On 12 March 2020, the Australian Government released its economic response to the coronavirus (COVID-19). The ATO also released a series of administrative concessions for taxpayers.
Tax incentives for business investment
Instant asset write-off increased
For new or second-hand assets first used or installed ready for use from 12 March until 30 June 2020, the instant asset write-off threshold will be increased from $30,000 to $150,000 for businesses with aggregated annual turnover of less than $500 million (up from the current $50 million threshold). The threshold applies on a per asset basis, so eligible businesses can immediately write-off multiple assets. The threshold will revert to $1,000 for small businesses (turnover less than $10 million) from 1 July 2020, however businesses not entitled to the instant asset write off from 1 July 2020 may be entitled to the 50% investment incentive as below.
Backing business investment incentive
The Government is introducing a time limited 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with aggregated annual turnover of less than $500 million per annum will be able to deduct 50 per cent of the cost of an eligible asset upon installation, provided it was acquired after 12 March 2020 and first used or installed by 30 June 2021. There is no asset value threshold for this 50% investment incentive. The existing depreciation rules will continue to apply to the remaining balance of the asset’s cost over its effective life. Therefore, an eligible asset will generate the immediate deduction of 50%, plus in the same year will generate a Division 40 depreciation deduction calculated in accordance with the normal depreciation rules. The measure results in businesses bringing forward depreciation deductions from future years to the current period resulting in a reduced tax liability in the current period. A rise in tax liability due to reduced depreciation in subsequent years will offset this reduction.
Cash flow assistance for businesses
Boosting cash flow for employers
Up to a $25,000 tax-free payment to small and medium-sized businesses with aggregated annual turnover of less than $50 million that employ workers, between 1 January 2020 and 30 June 2020. These eligible businesses will receive a payment equal to 50% of their PAYG withheld, delivered as a credit in their BAS from March to June 2020, with a minimum $2,000 payment.
*Please note that the Australian Federal Government’s second economic stimulus package increased the amount of the tax-free payment from $25,000 to $100,000 (and the minimum $2,000 payment to a minimum $25,000 payment). Please refer to this BDO Tax Technical Update for more information.
Supporting apprentices and trainees
Eligible small business employers will be able to apply for a wage subsidy of 50% of the apprentice’s or trainee’s (in training as at 1 March 2020) wage for up to 9 months from 1 January to 30 September 2020, up to $21,000 per apprentice. Employers can register for the subsidy from early April 2020 with final claims for payment due by 31 December 2020.
A one-off $750 payment will be available from 31 March 2020 to social security, veteran and other income support recipients and eligible concession cardholders including pensioners. There will be one payment per eligible recipient.
Assistance for severely affected regions
The Government has set aside $1 billion to support those regions and communities that have been disproportionately affected by the economic impacts of COVID-19, including those heavily reliant on industries such as tourism, agriculture and education.
On 12 March 2020, the Australian Taxation Office (ATO) announced a series of administrative concessions to assist businesses impacted by COVID-19, which include:
- deferring by up to 4 months the payment of tax amounts due through the BAS (including PAYG instalments), income tax assessments, FBT assessments and excise by affected businesses;
- allowing affected businesses on a quarterly reporting cycle to opt into monthly GST reporting to get quicker access to any GST refunds;
- allowing affected businesses to vary PAYG instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters;
- remitting any interest and penalties, incurred by affected businesses on or after 23 January 2020, that have been applied to tax liabilities; and
- allowing affected businesses to enter into low-interest payment plans for their existing and ongoing tax liabilities.
The ATO assistance is not automatic, taxpayers must first contact the ATO to request assistance, and if eligible, the ATO will ‘tailor the assistance package for the relevant taxpayer.
Please contact BDO for assistance with navigating the Australian Government’s first and second economic stimulus packages and determining your eligibility for the tax and business measures.
BDO can also help you with the development of your whole of business approach to respond to current and emerging issues arising in the current environment as well as with implementation tasks.
As certain incentives in the various economic packages will only be available for a short period of time, businesses should consider taking action as soon as practicable.
Read the technical updates on the additional Australian economic stimulus packages in response to Coronavirus
Second stimulus package
Third Stimulus pacakage
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