Federal Government | Economic Stimulus Package - Second Stage Release

The Federal Government has announced its second stage release to their Economic Stimulus Package in response to COVID-19.

The further $66.1 billion support package aims to provide additional financial aid to individuals and small businesses impacted by the current Coronavirus outbreak in Australia.

We highlight the key announcements of the extended Stimulus package below:

'Boosting Cash-Flow for Employers' - SME Business & Not-for-Profit Support

Under the new release, the Government has announced further assistance through their 'Boosting Cash-Flow for Employers' program, providing increased financial aid to Small-to-Medium Businesses and Not-for-Profit organisations.

As part of the second stage package, businesses (including Not-for-Profits & Charities) with a turnover under $50 million that employ staff may now be eligible for up to $100,000 (increased from $25,000) in tax-free payments, with a minimum payment of $20,000 (up from $2,000).

The implementation of this enhanced scheme will be delivered in two payment phases - 'initial payment' and 'additional payment':

  1. Employers will receive an initial payment equal to 100% of their salary and wage (PAYG) withheld (up to $50,000), when businesses lodge their Activity Statements by 28 April (March Quarter) and 28 July (June Quarter) quarterly due dates.
  2. An additional payment, equal to the 'initial payment', will be made after businesses lodge their BAS by 28 July (June Quarter) and 28 October (September Quarter) quarterly due date.

Furthermore, if a business is not required to withhold tax but pay salary and wages, the business may still be eligible for a minimum 'payment'/tax-credit of $20,000.

[Please note, the 'initial' & 'additional' "payments" are tax-credits issued by the Australian Tax Office (ATO).]

We've also included an example (below) of how the program will benefit your business:

Sarah's Construction Business

Sarah owns and runs a building business in South Australia – employing 8 construction workers on average full-time weekly earnings. Each worker earns $89,730 per year.

In the months 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 ‘Boosting Cash-Flow for Employers’ program on lodgment of each of her BAS.

Sarah’s business receives:

  • A credit of $45,024 for the March period, equal to 300 per cent of her total withholding.
  • A credit of $4,976 for the April period, before she reach the $50,000 cap.
  • No payment for the May period, as she has now reached the $50,000 cap
  • An additional payment/tax credit of $12,500 for the June period – equal to 25 per cent of her total ‘Boosting Cash-Flow for Employers’ payments
  • An additional payment of $12,500 for the July period – equal to 25 per cent of her total ‘Boosting Cash-Flow for Employers’ payments.
  • An additional payment of $12,500 for the August period – equal to 25 per cent of her total ‘Boosting Cash-Flow for Employers’ payments.
  • Additional payment of $12,500 for the September period – equal to 25 per cent of her total ‘Boosting Cash-Flow for Employers’ payments.

 

Coronavirus SME Guarantee Scheme

As part of the new announcement, the Government will establish the 'Coronavirus SME Guarantee Scheme', which will support SME businesses to get access to working capital to help mitigate the impact of COVID-19.

Under this scheme, the Government will provide a guarantee of 50% to SME lenders for new unsecured loans provided to SME businesses (with a turnover up to $50 million) to be used for working capital purposes.

It will apply to new loans from early April to 30 September 2020, and subject to lenders' credit assessment processes.

Loans will be up to three years, with an initial six-month loan repayment holiday and with a limit of $250,000 per borrower.

We've highlighted measures implemented by the 'Big-Four' banks in response to the Economic Stimulus Package - Second Stage announcement:

Commonwealth Bank
  • Small businesses (Australian businesses with less than $50 million turnover) can access an unsecured business loan through the Commonwealth Bank for three years up to $250,000.
  • Interest rates on unsecured small business loans will be up to 500bps lower than current rates.
  • No interest will apply unless the loan is used, no repayments will be required for six-months, and there will be no establishment or monthly account fees.
Westpac
  • Westpac will offer an unsecured three-year term loan up to $250,000 to all business customers with a turnover of less than $50 million.
  • This offer will be available with a six-month payment free option, which will be capitalised at the end of the six-month period.
  • The loan will be available to both existing and new customers that meet the eligibility criteria until the end of September 2020.
  • These loans will be offered at a 4 per cent discount to Westpac's current unsecured small business loan.
ANZ ANZ strongly support the Stimulus Package as a whole, and are currently working with the Government on further details to be released in the coming days.
NAB NAB strongly supported and advocated for the establishment of this scheme. NAB will work with the Government to implement these measures as quickly as possible and help ensure everything that can be done is being done to support Australians through this.

 

Superannuation

The second stage release outlines eligible individuals will be able to access up to $10,000 of their Superannuation before 1 July 2020.

A further amount of up to $10,000 will be available from 1 July 2020, but for only three months after that time.

There will also be a temporary 50% reduction in Superannuation Minimum Drawdown requirement for account-based pensions in 2019-20 and 2020-21.

Amounts released under this new ground for early release will be paid tax free and will not affect Centrelink or Veterans' Affairs payment eligibility.

Individuals

  • Coronavirus Supplement Support

The Government is temporarily expanding eligibility to income support payments and establishing a new, time-limited ‘Coronavirus Supplement’ to be paid at a rate of $550 per fortnight.

This will be paid to both existing and new recipients of the JobSeeker Payment, Youth Allowance jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.

The ‘Coronavirus Supplement’ will be paid for the next six months, and eligible income support recipients will receive the full amount of Supplement on top of their payment each fortnight.

  • Household Support Payment

Under the new announcement, the Government will provide a $750 payment to Social Security, Veteran Income Support recipients, and eligible Concession Card holders - additional to the $750 payment previously announced on 12 March 2020.

The payment will be made to the eligible recipients outlined above, except for those who are receiving an income support payment that is eligible to receive the ‘Coronavirus Supplement’.

The first payment will be made from 31 March 2020 and the second payment will be made from 13 July 2020.

For More Information

For more information on the second stage Economic Stimulus Package, please contact the Archer Gowland office on (07) 3002 2699.
Ian Walker

Written by Ian Walker

As Executive Chairman, Ian is a trusted Professional Services practitioner with over 25 years’ experience within the Accounting industry. Working closely with his clients to form long-term partnership, Ian provides high-level strategic advice across all areas of Accounting, Business Advisory, Superannuation, and Taxation. Ian is proud to partner with many SME & Family-owned businesses to provide comprehensive and bespoke strategies to help address the challenges and complexities they encounter through day-to-day operations & management.

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