In response to the unprecedented global economic impact of COVID-19, the Federal Government has announced a range of measures to support Australian businesses, some with immediate effect. The measures are designed to provide immediate cash relief for small and medium businesses, encourage investment in plant, equipment and other depreciable assets, and to support employment of apprentices and trainees.
Despite the lack of fine detail on the proposed measures at this stage, we applaud the Government for their initial steps to support Australian employers and small businesses, though expect further measures will be required in light of the twin economic shocks of the Australian bushfires and COVID-19.
These measures are targeted towards small and medium sized businesses and are more complex to apply in practice than might be first apparent.
Please get in touch if you would like to discuss your eligibility for any of these announced measures or if you require our assistance to ensure you maximise your entitlements.
Support for Business Investment
Increasing the instant asset write-off
Effective from 12 March 2020, the instant asset write-off threshold is increased from $30,000 to $150,000 and is expanded to be include businesses with aggregated turnover of less than $500 million (up from $50 million) until 30 June 2020.
This measure will allow qualifying businesses an immediate tax deduction for depreciable assets purchased and installed ready for use up to $150,000 before 30 June 2020. This threshold is per asset so that eligible businesses can write-off multiple assets.
This threshold is due to revert to $1,000 from 1 July 2020.
Although draft legislation has not yet been released for this measure, we anticipate that the immediate deduction for cars will remain capped at $57,581.
Business asset depreciation concession
A limited investment incentive is being introduced which will allow accelerated depreciation deductions for certain business assets purchased and installed ready for use between 12 March 2020 and 30 June 2021.
Businesses with a turnover of less than $500 million will be able to deduct 50% of the cost of an eligible depreciable asset in the year of installation, with ordinary depreciation rules applying to the balance of the asset’s cost.
This measure is targeted at new depreciable assets and will not be available in respect of the purchase of second-hand assets or building and capital works assets that are eligible for the 2.5% or 4% deduction.
The full Federal Government fact sheet for depreciation and instant asset write-off measures can be found here.
Cashflow Assistance for Businesses
$25,000 cash assistance to small business
This measure will provide up to $25,000 to eligible small and medium-sized businesses, with a minimum payment of $2,000.
This payment will be delivered to eligible businesses by the Australian Tax Office as a credit in the activity statement system from 28 April 2020 upon lodgement of an eligible upcoming activity statement.
A business is eligible if it withholds tax on employees’ salary and wages and reports this on an activity statement from March 2020 through to June 2020. The business will receive a credit equal to 50% of the amount withheld and reported over that period, 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.
Support for employing apprentices and trainees
Small businesses employing apprentices and trainees can apply for a wage subsidy of 50% of the employee’s wage paid during the 9 months from 1 January 2020 to 30 September 2020 up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).
An employer will be eligible where they are employing fewer than 20 full-time employees and had retained an apprentice or trainee as at 1 March 2020.
Employers can register for the subsidy from early April 2020 and further information can be found at:
The full Federal Government fact sheet for cash flow assistance measures can be found here.
Aaron is the tax partner at Baumgartners. He is a Chartered Tax Adviser with 18 years’ experience advising private and corporate clients on a wide range of tax and commercial matters. Aaron also represents clients in disputes with the Australian Tax Office and state revenue authorities. Aaron holds a Master of Taxation from UNSW and is an active member of the Taxation Institute of Australia.