Mar 2020 6 Minutes
Further Economic Plan Announced by the Prime Minister
The Prime Minister released details of the second round of the Government’s economic plan to combat the impact of the coronavirus outbreak. The new economic plan will provide significant benefits to SME businesses and households in addition to the stimulus package announced on 12 March 2020. These new measures together with the previous stimulus package will need to be legislated when the Parliament returns later today.
A total of $189 billion will be injected into the economy. This includes $17.6 billion for the Government’s first economic stimulus package (see our article issued 13 March 2020), $90 billion from the RBA, $15 billion from the Government to deliver easier access to finance and $66.1 billion in yesterday’s economic support package.
The economic support package includes:
- Assistance for businesses to keep people in a job;
- Support for households including casuals, retirees and those on income support; and
- Regulatory protection and financial support for businesses
Assistance to Employers
Boosting Cash Flow for Employers
The Government will provide up to $100,000 to eligible small and medium-sized businesses, and not for-profits (including charities) that employ people, with a minimum payment of $20,000. These payments will help businesses’ and not-for-profits’ cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff.
Under the enhanced scheme from the first package, employers will receive a payment equal to 100% of their salary and wages withheld (up from 50%), with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $10,000. The payment will be available from 28 April 2020.
The payments are tax-free, there will be no new forms and payments will flow automatically through the ATO. This measure should benefit around 690,000 businesses employing around 7.8 million people, and around 30,000 NFPs (including charities).
Small and medium business entities with aggregated annual turnover under $50 million and that employ workers will be eligible. NFPs entities, including charities, with aggregated annual turnover under $50 million and that employ workers will now also be eligible. This will support employment at a time where NFPs are facing increasing demand for services.
An additional payment is also being made from 28 July 2020. Eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments received.
Support for Workers and Households
The Government is temporarily expanding eligibility 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.
An increase of up to 5,000 staff for Services Australia will assist to support the delivery of new Government measures.
Payments to Support Households
In addition to the $750 stimulus payment announced on 12 March 2020, the Government will provide a further $750 payment 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.
This second payment will be made automatically from 13 July 2020 to around 5 million social security, veteran and other income support recipients and eligible concession card holders. Around half of those that benefit are pensioners.
The first payment will be made from 31 March 2020 to people who will have been on one of the eligible payments any time between 12 March 2020 and 13 April 2020.
Early Release of Superannuation
The Government will allow individuals in financial stress as a result of the coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21.
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.
Temporarily Reduce Superannuation Minimum Drawdown Rates
The Government will temporarily reduce superannuation minimum drawdown requirements for account based pensions by 50% for 2019-20 and 2020-21. This measure will benefit retirees by providing them with more flexibility as to how they manage their superannuation assets.
Reducing Social Security Deeming Rates
On top of the deeming rate changes made at the time of the first package, the Government is reducing 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. The change will benefit around 900,000 income support recipients, including Age Pensioners.
Regulatory Protection and Financial Support for Businesses
Coronavirus SME Guarantee Scheme
The Government will establish the Coronavirus SME Guarantee Scheme which will support SMEs to get access to working capital to help them get them through the impact of the coronavirus.
Under the Scheme, the Government will guarantee 50% of new loans issued by eligible lenders to SMEs.
The Government’s support will enhance lenders’ willingness and ability to provide credit to SMEs with the Scheme able to support $40 billion of lending to SMEs.
The Scheme will complement the announcement the Government has made to cut red-tape to allow SMEs to get access to credit faster. It also complements announcements made by Australian banks to support small businesses with their existing loans.
This builds on the investment the Government is making to enable smaller lenders to continue supporting Australian consumers and small businesses.
The Government will guarantee up to $20 billion to support $40 billion in SME loans.
Providing Temporary Relief for Financially Distressed Businesses
The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive. The package also includes temporary relief for directors from any personal liability for 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.
Support for the Aviation Industry
As previously announced, the Government is also providing up to $715 million in support for Australian airlines and airports, which will ensure that our aviation sector receives timely cash flow support through an unprecedented period of disruption to international and domestic air travel.
Walker Wayland WA will eagerly be awaiting the details of the new measures when the Parliament returns today and we will provide a further update on this.
Should you have any questions in relation to the above, please contact your accountant.