GUEST BLOG – COVID-19 STIMULUS PACKAGES IN A NUTSHELL

GUEST BLOG – COVID-19 STIMULUS PACKAGES IN A NUTSHELL

On the 12th of March the Government announced the below packages to assist businesses during the Coronavirus impact.  These packages are currently being formally legislated at the end of the month and are available between the time period 12thof March 2020 to 30thof June 2020. What does the Covit-19 stimulus package mean to you and your Business in Summary:

  1. ENHANCING THE INSTANT ASSET WRITE-OFF:

Previous to the announcement the Instant Asset Write-Off was $30,000.00 for Businesses.  It has now been increased to $150,000.00 for new or second-hand assets first used, or installed ready for use during the time period.  The Instant Asset Write-Off have been increased to include business with annual turnover of less than $500 million (up from $50 million turnover). 

  • WHAT DOES THIS MEAN FOR BUSINESSES:

It means that a Business can purchase an asset up to the value of $150,000.00 and instead of depreciating over the lifespan of the asset.  It can be instantly depreciated in the first year to help reduce potential profits made by a business and help reduce any potential tax payable by a Business also. The threshold is calculated per item not individual items added together to make $150,000.00.  So, the write-off occurs per asset purchased during the time period.

  • WHAT DO YOU NEED TO DO:

Provide a copy of the receipt as normal for the asset/s you have purchased during the time period.  Ensure that you have entered/reported the item into your software, so it is picked up during tax time.  If your Accountant can’t see it, they won’t know you purchased it.  Also, ensure that you have reported this asset in your Activity Statement if it was subject to a GST credit so you can receive the appropriate GST credit if applicable.

  1. BACKING BUSINESS INCENTIVE:

The Government is introducing a time limited 15-month investment incentive to support business investment and economic growth over a short term, by accelerating depreciation deductions.  A deduction of 50% of the cost of an eligible asset on installation will apply with existing depreciation rules applying to the balance of the assets cost. 

This incentive applies to businesses with an aggregated turnover below $500 million.  Eligible assets are new assets that can be depreciated under Division 40 of the Income Tax Assessment Act 1997.  Which basically include (plant, equipment and specified tangible assets like patents). It DOES NOT apply to second-hand Division 40 assets, buildings and capital works, depreciable under Division 43.  For clarify or more information you please check with your Accountant before buying an asset to confirm whether you are eligible for this package or not.

  • WHAT DOES THIS MEAN FOR BUSINESSES:

It allows them to receive a 50% reduction as mentioned above off the cost of an eligible asset and the rest will be depreciated.  Again it can help reduce potential profits made by a business and help reduce any potential tax payable by a Business also

  • WHAT DO YOU NEED TO DO:

Provide a copy of the receipt as normal for the asset/s you have purchased during the time period.  Ensure that you have entered/reported the item into your software, so it is picked up during tax time.  If your Accountant can’t see it, they won’t know you purchased it.  Also, ensure that you have reported this asset in your Activity Statement if it was subject to a GST credit so you can receive the appropriate GST credit if applicable.

  1. BOOSTING CASH FLOW FOR EMPLOYERS:

The ATO and Federal Government have created this package to help Businesses that employ Staff during the time period.  The Employer will be credited 50% of PAYG Withholding if they have employees during March 2020 and June 2020 Quarter. So, if you withhold $5000, ATO will pay $2,500 as credit in your GST/BAS Activity Statement ATO Account. This amount will be capped at $25,000.00 during the time period.  Eligible Businesses are Small and Medium Sized Business entities with aggregated annual turnover less than $50 million.  They will base this requirement on prior year turnover.

  • WHAT DOES THIS MEAN FOR BUSINESSES:

It means that Businesses will receive 50% credit off what they would normally owe in PAYG to the Australian Taxation Office. This amount is capped at $25,000.00 as mentioned above and has to be during the time period mentioned above. This amount is tax free.

Businesses that pay salary and wages will receive a minimum payment of $2,000, even if they are not required to withhold tax.  This will be credited to your GST/Bas Activity Statements ATO account.  You will receive these credits if you are monthly lodger between March 2020, April 2020, May 2020 or June 2020 GST/BAS Activity Statement reporting. 

For Quarterly reporters you will receive credits for the Quarters ending March 2020 and June 2020 when you have lodged your GST/BAS Activity Statements.

  • WHAT DO YOU NEED TO DO:

Report as normal, DO NOT halve the PAYG payment or you will be stuck at the end of financial year paying the shortfall because you have under reported.  Report as normal or ask your bookkeeper to report as normal the ATO will do the rest.  If you did not employ employees in the prior year but do this financial year. Please ensure to contact the ATO or ask your Accountant or Bookkeeper to contact the ATO if you have not received the credit to get them to apply the credit during the time period.

  1. SIX MONTH PAYMENT DEFERRALS FOR SMALL BUSINESS:

It was announced on the 20thof March 2020 that Small Business will now be entitled to a 6 x month loan repayment deferral under relief measures by the Australian Banking Association. 

The Government is working on legislating this measure and will announce what time period the 6 x months will commence from and to.  Please be aware these loans do not apply to fixed interest loans.

  • WHAT DOES THIS MEAN FOR BUSINESSES:

It means that any existing Business loan or any loan entered into during the time period in a Business entity (Trust, Company and Sole Trader) will be deferred for 6 x months.  Small businesses will not be required to make any repayments towards these loans for 6 x month time period allowing businesses to have extra cash flow they will need in their business during this difficult time. Some examples of what type of loans this measure assists are Business Loans, Loans for asset purchases like Motor Vehicle, Plant and Equipment, Asset Loans like Property in a Business name etc. If there’s a loan in a Business name, then the repayment should be on hold. 

  • WHAT DO YOU NEED TO DO:

Ensure you keep on top of the loans that are in the name of the Business and contact the lending provider if they do not comply with stopping these repayments.  If they still do not comply contact the Financial Ombudsman so they can act on your behalf.  They are there to ensure that bank and financial institutions do the right things. Please also ensure that you provide details of any new loan facilities to your Accountant, so they are aware of these new loan facilities.

At the moment these are the only stimulus packages and measures that are available to businesses. If there are any updates or changes, please ensure you keep a listen out via the TradieWives social media pages, and I am happy to provide assistance and can be contacted via the Directory or the details below.  Thanks, ladies, for the opportunity to share.  Stay safe and look after your loved ones.  I will pray for you all, your Businesses and families, and that they find a cure very soon.  Much love.

Kindest regards,

Jennifer Jarquin

Principal/Senior Accountant

iBusiness Groupwww.ibusinessgroup.com.au

Phone: 1300587985

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