What does the Australian Government stim­u­lus mean for you?

INNOVATION

As the Coronavirus pan­demic con­tin­ues to im­pact every­one’s lives across the globe, Governments around the world have been im­ple­ment­ing stim­u­lus pack­ages to help sup­port busi­nesses and em­ploy­ees dur­ing these dif­fi­cult times.

In this ar­ti­cle, we will ex­plore the Australian Government’s stim­u­lus re­sponse, where the money is go­ing, what the el­i­gi­bil­ity re­quire­ments are as a small to medium en­ter­prise and how the stim­u­lus may im­pact your op­er­a­tions.

How much is com­mit­ted and where is the money go­ing?

On March 30, the Australian Government an­nounced the fi­nal piece of its stim­u­lus pack­age re­sponse to the pub­lic in the form of the JobKeeper Payment. This brings the fis­cal re­sponse to the pan­demic to a stag­ger­ing $320 bil­lion, or around 16.4% of Australia’s an­nual GDP. This stim­u­lus is six times larger than the stim­u­lus pro­vided dur­ing the Global Financial Crisis.

JobKeeper Payment

The largest fis­cal re­sponse comes in the form of the JobKeeper Payment, cost­ing the bud­get an es­ti­mated $130 bil­lion. The pack­age is tar­geted at busi­nesses that have suf­fered a re­duc­tion in their turnover, giv­ing them ac­cess to a $1,500 per fort­night pay­ment that is passed on to the em­ployee to as­sist in pay­ing their wages. This pack­age will en­able em­ploy­ers to keep staff on which they would have oth­er­wise had to ter­mi­nate with­out ac­cess to the pack­age.

Boosting Cash Flow for Employers

The other ma­jor pack­age aimed at sup­port­ing the cash flow of Australian busi­nesses by pro­vid­ing el­i­gi­ble busi­nesses with tax-free cash flow boosts be­tween $20,000 and $100,000 and is es­ti­mated to cost the bud­get $31.9 bil­lion. These cash flow boosts will be pro­vided as cred­its through the ac­tiv­ity state­ment sys­tems on the lodg­ing pe­riod for that busi­ness, be that monthly or quar­terly. If you have lodged your most re­cent Business Activity Statement and are el­i­gi­ble, you have most likely al­ready seen the ini­tial cash flow boost hit your bank ac­count.

Asset Write-Offs

The fi­nal ma­jor pack­age busi­nesses can take ad­van­tage of come in the form of in­creas­ing the thresh­old for in­stant as­set write-offs from $30,000 to $150,000. The goals of this stim­u­lus are to sup­port busi­nesses in con­tin­u­ing to in­vest by en­abling a greater im­me­di­ate tax-write off, low­er­ing their over­all taxes they will have to pay. It is de­signed for en­abling in­no­va­tion in a dif­fi­cult cli­mate. This mea­sure is es­ti­mated to have a net cost of $700 mil­lion.

How to make the most of the Government ben­e­fits

As we’ll out­line fur­ther be­low, some stim­u­lus pack­ages have strict el­i­gi­bil­ity re­quire­ments. The in­stant as­set write off is not one of those. There is only one re­quire­ment to be met to take ad­van­tage of the in­crease in the in­stant as­set write-off. If your busi­ness has an ag­gre­gated an­nual turnover of less than $500 mil­lion (which is up from $50 mil­lion), you will be able to take ad­van­tage of the in­stant tax write-off.

While some busi­nesses may not be in a po­si­tion to in­vest fur­ther, it’s worth con­sid­er­ing if your busi­ness can make the most of in­cen­tives like the in­stant as­set write off. COVID-19 has high­lighted the need to ac­com­mo­date a re­mote work­ing en­vi­ron­ment. One par­tic­u­lar pain point for many busi­nesses has been soft­ware sys­tems that have been im­ple­mented as stop-gap so­lu­tions to con­tinue op­er­at­ing. With the in­stant as­set write off in­creas­ing to $150,000 there is a good op­por­tu­nity to cre­ate a cus­tom so­lu­tion that suits the unique processes of your com­pany.

If you’re con­sid­er­ing lever­ag­ing the in­stant as­set write off to build a soft­ware sys­tem for your busi­ness then let us know.

Who can ac­cess the stim­u­lus pack­age?

JobKeeper Payment

From March 30 to September 27, 2020, af­fected em­ploy­ers will be able to ac­cess the $1,500 pay­ment per em­ployee per fort­night. As a small busi­ness, if your turnover has fallen by or will likely fall bay 30% or more, you are con­sid­ered el­i­gi­ble for the JobKeeper Payment.

Whilst you may qual­ify as an af­fected busi­ness, it is also im­por­tant to con­sider which of your em­ploy­ees are el­i­gi­ble as part of your ap­pli­ca­tion for the pay­ment. The cri­te­ria for el­i­gi­ble em­ploy­ees are:

  • Employees cur­rently em­ployed by you (including those stood down or re-hired);
  • Were em­ployed by you on the 1st of March 2020;
  • Are a full-time, part-time, or long-term ca­sual;
  • Are a per­ma­nent em­ployee, or if a long-term ca­sual, not a per­ma­nent em­ployee of an­other busi­ness;
  • Are at least 16 years of age as of the 1st of March 2020;
  • Are an Australian Citizen, per­ma­nent visa or spe­cial cat­e­gory (subclass 444) visa holder on the 1st of March 2020;
  • Were a res­i­dent for Australian tax pur­poses on the 1st of March; and
  • Not re­ceiv­ing JobKeeper Payment from an­other busi­ness.

Boosting Cash Flow for Employers

The cash flow boost for em­ploy­ers re­quires no ap­pli­ca­tion and is cal­cu­lated based on your logged ac­tiv­ity state­ments and the Withholdings you must make as an em­ployer. To be con­sid­ered el­i­gi­ble, your busi­ness must be con­sid­ered a small to medium busi­ness:

  • Held an ABN on 12 March 2020 and is still ac­tive;
  • Has an ag­gre­gated an­nual turnover less than $50 mil­lion; and
  • Made el­i­gi­ble pay­ments that your busi­ness is re­quired to with­hold

Eligible pay­ments are:

  • Salary and wages
  • Director fees
  • Retirement or ter­mi­na­tion pay­ments
  • Compensation pay­ments
  • Voluntary with­hold­ing from pay­ments to con­trac­tors

If you meet these cri­te­ria, af­ter com­plet­ing your most re­cent ac­tiv­ity state­ments, you should find your cash flow pay­ments au­to­mat­i­cally cal­cu­lated and in­cluded as cred­its back to your busi­ness.

How will this im­pact my op­er­a­tion

In a per­fect world the Government’s plan would see the stim­u­lus help keep your op­er­a­tions as close to busi­ness as usual from be­fore the Coronavirus pan­demic. The JobKeeper Payment will en­able your busi­ness to keep your staff em­ployed by cov­er­ing all or part of their wages. The cash flow boost will pro­vide an in­stant cash in­jec­tion for your busi­ness. The as­set write-off will en­able you to con­tinue in­vest­ing in your or­gan­i­sa­tion by tak­ing ad­van­tage of the re­duced tax you will need to pay on new in­vest­ments.

It is im­por­tant to reach out to your trusted ac­coun­tant or fi­nan­cial of­fi­cer to dis­cuss your busi­nesses el­i­gi­bil­ity against the cri­te­ria to en­sure you are get­ting the most out of the var­i­ous stim­u­lus pack­ages.

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Oliver Armstrong

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