Federal stimulus boost provides $66b for those on the coronavirus economic frontline
23 Mar 2020
Prime Minister Scott Morrison and Treasurer Josh Frydenberg announced an additional $66b in COVID-19 economic support. In announcing these measures, the PM stated that the priority for this stimulus remains support for small businesses, with wage subsidies of up to $100,000, and access to a further $20b in government guaranteed unsecured loans (capped at $250,000) on offer.
This newsletter outlines the federal government measures across all announcements to date.
Boosting cash flow for employers
- An increase from the first package, small and medium business and not-for-profit (including charities) employers with aggregated annual turnovers of under $50m will be eligible for tax-free payments of up to $100,000 per employer. The first payment (capped at $50,000) will be made after 28th April and the second payment (also capped at $50,000) after 28 July 2020. This is the single largest measure in this package.
- Eligible businesses that pay salary and wages but are not required to withhold tax will receive a minimum payment of $20,000, up from $2,000 in the first package.
- The payment will be available from 28 April 2020 and, as stated in the previous stimulus update, will be paid as a credit to the business upon lodgement of their activity statements.
- The payments are tax free, there will be no new forms and payments will flow automatically through the ATO.
- Details, including timing of payments, are on the factsheet available here.
Coronavirus SME Guarantee Scheme
- The Government commits to underwrite $20b worth of loans as a 50 per cent guarantee to support lending of up to $40 billion to SMEs from bank and non-bank lenders.
- Starting in early April, this will apply to eligible loans for businesses with annual turnovers of up to $50 million and will include an upfront six month freeze on repayments.
- The loans will be unsecured but used only for working capital purposes and will apply to loans granted within six months from April 1, 2020. New and existing bank customers will be able to apply for loans up to $250,000 over three years.
Providing temporary relief for financially distressed businesses
- Temporary increase to the threshold at which a creditor can take action to initiate insolvency or bankruptcy from $2000 to $20,000 and giving companies and individuals six months instead of 21 days to respond.
- Relief for directors for personal liability when the company is trading while insolvent.
- The Corporations Act 2001 will be amended to provide temporary and targeted relief for companies to deal with unforeseen events that arise as a result of the coronavirus.
- This relief will be provided over the next six months.
- ASIC has also released guidance on AGMs and reporting for listed entities.
Payments for households
- The government is now providing 2 separate payments of $750 to social security and veteran income support recipients and eligible concession card holders, except for those who are receiving an income support payment that is eligible to receive the coronavirus supplement. The first payment will be paid automatically from 31 March 2020 and the second payment will be made automatically from 13 July 2020.
- Temporary eligibility expansion to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight.
- This will be paid to both existing and new recipients of the JobSeeker Payment, Youth Allowance jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.
- The Coronavirus supplement will be paid for the next 6 months. Eligible income support recipients will receive the full amount of the $550 Coronavirus supplement on top of their payment each fortnight.
Early release of superannuation
- From April, individuals will be able to access their superannuation, capped at $10,000 this financial year and a further $10,000 next financial year. The withdrawals will be tax-free and will be made available to those eligible for the coronavirus supplement as well as sole traders who have seen that hours of work, or income fall, 20% of more as a result of the coronavirus.
- Eligible individuals will be able to apply online through myGov for access of up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for another three months. They will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans' Affairs payments. This measure is estimated to cost $1.2 billion over the forward estimates period.
Superannuation minimum drawdown rates and social security deeming rates
- Temporary reduction to superannuation minimum drawdown requirements for account based pensions and similar products by 50 per cent for 2019-20 and 2020-21.
- Reduction of the deeming rates by a further 0.25 percentage points to reflect the latest rate reductions by the RBA. As of 1 May 2020, the lower deeming rate will be 0.25 per cent and the upper deeming rate will be 2.25 per cent. This measure is estimated to cost $876m over the forward estimates period.