Low Income Australian
The Australian Government will provide financial assistance to around 6.5 million lower-income Australians in response to the Coronavirus.
One-off payments of $750 will be paid to around 6.5 million lower-income Australians, including pensioners, other social security and veteran income support recipients and eligible concession cardholders.
This is to help them through this uncertain time and support economic activity.
The one-off payment will be paid from 31 March 2020.
Emma receives both Newstart Allowance and Family Tax Benefit as of 12 March 2020. As part of the Government’s economic response to Coronavirus, Emma is eligible for a single payment of $750.
Emma does not need to do anything, and this one-off payment will be made to her automatically from 31 March 2020 (subject to the passage of legislation).
Lift in the instant asset write-off to $150,000
Lifting the threshold to $150,000 (from $30,000) and expanding access to businesses with an aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.
The threshold applies on per asset basis, so eligible businesses can immediately write-off multiple assets.
Backing business investment
Offering businesses a 15-month investment incentive to support their business, by accelerating depreciation deductions. Key features of the incentive include:
- Deduction of 50 per cent of the cost of an asset, with existing depreciation applying to the balance of the asset’s cost.
- Available to businesses with aggregated turnover below $500 million, purchasing certain new depreciable assets.
Owen owns a company, ON Point Farms Pty Ltd, through which he operates a farming business in the Central Wheat Belt of Western Australia.
ON Point Farms Pty Ltd has an aggregated annual turnover of $25 million for the 2019-20 income year. On 1 May 2020, Owen purchases a second-hand tractor for $140,000, exclusive of GST, for use in his business. Under existing tax arrangements, ON Point Farms Pty Ltd is not able to immediately deduct assets costing more than $30,000 and instead would depreciate the tractor using an effective life of 12 years.
Choosing to use the diminishing value method, ON Point Farms Pty Ltd would claim a tax deduction of $3,899 for the 2019-20 income year. Under the new $150,000 instant asset write-off, ON Point Farms Pty Ltd would instead claim an immediate deduction of $140,000 for the purchase of the tractor in the 2019-20 income year, $136,101 more than under existing arrangements.
At the company tax rate of 27.5 per cent, Owen will pay $37,427.78 less tax in 2019-20. This will improve ON Point Farms Pty Ltd’s cash flow and help his business withstand and recover from the economic impact of the Coronavirus.
Employer Cashflow Subsidies
Helping small and medium businesses with aggregated annual turnover under $50 million to cover the costs of employee wages and salaries equal to 50 per cent of PAYG withheld for businesses that withhold tax, with a minimum of $2,000 and a maximum of $25,000 over six months.
Businesses that pay salary and wages but are not required to withhold tax will also receive the minimum payment of $2,000. This will be a tax-free payment, benefiting around 690,000 businesses employing 7.8 million people.
The payment will be delivered by the Australian Taxation Office (ATO) as a credit in the activity statement system from 28 April 2020 upon businesses lodging eligible upcoming activity statements.
• Eligible businesses that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 50 per cent of the amount withheld, up to a maximum payment of $25,000.
• Eligible businesses that pay salary and wages will receive a minimum payment of $2,000, even if they are not required to withhold tax.
Timing The Boosting Cash Flow for Employers measure will be applied for a limited number of activity statement lodgments.
The ATO will deliver the payment as a credit to the business upon lodgment of their activity statements.
Where this places the business 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.
Sarah’s Construction Business
Sarah owns and runs a building business in South Australia and employs 8 construction workers on average full-time weekly earnings who each earn $89,730 per year. In the months of March, April and June for the 2019-20 income year, Sarah reports withholding of $15,008 for her employees on each Business Activity Statement (BAS).
Under the Government’s changes, Sarah will be eligible to receive the payment on lodgment of each of her BAS.
Sarah’s business receives:
• A payment of $22,512 for the March period, equal to 150 per cent of her total withholding.
• A payment of $2,488 for the April period, before she reaches the $25,000 cap.
• No payment for the May period, as she has now reached the $25,000 cap.
• No payment for the June period, as she has now reached the $25,000 cap.
Sean’s Hairdresser Salon
Sean owns a hairdresser’s salon on the Gold Coast. He employs one apprentice who earns $37,970 per year and two stylists who both earn $44,260 per year. In the March and June 2020 quarterly BAS, Sean reports withholding of $4,570 for his employees.
Under the Government’s changes, Sean will be eligible to receive the payment on lodgment of his BAS.
Sean’s business will receive:
• A payment of $2,285 for the March quarter, equal to 50 per cent of his total withholding.
• A payment of $2,285 for the June quarter, equal to 50 per cent of his total withholding.
Sean’s business will receive a total payment of $4,570.
Sean may also benefit from the assistance for existing apprentices and trainees measure.
Tim’s Courier Run
Tim owns and runs a small paper delivery business in Melbourne, and employs two casual employees who each earn $10,000 per year. In the March and June 2020 quarterly BAS, Tim reports withholding of $0 for his employees as they are under the tax-free threshold.
Under the Government’s changes, Tim will be eligible to receive the payment on lodgment of his BAS.
Tim’s business will receive:
• A payment of $2,000 for the March quarter, as he pays salary and wages but is not required to withhold tax.
• No payment for the June quarter, as he has already received the minimum payment and he has no withholding obligation.
If Tim begins withholding tax for the June quarter, he would need to withhold more than $4,000 before he receives any additional payment.
If you would like to discuss how to maximise these benefits in your business contact our office, or feel free to book a meeting below.