Stimulus: Coronavirus (Corvid-19) and Assistance Measures

26/03/2020 0 Comments
Stimulus

Dear Clients,
The following is:

A. a brief analysis of the governments package of measures.

B. a list of income support, loans and concessions you can access during these troubling times.

We are of the view that this assistance is insufficient and weak in the current circumstances and we will be lobbying for stronger action to support incomes and jobs.

It would not hurt to call on your local member and lobby for extra assistance from the Government.

A. Analysis

Government Stimulus Packages

We wish the government would stop saying that the package is generous because it is not. There are significant flaws in the types of assistance being provided as well as the timing of this stimulus.

Stimulus payments will start at the end of April 2020 and for business this will be in form of credits which will arrive by May 2020. This is way too late. Immediate payment is required to stop the job losses.

The amount of $189 billion (10% of GDP) is being mentioned as the amount of the stimulus. You should be aware, that $90 billion of that is an emergency hand out to the big banks with the expectation that they will provide extra credit to the business community. In addition, there are significant investment incentives for business. So, most of the spending is for items that will have little to no impact in the current circumstances.

Private Debt Crisis

Prior to the coronavirus crisis, private debt was extremely high. Australian household debt to disposable income has been rising steadily over the years. It is current over 180% of disposable income. Business is also quite indebted. This indebtedness is a result of the policies of the government over the last few decades. In the context of this high private sector debt, the government is asking you to borrow more. Banks, cagey devils that are, are super cautious and not about to assist without conditions. Sure, they will take what they are given but I do not think it will be easy to get for many small business employers. In addition, it will prove a drag on the business for many years to come. It would have been better if the government had a guaranteed grant and loan package directly to businesses.

Investment Incentives

The investment incentives being proposed are also not that helpful. It is highly likely that many businesses in the face of this collapse of demand and employment will not feel confident in spending the money. Investment deductions may be the least of the helpful measures in this financial year where there is a collapse of businesses.

Early Access to Super

This is a particularly bad and regressive policy. It is encouraging people in a desperate situation to destroy their retirement savings and will mainly be accessed by people will low incomes and low super balances. They are being encouraged to liquidate they investments at a time when the market is at its lowest. It is going to ruin their balances as Super Funds will need to liquidate their holdings to pay out the balances. It is especially bad as the government has all the financial capacity to provide funds to mobilise the unemployed and to support any stimulus that is required.

Good Parts of the Package

If you really look at the current stimulus, the useful measures account for around 4% of GDP. This is a small amount and is not a proportionate response to the worst crisis we have had for a very long time. It is way too weak to be effective. So, I believe that the government will be forced to provide more funds or face mass unemployment on the scale of the depression.

This will result in a great deal of pain and misery and shattered lives. All this is quite unnecessary as the government has the tools to prevent this from being such a disaster. Greater stimulus combined with the mobilisation of the unemployed is the solution. The Government should:

  1. Provide more funds/guaranteed income to individuals and business.
  2. Provide rent relief to both businesses and individuals.
  3. Use its financial clout to design and create businesses and jobs that can be useful in the current circumstances. This would obviously be testing and health related jobs, manufacture of health equipment such as ventilators, Logistics support and boosts to the emergency services.

Giving billions to the banks who have just proved in spades that they are the worst corporate citizens is just plain stupid. It is rewarding and encouraging the worst behaviour.

There are many alternatives including a direct loan from the government through the establishment of a newly created public sector financial entity.

The best policy though is to make sure that people have a safe and guaranteed job/ income so that the government can continue to tax and earn revenue. A job can be guaranteed though government programs as we have done over many crisis situations or by temporary direct grants to small business. If people have guarantee jobs and income, they will be confident in carrying out the isolation measures required to stop the virus.

The following are the government measures to date. We will be contacting individual clients over the next week to make sure that they are prepared and can access what they are entitled to.

B. Government and Private Measures

Federal Government
https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Payments_to_support_households.pdf

Currently the government is providing the following once off payments from the stimulus package:

The Government is providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders.

The Government is providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders.

  • The first payment (announced on 12 March 2020) will be available to people who are eligible payment recipients and concession card holders at any time from 12 March 2020 to 13 April 2020 inclusive.
  • The second payment will be available to people who are eligible payment recipients and concession card holders on 10 July 2020.

A person can be eligible to receive both a first and second support payment. However, they can only receive one $750 payment in each round of payment even if they would be qualified in multiple ways. This payment is exempt from taxation and will not count as income for the purpose of social security, Farm Household allowance or Veterans payments:

Eligibility

To be eligible for the first payment, you must be residing in Australia and be receiving one of the following payments, or hold one of the following concession cards, at any time from 12 March 2020 to 13 April 2020, inclusive:

  • Age Pension
  • Disability Support Pension
  • Carer Payment
  • Parenting Payment
  • ABSTUDY (Living Allowance)
  • Austudy
  • Wife Pension
  • Widow B Pension
  • Bereavement Allowance
  • Newstart Allowance
  • JobSeeker Payment
  • Youth Allowance
  • Partner Allowance
  • Sickness Allowance
  • Special Benefit
  • Widow Allowance
  • Family Tax Benefit, including Double Orphan Pension
  • Carer Allowance
  • Pensioner Concession Card (PCC) holders
  • Commonwealth Seniors Health Card holders
  • Veteran Gold Card holders
  • Farm Household Allowance
  • DVA PCC holders; DVA Education Scheme recipients; Disability Pensioners at the temporary special rate; DVA Income support pensioners at $0 rate.
  • Veteran Service Pension; Veteran Income Support Supplement; Veteran Compensation payments, including lump sum payments; War Widow(er) Pension; and Veteran Payment.

Eligibility for second payment

To be eligible for the second payment, you must be residing in Australia and be receiving one of the payments or holding one of the concession cards that were eligible for the first payment, except for those who are receiving an income support payment that is eligible to receive the Coronavirus supplement.

If you receive one of the following, you will not be eligible for the second payment:

  • JobSeeker Payment (and payments progressively transitioning into JobSeeker Payment)
  • Youth Allowance Jobseeker
  • Parenting Payment (Partnered and Single)
  • Farm Household Allowance
  • Special Benefit

Timing of payments

The first payment will be paid automatically from 31 March 2020

The second payment will be paid automatically from 13 July 2020

Increased and accelerated income support

The government is temporarily expanding eligibility for income support payments and establishing a new time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight, on top of the other income support payment.

The coronavirus supplement will be paid to both existing and new recipients of the eligible payment.

These changes will apply for the next six months.

The Coronavirus Supplement and expanded access for payments will commence from 27 April 2020.

Eligibility

The income support payment categories eligible to receive the Coronavirus supplement are:

  • Jobseeker Payment (and all payments progressively transitioning to JobSeeker Payment; those currently receiving Partner Allowance, Widow Allowance, Sickness Allowance and Wife Pension)
  • Youth Allowance Jobseeker
  • Parenting Payment (Partnered and Single)
  • Farm Household Allowance
  • Special Benefit recipients

Expanded access:

For the six months, there will be expanded access to the income support payments listed above.

Jobseeker Payment and Youth Allowance Jobseeker criteria will provide payment access for permanent employees who are stood down or lose their employment; sole traders; the self-employed; casual workers; and contract workers who meet the income tests as a result of the economic downturn due to the Coronavirus.
This could also include a person required to care for someone who is affected by the Coronavirus.

The government is also waiving asset testing for the jobseeker payment, youth allowance jobseeker and parenting payment.

The usual one-week ordinary waiting period has already been waived in this time of crisis as well.

To claim these payments online, people must set up their Mygov account, call to verify their identity and get a link to their Centrelink online account.

Applicants for Jobseeker Payment and Youth Allowance Jobseeker will:

  • Make an initial declaration about their identity, residency status, income and that they have been made redundant, or had their hours reduced (including to zero) as a result of the economic downturn due to Coronavirus.
  • In the case of sole traders and the self-employed, applicants will make a declaration that their business has been suspended or had turnover reduced significantly.

Streamlined application process:

Several simplified arrangements will be put in place to make it easier to claim, including removing the requirements for:

  • Employment Separation Certificates, proof of rental arrangements and verification of relationship status.
  • Job Seeker Classification Instrument assessment for those people who have recently left jobs, recognising they are job ready; and
  • Job seekers to make an appointment with an employment service provider before they can be paid.

Early Access to Superannuation

One initiative for by the government is the ability to access some superannuation today.

Eligible individuals will be able to apply online through Mygov to access up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to $10,000 from 1 July 2020 for approximately three months, subject to the exact timing in the relevant legislation.

You will be able to apply for early release of your superannuation from mid-April 2020.

Eligibility
To apply for early release, you must satisfy any one or more of the following requirements:

  • you are unemployed; or
  • you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
  • on or after 1 January 2020:
    i. you were made redundant; or
    ii. your working hours were reduced by 20 per cent or more; or
    iii. if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more.

People accessing their superannuation will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.

How to apply:
If you are eligible for this new ground of early release, you can apply directly to the ATO through the Mygov website: www.my.gov.au. You will need to certify that you meet the above eligibility criteria.

After the ATO has processed your application, they will issue you with a determination.

The ATO will also provide a copy of this determination to your superannuation fund, which will advise them to release your superannuation payment.

Your fund will then make the payment to you, without you needing to apply to them directly.

To ensure you receive your payments as soon as possible, you should check your fund details include your current bank account details and proof of identity documents.

Reducing the minimum drawdown amounts for superannuation pensions

The Government will be temporarily reducing the superannuation minimum drawdown amounts for account-based pensions and similar products by 50% for the 2020 and 2021 income years. This means that the minimum amount that a superfund needs to pay its pension has been halved for these financial years.

Under the superannuation rules, the total minimum pension amount that a superannuation fund is required to pay to a fund member receiving a pension is generally calculated by: multiplying the member’s pension account balance at the beginning of the year, by the relevant drawdown percentage

The current drawdown percentages and changes are on the following table:

Recipients AgeCurrent Minimum DrawdownReduced drawdown for 2020 and 2021 income years
Under 654%2%
65 to 745%2.5%
75 to 796%3%
80 to 847%3.5%
85 to 899%4.5%
90 to 9411%5.5%
95 and above14%7%

Small Business Cash Flow Assistance

https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Cash_flow_assistance_for_businesses_0.pdf

What it is?

The Government is providing 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.

To be eligible:

  • The payment will be delivered by the Australian Taxation Office (ATO) as a credit in the activity statement system from 28 April 2020 upon businesses lodging eligible upcoming activity statements.
  • Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld, up to a maximum payment of $50,000.
  • Eligible employers that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.

This credit will be for the PAYG withholding for the March quarter is paying quarterly. If paying monthly, it will be for the month of March 2020 but multiplied by 300% to match quarterly payments. The $50,000 cap is for the March, April, May and June periods.

Eligibility – Additional payment

To qualify for the additional payment, the entity must continue to be active.
For monthly activity statement lodgers. This will be credited monthly and will be equal to a quarter of their total initial Boosting Cash Flow for employer’s payment of the credits in the March, April, May and June periods. For example, if you were credit $50,000 total in the months of March, April and May you will receive 25% June to September months or $12,500 per month.

For quarterly activity statement lodgers, you will be credited an amount equal to half of the total initial Boosting Cash Flow for employer’s payment following the lodgement of their June 2020 and September 2020 activity statements (up to a total of $50,000).

If you receive a $10,000 credit in March quarter, you will receive a $5,000 in the June and September quarters

How is this paid?

The ATO will deliver the payment as a credit to the business upon lodgement of their activity statements. Where this causes the business to be in a refund position, the ATO will deliver the refund within 14 days.

Timing of the payments

Quarterly lodgers will be eligible to receive the first payment for the quarter ending March.

Monthly lodgers will be eligible to receive the first payment for the March 2020, April 2020, May 2020. To provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate in the March 2020 activity statement.

Quarterly lodgers will be eligible to receive the additional payment for the quarter ending June 2020 and September 2020. Each additional payment will be equal to half of their total initial Boosting Cash Flow for Employers payment (up to a total of $50,000).

Monthly lodgers will be eligible to receive the additional payment for the June 2020, July 2020, August 2020 and September 2020 lodgements. Each additional payment will be equal to a quarter of their total initial Boosting Cash Flow for Employers payment (up to a total of $50,000).

Support for business investment

The government is current investing in businesses and the helping the economy withstand and recover from the Coronavirus. This will be done by increasing the instant asset write-off and accelerating depreciation.

Instant asset write-off
The government has increased the instant asset write-off threshold from $30,000 to $150,000.

The access to utilise the write-off is being extended to include businesses with an aggregated annual turnover of less than $500 million (up from $50 million). This increased threshold will be until 30 June 2020 and the government hopes that it will stimulate the economy and keep encouraging spending.

Backing business investment
To incentivise business investment, the government is accelerating depreciation deductions.

Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost. This accelerated depreciation is available until 30 June 2021

Supporting the flow of credit and loans.

This incentive helps small and medium enterprises (SMEs).

The Coronavirus SME Guarantee Scheme will provide support for these businesses. Under the Scheme, the Government will provide a guarantee of 50 per cent to SME lenders for new unsecured loans to be used for working capital.

The Scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.

SMEs with a turnover of up to $50 million will be eligible to receive these loans.

The Government will provide eligible lenders with a guarantee for loans with the following terms:

  • Maximum total size of loans of $250,000 per borrower.
  • The loans will be up to three years, with an initial six-month repayment holiday.
  • The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.

Apprentices and Trainees
The government is offering to subsidise 50 per cent of an apprentice’s or trainee’s wage during the 9 months from 1 January 2020 to 30 September 2020. For a maximum of $21,000 per eligible trainee or apprentice.

ATO
The Australian Tax office is also assisting in support for businesses experiencing financial difficulty during this time.

https://www.ato.gov.au/Individuals/Dealing-with-disasters/In-detail/Specific-disasters/COVID-19/

The ATO can defer payments and debts by up to four months, on a case by case basis, remit interest and penalties from 23 January 2020 and offer low interest payment plans.

Pay as you go instalments
If you are a quarterly pay as you go (PAYG) instalments payer, you can vary your PAYG instalments on your activity statement for the March 2020 quarter. You can do this by lodging a revised activity statement before your instalment is due and before you lodge your tax return for the year. Businesses that do vary the PAYG can also claim a refund for any instalments paid in the September 2019 and December 2019 quarter.

However if you pay monthly and have a base instalment income of $500 million or less and wish to vary, you will need to phone the ATO on 13 72 26 to discuss it with them or elect your tax agent to do it.

Monthly GST credits
Businesses on a quarterly reporting cycle can elect to change their GST reporting to monthly to potentially receive GST credits earlier.

You can only elect to change from 01 April 2020 and must keep reporting monthly for 12 months before electing to go back to quarterly cycles.

However, if a GST turnover is over $20 million you must pay and report on a monthly basis.

State Governments
Most State government have not yet implemented any concessions or aid outside of what the Federal government is offering now.

It is worth checking with your local council to see if they are offering any additional aid to your local area.

Measures taken by different State Governments

So far Queensland and Western Australia are offering additional aid to individuals and/or small businesses, but other States/Territories could offer more at a moment’s notices.

Queensland:
Queensland will offer up to $250,000 loans that are interest free for the first 12 months to any local companies as well as the payroll tax deferral being extended to any sized company.

http://statements.qld.gov.au/Statement/2020/3/17/palaszczuk-government-offers-500m-in-loans-to-support-workers-in-businesses-affected-by-coronavirus

Western Australia:
Western Australia will offer the following aid:

  • $607 million stimulus package to support WA households and small businesses in the wake of COVID-19
  • $402 million to freeze household fees and charges until at least July 1, 2021
  • Freeze will apply to entire ‘household basket’, including electricity, water, motor vehicle charges, emergency services levy and public transport fares
  • Energy Assistance Payment (EAP) doubled to $600 to support vulnerable Western Australians, including pensioners
  • $114 million in additional measures to support small businesses
  • Small businesses that pay payroll tax will receive a one-off grant of $17,500
  • $1 million payroll tax threshold brought forward by six months to July 1, 2020
  • Businesses impacted by COVID-19 can defer payroll tax payments until July 21, 2020

https://www.mediastatements.wa.gov.au/Pages/McGowan/2020/03/COVID-19-economic-response-Relief-for-businesses-and-households.aspx

New South Wales:

  • $450 million for the waiver of payroll tax for businesses with payrolls of up to $10 million for three months (the rest of 2019-20).
  • $56 million to bring forward the next round of payroll tax cuts by raising the threshold limit to $1 million in 2020-21
  • $80 million to waive a range of fees and charges for small businesses including bars, cafes, restaurants and tradies
  • $250 million to employ additional cleaners of public infrastructure such as transport assets, schools and other public buildings
  • More than $250 million to bring forward maintenance on public assets including social housing and crown land fencing
  • $500 million to bring forward capital works and maintenance.

https://www.nsw.gov.au/your-government/the-premier/media-releases-from-the-premier/health-boost-and-economic-stimulus/

Victoria
As at 21 March 2020 the Victorian government has announced the following state package

  • The Government will provide full payroll tax refunds for the 2019-20 financial year to small and medium-sized businesses with payroll of less than $3 million Payment will commence next week
  • The same businesses will also be able to defer any payroll tax for the first three months of the 2020/21 financial year until 1 January 2021.
  • Commercial tenants in government buildings can apply for rent relief and 2020 land tax payments will be deferred for eligible small businesses.
  • The Government will pay all outstanding supplier invoices within five business days – releasing up to $750 million into the economy earlier.
  • Waiving of liquor licencing fees for 2020 for affected venues and small businesses
  • Victoria also provide $500 million to establish a Business Support Fund. The fund will support the hardest hit sectors, including hospitality, tourism, accommodation, arts and entertainment, and retail.
  • The Government will establish a $500 million Working for Victoria Fund in consultation with the Victorian Council of Social Services and Victorian Trades Hall Council. The fund will help workers who have lost their jobs find new opportunities, including work cleaning public infrastructure or delivering food.

Private Sector – Banks
https://www.bankaust.com.au/about-us/news/corporate2/supporting-customers-affected-by-covid-19/

https://mozo.com.au/home-loans/articles/guide-to-australian-banks-emergency-coronavirus-relief-packages

Currently Banks such as the big 4 and others are offering concessions such as waiving fees, deferral of loan repayments and interest free periods.

However, these concessions are currently being given out on a case by case basis. It may change in the future but general concessions from the banks are limited and approved at the whims of the bank. However, it is still worth discussing with your banks what they can do to help. There is just isn’t any general concessions available automatically to everyone.

In these trying times, it would be best to avoid payday loans for your general expenses and groceries. These loans charge an exorbitant amount of interest and this crisis seems to be for the foreseeable future. Taking out this type of loan is unsustainable.

Loans available:

1. The No Interest Loan Scheme (NILS):

https://moneysmart.gov.au/loans/no-or-low-interest-loans

You can apply for interest free loan for essentials such as some medical and dentist services, educational items, car repairs or household items like a fridge, washing machine, computer or furniture. You will need to ask your NILS provider for items that are not on the list and it cannot be used to pay for groceries.

You are eligible if:

  • have a Health Care Card, a Pensioner Concession Card or an income less than $45,000 per year after tax
  • have lived at your current address for more than three months
  • show that you can repay the loan

2. Low Interest Loans:

A StepUP loan is a low interest loan for people on lower incomes who find it hard to borrow from a bank. With a StepUP loan you can borrow between $800 and $3,000. It has a low interest rate (fixed at 5.99%) and no fees or charges.

You have up to three years to pay back the loan with weekly, fortnightly or monthly repayments.

You are eligible if you:

  • have a Health Care Card or a Pensioner Concession Card, or be receiving Family Tax Benefit A
  • have lived at your current premises for more than three months

you can apply for a low interest loan to cover the same list of items as an interest free loan.

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