Cash is King - Government & RBA Economic Stimulus

The Australian Government has announced an economic response to the Coronavirus totalling $17.6 billion across the forward estimates.

 The Government’s economic response targets four key areas:

• Delivering support for business investment
• Cash flow assistance for employers
• Stimulus payments to households to support growth
• Assistance for severely affected regions.

Federal Opposition Leader Anthony Albanese has indicated Labor would support passage of the necessary legislation without delay.

The Government intends to legislate the incentives by 31 March 2020 (in time for the start of the June quarter).

WARNING NOTE : The following information comes from the Australian Government - Treasury outlining the Government’s response. The following response must still pass legislation through Parliament before becoming legal. Please speak to your relationship manager at Bishop Collins before taking any action and for more information and clarity on how this will affect your business.

Delivering support for business investment

Summary - The Government is proposing to increase 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, for new or second hand assets first used or installed ready for use in this timeframe.

Cash flow assistance for employers – Boosting cash flow for employees

Summary - 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.

Eligibility - 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.

·        Eligible businesses that pay salary and wages will receive a minimum payment of $2,000, even if they are not required to withhold tax.

Cash flow assistance for employers – Supporting Apprentices & Trainees

Summary - The Government is supporting small business to retain their apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage paid during the 9 months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer. 

Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).

Support will also be provided to the National Apprentice Employment Network, the peak national body representing Group Training Organisations, to co-ordinate the re-employment of displaced apprentices and trainees throughout their network of host employers across Australia.

Eligibility - The subsidy will be available to small businesses employing fewer than 20 full-time employees who retain an apprentice or trainee. The apprentice or trainee must have been in training with a small business as at 1 March 2020.

Employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will be eligible for the subsidy.

Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network (AASN) provider.

Stimulus payments to households to support growth

Summary - The Government will provide a one-off $750 payment to around 6.5 million social security, veteran and other income support recipients and eligible concession card holders. Around half of those that benefit are pensioners. This payment will help to support confidence and domestic demand in the economy.

There will be one payment per eligible recipient. That is, if a person qualifies for the one-off payment in multiple ways, they will only receive one payment.

The payment will be exempt from taxation and will not count as income for Social Security, Farm Household Allowance and Veteran payments.

Assistance for severely affected regions.

The 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 provided through existing or newly established Government programs.   

This will include the waiver of the Environmental Management Charge for tourism businesses that operate in the Great Barrier Reef Marine Park and the waiver of entry fees for Commonwealth National Parks. It will also include additional assistance to help businesses identify alternative export markets or supply chains. Targeted measures will also be developed to further promote domestic tourism. 

Reserve Bank and Government additional response.

·        On Thursday 19th March 20, the Reserve Bank has cut interest rates to a record low 0.25 per cent and announced extraordinary measures to help prevent a coronavirus-driven recession.

·        The RBA will buy Australian government bonds as part of its first-ever quantitative easing program, and provide a three-year funding facility to provide cheap loans for Australian banks.

·        The RBA said it would also provide at least $90 billion at 0.25 per cent over three years to banks if they lend that cash to small and medium-sized businesses.

·        The Government also announces investment of up to $15 billion to enable smaller lenders to support consumers and small businesses.

·        The Australian Office of Financial Management, would provide the $15 billion through wholesale funding markets used by small banks and non-bank lenders.

·        Enabling legislation would be introduced into Parliament next week.

Banking Association response

·        Friday 20 March 20 The Australian Banking Association (ABA) says all small businesses hit by the coronavirus pandemic will be able to access a six-month deferral of all loan repayments.

·        The Banking Association expects that will put $8 billion back in small business' pockets.

·        The banks will consider home loan relief measures if households enter mortgage stress.

·        Please contact your bank or loan provider to understand the full terms and conditions.

For more personalised advice and recommendations please contact Juston Jirwander - Bishop Collins – Chartered Accountants. Email: [email protected] or Visit :   bishopcollins.com.au