The Federal Parliament passed the economic stimulus package was passed last night and should receive Royal Assent today or tomorrow.
These new measures will provide immediate assistance to businesses struggling to cope with the unprecedented impact of COVID-19. It is important that businesses are aware of the benefits available to them, so we have prepared an overview of the relevant measures the Government has introduced.
1. Cash flow assistance for businesses
The Government is now offering up to $100,000 in payments to eligible businesses through the Australian Taxation Office. To be eligible you must be a small to medium business with an aggregated turnover of less than $50 million and employ employees.
The way it will work is that an eligible business will be automatically provided with a credit in their business activity statement equal to 100% of the withholding tax that the ATO is entitled to when the employer pays its salary and wages. If that places the business activity statement into credit, the ATO will issue a payment equal to that credit within 14 days.
The calculation of the credit will be done automatically and there will be no need to submit forms to request the credit.
2. Temporary relief for financially distressed businesses
The Government has moved to ease pressure on businesses at risk of insolvency by:
- temporarily increasing the threshold of the minimum amount of debt owed before a creditor can initiate involuntary bankruptcy proceedings to $20,000;
- increasing the statutory minimum for a creditor to issue a statutory demand to $20,000; and
- extending the period to respond to bankruptcy notices and statutory demands from 21 days to six months.
Most importantly, the Government has moved to temporarily relieve directors of their duty to prevent insolvent trading with respect to any debts incurred during the ordinary course of the company's business. At this stage it will only be in place for 6 months.
For more detailed information on these insolvency changes, please see: https://mccabecurwood.com.au/temporary-changes-insolvency-laws-coronavirus/
3. Increasing the instant asset write-off
The Government has increased the instant depreciation threshold to $150,000 (up from $30,000) under the instant asset write-off (IAWO
) scheme. The IAWO scheme allows businesses to claim an immediate tax deduction on assets purchased for the business that costs less than the instant depreciation threshold in the year the asset is first used or installed, rather than in accordance with the normal depreciation rules.
Additionally, the IAWO scheme which was previously only available to businesses with a turnover of less than $50 million has now been extended to include businesses with a turnover of less than $500 million.
4. Backing business investment
For larger purchases beyond $150,000 the Government has introduced a 15-month investment incentive that permits a business with a turnover of less than $500 million that purchases new depreciable assets before the 30 June 2021 to claim an instant 50% tax deduction of the cost of the eligible asset, with the remainder of the balance being subject to the normal depreciation rules.
This article is aimed at providing a brief overview of the measures available to business owners during these trying times. Full details of the Government's proposals can be found here: https://treasury.gov.au/coronavirus/businesses
If you are interested in obtaining further clarification or have any queries about these new support measures, or other matters relating to the impact of COVID-19 we at McCabe Curwood are ready and willing to assist you.