We have been receiving a lot of enquiries from clients about the Government assistance being offered to small business and how these can be accessed. While the details will be finalised by Parliament in the coming week we have included below a summary of those areas we think are most applicable to our clients as well as some worked examples.
BOOSTING CASHFLOW FOR EMPLOYERS
The Boosting Cash Flow for Employers measure will provide up to $25,000 back to business, with a minimum payment of $2,000 for eligible businesses. The payment will provide temporary cash flow support to small and medium businesses that employ staff. The payment will be tax free.
Small and medium business entities 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 Australian Taxation Office (ATO) as a credit in the activity statement system from 28 April 2020 upon businesses lodging eligible upcoming activity statements.
- Eligible businesses that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 50 per cent of the amount withheld, up to a maximum payment of $25,000. See example.
- Eligible businesses that pay salary and wages will receive a minimum payment of $2,000, even if they are not required to withhold tax. See example.
The Boosting Cash Flow for Employers measure will be applied for a limited number of activity statement lodgements. The ATO will deliver the payment as a credit to the business upon lodgement of their activity statements. Where this places the business in a refund position, the ATO will deliver the refund within 14 days.
|Type of lodger||Eligible period||Lodgement due date|
|Quarterly||Quarter 3 (January, February & March 2020)|
Quarter 4 (April, May and June 2020)
|28 April 2020|
28 July 2020
|21 April 2020|
21 May 2020
22 June 2020
21 July 2020
Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020.
Monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgements. To provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (150 per cent) in the March 2020 activity statement.
The minimum payment will be applied to the business’ first lodgement.
Maria – Owns and runs Family Practice (monthly PAYG Withholding Reporting)
Maria owns and runs a medical clinic in Victoria and employs 10 people on average full-time weekly earnings who each earn $89,730 per year. In the months of March, April and June for the 2019-20 income year, Maria reports withholding of $15,008 for his employees on each Business Activity Statement (BAS).
Under the Government’s changes, Maria will be eligible to receive the payment on lodgement of each of his BAS. JMaria’s practice receives:
• A payment of $22,512 for the March period, equal to 150 per cent of the total withholding.
• A payment of $2,488 for the April period, before she reaches the $25,000 cap.
• No payment for the May period, as she has now reached the $25,000 cap.
Tarryn – Owns a Medical Specialist Practice (quarterly reporting with nil PAYG Withholding)
Tarryn owns and runs a small medical specialist practice in Melbourne and employs her husband as a bookkeeper who earns $10,000 per year. In the March and June 2020 quarterly BAS, Tarryn reports withholding of $0 for her employee as they are under the tax-free threshold.
Under the Government’s changes, Tarryn will be eligible to receive the payment on lodgement of her BAS. Tarryn’s practice will receive:
• A payment of $2,000 for the March quarter, as she pays salary and wages but is not required to withhold tax.
• No payment for the June quarter, as she has already received the minimum payment and she has no withholding obligation.
If Tarryn begins withholding tax for the June quarter, she would need to withhold more than $4,000 before she receives any additional payment.
Anthony’s – GP Clinic (quarterly PAYG Reporting)
Anthony owns a clinic in Victoria. He employs his wife who earns $78,000 per year. In the March and June 2020 quarterly BAS, Anthony reports withholding of $4,628 for her.
Under the Government’s changes, Anthony will be eligible to receive the payment on lodgement of his BAS.
Anthony’s practice will receive:
• A payment of $2,314 for the March quarter, equal to 50 per cent of his total withholding.
• A payment of $2,314 for the June quarter, equal to 50 per cent of his total withholding. David’s business will receive a total payment of $4,628.
DELIVERING SUPPORT FOR BUSINESS INVESTMENT
Increasing the instant asset write-off (IAWO)
The Government is increasing the instant asset write-off (IAWO) threshold from $30,000 to $150,000 and expanding access to include all businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020. In 2017-18 there were more than 360,000 businesses that benefited from the current IAWO, claiming deductions to the value of over $4 billion.
The IAWO threshold
The higher IAWO threshold provides cash flow benefits for businesses that will be able to immediately deduct purchases of eligible assets each costing less than $150,000. The threshold applies on a per asset basis, so eligible businesses can immediately write-off multiple assets. The IAWO is due to revert to $1,000 for small businesses (turnover less than $10 million) from 1 July 2020.
The Government is expanding access so that more businesses can take advantage of the IAWO. The annual turnover threshold for businesses is increasing from $50 million to $500 million. Expanding the threshold will mean an additional 5,300 businesses who employ around 1.9 million Australians will be able to access the IAWO for the first time.
This proposal applies from announcement on 10 March 2020 until 30 June 2020, for new or second-hand assets first used or installed ready for use in this timeframe.
Example 1 — Business benefits from increased asset threshold
Dr Reggie Diamond and/or his service entity operate a medical practice. On 1 May 2020, Reggie bought lasers and other medical equipment for $140,000, exclusive of GST for use in his practice.
Under the new $150,000 instant asset write-off, Reggie could claim an immediate deduction of $140,000 for the purchase of the medical equipment in the 2019-20 income year.
This will improve Reggie’s cash flow and help his business withstand and recover from the economic impact of the Coronavirus.
Note – the deduction for instant asset write-off is allowable whether Reggie paid cash or financed the purchase of the medical equipment.
Backing business investment (bbi)
The Government is introducing a time limited 15-month investment incentive to support business investment and economic growth over the short-term, by accelerating depreciation deductions. The key features of the incentive are:
- benefit — deduction of 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost;
- eligible businesses — businesses with aggregated turnover below $500 million; and
- eligible assets — new assets that can be depreciated under Division 40 of the Income
Tax Assessment Act 1997 (i.e. plant, equipment and specified intangible assets, such as patents) acquired after announcement and first used or installed by 30 June 2021. Does not apply to second-hand Division 40 assets, or buildings and other capital works depreciable under Division 43.
Businesses with aggregated turnover below $500 million, purchasing certain new depreciable assets.
Applies to eligible assets acquired after announcement on 10 March 2020 and first used or installed by 30 June 2021.