO has announced it will be automatically deferring any lodgments or payments that taxpayers in bushfire-impacted postcodes are due to make.

Deferral will apply to income tax, activity statement, fringe benefits tax (FBT) and excise return lodgments and any associated payments, with the new deadline being 28 May 2020. Refund payments will be prioritised.

If you are affected by the bushfires but don’t live in a postcode on the ATO’s list, phone its Emergency Support Infoline on 1800 806 218. The service can also assist with re-issuing tax returns and activity statements, re-constructing your tax records and setting up payment plans.

Super obligations also delayed

SMSFs in bushfire zones have also been given extra time to meet their lodgement and compliance obligations.

The deferral applies to SMSF members and trustees living in an affected postcode, even if your SMSF’s address is not in these areas.

Employers in bushfire zones are still required to meet employee super guarantee (SG) obligations by the due date. SG charges for late SG payments will not be waived.

More employers up for FBT on car parking

The ATO has released a new draft interpretation of the FBT legislation that could see more businesses paying FBT if they provide employees with car parking benefits.

Draft Taxation Ruling TR 2019/D5 is due to commence on 1 April 2020 and replaces the former ruling, which was in place for over 20 years.

Under the ATO’s new interpretation, if your staff car parking facilities are both in the vicinity of your business and within 1 kilometre of a car park that offers all-day parking as a ‘commercial’ car park for FBT purposes, you may have to pay FBT on the value of your employees’ car spaces – even if they were tax-free before. A car park can be commercial for FBT purposes even if its fee structure discourages all-day parking by charging a higher fee.

If your business is near a shopping centre, hospital or airport for example, you should review your obligations prior to the new FBT year.

ATO collecting details on lifestyle assets

Taxpayers with ‘lifestyle assets’ like yachts, thoroughbred horses, expensive cars and fine art are likely to find themselves under the tax man’s microscope after the ATO requested five years of policy details from insurers.

Over 30 insurers have been asked to provide details of assets over certain value thresholds for use in the ATO’s data matching program.

Valuations of assets owned by around 350,000 taxpayers will be added to the ATO’s database, providing it with a more complete picture of a taxpayer’s actual financial situation. Although the information will not be used to start automated compliance activities, it will be used for risk profiling purposes.

Early release of super on ATO radar

The tax man is once again warning taxpayers that withdrawing your super savings before a condition of release is met is illegal.

If you are approached by someone promoting a scheme offering early release of your super benefits, the ATO is asking you to contact it on 13 10 20.

CGT blow for non-resident property owners

Property owners who are non-residents for tax purposes are no longer eligible for the main residence exemption (MRE) for capital gains tax (CGT) when they sell their home.

Under new legislation, the MRE is now denied to non-resident taxpayers if they dispose of a property purchased after 9 May 2017, unless certain life events occur within six years of becoming a foreign resident for tax purposes.

For homes purchased prior to 9 May 2017, non-resident taxpayers only have until 30 June 2020 to sell their former home if they do not want to pay full CGT on the capital gain made since the original property purchase.

The Economic Stimulus Package – Round 2

The Second $66.1 bn Stimulus Package: What You Need To Know

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.

The Prime Minister has warned that there are no “quick
solutions” and that business should prepare for 6 months of disruption.

 In Summary

Business

·      
Tax-free payments up to
$100,000 for small business and not-for-profit employers. An increase in the previously announced initial tax-free payments for
employers to a maximum of $50,000. In addition to this, a second round of payments
will be made up to a maximum of $50,000, accessible from July 2020. 

·      
Solvency safety net – temporary 6 month increase to the threshold at which creditors
can issue a statutory demand on a company from $2,000 to $20,000, and an
increase in the time companies have to respond from 21 days to 6 months.
Directors also are provided with temporary relief from personal liability for
trading while insolvent for 6 months.

·      
Access to working capital – Introduction of a Coronavirus SME guarantee scheme protecting
financial institutions by guaranteeing 50% of new loans to SMEs.

·      
Sole traders and
self-employed eligible for Jobseeker payment – the
eligibility criteria to access income support relaxed for the self-employed and
sole traders.

·      
Temporary relief from some Corporations
Act requirements

Individuals

·      
Early release of
superannuation – individuals in financial distress
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.

·      
Temporary reduction in
minimum superannuation draw down rates – superannuation
minimum drawdown requirements for account based pensions and similar products
reduced by 50% in 2019-20 and 2020-21.

·      
Deeming rates reduced – from 1 May, superannuation deeming rates reduced further to a
lower rate of 0.25% and upper rate of 2.25%.

·      
Supplements increased,
access extended and eased – for 6 months from 27
April 2020:

o  
A temporary coronavirus
supplement of $550 will be paid to existing income support recipients (people
will receive their normal payment plus $550 each fortnight for 6 months).

o  
A second one-off stimulus
payment of $750 will be paid automatically from 13 June 2020 to certain income
support recipients (in addition to the payment made from 31 March 2020).

o  
Eligibility for access to
income support eased to include sole traders and the self-employed, and to
those caring for someone infected or in isolation.

o  
Waiting periods and assets
tests temporarily waived.  

·      
Bankruptcy safety net – temporary 6 month increase to the threshold for the minimum
amount of debt required for a creditor to initiate bankruptcy proceedings
against a debtor from $5,000 to $20,000.

The Government has flagged that additional stimulus packages
will be required.

 In detail

Support for business

Tax-free payments up to $100,000 for employers

·      
From:
28 April 2020

·      
Eligibility:
Small and medium business entity employers and not-for-profit entities, with an
aggregated annual turnover under $50 million.

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 $100,000.

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.

·      
The
first phase ensures that eligible employers receive a credit equal to 100% of
the PAYG amounts withheld from salary and wages paid to employees during the
relevant period, up to the maximum amount of $50,000.

·      
The
second phase ensures that eligible employers receive another series of credits,
equal to the credits that were received under the first phase. For example, if
a business received $40,000 of credits in the first phase it will receive a
further $40,000 of credits in the second phase. These additional credits will
be spread over two or four activity statement periods, depending on whether the
employer lodges on a quarterly or monthly basis.

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
support.

·    
See: Cash flow assistance for businesses

Solvency safety net

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:

·      
A temporary 6 month increase to
the threshold at which creditors can issue a statutory demand on a company from
$2,000 to $20,000.

·      
The time a company has to
respond to statutory demands will increase from 21 days to 6 months.

·      
For 6 months, directors will be
provided with temporary relief from personal liability for trading while
insolvent.

·      
See also bankruptcy safety
net below

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.

·    
See: Temporary relief for financially distressed
businesses

 Access to working capital for SMEs – supporting lenders

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:

·    
Maximum total size of loans of
$250,000 per borrower.

·    
The loans will be up to three
years, with an initial six month repayment holiday.

·    
The loans will be in the form
of unsecured finance, meaning that borrowers will not have to provide an asset
as security for the loan.

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:

·    
An
exemption to the responsible lending obligations to enable financial
institutions to provide new credit, credit limit increases, and credit
variations and restructures,

·    
$15bn
to the Australian
Office of Financial Management to invest in wholesale
funding markets used by small banks and non-banks to enable these lenders to
support SMEs, and

·    
Australian Banking
Association members will defer loan repayments for 6 months
for small businesses (affected small businesses will need to apply for relief).

Sole traders and self-employed
eligible for Jobseeker payment

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.

More:

·    
Income support for individuals

·    
More
financial support for coronavirus affected job seekers

Temporary relief from Corporations Act requirements

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.

Individuals

Early release of superannuation

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:

·    
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:

o  
you were made redundant; or

o  
your working hours were reduced
by 20% or more; or

o  
if you are a sole trader — your
business was suspended or there was a reduction in your turnover of 20% or more.

For those eligible to access their superannuation, you can
apply directly to the ATO through the myGov website from mid-April.

More:

·    
Early access to superannuation

Temporary reduction in minimum superannuation draw down rates

Superannuation minimum drawdown requirements for account-based
pensions and similar products will be reduced by 50% in 2019-20 and 2020-21.

 

Age	Default minimum drawdown rates (%)	Reduced rates by 50 per cent for the 2019-20 and 2020-21 income years (%)
Under 65	4	2
65-74	5	2.5
75-79	6	3
80-84	7	3.5
85-89	9	4.5
90-94	11	5.5
95 or more	14	7

 

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%.

More: Providing support for retirees

 Time limited fortnightly $550 ‘coronavirus supplement’

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:

·    
Jobseeker payment (and those
transitioning to the jobseeker payment)

·    
Youth allowance jobseeker

·    
Parenting payment

·    
Farm household allowance

·    
Special benefits recipients

In addition, eligibility to income support payments will be
expanded to:

·    
Permanent employees who are
stood down or lose their job

·    
Casual workers

·    
Sole traders

·    
The self-employed

·    
Contract workers who meet the
income test

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.

More:

·    
Income support for individuals

 Second $750 payment to households

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. 

·    
Payment 1 from 31 March 2020 (previously announced on 12 March): Available to people who are
eligible payment recipients and concession card holders at any time between 12
March 2020 to 13 April 2020;

·    
Payment 2 from 13 July 2020: Available to people who are eligible payment recipients and
concession card holders on 10 July 2020.

The payments will be made automatically to those that meet
the criteria.

More:

Payments to
support households

Bankruptcy safety net

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.

More:

·    
Temporary relief for financially distressed
businesses

 More information:

·    
Joint media release with The Hon. Scott
Morrison MP Prime Minister

·    
Treasury: Support for Businesses

·    
Treasury: Supporting Individuals
and Households

The Economic Stimulus Package

Maintaining confidence, supporting investment, keeping people employed

By now you’re probably aware that the Federal Government has announced a $17.6 billion stimulus package. One designed to “protect the economy by maintaining confidence, supporting investment and keeping people in jobs”.

If you’re wondering what that might mean for you, here’s a brief guide to the four major components of the package. ⁱ

Payments to lower-income households

Post-GFC, the Rudd Government sent $900 cheques to adult Australians earning less than $80,000.ⁱⁱ The Morrison Government is doing something similar by providing Newstart recipients, age pensioners and veterans a one-off payment of $750. These payments will start flowing into the bank accounts of 6.5 million (mainly) lower-income Australians from March 31. While most working Australians won’t receive this payment, this type of tightly targeted payment will provide maximum bang for buck in terms of stimulating the economy.

Cashflow assistance to business

Business owners and their employees have also been well-catered for in the stimulus package.

Small and medium-sized businesses that employ staff and have a turnover of less than $50 million will be eligible for tax-free payments of between $2000-$25,000. It’s estimated this ‘Boosting Cash Flow for Employers’ measure will benefit 690,000 businesses that collectively employ 7.8 million people. Given there’s a $25,000 ceiling on the payment regardless of the size of a business’s workforce, it’s a measure that will benefit smaller businesses much more than medium-sized ones.ⁱⁱⁱ

Business owners who employ apprentices and trainees are also eligible to apply to have the Government pay half their wage for the first nine months of 2020. It’s estimated this measure will assist 70,000 business and 117,000 apprentices and trainees.

While it’s a separate initiative, the Government’s provision of modest financial support for casual workers who contract Coronavirus will directly benefit those casual workers and indirectly benefit their employers. Without this payment to casuals, employers might have, for instance, had to worry about infected staff turning up to work out of financial desperation.^iv

Support for business investment

The government is loosening the criteria around the instant asset write-off. Pre-Coronavirus, businesses with a turnover of up to $50 million could instantly write-off the purchase of assets costing up to $30,000. Post-Coronavirus, businesses with a turnover of up to $500 million can write off asset purchases of up to $150,000.

On top of this, the Government has also accelerated depreciation deductions for the next 15 months. Up until June 30, 2021, businesses turning over less than $500 million will be able to deduct 50 per cent of the cost of any eligible asset the moment it’s installed. It’s predicted these two tweaks to the investment rules could benefit up to 3.5 million businesses that collectively employ almost 10 million Australians.

Assistance for regional Australians

Regional Australia, already laid low by drought and bushfires, will be disproportionately impacted by Coronavirus. Many regional economies are dependent on the industries – tourism, education and agriculture – most affected by the pandemic. It’s yet to provide much detail, but the Government has promised to spend $1 billion propping up the nation’s regional economies.

The end of the beginning

There’s broad agreement the Government’s stimulus package has been well-designed and will reduce the chance of Australia slipping into its first recession in three decades. But with share markets across the globe increasingly volatile and countries closing their borders, Australia is in unchartered territory and there may well be further changes to Australia’s economic policy settings in months to come.

If you have any queries in relation to how the above measures may apply to your circumstances, please do not hesitate to contact our office.

i Unless otherwise end noted, all the facts, figures and claims in this article come from the CommSec Economic Stimulus Package document

ii https://finance.nine.com.au/personal-finance/900-cash-bonus-who-gets-it/facdc354-9a48-4e9e-850c-2bb8705dbe29

iii https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Assistance_for_businesses.pdf

iv https://www.smh.com.au/politics/federal/casual-workers-face-wait-up-to-13-weeks-for-coronavirus-payment-20200312-p549cj.html