The Australian Federal Government's response to COVID-19 has been swift and sweeping. Since 12 March 2020, it has released three tranches of economic measures to support businesses, households and individuals who will experience financial hardship as a result of the pandemic. To date, the Federal Government has committed AUD213.6 billion in stimulus to offset an economy that has been forced into “hibernation” while the worst of the pandemic passes. In addition, the country’s State Governments have committed a further AUD11.8 billion to regions and communities disproportionately affected by COVID-19. Below is a summary of some of the key economic measures that have been announced by the Australian Federal Government.
Support for employers and employees
Social distancing and other restrictions are expected to be in place for some months. Most companies and organisations have been impacted by the new measures, particularly small to medium businesses (SMEs), charities and not-for-profits. In support of the business community, the Australian government has introduced the following measures.
JobKeeper Payment Program
The JobKeeper Payment provides a wage subsidy to businesses impacted by coronavirus. The Government will provide eligible employers with AUD1,500 per fortnight per employee to help them retain workers through this period. Key points related to this measure include:
- Employers will be eligible if, at the time of applying, they estimate that their turnover has fallen (or will likely fall) by at least 30% as a result of the current restrictions / COVID-19 impact relative to a comparable period in 2019.
- Businesses whose “aggregated turnover” for income tax purposes is likely to exceed AUD1 billion must instead show a 50% reduction in turnover. For testing whether the 50% rate applies the turnover of certain related entities, including foreign residents, is taken into account.
- Registered charities will be eligible if they estimate their turnover has fallen (or will likely fall) by at least 15% or more relative to a comparable period a year earlier.
- Turnover is defined to be “GST turnover” as reported on Business Activity Statements. It includes all Australian taxable supplies and GST free supplies but not input taxed supplies.
- Consistent with the GST law turnover includes only Australian-based sales, so a decline in overseas operations will not be counted in the turnover test.
- The JobKeeper Payment covers part time, full time, stood down employees and long-term casual workers (that is, those who have been with their employer on a regular and systematic basis for at least 12 months).
- There is a “one-in-all-in” rule where participation must be offered to all eligible employees, but the employee is not required to accept the offer.
- Payments will be available for a period of 6 months from 30 March 2020.
- Employers will need to report to the ATO on a monthly basis regarding the number of eligible employees.
- To be eligible however, employees cannot be getting other benefits such as Job Seeker payments.
Boosting cashflow for employers
From 28 April 2020, eligible SMEs will receive a tax-free cash flow boost of between AUD20,000 and AUD100,000 through credits in the activity statement system when they lodge all relevant activity statements. Key points related to measure include:
- The business must have an aggregated annual turnover of less than AUD50 million and employ workers
- To be calculated based on the PAYG withholding as recorded in the affected business’ quarterly activity statement
- The first phase commences on 28 April 2020 and the second phase commences on 21 July 2020.
Supporting apprentices and trainees
Employers will be able to access the wage subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network provider. Details include:
- Eligible employers can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wage paid during the 9 months from 1 January 2020 to 30 September 2020
- Employers will be reimbursed up to a maximum of AUD21,000 per eligible apprentice or trainee (i.e. AUD7,000 per quarter)
- Eligible small businesses are those employing fewer than 20 full-time employees who retain an apprentice or trainee (with the apprentice or trainee being in training with a small business as at 1 March 2020).
Small business loan support
The Government will guarantee 50% of new bank loans issued by eligible lenders by 30 September 2020 to SMEs. Unsecured loans of up to AUD250,000 with a three-year term and no repayments for the first six months.
Insolvency and Director relief
Temporary amendments to the Corporations Act 2001 to increase the threshold at which creditors can issue a statutory demand and the time companies have to respond as well as relief for directors from any personal liability for trading while insolvent.
Bank loan deferral
Australian banks will defer loan repayments for 98% of all affected businesses. Those with a loan of up to AUD10 million will be able to defer repayments for up to six months. The measures are available on an opt-in basis and apply to current customers with existing facilities 90 days prior to applying.
Protection from foreign investment
To address concerns that distressed Australian assets could be vulnerable during the pandemic, the Government has mandated that the Foreign Investment Review Board scrutinise every single purchase application, regardless of its value. The previous threshold limits for foreign private investment in Australia ranged from AUD50 million to AUD1.1 billion, for land and non-land proposals.
Support for individuals and households
For those who have experienced loss of employment or income due to COVID-19 may be eligible for one or more of the following payments:
- Additional financial support of AUD550 per fortnight for those seeking employment
- Available to those between the ages of 22 and the Age Pension
- Must be required to meet income test limits and residency rules.
Early access to superannuation
Australians affected financially by the virus may be granted early access to their compulsory superannuation.
- Withdraw tax-free up to AUD10,000 of superannuation before 1 July 2020 and another AUD10,000 withdrawal from 1 July 2020 to 30 September 2020.
- An additional measure is allowing individuals affected by COVID-19 to access up to AUD10,000 of their superannuation in 2019–20 and a further AUD10,000 in 2020–21. Individuals will not need to pay tax on amounts released and will not need to include it in their income tax return.
These additional measures are designed to assist around 6.5 million lower-income Australians, including pensioners and social, security and veteran income support recipients:
- A one-off AUD750 payment (with one payment per recipient).
- Reduction of the minimum drawdown for account-based pensions by 50% for the 2019-20 and 2020-21 financial years.
- ‘Coronavirus supplement’ to welfare recipients of additional AUD550 per fortnight for the next six months and increased eligibility for benefits.
- Additional AUD750 to social security and veteran income support recipients and eligible concession card holders.
- Reduction of the social security deeming rates by a further 0.25 percentage points.
Support for industry
The Federal and State Governments have allocated funding for specific sectors directly impacted by the virus in the form of waivers, tax relief, rent relief, cash grants and loans. Below are links to updates for Australia’s states:
- New South Wales
- South Australia
- Western Australia
We recommend speaking to an HLB Mann Judd Adviser about what state-based initiative are available to local businesses.
COVID-19 policy initiatives by Australia’s regulatory bodies
ATO administrative relief
- GST deferral allowing affected businesses on a quarterly reporting cycle to opt into monthly GST reporting to get quicker access to any GST refunds.
- PAYG tax instalment variation concessions
- Income tax deferral
- Remission of penalties
- R&D lodgement deferral
ASIC administrative relief
- As of 9 April 2020 relief takes the form of a one-month extension for unlisted entities with balance dates from 31 December 2019 to 31 March 2020 to lodge financial reports under Chapters 2M and 7 of the Corporations Act 2001.
- ASIC will not take any action against an entity with a 31 December 2019 year end that fails to hold its AGM by 31 May 2020 as long as the AGM is held by 31 July 2020.
Will further support be needed?
At a press conference on 30 March, Prime Minister Scott Morrison, stated "the government will continue to do all within our power and all within our capacity." Some of the measures introduced are yet to be legislated. However, the Australian Government has proved it is committed to supporting the economy through the pandemic. As one of the few countries in the world with a triple-A credit rating, Australia is in a better position than some other countries in this unprecedented and uncertain time. However, it is too soon to speculate on the economic outcome of these measures and the burden it will place on our society for the years to come.Click here to learn more.