The Federal Government has today announced a raft of measures to assist Australian businesses and individuals in response to the likely economic impact of COVID-19. The $17.6 billion package is intended to protect the economy by maintaining confidence, supporting investments and keeping people in jobs.
Depreciating assets costing up to $150,000 (up from $30,000) purchased between 12 March 2020 – 30 June 2020 will be fully deductible in the year ended 30 June 2020. This measure applies to both new and second-hand depreciating assets.
Support for Individuals
We believe the measures announced today will encourage new spending by many businesses on new assets and keeping their workforces intact throughout the expected turbulent times ahead.
The key measures are highlighted below.
Support for Businesses
Instant asset write-off - effective immediately, until 30 June 2020
Depreciating assets costing up to $150,000 (up from $30,000) purchased between 12 March 2020 – 30 June 2020 will be fully deductible in the year ended 30 June 2020. This measure applies to both new and second-hand depreciating assets.
Car write-offs may still be subject to the luxury car limit ($57,581).
Businesses with turnover of up to $500m are eligible (previously applied to businesses with turnover of up to $50m)
The payments will be credited to the relevant Quarterly (March 2020 & June 2020) or Monthly (March 2020, April 2020, May 2020 & June 2020) activity statements of eligible businesses.
Accelerated Depreciation - effective immediately, until 30 June 2021
All other new (but not second-hand) depreciating assets purchased between 12 March 2020 – 30 June 2021 will be eligible for a 50% upfront deduction and the remaining 50% will be depreciated at existing rates.
Unlike the instant asset write-off, there is no cap on the expenditure eligible for this measure.
Businesses with turnover of up to $500m are eligible. This is an entirely new concession.
Cash-flow boost to employers – covers amounts withheld between 1 January- 30 June 2020
A tax-free payment of between $2,000 - $25,000 to businesses with turnover of less than $50m who employ staff.
Wage subsidy for employing apprentices
A wage subsidy of 50% of apprentice/trainee wages for up to 9 months between 1 January 2020 – 30 September 2020.
To be capped at $21,000 ($7,000 per quarter) per eligible apprentice or trainee and only available to small businesses with fewer than 20 full-time employees.
Businesses will need to register for the subsidy with the Department of Educations, Skills & Employment starting early April 2020 and lodge their claims by 31 December 2020.
- Tax-free once-off payment of $750 to recipients of social security, veteran and other income support. Effective from 31 March 2020.
- Sickness Allowance (to be replaced by a new JobSeeker Payment from 20 March 2020) for some employees (e.g., casuals) who do not have any employer leave entitlements.
Support for severely impacted regions
- Set-aside $1bn to support regions severely impacted by the economic impacts of COVID-19 – e.g., tourist, agricultural and education regions.
- New and existing Government programs to be implemented by the Department of Trade, Tourism and Investment over coming months.
- The ATO will provide administrative relief for some tax obligations for impacted individuals and businesses in such regions.
Wrap up
The Federal Government confirmed earlier today that its projected FY20 Budget surplus is no longer viable. The coming weeks and months will indicate the success or otherwise of these measures in stimulating the Australian economy and the on-going impact of the Federal Budget position. If you have any questions regarding the above, please contact our Tax Director Raffi Tenenbaum or your Prosperity adviser.
