Over the past few weeks, the COVID-19 Pandemic has created major disruption to our wellbeing, businesses and ways of life. To help Australians get through the impacts of COVID-19, the Government has put a range of measures in place. Here is a summary of the key measures and how they could help:
- The Instant Asset Write-Off: The write off has been increased so that businesses potentially pay less tax – there is an incentive to buy new assets sooner rather than later.
- Accelerated Depreciation: Businesses are better off when buying new assets, for the next 15 months accelerated deprecation means businesses potentially pay less tax.
- A Government Guarantee for SME loans up to $250k: Encourages the banks to keep lending to smaller businesses.
- Boosting Cashflow for Employers: A package providing up to $100k as a credit from the ATO. This has been designed to help keep businesses afloat in these tough times.
- The Government is helping businesses keep their apprentices and trainees with a 50% subsidy for wages paid to apprentices/trainees.
Disclaimer: The following is not tax advice. Please speak with your accountant to see how the economic stimulus measures will apply to your own business.
As at March 2020
More details at: treasury.gov.au/coronavirus
1. The Instant Asset Write-Off
If a business purchases an asset between the 12th of March 2020 and the 30th of June 2020, the Instant Asset Write-Off lets them claim an immediate deduction for 100% of the cost in their 2019/20 tax return. This is not a tax refund or cash payment; it simply reduces the tax paid for 2019/20.
- The write off has now been increased to assets costing up to $150,000 (ex GST). Previously this was only up to $30,000.
- More businesses can now claim this; businesses that have an aggregated turnover of less than $500m can access this write off.
- This can be used for both new and used assets that are purchased and installed ready for use between the 12th of March and 30th June 2020.
- This can be applied to more than one asset, there is no limit to the number of assets for the write off.
- This is only available until the 30th of June 2020. From the 1st of July 2020 it reverts to $1,000 for businesses with turnover of less than $10 million.
Here is a general example that explains how this could save a business money. You should speak with your accountant to see how the write-off will apply to your business.
2. Accelerated depreciation for new assets
To be better off when buying new assets, the Government is allowing businesses to significantly increase the depreciation they can claim – and therefore pay less tax.
- This is for new assets over $150,000 in 2019/20
- And all new assets purchased in 2020/21
- Businesses can now depreciate 50% of the cost of a new asset, with existing depreciation applying to the balance of the asset’s cost.
- This is only available for the 15 months between the 12th of March 2020 and the 30th of June 2021. The asset needs to have been purchased and installed in this timeframe.
- This is available to businesses with aggregated turnover below $500 million.
- This is only for new assets that the ATO allows businesses to depreciate under Division 40 of the Income Tax Assessment Act 1997 (i.e. plant & equipment). Always check with your accountant.
Here is a general example of what this could mean. You should speak with your accountant to see how accelerated depreciation could apply to your business.
3. The government will guarantee unsecured loans up to $250,000
The Government is encouraging the Banks and Lenders to keep lending with a 50% guarantee scheme. This has been put in place to encourage lending to SMEs (businesses with a turnover of up to $50m).
- The loans will be from the Bank or Lender (not the Government). While the Government will guarantee 50% of the loan, it is still up to the lender to approve and provide the funding.
- The interest rate will be up to the lender.
- The Government’s intent is for these to be facilities that only have to be drawn if needed. This would mean that the business would only incur interest on the amount they draw down.
- Banks are expected to start offering this from early April.
4. Boosting cashflow for employers
Government will now provide a credit of between $20k and $100k to help keep small and medium businesses afloat and keep their staff.
- Businesses receive a credit equal to 100% of PAYG withheld on their BAS, with a minimum credit of $20,000.
- This is for businesses that employ staff and were established prior to the 12th of March If businesses are eligible, they do not need to separately apply and upon lodgement of the activity statement, their first amount will automatically be credited to the account but no earlier than the 28th of April 2020.
- This is available to businesses and not-for-profits that employ staff and have an aggregated annual turnover under $50m.
- You should speak to your accountant about your eligibility and for this and the timing for payment you may be able to receive.
- More information can be found here: https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/In-detail/Boosting-cash-flow-for-employers/
5. Helping businesses keep their apprentices and trainees
The Government is helping businesses to keep apprentices and trainees on with a wage subsidy.
- Businesses can apply for a subsidy of 50% of the wage that they paid between the 1st of January 2020 and the 30th of September 2020.
- This would be up to a maximum of $21k per apprentice/trainee – paid out at $7k per quarter.
- Available to small businesses with fewer than 20 full-time employees that keep the apprentice/trainees on.
- The apprentice/trainee needs to have been in training in the business as at the 1st of March 2020.
- Employers can register for the subsidy from early April 2020. Final claims for payment must be lodged by the 31st of December 2020.
Further information is available at:
- The Department of Education, Skills and Employment website at: dese.gov.au
- Australian Apprenticeships website at: australianapprenticeships.gov.au
- For further information on how to apply for the subsidy, including information on if you are eligible, you should contact an Australian Apprenticeship Support Network (AASN) provider.
Our team here at Linx Finance Australia are dedicated to helping our clients work through these unprecedented times.
If there is anything we can do to help, please give your Broker a call.