As the anticipated economic impact from the Coronavirus worsens, the Government on the weekend beefed up its assistance package that was originally announced last week as follows:
PAYG cash credits to SME employers and charities up to $100k (minimum $20k)
The Government announced on the weekend that it will boost last week’s cash credit to employers. It will now provide a tax-free credit up to $100,000 for eligible small and medium sized entities (SMEs), and not-for-profits (including charities) that employ people, with a minimum credit of $20,000. These tax-free credits seek to help businesses’ and NFPs’ cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff.
Under the enhanced scheme from last week’s first stimulus package, employers will receive a credit equal to 100% PAYG withholding from employee salary and wages (up from 50%), with the maximum credit being increased from $25,000 to $50,000. In addition, the minimum credit will be increased from $2,000 to $10,000.
SMEs with aggregated annual turnover under $50m and that employ workers are eligible. NFPs entities, including charities, with aggregated annual turnover under $50m and that employ workers will now also be eligible. This will support employment at a time where NFPs are facing increasing demand for services.
The cash flow credit for employers will be available from 28 April 2020.
For example, if an employer lodging their quarterly March Activity Statement was ordinarily due to withhold $40,000 in PAYG withholding from their employee’s salaries in that quarterly period, then they would just keep this money themselves (being 100% of the withholding that was due) rather than sending it to the ATO and it would be tax-free. The rest of that Activity Statement would be dealt with normally, for instance it may be the case that GST may be owed for that quarter.
We can see from this example, that the benefit is by way of the withholding that would normally be owed to the ATO, and that withholding amount is tax-free to the employer. Therefore, it is not a cash payment from the ATO as such, but rather retaining the withholding which would otherwise be payable.
An additional credit is also being made from 28 July 2020. Eligible entities will receive an additional credit equal to the total of all of the Boosting Cash Flow for Employers payments received. The credits are tax-free, there will be no new forms and payments will flow automatically from the ATO.
Temporary Relief for Financially Distressed Businesses
The Government is temporarily increasing the threshold to $20,000 (up from $2,000) at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive (21 days to 6 months). Temporary relief will also be provided for directors from any personal liability for trading while insolvent. The Corporations Act 2001 will also be amended to provide temporary and targeted relief for companies to deal with unforeseen events that arise as a result of the Coronavirus.