Details as announced as of 12 March 2020, prior to Legislation being presented. It is not law yet!!!!
(It is extremely likely to become law.)
Both sides of Parliament have indicated their support for these measures
Instant Asset Write-Off
*If the business had a turnover last year of less than $500m
For assets:
- purchased after 12 March 2020, and
- installed ready for use before 30 June 2020, and
- costing less than $150k (GST-exclusive),
- either new or second-hand
Note: Each individual asset will be considered a separate purchase. (i.e. 3 purchases at the same time will be considered 3 separate purchases. |
There is a short window for instant asset write-off before 30 June 2020, at which time the cost of acquisition for instant write-off reduces to $1000.
*Currently small businesses (with turnover less than $10m) have a $30k write-off threshold.
The effect is a quicker tax deduction. All such assets must be business assets eligible for normal depreciation rules. The Asset would have been written off eventually. This measure allows the business to obtain a tax deduction for the full amount at the time of purchase.
Note that, as it is only a tax deduction, the cash benefit is simply a reduction in the amount of Income Tax that would otherwise have been paid – i.e. for companies with a tax rate of 30%, a purchase of $100k (GST excluded) may save $30k off the tax bill. The business will still have to fund the full purchase of $100k in the short term and the net of tax amount of $70k in the long-term.
If the business is not profitable then, any losses will normally be carried forward to offset future profits.
Unknowns
There has been no mention of a change to the Motor Vehicle Cost Limit, which would normally restrict the total amount of depreciation and the GST claimable on the acquisition of a motor vehicle.
We expect that the current instant write-off provisions will apply.
50% Instant Depreciation
*If the business had a turnover last year of less than $500m
For assets:
- purchased after 12 March 2020, and
- installed ready for use before 30 June 2021, and
- classified as Division 40 assets (normally available for depreciation),
- of unlimited value,
- which are not second-hand
Note: This does not apply to assets that have been instantly written off. |
There is a 15 month period for allowing an instant 50% depreciation claim, in addition to the normal depreciation claim for acquisitions ready for use before 30 June 2021.
The effect is once again a quicker tax deduction.
If the business is not profitable then, any losses will normally be carried forward to offset future profits. A $500k asset may have been acquired, and normally depreciated at 15% in the first year for a claim of $75,000. With this concession, the business would claim a 50% deduction of $250k, plus 15% of the balance of $250k – that being $37,500k – for a total claim of $287,500.
Credit on BAS for 50% of PAYGW (up to $25k)
This is the provision that the media has [inaccurately] reported as Cash for Business.
It is managed as a credit to the Integrated client account – which could produce a refund – but in reality it is a reduction in amounts that would otherwise have been paid to the ATO as PAYGW.
It does not change payroll, nor does it have any consequence to the employee.
It is expected that the ATO will calculate the credit based on the lodged BAS, and automatically allocate the credit to the ATO Account of the employer. Alternatively, the credit will need to be separately advised to the ATO. We will need to await further information from the ATO.
If the employer had a turnover last year of less than $50m
- The maximum credit will be $25,000.
- There will be a minimum credit of $2,000 but there must still be employment.
- 50% of the PAYG amount that would otherwise be payable reduces the amount due to the ATO.
Subsidy of 50% of Wages (for 9 months to a maximum of $21k)
For Employers of Apprentices or Trainees with fewer than 20 employees
- 50% of the wages for the 9 month period from 1 January 2020 to 30 September 2020
- Paid in 3 instalments of up to $7k for a total maximum of $21k
Regional Support
- $1b funding will be made available to support regions on a case-by-case basis.
- The government will be administering this.
Newstart and Pensioners
- A one-off payment of $750 will be made available to pensioners and those on Newstart payments.
ATO Supporting Business (no law required)
“The ATO will work shoulder-to-shoulder with businesses to assist them through this difficult period and do what we can to ease the pressure.
“Once you contact us, we’ll tailor a support plan for your needs and circumstances.”
- Businesses are to apply for these initiatives by contacting the ATO on 1800 806 218
- Case-by-case discussion with the ATO will determine eligibility.
Options available to assist businesses that are impacted by COVID-19 include the following:
4 Month Deferral on Payments
Deferring, by up to four months, the payment date of amounts due through the business activity statement (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise.
Converting to Monthly BAS
Allowing businesses on a quarterly reporting cycle to opt in to monthly GST reporting in order to get quicker access to GST refunds to which they may be entitled.
- If you convert to monthly it is for a minimum of 12 months.
- This monthly reporting would apply to GST, and the PAYGW cycle does not need to change from quarterly, if applicable.
- FTX Credits would also be claimable monthly.
- It will be possible to convert to monthly from 1 April 2020. This measure would suit businesses with GST refunds.
Apply to convert to monthly through the normal online services forms.
PAYG Instalments (Income Tax) can be varied to Nil
To be discussed with the business tax agent (Accountant)
This measure allows businesses to vary Pay As You Go (PAYG) instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
Remitting Penalties and Interest imposed since 23 January 2020
This option will allow remitting any interest and penalties incurred on or after 23 January 2020, that have been applied to tax liabilities.
Low-interest Payment Plans
Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low-interest payment plans
Superannuation
Note: There is no discretion available for super payments. Super must be paid as per normal. |
