Prime Minister Scott Morrison announced an economic stimulus package on March 12 in response to the coronavirus pandemic. The goal is to minimise the impact of the pandemic on Australian businesses and the economy as a whole and includes business and individual elements. This article focuses on the business elements.
Cash flow assistance for businesses
The economic stimulus package has two measures designed to boost cash flow for eligible Australian businesses:
- tax-free payments, and
- wage subsidies for businesses that employ apprentices or trainees.
We’ll now look at both of these measures in more detail.
The federal government will provide tax-free payments of between of between $2,000 and $25,000 to eligible businesses who employ staff and who have an annual turnover less than $50 million.
Employers who lodge a BAS or IAS for the periods March 2020 through to June 2020 will be eligible to receive the payment of 50% tax refund of the amount of PAYG withholding up to a maximum of $25,000 on their first business activity statement (BAS) or income activity statement (IAS) submitted after 28 April this year. The refund will be paid within 14 days.
Businesses who employ apprentices or trainees between 1 January 2020 and 30 September 2020 will be able to apply for a 50% subsidy for each apprentice or trainee’s wage.
Delivering support for business investment
The stimulus package has two tax deduction incentives to support investment by Australian businesses:
- an increase to the instant asset write-off threshold, and
- a provision to accelerate tax deductions for depreciation.
We’ll now look at both of these initiatives in more detail.
Increased instant asset write-off threshold
The instant asset write-off threshold has been immediately increased from $30,000 to $150,000 for the current financial year ending June 30, 2020. This means that businesses will be able to write-off assets purchased up to the value of $150,000 as tax deductions.
The government has also increased the annual turnover eligibility threshold for the instant asset write-off scheme as part of the stimulus package. Businesses with a turnover of up to $500 million will be eligible to claim instant asset write-off tax deductions up until June 30 this year. Previously, only businesses with a turnover of up $50 million were eligible.
Accelerated tax deductions for depreciation
For new assets purchased, 50% of their purchase price will be able to be depreciated, provided it was acquired after 12 March 2020 and it first used or installed by 30 June 2021. Please note that second-hand assets are ineligible and there is no minimum asset cost to claim the deduction.
The bottom line
There’s no doubt that the coronavirus pandemic will have an effect on many Australian businesses and the economy. Unfortunately, no one has a crystal ball to predict just how big an impact it will have.
How we can help
One of our experienced tax advisors at Wilson Pateras would be happy to take the time to understand your business and provide you with appropriate advice on how you may be able to take advantage of the economic stimulus package. Our goal is to proactively work with our clients to, as best as possible, minimise the impact of these challenging times and enable clients and businesses to thrive once the market bounces back.
Please contact us today!