Government economic support package updated: How it applies to me

Legislation for the second stage of the economic stimulus package announced on 22 March has now been passed. The response targets three key areas:

• Supporting individuals and households
• Support for businesses
• Supporting the flow of credit

The combined summary of stage one and two stimulus packages are summarised below with links to treasury fact sheets for further details.

Supporting Individuals and Households

The Australian Government is providing financial assistance to Australians. This assistance includes income support payments, payments to support households and temporary early releases of superannuation.

• Income support for individuals
• Payments to support households
• Temporary early release of superannuation
• Temporarily reducing minimum super pension withdrawal rates
• Reducing social security deeming rates 

Income support for individuals

A new temporary “Coronavirus Supplement” payment will be available to eligible individuals, including employees, sole traders, casual and contractors, who are in receipt of one of the following:

• JobSeeker Payment
• Youth Allowance for job seekers
• Parenting Payment
• Farm Household Allowance
• Special Benefit
• *Youth Allowance, Austudy, Abstudy expected to be included

The Coronavirus Supplement will be paid to both existing and new recipients of the above payments at a rate of $550 per fortnight. Eligibility for JobSeeker Payment and Youth Allowance for job seekers is being expanded from 27 April for six months to apply income testing and exclude asset testing.

For more information, including examples, please refer to Treasury’s fact sheet: Income support for individuals or refer to Government Services Australia: More financial support for Coronavirus affected job seekers

Payments to support households

The Government is providing two separate $750 payments to the following social security, veteran and other income support recipients and eligible concession card holders:

• Age Pension
• Disability Support Pension
• Carer Payment
• Parenting Payment
• Wife Pension
• Widow B Pension
• ABSTUDY (Living Allowance)
• Austudy
• Bereavement Allowance
• Newstart Allowance
• Youth Allowance
• Partner Allowance
• Sickness Allowance

• Special Benefit
• Widow Allowance
• Family Tax Benefit, including Double Orphan Pension
• Carer Allowance
• Pensioner Concession Card holders
• Commonwealth Seniors Health Card holders
• Veteran Service Pension; Veteran Income Support Supplement; Veteran Compensation payments, including lump sum payments; War Widow(er) Pension; and Veteran Payment.
• Veteran Gold Card holders
• Farm Household Allowance

The first payment will be made from 31 March 2020 via Services Australia or the Department of Veteran’s Affairs. The second payment will be made from 13 July 2020 but is not available to those eligible for the Coronavirus Supplement.

For more information, including examples, please refer to Treasury’s fact sheet: Payments to support households

Temporary Early release of superannuation

Individuals affected by the Coronavirus can apply to access up to $10,000 in each financial year ended 30 June 2020 and 2021. To apply, one of the following requirements must be satisfied:

• You are unemployed, or
• You are eligible to receive a JobSeeker Payment, Youth Allowance for job seekers, Parenting Payment, Farm Household Allowance or Special Benefit, or
• On or after 1 January 2020
  • you were made redundant, or
  • work hours decreased by 20% or more, or
  • you are a sole trader and your business was suspended or a decrease of 20% or more in gross income

Payments will be tax free and will not affect Centrelink or Veterans’ Affairs payments.

For more information, including examples, please refer to Treasury’s fact sheet: Early access to superannuation

Temporarily reduce minimum super pension withdrawal rates

The minimum superannuation pension withdrawal rate for account-based pensions and similar products is reduced by 50 per cent for the financial years ended 30 June 2020 and 2021, as follows:

This measure will benefit retirees holding these products by reducing the need to sell investment assets to fund minimum drawdown requirements.

Reducing social security deeming rates

From 1 May 2020, income support payments including age pensions, will increase as the income deeming rate used to work out income from financial assets, will be reduced by 0.75%. As a result, the higher tier deeming rate will be 2.25% and the lower tier deeming rate will be 0.25%.

The reductions reflect the low interest rate environment and its impact on the income from savings.

For more information, including examples, please refer to Treasury’s fact sheet: Providing support for retirees

Support for Businesses

The Australian Government is supporting Australian businesses to manage cash flow challenges and retain employees. Assistance includes cash flow support to businesses and temporary measures to provide relief for financially distressed businesses.

• Boosting cash flow for employers
• Temporary relief for financially distressed businesses and directors
• Increasing the instant asset write-off
• Backing business investment
• Supporting apprentices and trainees

Boosting cash flow for employers

Businesses and not for profit organisations (NFP) with aggregated annual turnover under $50 million that employ people, will receive a tax-free cash flow boost of between $20,000 to $100,000.

All employers will receive a minimum payment of $10,000 or a higher payment equal to 100% of PAYG withheld on March to June 2020 activity statement lodgements, up to a maximum $50,000.

In addition, should the employer remain active, an equal payment between $10,000 to $50,000 will be made to the business or NFP during the period July to October.

The payments will be made via a credit to business instalment activity statements lodged with the ATO.

For more information, including examples, please refer to Treasury’s fact sheet: Cash flow assistance for business

Temporary relief for financially distressed businesses and directors

To reduce the threat of actions pushing otherwise profitable businesses into insolvency and force the winding up of the business, temporary changes applying for the next 6 months include:

For companies and directors

• increasing the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000
• increasing the time companies must respond to statutory demands they receive from 21 days to 6 months
• relief for directors from any personal liability for trading while insolvent

For individuals

• increasing the threshold at which creditors can initiate bankruptcy proceedings from $5,000 to $20,000
• increasing the time to respond to a bankruptcy notice from 21 days to 6 months.

Creditors will still have the right to enforce debt against companies or individuals through the courts.

The ATO will tailor solutions for owners or directors of business that are currently struggling due to the Coronavirus, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.

For more information, including examples, please refer to Treasury’s fact sheet: Temporary relief for financially distressed businesses

Increasing the instant asset write-off

Lifting the threshold to $150,000 (from $30,000) and expanding access to businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020. The threshold applies on a per asset basis, so eligible businesses can immediately write-off multiple assets.

Backing business investment

Businesses with an aggregated annual turnover below $500 million are eligible to claim a deduction of 50% of the cost of an asset, with existing depreciation applying to the balance of the asset’s cost. The accelerated depreciation incentive is available on certain assets purchased and ready for use by 30 June 2021.

This incentive will be utilized where assets purchased before 1 July 2020 exceed $150,000 or for assets purchased and ready for use after 30 June 2020 but before 1 July 2021.

For more information, including examples, please refer to Treasury’s fact sheet: Delivering support for business investment

Supporting apprentices and trainees

The federal government is providing businesses who employ and continue to employ apprentices and trainees a wage subsidy of 50% of the apprentice’s or trainee’s wage for nine months. The subsidy of up to a maximum of $21,000, will be available to businesses employing fewer than 20 full-time employees who retain an apprentice or trainee, or, where a small business is not able to retain an apprentice, the subsidy will be available to a new employer.

Employers will need to register for the subsidy from April 2020, with final claims for payment being lodged before 31 December 2020.

For more information, including examples, please refer to Treasury’s fact sheet: Cash flow assistance for business

Support for Coronavirus affected regions and communities

The federal government has set aside an initial $1 billion allocation to support those regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on industries such as tourism, agriculture and education.

The $1 billion will be available for distribution through existing or newly established mechanisms as soon as practicable.

The Australian Tax Office (ATO) will also provide administrative relief for certain tax obligations (similar to relief provided following the bushfires) for taxpayers affected by the Coronavirus outbreak, on a case by case basis.

The ATO will look at ways to enhance its presence in significantly affected regions to make it easier for people to apply for relief.

For more information, including examples, please refer to Treasury’s fact sheet: Assistance for severely affected regions and sectors

Support the Flow of Credit

The Government, the Reserve Bank of Australia (RBA) and the Australian Prudential Regulation Authority (APRA) have taken coordinated action to ensure the flow of credit in the Australian economy. Timely access to credit is vital for businesses to manage the impacts of the Coronavirus.

Support for immediate cash flow needs for business

Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50% to lenders to support new short-term lending to businesses with turnover under $50 million.

Subject to lender approval, unsecured loans of up to $250,000 for a term of up to 3 years with $nil repayments for the first 6 months will assist otherwise viable businesses across the economy who are facing significant challenges due to disrupted cash flow to meet existing obligations.

Quick and efficient access to credit for small business

To improve turnaround times on business loan approvals, lenders will receive a temporary exemption from responsible lending obligations when providing credit to existing small business customers.

Reserve Bank of Australia – Supporting the flow and reducing the cost of credit

The Reserve Bank of Australia (RBA) announced banks will have access to at least $90 billion in funding at a fixed interest rate of 0.25 per cent. This will help reduce funding costs for banks and reduce interest rates for borrowers.

APRA – Ensuring banks are well placed to lend

The Australian Prudential Regulation Authority (APRA) has announced temporary changes to its expectations regarding bank capital ratios. The changes will support banks’ lending to customers, particularly if they wish to take advantage of the new facility being offered by the RBA.

For more information on supporting the credit flow, please refer to Treasury’s fact sheet: Supporting the flow of credit

The coming months will be challenging for all of us and we wish our clients, referral partners and community the best of health. If you have any questions or need any assistance with any of the above, please do not hesitate to contact your Altitude Adviser.