13 March 2020
by David Prichard and Andrew Law
- Related topics
- Corporate Tax & Regulatory
In response to the potential impact to the economy arising from the COVID-19 (Coronavirus) outbreak, The Federal Government have announced a $17.6 billion stimulus package in order to provide relief to small and medium sized businesses across the country. These measures aim to increase cash flow in businesses; aiming to do so in a number of ways.
Expansion of Instant Asset Write-Off Eligibility
Until 30 June 2020, the instant asset write-off thresholds have been significantly expanded as follows:
|Prior to Announcement||Until 30 June 2020|
|Aggregated Turnover Eligibility||$50 million||$500 million|
|Immediately Deductible Asset Cost||Less than $30,000||Less than $150,000|
As can be seen, this is a large increase in both the businesses eligible for this measure, and the assets available to utilise this measure. Whilst not yet enacted as law, the announcements state that these measures can be utilised immediately.
In essence, this will provide a 27.5%-30% cash benefit of the cost of the asset upon lodgement of the business’s income tax return.
The announcement is silent on the interaction with other depreciation measures. In particular, it is unknown how this measure interacts with the limits on depreciation of “luxury cars”. As such the purchase of a $100,000 car may not come under these measures.
Accelerated Depreciation for Larger Assets
For assets costing more than $150,000 purchased prior to 30 June 2021 (and assets costing more than $30,000 upon expiry of the above expanded instant asset write-off), the Federal Government has announced an accelerated depreciation scheme. Once installed for use, a business with an aggregated turnover of less than $500 million can immediately claim a 50% depreciation deduction on the asset. The remaining balance will then be depreciated as per the regular depreciation rules applicable to the business.
In essence, this will provide a 13.75%-15% cash benefit of the cost of the asset upon lodgement of the business’s income tax return.
Importantly, the announcement notes a 15-month window up to June 2021 and hasn’t expressly stated that it is to commence from yesterday’s announcement. As such, we recommend waiting until further information is provided, prior to taking advantage of this measure.
Cash Flow Assistance – PAYG Withholding
The announcement also flagged cash payments to businesses who employ staff. The specifics on this measure are vague at this stage, and the ATO has not confirmed the mechanism for payment of this amount. We do however note the following:
- It will apply from 1 January 2020 to 30 June 2020;
- For businesses who employ staff, payments will range between $2,000 and $25,000;
- The amounts appear likely to be tied to the lodgement of activity statements and payment of PAYG withholding amounts.
As such, businesses do not appear to need to do anything to receive this payment – as in, it will be an automatic process facilitated by the ATO.
Further announcements made relating to the stimulus package include:
- Wage subsidies of up to 50% on payments to new and existing apprentices and trainees; and
- One off payments of $750 to certain government income support recipients.
With 30 June rapidly approaching, the window appears short to take full advantage of these announced measures. We can assist with any specific questions regarding these measures and how they apply to your business.
For any further information, please don’t hesitate to contact your engagement partner on 92831666. ESV will also continue to provide updates on any stimulus packages as they are announced.