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Last updated: 1 June 2020

Introduction

The Federal Government announced an economic stimulus package worth $17.6 billion in response to COVID-19 on 12 March 2020 (Stage 1). A further economic stimulus package worth $66.1 billion was announced on 22 March 2020 (Stage 2).

Stage 1

Stage 1 of the stimulus package includes four key parts:

Support for business investment

The first part of Stage 1 is targeted at supporting business investment. This includes an increase in the instant asset write-off threshold from $30,000 to $150,000. The instant asset write-off will be available to businesses with an aggregated annual turnover of less than $500 million (increased from $50m). This will be available from 12 March 2020 until 30 June 2020 for new or second-hand assets first used, or installed ready for use in this timeframe.

Additionally, the Government will support business investment by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct an additional 50% of the asset's cost on installation. This measure will be available until 30 June 2021 and will only apply to new depreciable assets (ie. Division 40 assets).

Cash flow assistance for businesses

The second part of Stage 1 is aimed at providing cash flow assistance to businesses to help cover the costs of employee wages and salaries.

The Government has proposed a tax-free payment of between $2,000 and $25,000 to businesses with a turnover of less than $50 million (these businesses must be withholding tax to the Australian Taxation Office (ATO) on their employee salary and wages). However, this has now been superseded by its announcement of Stage 2 of the economic stimulus.

The Government has also proposed a wage subsidy of 50% for apprentice and trainee wages to eligible employers, available from 1 January 2020 to 30 September 2020.

Stimulus payments to households

The third part of Stage 1 is a one-off $750 stimulus payment to pensioners, social security, veteran and other income support recipients and eligible concession card holders. The payment will be tax-free and  paid from 31 March 2020.

Assistance for severely-affected regions

The fourth part of Stage 1 will assist regions severely affected by the Coronavirus outbreak and will support the tourism, agriculture and education sectors. This includes a waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and Commonwealth National Parks.

Stage 2

Stage 2 of the stimulus package includes three key parts:

Support for households

The first part of Stage 2 includes the following:

  • a "Coronavirus supplement" to be paid at a rate of $550 per fortnight to existing and new recipients of the JobSeeker Payment, Youth Allowance, Parenting Payment, Farm Household Allowance and Special Benefit, which will be paid over the next six months;
  • a second $750 stimulus payment to pensioners, social security, veteran and other income support recipients and eligible concession card holders. This payment will be tax free and will be paid from 13 July 2020;
  • individuals in financial stress as a result of the Coronavirus will be able to access up to $10,000 of their superannuation in 2019/20 and a further $10,000 in 2020/21; and
  • a reduction of the social security deeming rates by a further 0.25% to reflect the rate reductions by the Reserve Bank of Australia.

Assistance for businesses

The second part of Stage 2 is an update to that in Stage 1. It is targeted at small- and medium-sized businesses, and not-for-profits (including charities). These businesses will now receive an increased tax-free payment of between $10,000 and $50,000. As noted above, this will be available as a credit in the activity statement system from April 2020. This payment is known as the Boosting Cash Flow for Employers Payment (BCFEP).

An Additional Payment will also be made as a credit through the activity statement system starting from July 2020 through to October 2020 to eligible entities which is equal to the BCEFP received. This means that a business could receive up to a maximum of $100,000 (after totalling both the BCEPF and the Additional Payment).

The timing of delivery of the BCFEP and the Additional Payment will be staggered according to whether the relevant business lodges their activity statements on a monthly or quarterly basis.

Regulatory protection and financial support for businesses

The third part of Stage 2 is aimed at supporting small and medium enterprises to get access to working capital. The government has stated that it will guarantee 50% of new loans issued by eligible lenders to small and medium enterprises with the following terms:

  • maximum of $250,000 per borrower;
  • term of up to three years, with an initial six-month repayment holiday; and
  • in the form of unsecured finance.

Further, the Government is also temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the timeframe for companies to respond to statutory demands received.

JobKeeper Payment

JobKeeper payments received by eligible businesses will be assessable income of the business and the subsequent payments to employees will be deductible payments according to the general rules.

However, JobKeeper payments will not be subject to GST. 

All States and Territories have now introduced payroll tax exemptions in respect of wages subsidised by JobKeeper payments. The application of such payroll tax exemptions will vary depending on the jurisdiction and particular circumstances of the employer and employee.

Further details on eligibility for the JobKeeper Payment scheme are here.