Australian Small Business Stimulus Package: What does it mean to your business?
The Scott Morrison Government today announced a series of stimulus strategies aimed at shielding the economy from the impacts of the Coronavirus pandemic. The $17.6 billion package, equal to about 1% of GDP, is welcome relief and shows that the broader community recognises the importance a thriving Small Business sector has on the overall economy. We break down the announcement so that all Small Business owners can understand what these measures are and how to take advantage of them.
First off, let’s start with the specifics of the package itself:
- Cash grants of up to $25,000 for small businesses that employ staff.
- The instant asset write off threshold is increased from $30,000 to $150,000.
- $3.2 billion to support business investment and economic growth over the short term, by accelerating depreciation deductions.
- Businesses with a turnover of less than $500 million will be able to deduct an additional 50% of the asset cost in the year of purchase.
- Administrative relief for some tax obligations, including deferring tax payments by up to four months.
- Eligible employers can apply for a wage subsidy of 50% an apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020.
- $1 billion to support those sectors such as tourism, agriculture and education that have been disproportionately affected by the economic impacts of the Coronavirus.
- The Government also announced that whilst the package is intended to be temporary, it can be extended depending on how the economy is performing.\
Cash Grants of up to $25,000
If your business has a turnover of up to $50 million, and you employ any staff from January 1 to June 30 this year, you will receive up to $25,000 to assist with staff payments. These funds will be issued automatically after 41 days, based on business activity statements from April 28. The amount issued will be benchmarked to 50% of the amount withheld on an employees’ salary and wages, up to a maximum payment of $25,000.
Instant Asset write off increased to $150,000
The Government agreed to increase the instant asset write-off threshold from $30,000 to $150,000. The turnover threshold for being eligible for the instant asset write-off has increased from $50 million to $500 million until 30 June, 2020. The intention here is to encourage Small Businesses to go out and spend on larger assets.
50% deduction of the asset cost in the year of purchase
Businesses who turnover less than $500 million will also now be able to deduct an additional 50% of the asset cost in the year of purchase. The Government has extended this package to a 15 month investment horizon.
Tax payment deferral plans
The Government is offering administrative relief for certain tax obligations, including deferring tax payments by up to four months. This is similar to relief provided following the bushfires for taxpayers affected by the coronavirus, on a case-by-case basis. You can apply for this after submitting your tax return.
50% apprentice or trainee wage subsidy
The Government has made a total $1.2bn available to subsidise 50% of an apprentice’s or trainee’s wage for up to nine months from 1 January 2020 to 30 September 2020. This is expected to help over 70,000 Small Businesses and 117,000 apprentices. This is expected to ensure Small Businesses are able to retain their staff.
The good news is that when Thriday launches, we will automatically calculate your tax position, write offs and cash flow forecast based on the latest Government guidance so that you can focus on what really matters, your core business. You can sign up for Thriday here.
We congratulate the Government on their announcement. It should definitely help. By offering incentives to buy larger assets such as cars and equipment hopefully Small Businesses can boost the economy and help prevent a long-term downturn. The cash grants and apprentice subsidies should also protect jobs. Now we just have to focus on stopping the spread of the virus even more.