Government’s Coronavirus Economic Legislation was yesterday introduced in Parliament and comprises 8 Bills. Our summary is limited to business measures only:
Instant Asset Write-off Extended and Increased to $150k
- Instant asset write-off threshold from $30,000 to $150,000 for small business entities (SMEs) with aggregated annual turnover of less than $500m (up from $50m) from 12 March 2020 to 30 June 2020.
- The instant asset write-off will revert to $1,000 from 1 July 2020 and thereafter only be available for small business entities.
- There is no change to the types of assets that may qualify for the increased thresholds.
Backing Business Investment – 50% Asset write-off
- Same entity criteria as the Instant Asset Write-off ($500m aggregated annual turnover), but does not have an asset-value threshold. Second-hand goods are also excluded (Unlike Instant Asset Write-off)
- Applies from 12 March 2020 to 30 June 2021.
- Provides an accelerated (instant) depreciation of 50%, with the remainder depreciated over the normal life of the asset.
Cash Payments for SMEs Employers and Charities
The Commissioner intends to make 2 “cash flow boost payments”.
The first cash flow boost payment:
- Will be made to eligible entities for periods from March 2020 to June 2020.
- Eligible entities are those which make a payment which is subject to the withholding obligations in Div 12 of Sch 1 to the TAA (i.e. in relation to wages, salary or similar remuneration), whether or not any amount is actually withheld in the period.
- In addition, the entity must be a small or medium business entity, or charity or not-for-profit entity of equivalent size (with scope for the Commissioner’s discretion). I.E. $50 million or less aggregated annual turnover.
- The business entity must have held an ABN on 12 March 2020 and have carried on an enterprise at that time.
All eligible entities will receive a minimum cash flow boost payment of $10,000 in the first period for which they are eligible. Entities will receive further amounts, 100% of the amount withheld above the minimum payment, up to a maximum total of $50,000 across all cash flow bonus payments to the entity.
The payment: will be made on lodgement of the activity statement notifying the Commissioner of their withholding liabilities for the period and can be provided as a credit against tax liabilities. It will be generated automatically and will be a tax-free amount.
The second cash flow boost payment
- Will be made to an entity for a total amount equal to the amount of the first cash flow boost payments to which the entity was entitled.
- These second cash flow boost payments are payable in equal instalments for either:
- the months of June, July, August and September 2020; or
- the June and September 2020 quarters.
- The second cash flow boost payments will generally be made on lodgement of the activity statement containing the GST return of the entity for the period.
Temporary Relief for Financially Distressed Individuals and Businesses
- The minimum amount of debt required to be owed before a creditor can initiate involuntary bankruptcy proceedings against a debtor will increase from $5,000 to $20,000.
- The period in which debtors must respond to a bankruptcy notice is extended from 21 days to 6 months.
- The timeframe in which a debtor is protected from enforcement action by a creditor following presentation of a declaration of intention to present a debtor’s petition is also extended from 21 days to 6 months.
The minimum amount due for a creditor to issue a statutory demand to a debtor increases from $2,000 to $20,000. The amendments also temporarily provide debtors more time to respond to a statutory demand – the period is extended from 21 days to 6 months. Finally, the amendments provide temporary relief for directors from their personal duty to prevent insolvent trading.
Early Release of Superannuation
Releases a tax-free up to $10,000 from their superannuation on compassionate grounds. Each person is permitted to have up to 2 releases of $10,000 – one for an application made during the 2019-20 financial year, and another for an application made during 2020-21.
To be eligible a person must be either unemployed or eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment, special benefit or farm household allowance.
Alternatively, on or after 1 January 2020, a person must have been made redundant; or their working hours have been reduced by 20% or more (including to zero). A sole trader will be eligible if, on or after 1 January 2020, their business was suspended or has suffered a reduction in turnover of 20% or more.
Date of effect: Eligible individuals will be able to apply directly to the ATO from mid-April 2020 through the MyGov website to access up to $10,000 of their superannuation before 1 July 2020.
NOTE: The ATO will also provide a copy of this determination to the superannuation fund which will then make the payment to the individual, without the person needing to apply to them directly. Separate (yet not fully clarified) arrangements will apply for the early release from an SMSF.
The annual superannuation minimum drawdowns in the SIS Regulations for account-based pensions will be reduced by 50% for 2019-20 and 2020-21.
Regulatory Flexibility in Corporations Act
The Corporations Act 2001 will be amended to establish a temporary mechanism to provide short-term regulatory relief to classes of persons that, due to the Coronavirus, are unable to meet their obligations under the Corporations Act or Regulations: see above.
Treasury and ATO Updates
The ATO has updated the COVID-19 support measures to change the BAS deferral period from 4 months to 6 months.
Options available to assist businesses impacted by COVID-19 include:
- Deferring by up to six months the payment date of amounts due through the business activity statement (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise.
- 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 Pay As You Go (PAYG) instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
- Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities.
- Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low interest payment plans.
Q & A to deferrals which will be available for BAS, income tax and fringe benefits tax from 23 January 2020.
Payments due from 23 January 2020
Question: Can I defer the due dates for tax payments that were due after 23 January 2020?
Answer: Yes, you can request a deferral of due dates for tax payments that were due after 23 January 2020. Also see questions about Interest and Penalties.
Date of Issue: 24 March 2020 Author: Noé Vicca
Disclaimer: The contents herein are intended for general information only and should not be construed as legal or accounting advice. Vicca Chartered Accountants Brisbane bears no responsibility for any loss that might occur from reliance on information contained in this publication. Please do not reproduce, transmit or distribute the contents herein in any form without prior permission from Vicca Chartered Accountants, Taxation Accountants Brisbane Australia.