Coronavirus: Guiding you through the crisis

Further to the Stimulus package announced late last week, a summary of the application to you and your business is as follows:

 

Asset write off threshold uplift 

1. The government has confirmed on Thursday that the instant asset write off threshold would increase to $150,000 and be extended to businesses with annual turnover of up to $500 million (up from $50 million);
2. These measures would be effective from 12/03/2020;
3. This will apply to new and used equipment;
4. This threshold increase is temporary and has been increased until 30 June 2020; and
5. The rules will allow businesses to immediately write off the cost of assets under $150,000 and claim a tax deduction for the business portion of the expense in the first year the asset is used or installed ready for use by 30 June 2020.

 

Specific notes:

As this is an increase in deductions, to see the cash benefit more immediately we suggest variations in June (or March if applicable) PAYG instalments. This is an acceleration in tax deduction so for any business not in a taxable position there would be no cash payment.

The benefit is an immediate depreciation deduction. That means an asset has to be purchased so it is anticipated a finance leased asset would not be eligible. 

It is likely depreciation limits for luxury cars will still apply (currently limited to $57,781) so you would not get the full benefit on a $100k car.

 

Accelerated depreciation deductions

1. Businesses with a turnover of less than $500 million can accelerate their depreciation deductions by being able to (effective 12/03/2020) deduct an additional 50% of the asset cost in the year of purchase;
2. Applies to new, not used assets; and
3. This incentive is in place until 30 June 2021.

 

As this is an increase in deductions, to see the cash benefit more immediately we suggest variations in PAYG instalments for the respective quarter the asset is acquired through forecasting the reduction in taxable income. This is an acceleration in tax deduction so for any business not in a taxable position there would be no cash payment. 

 

Supporting apprentices and trainees 

1. Eligible employers (one that has less than 20 full time employees and retains an apprentice or trainee) can apply for a wage subsidy of 50% of the apprentices or trainee’s wage paid during the 9 months from 1 January 2020 to 30 September 2020;
2. Employers will be reimbursed up to a maximum of $21k per eligible apprentice or trainee ($7k per qtr);
3. Apprentice or trainee must have been in training with the small business as at 1 March 2020;
4. Employers can access the subsidy after successfully going through an eligibility assessment undertaken by the Australian Apprentice Support Network (“AASN”); and
5. Registrations open from early April 2020, with final claims for payment lodged by latest 31 December 2020.

 

PAYG Assistance

1. Provide between $2,000 to $25,000 back to businesses, as a form of a cash flow support. This payment will be tax-free;
2. Small and medium sized business entities with aggregated annual turnover of less than $50 million that employ workers will be eligible. Turnover will generally be based on the prior year turnover;
3. The payment will be credited to the businesses integrated client account from 28 April 2020 upon businesses lodging eligible upcoming activity statements. If this delivers a net refund position, the refund will be deposited within 14 days;
4. Businesses that withhold PAYG, will receive a payment equal to 50% of the total amount withheld – up to a maximum of $25,000;
5. Businesses that are not required to withhold PAYG but pay salary a wage, will receive a minimum payment of $2,000;
6. Quarterly lodgers will be eligible to receive the payment for the March and June 2020 quarters only; and
7. Monthly lodgers will be eligible to receive the payment for March, April, May and June 2020 lodgement. In an effort to bring forward the benefit, a 150% gross up is to be provided in the March 2020 activity statement lodgement to balance the treatment against quarterly lodgers.

 

ATO Administrative Assistance

In addition to the above (which will be legislated), the ATO will be implementing other measures to assist businesses including:

• Deferring by up to four months the payment date of amounts due through activity statements (including PAYG instalments), income tax assessments and fringe benefit tax assessments;
• Allow businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to;
• Allowing businesses to vary PAYG instalments to nil for the March 2020 quarter and claim a refund for September and December quarters

These measures will not be automatically implemented so application to the ATO will be required.

 

Note, there are no measures to assist or allow deferral for superannuation obligations. These must continue to be met by respective deadlines.

We hope this information has been helpful, if you have any questions or concerns please feel free to reply to this email or contact us anytime on 02 8908 3444 or send us a message here.