ScoMo Jump Starts a Shaky Economy: announces $17.6 bn stimulus package following impact of COVID19 on businesses
12 March 2020
BDO Australia has commented on the $17.6 billion stimulus package which was announced by the Morrison Government today.
Mark Molesworth, Tax Partner at BDO in Australia said: “The stimulus will help shake off some of the anxiety and bring a bit of relief to small and medium businesses in Australia. Providing a much needed tax break in three key areas will help to jump-start a weaker economic outlook.”
The three key areas of the stimulus package are: an extension of the instant asset write-offs, cash boosts for small businesses as well as wage subsidies.
- Instant Asset Write-Off: $700 million will be used to significantly expand the instant asset write-off scheme, which will operate from today until July 1. Currently under the scheme, businesses with turnovers of up to $50 million can instantly write off assets valued at up to $30,000. The asset value will now rise $150,000 and will be for eligible businesses who have a turnover of up to $500 million. This will cover 3.5 million businesses.
“Increasing the instant asset write off will bring forward tax deductions for the cost of depreciating assets. This will certainly encourage spending by profitable businesses on additional equipment, however, as it is an additional tax deduction, it provides no immediate support to loss making businesses.”
- PAYG Withholding: Businesses with a turnover of less than $50 million will be eligible for payments of up to $25,000 when they pay the PAYG-withholding taken from employees’ salaries. Eligible businesses that pay salary and wages but are not required to withhold tax will receive a minimum payment of $2,000. The government anticipates the measure will benefit around 690,000 businesses employing around 7.8 million people. The money will be available over the four months of March, April, May and June and the maximum a business will be entitled to across that period is $25,000.
“This will provide an immediate cash boost to eligible employers, irrespective of whether they are profitable or not. The design of this measure will be critical. It will not be sensible if the business has to pay their full amount of PAYG withholding and then wait some weeks for the government to pay out. It will be much better if the boost is able to be offset against the PAYG payable on the business activity statement.”
- Wage Subsidies - $1.3 billion over this and the next financial year to wage subsidies for employers to save the jobs of 120,000 apprentices at risk of lay-off. The package will offer up to $7000 each quarter in wage assistance for each apprentice so small businesses can retain existing apprentices and trainees, or re-employ apprentices and trainees who lose their positions from a small business because of the coronavirus downturn.
Where a small business can’t afford to hold on to an apprentice, the subsidy will be available to a new employer.
“This cash boost to small business will be welcomed. It shows a good balance between handing out cash and incentivising behaviour that the government wants to see in the economy.”
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Read Mark’s comments in The Australian Financial Review*: New $25k cash flow boost to keep workers at work
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