Keeping people employed
The three stimulus packages have put a strong focus on attempting to help businesses around the country retain the millions of workers they employ.
The government has announced wage subsidies to eligible businesses of $1500 per employee each fortnight to assist an estimated six million workers over the next six months. This equates to 70% of the Australian median wage, and is designed to be passed to employees through their employers existing payroll system.
To qualify, the business must have lost 30% of its turnover–or 50% if the business usually brings in more than $1 billion annually–measured in a month-long period compared with the previous year.
All full time, part time, casual or self-employed workers are eligible for the payment, and they will receive the full $1500 regardless of whether they usually earn less than that. Casuals need to have been with the business for at least a year. New Zealanders can receive the subsidy, but it isn’t available to workers from other countries on temporary visas.
Employers are expected to make up the gap for employees who earn more than $1500, although they don’t need to pass on more if the worker has already been stood down. Payments will start in May, and will be backdated to March.
This comes in addition to measures announced as part of the first round of economic stimulus, which support eligible businesses in paying the salaries of apprentices or trainees. The government will subsidise half of the salary paid to apprentices and trainees between the 1 January 2020 and 30 September 2020, up to a maximum $21,000 per employee.
Cash flow boost
Businesses that employ staff and have a turnover under $50 million will also automatically receive tax-free cash flow boosts of between $20,000 and $100,000 when they lodge their monthly or quarterly activity statements with the Australian Taxation Office.
They don’t need to apply, and will receive the payment as a credit equal to 100% of their salary and wages withheld in statements lodged before June. The minimum payment is $10,000 and the maximum payment is $50,000. The same payment will be made in the July to October period, meaning eligible entities could receive a total of between $20,000 and $100,000.
These payments were increased as part of the third stimulus package (they were initially set to be between $2000 and $25,000 as part of the second stimulus package), and also extended to not-for-profit organisations including charities.
The government expects around 690,000 businesses and 30,000 not-for-profits to qualify, employing around 7.8 million people.
Sammy Gitonga, ANZ Private Advice Director, says this could be a major help for businesses with fixed term expenses such as insurance.
“This could help them avoid unexpected results from situations where you may have to otherwise let go of your insurance because you just can’t afford it anymore,” Gitonga says.
For businesses that need to make purchases during this time, the instant asset write-off threshold was increased to $150,000 from $30,000, and access was expanded to businesses with aggregated annual turnover of less than $500 million (up from $50 million). This applies until the end of June for new or second-hand assets that are first used, or installed for use, within this timeframe.
The newly-created Coronavirus SME Guarantee Scheme will see the government guarantee 50% of new unsecured loans issued to eligible small businesses by eligible lenders, giving businesses easier access to loans between 1 April 2020 and 30 December 2020.
It will apply to loans for up to three years capped at $250,000, with an initial six-month repayment deferral. This is expected to support around $40 billion in financing to small and medium enterprises.
The government is also providing a temporary exemption from responsible lending obligations to lenders providing credit to existing small business customers, temporarily increasing the threshold where creditors can issue a statutory demand to a company and begin bankruptcy proceedings against an individual, and temporarily increasing the time companies and individuals have to respond to statutory demands.
Targeted relief from provisions in the Corporations Act 2001 include temporary relief for directors from personal liability for trading while insolvent.
The ATO is willing to help affected businesses with payments on a case-by-case basis for up to six months. Federal and State governments have also offered targeted support to regions and industries disproportionately hit by the virus, including tourism, hospitality and education.
Help for individuals
While much of the support is being passed down through businesses, individuals can also receive direct support if they have lost their job or had their salary reduced.
Existing and new recipients of benefits including JobSeeker (formerly Newstart), Youth Allowance, Parenting Payment and others will get an additional $550 a fortnight for the next six months on top of their existing payment.
More than 6.5 million Australians receiving income support including the age pension received a one-off payment of $750 on 31 March 2020, and another payment of $750 is due on 13 July 2020. The second payment won’t be available to those already receiving the fortnightly $550 coronavirus supplement.
While it will be a difficult choice to make, workers who lose their job or more than 20 per cent of their hours can access up to $20,000 from their superannuation balance in two separate payments this and next financial year.
The withdrawals are tax free, and won’t affect welfare payments. Those interested can apply online through the myGov website before 1 July 2020, and shouldn’t apply to their superannuation fund directly.
There are no income or asset tests involved, and someone with a high salary who remains employed can apply as long as his or her salary has been reduced. Applications will open mid-April, but there could be a significant time lag in accessing the funds.
For pensioners, the government has cut lower and upper deeming rates by 50 basis points to reflect the record low interest environment, reducing the upper deeming rate to 2.25% and the lower deeming rate to 0.25%. This will increase the amount some will receive from the age pension, and potentially increase the number of eligible pensioners.
The minimum drawdown requirements for account-based pensions has also been reduced by 50% for the next two financial years, giving more flexibility to retirees over how they manage their superannuation assets and potentially reducing the need to sell assets to fund drawdown requirements. Johnstone warns there could be tax implications of reducing superannuation drawdowns, and retirees should seek advice before making changes on this front.
State governments around the country have also put forward additional measures aimed to help affected individuals and businesses in their states.
While these measures are designed to lessen the load over the difficult months to follow, Johnstone warns that businesses should continue to ask hard questions, before making decisions.
Banks such as ANZ are looking for ways to help the community, she says, and may be flexible about repayments and deadlines. Landlords may also be open to temporary rent reductions.
“You should be looking at all underlying expenses,” Johnstone says. “A lot of people are open to flexibility around some of those fixed term expenses right now”.