/ Breakdown of 2nd Federal Stimulus Package | Tamworth Business Chamber

Breakdown of 2nd Federal Stimulus Package

Thank you to Tamworth Business Chamber board member Stephen Maher for putting this information together. Website www.stephenamaherco.com.au

 

Coronavirus Federal Package 2

 SUMMARY OF THE ECONOMIC RESPONSE

The Government’s economic response will support households and business through the period ahead. It is designed to support businesses in managing short-term cash flow challenges, provide support to individuals, severely affected communities and regions, and to ensure the continued flow of credit in the Australian economy. The second set of economic responses which, combined with our previous actions, total $189 billion across the forward estimates, representing 9.7 per cent of annual GDP

 

  1. Support for individuals and households

 

Income support for individuals

Over the next six months, 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 Jobseeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit. The one week waiting period and asset test has been waived.

 

Payments to support households

The Government is providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders. The first payment will be made from 31 March 2020 and the second payment will be made from 13 July 2020. Around half of those that benefit are pensioners.

 

Temporary early release of superannuation

The Government is allowing individuals affected by the Coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21. Individuals will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.

 

Temporarily reducing superannuation minimum drawdown rates

The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for 2019-20 and 2020-21

 

Reducing social security deeming rates

On 12 March, the Government announced a 0.5 percentage point reduction in both the upper and lower social security deeming rates. The Government will now reduce these rates by another 0.25 percentage points.

 

As of 1 May 2020, the upper deeming rate will be 2.25 per cent and the lower deeming rate will be 0.25 per cent. The reductions reflect the low interest rate environment and its impact on the income from savings.

 

  1. Support for businesses

 

Boosting Cash Flow for Employers

The Government is enhancing the Boosting Cash Flow for Employers measure it announced on 12 March 2020. The Government is providing up to $100,000 to eligible small and medium-sized businesses, and not-for-profits (NFPs) that employ people, with a minimum payment of $20,000.

 

Small and medium-sized business entities with aggregated annual turnover under $50 million and that employ workers are eligible. NFPs, including charities, with aggregated annual turnover under $50 million and that employ workers will now also be eligible. This will support employment at a time where NFPs are facing increasing demand for services.

 

Under the enhanced scheme, employers will receive a payment (PAYGW Witholdings) 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. In addition, the minimum payment is being increased from $2,000 to $10,000.

 

An additional payment is also being introduced in the July — October 2020 period. Eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments they have received. This means that eligible entities will receive at least $20,000 up to a total of $100,000 under both payments. As previously announced for eligible SMEs that employ staff and calculated based on PAYG withholdings. Businesses will receive payments of 100 per cent of their Business Activity Statements or Instalment Activity Statement from 28 April with refunds to then be paid within 14 days. The ATO will deliver the payment as a credit to the business upon lodgement of their activity statements. Where this places the business in a refund position, the ATO will deliver the refund within 14 days. Monthly lodgers will receive their credits or refunds for March 2020, April 2020, May 2020 and June 2020. Quarterly Lodgers will receive their credits in Quarter 3 March 2020 BAS and quarter 4 June 2020 BAS

 

 

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 to initiate bankrupt proceedings against an individual as well as temporarily increasing the time companies and individuals have to respond to statutory demands they receive. The package also includes temporary relief for directors from any personal liability for trading while insolvent, and providing temporary flexibility in the Corporations Act 2001 to provide targeted relief from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.

 

The Government will make a number of changes to the personal insolvency system regulated by the Bankruptcy Act 1966. The threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will temporarily increase from its current level of $5,000 to $20,000. This will apply for six months. Failure to respond to a bankruptcy notice is the most common act of bankruptcy. The time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.

 

The ATO will tailor solutions for owners or directors of business that are currently struggling due to the Coronavirus, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.

 

Increasing the instant asset write-off

The Government is increasing the instant asset write-off threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.  

 

Backing business investment

The Government is introducing a time-limited 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation (in excess of the $150,000 instant asset write off), with existing depreciation rules applying to the balance of the asset’s cost.

 

Supporting apprentices and trainees (unchanged from last week)

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 for 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 that employs that apprentice. 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.

 

Support for Coronavirus-affected regions and communities

The Government will set aside $1 billion to support regions most significantly affected by the Coronavirus outbreak. These funds will be available to assist during the outbreak and the recovery. In addition, the Government is assisting our airline industry by providing relief from a number of taxes and Government charges estimated to total up to $715 million.

 

  1. Supporting the flow of credit

 

Support for immediate cash flow needs for SMEs

Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50 per cent to SME lenders to support new short-term unsecured loans to SMEs. 

 

Quick and efficient access to credit for small business

The Government is cutting red tape by providing a temporary exemption from responsible lending obligations for lenders providing credit to existing small business customers. This reform will help small businesses get access to credit quickly and efficiently.

 

Reserve Bank of Australia — Supporting the flow and reducing the cost of credit

The Reserve Bank of Australia (RBA) announced a package on 19 March 2020 that will put downward pressure on borrowing costs for households and businesses.

 

The RBA announced a term funding facility for the banking system. Banks will have access to at least $90 billion in funding at a fixed interest rate of 0.25 per cent. This will reinforce the benefits of a lower cash rate by reducing funding costs for banks, which in turn will help reduce interest rates for borrowers. To encourage lending to businesses, the facility offers additional low-cost funding to banks if they expand their business lending, with particular incentives applying to new loans to SMEs.

 

In addition, the RBA announced a further easing in monetary policy by reducing the cash rate to 0.25 per cent. It is also extending and complementing the interest rate cut by taking active steps to target a 0.25 per cent yield on 3-year Australian Government Securities.

 

 

 

Australian Prudential Regulatory Authority — Ensuring banks are well placed to lend

The Australian Prudential Regulatory Authority has announced temporary changes to its expectations regarding bank capital ratios. The changes will support banks’ lending to customers, particularly if they wish to take advantage of the new facility being offered by the RBA.

 

PACKAGE IMPLEMENTATION

The Government is moving quickly to implement this package. To that end, a package of Bills is being introduced into Parliament on 23 March 2020 for urgent consideration.

Subject to passage of the Bills through Parliament, the Government will then move to immediately make, and register, supporting instruments.

FOR MORE INFORMATION

For more information on the Australian Government’s Economic Response to Coronavirus visit treasury.gov.au/coronavirus. 

 

Timing of Assistance DATE

SUPPORT

Immediately, with deductions to be included in 2019-20 tax returns

Increased instant asset write off

Immediately

Temporarily reduced minimum drawdown rates for superannuation

Immediately, with deductions to be included in 2019-20 tax returns

Backing business investment — accelerated depreciation

As soon as practicable

Support for Coronavirus-affected regions and communities

From 31 March 2020

First round of $750 payments to support households

Applications from early-April

Assistance for existing apprentices and trainees

Applications from mid-April 2020

Temporary early release of superannuation

From 27 April 2020

Income support and a Coronavirus supplement

From 28 April 2020

First phase of Boosting Cash Flow for Employers

From 1 May 2020

Increased transfer payments from reduced deeming rates

From 13 July 2020

Second round of $750 payments to support households

From 21 July 2020

Second phase of Boosting Cash Flow for Employers

For more information see below-

  1. Overview – economic response to Coronavirus. Click Here
  2. Fact sheet - supporting cashflow. Click Here
  3. Fact sheet - supporting temporary relief for financially stressed businesses. Click Here
  4. Fact sheet – providing support for retirees to manage market volatility. Click Here
  5. Fact sheet – payments to support households. Click Here
  6. Fact sheet – income support for individuals. Click Here
  7. Fact sheet – early access to super. Click Here
  8. Fact sheet – delivering support for business investment. Click Here
  9. Fact sheet - cash flow assistance for individuals. Click Here
  10. Fact sheet – Assistance for severely affected regions. Click Here