Summary of Economic Stimulus Initiatives
Sunday, 19 April, 2020
We have provided a brief snapshot of the key government initiatives announced over recent weeks.
Please don’t hesitate to contact us if you would like further detail on any of the measures.
As part of the Government’s series of measures to support the economy and individuals through the Coronovirus crisis, Newstart recipients, age pensioners and veterans are being provided with a one-off payment of $750.
These payments started flowing into the bank accounts of 6.5 million (mainly) lower-income Australians from March 31.
While most working Australians won’t receive this payment, this type of tightly targeted payment will provide maximum bang for buck in terms of stimulating the economy.
Pensioners have also received additional support. On top of the $750 payment announced on March 12, an additional $750 will be paid to any eligible recipients, as at 10 July 2020, receiving the Age Pension, Veterans Pension or eligible concession card holders.
If you have any questions about your entitlements to government payments, please don’t hesitate to call.
Federal Government’s second support package announced March 22, flicked the switch to more income support for retirees.
Retirees affected by falling superannuation balances and deeming rates out of line with historically low interest rates have been offered some reprieve.
In addition to the cut in pension deeming rates announced in the first stimulus package, the Government has cut deeming rates by a further 0.25 percentage points.
Deeming rates are the amount the Government ‘deems’ pensioners earn on their investments to determine eligibility for the Age Pension and other entitlements, even if that rate is lower than they actually earn.
This move will bring deeming rates closer in line with the interest rates pensioners are receiving on their bank deposits, especially those with lower balances.
From 1 May 2020, deeming rates will fall to 0.25 per cent on investments up to $51,800 for singles and $86,200 for couples. A rate of 2.25 per cent will apply to amounts above these thresholds.
|Up to $51,800
||Up to $86,200
Federal Government’s second support package announced on March 22 offered assistance for self-funded retirees.
Minimum drawdown rates for account-based pensions and similar products will be halved for the 2020 and 2021 financial years. This means retirees will be under less pressure to sell shares or other pension assets in a falling market to meet the minimum payments they are required to withdraw each financial year.
The new rates are in the table below:
|Age of member
||Default minimum drawdown rates
|| Minimum drawdown rate for the 2019-20 and 2020-21 income years
|95 or more
Contact us if you’d like to discuss what these changes will mean for your income in retirement.
As part of the measures taken by the government to support those impacted by COVID-19 some people will be able to access up to $10,000 of their super between now and 1 July 2020, with a further $10,000 in the first three months of the 2020-21 financial year, tax free.
Those who are eligible include the unemployed, people receiving JobSeeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit. People who’ve been made redundant, had their work hours reduced by 20% or more or sole traders whose turnover has reduced by 20% or more since 1 January this year are also eligble.
Applications can be made online from mid-April by using myGov. Members will self-certify that they satisfy the eligibility criteria.
While this provides an additional safety net for individuals and families who face the loss of a job or a significant fall in income, we do urge our clients to consider accessing their super as a last resort.
Taking a chunk out of your retirement savings now, after a big market fall, would not only crystallise your recent losses but it also means you would have less money working for you when markets recover.
So before you do anything, speak to us and we can help you review other income support measures that may be applicable to your situation.
On April 7, the Government announced new commercial rental waivers and deferrals for tenants that have been severely impacted by the coronavirus crisis.
The draft Code of Conduct is to impose a set of ‘good faith leasing principles’ and intended for landlords and tenants to share a proportionate financial risk and cashflow impact during this period of crisis. The code will apply to any small-medium sized tenancies where the tenant is eligible for the JobKeeper program and where they have a turnover of $50 million or less.
Under this relief package, landlords must not terminate a lease due to non-payment during the COVID-19 period and tenants must remain committed to the terms of their lease agreement.
Landlords must offer tenants proportionate reductions in rent payable as either waivers or deferrals of up to 100%, which is based on the reduction in the tenant’s trade throughout this crisis period and recovery.
Waivers will have to account for at least 50 per cent of rent payable, or greater in cases where it would compromise a tenant’s capacity to fulfil their ongoing obligations. Consideration must also be given to the Landlord’s ability to provide the additional waiver. Tenants may also waive the requirement for a 50% minimum waiver by agreement.
Rental payments will need to be made, but can be deferred to a later date, with payment amortised over the remaining term of the lease and for no less than 24 months, whichever is greater.
While the package is encouraging landlords and tenants to work together, where agreement on leasing cannot be reached, the matter can be referred on to applicable state retail/ commercial leasing dispute resolution processes.
We encourage you to speak to your landlord, tenant or the bank, and if you need assistance in regards to your financial situation, please don’t hesitate to give us a call.
The Government has accelerated depreciation deductions for the next 15 months. Up until June 30, 2021, businesses turning over less than $500 million will be able to deduct 50 per cent of the cost of any eligible asset the moment it’s installed. It’s predicted these two tweaks to the investment rules could benefit up to 3.5 million businesses that collectively employ almost 10 million Australians.
On April 8th, the JobKeeper package was passed by both sides of Parliament and legislated. This update offers further guidance on the scheme.
Workers with multiple jobs
If you are employed by multiple businesses, you are only eligible to receive the payment from your nominated primary employer.
The JobKeeper will be available from March 30 and will last until September 27 2020, employers can expect to receive payments from the first week of May. Payments will be made monthly by the ATO in arrears.
Businesses can apply for the payment if your turnover will fall by 30% or more (or by at least 50% for businesses with a turnover of greater than $1 billion or more), relative to turnover of a corresponding period of the previous year.
For businesses who reasonably expect their turnover to fall in the coming month by either 30% or at least 50% for those with a turnover of more than $1 billion relative to that of a previous year, the ATO will provide guidance about self-assessment of actual and anticipated falls in turnover.
If you do not initially meet the turnover test at the start of the scheme on March 30, the business can receive the payment once the turnover test has been met.
For new businesses or businesses with a ‘lumpy’ income, the Tax Commissioner has discretion to set out alternative tests that will establish eligibility in specific circumstances. There will also be some tolerance for employers, who in good faith estimate a 30% or 50% all in turnover but actually experience a slightly smaller fall.
JobKeeper Payment clarification.
To be able to claim the JobKeeper payment for an eligible employee, that employee must be paid a minimum of $1,500 income per fortnight, before tax is withheld. This includes:
- Employees who have been stood down without pay after March 1 2020, will receive the full $1,500 before tax, per fortnight.
- Employees who usually earn less than $1,500 a fortnight before tax, are to be ‘topped up to $1,500 per fortnight.
- Employees whose hours have been reduced and now earn less than $1,500 per fortnight, are to be topped up to $1,500 per fortnight.
- Employees who were let go after March 1 who have been re-hired will be eligible.
For employees who earn over $1,500 per fortnight, the businesses payments and obligations will not change. The $1,500 fortnightly subsidy received will be to support their continued employment.
Self employed and other eligible businesses
- Self-employed taxpayers will be eligible provided they meet certain criteria at the time of applying.
- Director Fees – Only one person in a director capacity may receive the payment and that individual may not receive the payment as an employee.
- Trusts – Trust can receive JobKeeper payments for any eligible employees. where beneficiaries only receive distributions, rather than being paid a wage for work done, only one individual beneficiary can be nominated to receive the JobKeeper Payment.
- Partnership – only one partner can be nominated to receive a JobKeeper Payment along with any eligible employees.
- Company – where an eligible business pays shareholders in the form of dividends, in lieu of a wage, only one shareholder will be eligible to nominate for the JobKeeper Payment
Eligible employers will need to need to register for the scheme in order to receive payments administered by the ATO.
If you have not already registered, please go to https://www.ato.gov.au/Job-keeper-payment/. Once you have registered you will receive information and updates from the ATO about how and when to claim the JobKeeper payments.
An economic stimulus package is being put in place to support businesses to manage cash flow challenges and assist them retain their employees to continue to stay viable through the coronavirus crisis.
The Government is providing tax-free cash flow boosts between $20,000 and $100,000 to eligible businesses delivered through credits in the activity statement system when businesses lodge their statements.
Businesses do not need to apply, and the first amount will automatically be credited to the business’ account from April 28.
- Have an active ABN on March 12 2020, which continues to be active.
- Have an aggregated turnover less than $50 million, based on the business’ previous years turnover.
- Made eligible payments that the business is required to (ie wages, directors fees, eligible termination or retirement payments, compensation payments or voluntary withholdings from payments to contractors).
- Earned an assessable income from 2018-19 year or made sales in a previous tax period (since July 1 2018) and lodged the relevant activity statement on or before March 12 2020.
- Not-for-profit organisations, sole traders, partnerships, companies and trusts
(Not-for-profit organisations eligibility can be found here).
When will you see your cash flow boost?
If the business lodges:
- quarterly, it will be eligible to receive the credit for:
- quarter 3, March 2020 (lodgment due date 28 April 2020)
- quarter 4, June 2020 (lodgment due date 28 July 2020).
- monthly, it will be eligible to receive the credit for the lodgment periods of:
- March 2020 (lodgment due date 21 April 2020)
- April 2020 (lodgment due date 21 May 2020)
- May 2020 (lodgment due date 21 June 2020)
- June 2020 (lodgment due date 21 July 2020)
Note: if the businesses has been granted a deferral from the ATO, the cash flow boost will generally be made at the time of the deferral lodgement.
Eligible businesses who received the initial cash flow boost will receive an additional cash flow boost, for the periods June to September 2020, equal to the amount of initial cash flow boost received.
Can you qualify for a refund?
A business may receive a refund where the credit exceeds the business’ other tax liabilities or if it has overpaid its activity statement. If your business is in the position to receive a refund, you will generally receive the refund within 14 days.
If you have any questions in regards to the cash flow boosts your business is entitled to, please don’t hesitate to give us a call.
Super Focus Pty Ltd (ABN 48 200 213 405) Corporate Authorised Representative of CMT Financial Services Pty Ltd (ABN 61 162 109 373) Australian Financial Services Licence No. 434 377 This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information. Investment Performance: Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.