CORONAVIRUS ECONOMIC RESPONSE PACKAGE

Legislation to implement the Government's Coronavirus Economic Response Package has passed.

The package of 8 Bills include:

This package of Bills seek to urgently implement aspects of the Government's economic stimulus package originally announced on 12 March 2020, and followed up on 22 March 2020 with a second package containing $66.1bn of measures (see 2020 LTN 55 [1]). The key measures contained in the package of Bills are outlined as follows.

Instant asset write-off extended and increased to $150k

The Coronavirus Omnibus Bill will amend the ITAA 1997 to increase the instant asset write-off threshold from $30,000 to $150,000 for small business entities (SMEs) with aggregated annual turnover of less than $500m (up from $50m) from 12 March 2020 to 30 June 2020.

This Bill will also amend the tax law to:

  • provide access to an instant asset write-off to entities with an aggregated turnover of $10m or more, but less than $500m (up from the existing cap of $50m); and
  • make the instant asset write-off available for depreciating assets and certain related expenditure costing less than $150,000, from 12 March 2020 to 30 June 2020.

The instant asset write-off is due to revert to $1,000 from 1 July 2020 and only be available for small business entities. There is no change to the types of assets that may qualify for the increased thresholds.

Business investment initiatives: accelerated rate of depreciation

The Coronavirus Omnibus Bill will amend the ITAA 1997 Act to temporarily allow businesses with aggregated turnovers of less than $500m in an income year to deduct capital allowances for depreciating assets at an accelerated rate.

Generally, to be eligible to apply the accelerated rate of deduction, the depreciating asset must satisfy a number of conditions including that the asset:

  • is new and has not previously been held by another entity (other than as trading stock or for testing and trialling purposes);
  • is an asset for which an entity has not claimed depreciation deductions, including under the instant asset write-off rules; and
  • is first held, and first used or installed ready for use, for a taxable purpose between 12 March 2020 and 30 June 2021 (inclusive).

Under the amendments, different rules apply depending on whether or not an entity is using the simplified rules for capital allowances for small businesses.

An entity with aggregated turnover of less than $500m in the income year that does not use the simplified depreciation rules may deduct an amount at an accelerated rate for qualifying assets.

A small business entity (generally, an entity with an aggregated turnover less than $10m in the income year) that uses the simplified depreciation rules may deduct an amount equal to 57.5% (rather than 15%) of the taxable purpose proportion of the adjusted value of a qualifying depreciating asset added to the general small business pool in an income year.

Cash payments for SMEs employers and charities

The Coronavirus Omnibus Bill will require the Commissioner to make 2 "cash flow boost payments".

The first cash flow boost payment will be made to eligible entities for periods from March 2020 to June 2020. Eligible entities are those which make a payment which is subject to the withholding obligations in Div 12 of Sch 1 to the TAA (ie in relation to wages, salary or similar remuneration), whether or not any amount is actually withheld in the period. In addition, the entity must be a small or medium business entity, or charity or not-for-profit entity of equivalent size (with scope for the Commissioner's discretion).

For all entities other than ACNC charities, the entity must have held an ABN on 12 March 2020 and have carried on an enterprise at that time.

The relevant period is one of the following:

  • the quarters ending in March 2020 or June 2020; and
  • the months of March 2020, April 2020, May 2020 or June 2020.

All eligible entities will receive a minimum cash flow boost payment of $10,000 in the first period for which they are eligible. Entities will receive further amounts, based on the amount withheld, up to a maximum total of $50,000 across all cash flow bonus payments to the entity.

The payment will generally be made on lodgment of the activity statement notifying the Commissioner of their withholding liabilities for the period and can be provided as a credit against tax liabilities. It will be generated automatically and will be a tax free amount.

The Commissioner must also make the second cash flow boost payment to an entity for a total amount equal to the amount of the first cash flow boost payments to which the entity is entitled. These second cash flow boost payments are payable in equal instalments for either:

  • the months of June, July, August and September 2020; or
  • the June and September 2020 quarters.

The second cash flow boost payments will generally be made on lodgment of the activity statement containing the GST return of the entity for the period.

Temporary relief for financially distressed individuals and businesses

The Coronavirus Omnibus Bill contains 6 broad (and temporary) measures designed to avoid what are termed unnecessary bankruptcies and insolvencies.

The minimum amount of debt required to be owed before a creditor can initiate involuntary bankruptcy proceedings against a debtor will increase from $5,000 to $20,000.

The period in which debtors must respond to a bankruptcy notice is extended from 21 days to 6 months.

Third, the timeframe in which a debtor is protected from enforcement action by a creditor following presentation of a declaration of intention to present a debtor's petition is also extended from 21 days to 6 months.

The statutory minimum for a creditor to issue a statutory demand to a debtor increases from $2,000 to $20,000. This raises the thresholds for creditor demands that can push businesses into insolvency. The amendments also temporarily provide debtors more time to respond to a statutory demand - the period is extended from 21 days to 6 months. Finally, the amendments provide temporary relief for directors from their personal duty to prevent insolvent trading.

Early release of superannuation

The Bill will amend the SIS Regulations to allow individuals affected by Coronavirus to release tax-free up to $10,000 from their superannuation on compassionate grounds. Each person is permitted to have up to 2 releases of $10,000 - one for an application made during the 2019-20 financial year, and another for an application made during 2020-21.

To be eligible for this new coronavirus condition of release (reg 6.19B of the SIS Regs), a person must be either unemployed or eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment, special benefit or farm household allowance. Alternatively, on or after 1 January 2020, a person must have been made redundant; or their working hours have been reduced by 20% or more (including to zero). A sole trader will be eligible if, on or after 1 January 2020, their business was suspended or has suffered a reduction in turnover of 20% or more. Released amounts will be tax-free and not affect Centrelink or Veterans' Affairs payments.

Date of effect: Eligible individuals will be able to apply directly to the ATO from mid-April 2020 through the myGov website to access up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for approximately 3 months (exact timing is 6 months after the day the regulation commences). After the ATO has processed an application, they will issue the person with a determination. The ATO will also provide a copy of this determination to the superannuation fund which will then make the payment to the individual, without the person needing to apply to them directly. Separate arrangements will apply for the early release from an SMSF.

Superannuation drawdowns

The annual superannuation minimum drawdowns in the SIS Regulations for account based pensions (and similar annuity products) will be reduced by 50% for 2019-20 and 2020-21.

Job seeker supplement of $550 per fortnight

The Bill will implement a new temporary Coronavirus supplement of $550 per fortnight, effectively doubling the current payment for job seekers. This Coronavirus supplement will be paid for the next 6 months to both existing and new recipients of the JobSeeker Payment, Youth Allowance jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit. Eligible income support recipients will receive the full amount of the $550 Coronavirus supplement on top of their payment each fortnight.

The supplement will commence on 27 April 2020 and be available for an initial 6-month period (although the Minister may extend that period and extend the supplement to other social security payments). Recipients of jobseeker payment or Youth Allowance (other) (which includes new and existing recipients) and Parenting Payment are also exempt from the assets test, liquid assets waiting period, ordinary waiting period, newly arrived resident's waiting period and seasonal worker preclusion periods. The exemption from the newly arrived resident's waiting period also applies to special benefit. The supplement and exemptions will be extended to recipients of the Farm Household Allowance.

Stimulus payments for pensioners ($750 x 2)

The Government will provide 2 separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders. The first payment of $750 (announced on 12 March 2020) will be available to people residing in Australia and receiving one of the listed social security payments or concession cards at any time from 12 March 2020 to 13 April 2020. The second payment of $750 will be available to people who are eligible payment recipients and concession card holders on 10 July 2020. The first payment will be paid automatically from 31 March 2020, and the second payment paid from 13 July 2020.

Medicare levy low-income thresholds

The Medicare levy and Medicare levy surcharge low-income thresholds will be amended for the 2019-20 income year in line with movements in the CPI.

Regulatory flexibility in Corporations Act

The Corporations Act 2001 will be amended to establish a temporary mechanism to provide short-term regulatory relief to classes of persons that, due to the Coronavirus, are unable to meet their obligations under the Corporations Act or Regulations: see above.

Other measures

Other measures contained in the Bills cover:

  • Child care - some limited flexibility will be provided for managing the impact of the Coronavirus, as well as future disasters, on families and on business continuity for child care services. These amendments will generally apply from the 2019-20 financial year;
  • Assistance for apprentices and trainees and the aviation sector;
  • Environmental Management Charge - certain environmental management charges (eg Great Barrier Reef Marine Park fees) will be temporarily waived from 1 April 2020 to 31 December 2020;
  • Delaying the next intergenerational report until mid-2021;
  • Deferral of Sunsetting;