With the country locking down it’s borders, empty airports, cafes, bars, restaurants and more changes to come the Commonwealth Government has released the second stage of its plan to cushion the economic impact of the coronavirus.
For small to medium sized businesses (SMEs), the key elements of the second stimulus package are:
- Relief from PAYG withholding obligations on salaries and wages, and an additional payment;
- A wages subsidy to support apprentices and trainees;
- Increased access to working capital; and
- Temporary relief for financially distressed businesses.
> Relief from PAYG withholding obligations and an additional payment
This is referred to as Boosting Cash Flow for Employers Payments in the stimulus packages.
The Government has enhanced its initial stimulus package with the following changes:
- Not-for-profit entities (NFPs), including charities, with aggregated annual turnover under $50 million and that employ workers will now also be eligible;
- employers will 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;
- the minimum payment is being increased from $2,000 to $10,000. The payment will be available from 28 April 2020; and
- an additional payment is being made from 28 July 2020. Eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments received.
You should note that “payment” refers to an automatic credit to your business activity statement and is NOT a cash injection directly to your business unless the credit puts your business in a refund position.
Eligibility for PAYG withholding relief
SMEs and NFPs with aggregated annual turnover under $50 million and that employ workers will be eligible for PAYG withholding relief.
Eligibility will generally be based on prior year turnover.
The payments will only be available to active eligible employers established prior to 12 March 2020.
However, charities which are registered with the Australian Charities and Not-for-profits Commission will be eligible regardless of when they were registered, subject to meeting other eligibility requirements. This recognises that new charities may be established in response to the Coronavirus pandemic.
PAYG withholding relief
The payment will be delivered by the ATO as an automatic credit in the activity statement system from 28 April 2020 upon employers lodging eligible upcoming activity statements.
Relief for eligible employers will be provided as follows:
- A credit up to a maximum of $50,000 for any withholding tax already paid on salaries and wages to the ATO; and
- A minimum credit of $10,000 for all businesses that pay salaries and wages, even if they are not required to withhold tax.
The credits will be applied to a limited number of activity statement lodgements up to the June 2020 quarter.
The ATO will deliver the payment as a credit to the entity upon lodgment of their activity statements. Where this places the entity in a refund position, the ATO will deliver the refund within 14 days.
Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020.
Monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgments.
To provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (300 per cent) in the March 2020 activity statement.
The minimum payment will be applied to the entities’ first lodgment.
Eligibility for additional payment
To qualify for the additional payment, the entity must meet the above eligibility criteria and continue to be active.
The additional payment will be applied to a limited number of activity statement lodgments. The ATO will deliver the payment as a credit to the entity upon lodgment of their activity statements. Where this places the entity in a refund position, the ATO will deliver the refund within 14 days.
Quarterly lodgers will be eligible to receive the additional payment for the quarters ending June 2020 and September 2020. Each additional payment will be equal to half of their total initial PAYG withholding relief (i.e. the Boosting Cash Flow for Employers payment) up to a total of $50,000. This will be paid following the lodgment of their June 2020 and September 2020 activity statements.
Monthly lodgers will be eligible to receive the additional payment for the June 2020, July 2020, August 2020 and September 2020 lodgments. Each additional payment will be equal to a quarter of their total initial PAYG withholding relief (i.e. the Boosting Cash Flow for Employers payment) up to a total of $50,000. This will be paid following the lodgment of their June 2020, July 2020, August 2020 and September 2020 activity statements.
This means that eligible entities will receive at least $20,000, up to a total of $100,000 under both the PAYG withholding relief and the additional payment.
Please note that all other BAS obligations, including PAYG instalments and GST, must continue to be satisfied.
> Wages subsidy to support apprentices and trainees
The Government is supporting small business to retain their apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage paid during the 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.
Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).
Support will also be provided to the National Apprentice Employment Network, the peak national body representing Group Training Organisations, to co-ordinate the re-employment of displaced apprentices and trainees throughout their network of host employers across Australia.
Please note businesses must apply for this subsidy, it is NOT automatic.
Eligibility for subsidy
The subsidy will be available to small businesses employing fewer than 20 full-time employees who retain an apprentice or trainee.
The apprentice or trainee must have been in training with a small business as at 1 March 2020.
Employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will be eligible for the subsidy.
Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network (AASN) provider.
Deadline for applications
Employers can register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020.
Further information is available at:
* The Department of Education, Skills and Employment website at: www.dese.gov.au
* Australian Apprenticeships website at: www.australianapprenticeships.gov.au For further information on how to apply for the subsidy, including information on eligibility, contact an Australian Apprenticeship Support Network (AASN) provider.
> Increased access to working capital
Coronavirus SME Guarantee Scheme
The Government will establish the Coronavirus SME Guarantee Scheme to assist SMEs to get access to working capital.
Under the Scheme, the Government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs.
The Government’s support will enhance lenders’ willingness and ability to provide credit to SMEs with the Scheme able to support $40 billion of lending to SMEs.
The Scheme will complement the announcement the Government has made to cut red-tape to allow SMEs to get access to credit faster. It also complements announcements made by Australian banks to support small businesses with their existing loans.
This builds on the investment the Government is making to enable smaller lenders to continue supporting Australian consumers and small businesses, through providing the Australian Office of Financial Management (AOFM) an investment capacity of $15 billion to invest in wholesale funding markets used by small authorised deposit-taking institutions (ADI) and non-ADI lenders.
It further supports the Reserve Bank of Australia’s announcement of a $90 billion term funding facility for ADIs, that will reduce the cost of lending, with particular incentives to lend to small and medium enterprises.
The Government will guarantee up to $20 billion to support $40 billion in SME loans.
> Temporary relief for financially distressed businesses
The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive.
The package also includes temporary relief for directors from any personal liability for trading while insolvent.
The Corporations Act 2001 will be amended to provide temporary and targeted relief for companies to deal with unforeseen events that arise as a result of the Coronavirus.
FOR MORE INFORMATION For more information on the Australian
Government’s Economic Response to the Coronavirus visit
treasury.gov.au/coronavirus. Businesses can visit business.gov.au to find out
more about how the Economic Response complements the range of support
available to small and medium businesses.
NEXT STEPS We recommend business owners to book an advisory session with your LT accountant to maximise these opportunities.