Second Economic Response Package to the Coronavirus | McSweeney CA | Consulting Accountants
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Second Economic Response Package to the Coronavirus

Today the Australian Government has announced a second economic response package in addition to the initial Boosting Cash Flow for Employers measures announced on 12 March.

The economic response packages total $189 billion across the forward estimates, representing 9.7 per cent of annual GDP. These actions will provide timely support to affected workers, businesses and the broader community.

Further to our previous email, we have put together a summary of the additional areas that the Government’s second economic response is targeting, and we will be working with you to ensure that you obtain the best advantage from these measures.

Please ensure you contact our office to discuss your particular circumstances.

The key areas covered under the second package include:
• Boosting Cash Flow for Employers (minimum $20,000 to maximum $100,000 tax free payments)
• Support for Immediate Cash Flow Needs of SMES
• Payments to Support Households (two rounds of $750 to those eligible)
• Temporary Early Release of Superannuation (early access to super)
• Temporarily Reduce Superannuation Minimum Drawdown Rates (supporting retirees)

Boosting Cash Flow for Employers

On 12 March 2020, the Government announced that it will make tax free payments to employers, with a minimum payment of $2,000 and a maximum payment of $25,000.

Today, the Government announced it will extend this measure as follows:
• In addition to businesses with aggregated annual turnover under $50 million, not-for-profit entities (including charities) with aggregated annual turnover under $50 million that employ workers will also be eligible.
First Tax Free Payment
• The payment, which was previously announced to be calculated based on 50% of PAYG withheld from salaries, will now be calculated based on 100% of PAYG withheld from salaries. This payment will be made in the January to June 2020 period when lodging the March and June 2020 quarter BASs (or monthly for monthly lodgers).
• The minimum payment will increase from $2,000 to $10,000 and the maximum payment will increase from $25,000 to $50,000
Second Tax Free Payment
• An additional payment will be made in the July to September 2020 period that is equal to the total payments received in the first periods. This means that eligible entities will receive at least $20,000 up to a total of $100,000 from both payments.

The ATO will deliver the payment as a credit to the business upon lodgment of their activity statements. Where this places the business in a refund position, the ATO will deliver the refund within 14 days.

Small and medium sized business entities and not-for-profits with aggregated annual turnover under $50 million and that employ workers will be eligible. Eligibility will generally be based on prior year turnover.
• The payment will be delivered by the ATO as an automatic credit in the activity statement system from 28 April 2020 upon employers lodging eligible upcoming activity statements.
• Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld, up to a maximum payment of $50,000.
• Eligible employers that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.
• The payments will only be available to active eligible employers established prior to 12 March 2020.

Support for Immediate Cash Flow Needs for SMEs

The Government announced that it will provide a guarantee of 50% to SME lenders to support new unsecured short-term loans to SMEs to help fund their working capital. This will operate as follows:
• SMEs with a turnover of up to $50 million will be eligible to receive these loans.
• The loans will be for a maximum of $250,000 per borrower.
• The term of the loans will be up to 3 years.
• No loan repayments will be required to be made over the first 6 months.
• Borrowers will not have to provide assets as security, because the loans will be unsecured.
• The loans will commence by early April and be available until 30 September 2020.

Supporting Quick Access to Credit for Small Business
The Government is cutting red tape by providing a temporary exemption from responsible lending obligations for lenders providing credit to existing small business customers. This reform will help small businesses get access to credit quickly and efficiently.

This exemption will be for 6 months and will apply to any credit for business purposes including new credit and credit limit increases.

Payments to Support Households

On 12 March 2020, the Government announced a $750 payment to be made from 31 March 2020 to social security, veteran and other income support recipients, and eligible concession card holders.

Today, the Government announced a second $750 payment to the eligible payment recipients on 10 July 2020. Individuals receiving the age pension, family tax benefit, and various other government payments/allowances between 12 March 2020 and 13 April 2020 are eligible.

This includes individuals who lodge a claim for one of the eligible payments between this period, and the claim is subsequently granted.

Temporary Early Release of Superannuation

Eligible individuals will be able to access $10,000 of their superannuation this financial year and another $10,000 next financial year. To be eligible, an individual must meet one of the following requirements:

• The individual is unemployed.
• The individual is eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance.
• On or after 1 January 2020, the individual is made redundant, the individual’s working hours reduce by 20% or more, or if the individual is a sole trader, the business is suspended or revenue reduces by 20% or more.

Individuals will be eligible to apply for this from mid-April 2020 and applications will be made to the ATO through the myGov website.

Temporarily Reduce Superannuation Minimum Drawdown Rates

Retirees who have account-based pensions in their superannuation funds are currently required to draw an annual pension equal to a minimum of 4% to 14% (depending on their age).

For the years ending 30 June 2020 and 30 June 2021, the minimum pension amount will be halved. This means that someone aged under 65 years will only have to draw 2% of their superannuation instead of 4%, and someone aged between 65 and 74 years will only have to draw 2.5% instead of 5%.

This measure will give retirees more discretion on the management of their superannuation assets and reduce the need to sell investments to fund minimum pension requirements

With a trusted and personal approach, we give you the peace of mind to focus on building and growing your business while avoiding issues with your accounting & financial affairs. The result is stronger management of your business and personal matters and long-term wealth creation.

We are always here to help!

McSweeney CA

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