Explained: Latest $66 Billion Stimulus Aimed At Business and Workers
Small businesses now eligible for $20,000 - $100,000 in tax-free cash injections
Employers can claim 100% of payroll tax withheld
Instant asset write-off scheme raises from $30 to $150,000
JobSeeker payments doubled
Nearly 10% of Australia’s GDP pledged to stimulus measures
The Federal Government has unveiled its latest financial stimulus package designed to keep small and medium businesses afloat, and their workers employed at the economy struggles to cope with the coronavirus pandemic.
The ABC has termed it an “economic lifeline” as small, medium and large-sized businesses prepare for further lockdown measures that will slow down the economy.
In the second stage of the government’s package $66 billion worth of measures is being directed at providing a “safety net” for newly-unemployed workers, relief for retirees and cash injections into small and medium-sized organisations struggling to stay afloat.
“There is a lot of pain coming but we’re going to cushion the blow as best we can,” Prime Minister Morrison said. “We want to help businesses going as best they can or to pause instead of falling apart,” Morrison added. “We want to ensure when this crisis has passed, Australia can bounce back”
The latest stimulus package combined with the initial round of stimulus measures we reported on last week as well as the Reserve Bank’s $90 billion term funding facility, as well as the slashing of interest rates to 0.25% brings the Commonwealth’s contributions to a stimulus package to $189 billion; 9.7% of Australia’s GDP.
Non-profit organisations and small businesses are now eligible for a tax-free cash injection of anywhere between $20,000 to $100,000; these payments will be delivered in the form of a tax credit by the Tax Office from late April. SmartCompany writes that “this booster will be available to businesses with an aggregated annual turnover of less than $50 million, and that have employees...The size of the grant is based on tax withheld on employees’ wages, and calculated automatically from business’ business accounts statements.”
The government expects that 690,000 businesses employing 7.8 million people, as well as 30,000 non-profits will be eligible for these measures, according to a report from The ABC.
“Previously, businesses would have been able to reclaim 50% of tax withheld. That has now been increased to 100%, to a maximum of $50,000 per payment.” The minimum for these payments has also been increased, from $2,000 to $10,000 per payment.
“So, for example, if a business pays $2,000 in PAYG tax on employee wages, it will receive a grant of $10,000 twice, for a total of $20,000… If the business pays $50,000 or more in PAYG, it will receive the maximum grant of $50,000 for the current period, and again in October, for a total of $100,000,” writes SmartCompany.
The government is also attempting to get more companies borrowing money, and will guarantee unsecured loans of up to $250,000 for up to 36-months. This is on top of an accelerated depreciation deduction which takes place immediately. According to SmartCompany, “for the next 15 months, until June 30, 2021, businesses will be able to deduct 50% of the cost of an eligible asset on installation. Existing depreciation rules will apply to the full cost of the asset. Businesses with an annual turnover of less than $500 million will be eligible for this measure, intended to encourage business to invest.”
Under the RBA’s latest $90 billion term funding facility for banks, for every $1 they lend to a small business customer, the bank is eligible for $5 in funding themselves. “At the same time, the federal government announced its own $15 billion funding facility for non-bank lenders, also intended to encourage lending to small business,” writes SmartCompany.
In addition, the instant asset write-off scheme has been expanded from its $30,000 threshold to $150,000, which includes organisations with an annual turnover of less than $500 million, up from $50 million.
For workers and recently unemployed individuals, the Jobseeker payment has doubled temporarily, and those impacted are now able to access $10,000 from their superannuation fund for the next two-years.
“We cannot prevent all the many hardships, many sacrifices that we will face in the months ahead, Mr Morrison said.
Shadow Health Minister, Chris Bowen has called for an increase to the Newstart Allowance, stating that “it’s similar to the health challenge facing the country; if in doubt, do more.”
“And we have consistently said that what the Government’s done so far, in health and in the economy is good, but not good enough,” he concluded.