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The Government has passed legislation containing stimulus measures in response to the economic impact of the Coronavirus. The stimulus measures contain changes that affect super, tax and social security. The key changes include a new time-limited condition of release on super, tax concessions for small businesses and additional payments for certain social security recipients. These changes are contained in the Coronavirus Economic Response Package Omnibus Bill 2020 which received Royal Assent on 24 March 2020.
The Government has announced that they will not sit again until August meaning other Bills that have not been passed may not be legislated until the new financial year. Furthermore, the Prime Minister, Scott Morrison has announced the Federal Budget will be delayed until 6 October 2020.
We will continue to monitor the stimulus package and provide relevant updates as more information becomes available.
Eligible people may access up to $10,000 of their super before 1 July 2020. A further $10,000 can be accessed from 1 July 2020 until 24 September 2020. It is expected that the ATO will start to accept applications via MyGov from 20 April 2020.
To be eligible to access lump sums from super, a person must be:
These payments are tax-free and not treated as income under the Centrelink income test.
Steps to follow to apply for the lump sum payment from super:
Self-managed super funds (SMSFs) will use a different process which will be released shortly.
This measure will provide some cash flow to those affected sole traders and employees who are on reduced hours or who are stood down because of the COVID-19 crisis.
The minimum pension payments required from account-based pensions, transition to retirement pensions and market linked pension (term allocated pensions) will be reduced by 50%:
Default minimum drawdown rates (%)
Reduced rates by 50% in 2019/20 and 2020/21 income years (%)
Pensioners who invest in growth investments may crystallise smaller capital losses as they may dispose of a smaller proportion of their investments to meet minimum pension payments. This may allow any remaining growth investments to potentially grow in value when the markets recover.
Up to two, separate, tax-free $750 lump sum payments may be paid to people who receive one of the following payments or who hold any of the following concession cards, as shown in Table 2 below. A person who holds more than one of these will only receive a maximum of two lump sums. A person can only receive one $750 payment in each round of payments even if they qualify for each round of payment in multiple ways. For example, someone receiving a Carer Payment and Carer Allowance may receive a first payment of $750 and a second payment of $750, but they won’t receive four lots of $750.
Those who are eligible for the Coronavirus Supplement will only receive the first lump sum payment and will not be eligible for the second lump sum payment.
To be eligible for these payments the person must be residing in Australia.
The first payment will be paid from 31 March 2020. Those who lodged a claim for an eligible payment or concession card at any time between 12 March 2020 to 13 April 2020, which is subsequently approved, will also receive the first payment.
The second payment will be made from 13 July 2020.
Table 1: Eligible payments and concession cards
The payments will not be treated as income for Social Security, Department of Veterans’ Affairs (DVA) and Farm Household Allowance purposes.
This means a single person may receive up to $1,500 and couples may receive up to $3,000 from the first and second payments.
From 27 April 2020, if client's are eligible (see column two of table above) they will be automatically paid the Coronavirus Supplement. The Coronavirus Supplement is a $550 fortnightly payment for six months. The payments are taxable and are not assessed for the social security income tests.
To provide more access to income support payments the following arrangements will apply during the six-month period:
New applicants are encouraged to lodge claims for eligible payments online through their myGov account for faster processing. Applications can also be done by phoning Centrelink.
From 1 May 2020, the upper deeming rate for income in excess of the income threshold will reduce from 3% to 2.25%, and the lower deeming rate from 1% to 0.25%.
These reductions reflect the low interest rate environment and its impact on the income from savings.
As the coronavirus situation is expected to last for most of the remainder of this year, many pensioners and income support recipients will experience a significant reduction in the value of their investments which are assessed under Social Security, DVA and Aged Care assets tests. This decline in value, combined with the reduction of deeming rates from 1 May 2020, is expected to make more people eligible for the Age Pension or other types of income support. Many people who are currently receiving part pensions and less than the full rate of income support may receive increased entitlements.
From 23 March 2020 until 30 June 2020, small business’ with aggregated annual turnover of less than $500 million (increased from $50 million) may be eligible for an instant asset write-off on assets of up to the value of $150,000 (from $30,000).
From 1 July 2020, this threshold reduces to $1,000 (for businesses with less than $10 million turnover).
The measure applies to new or second-hand assets first used, or installed ready for use, between 12 March 2020 until 30 June 2020 (inclusive). Certain assets are excluded, for example, horticultural plants and capital works deductions.
The threshold applies on a per asset basis, so eligible businesses can immediately write-off multiple assets.
Clients should confirm the entitlement to the tax deduction with their accountant.
From 12 March 2020 eligible small or medium business will get payments up to a total of $100,000 and a minimum of $20,000, to help with cash flow in order to keep operating, pay bills and retain employees. Not -for-profit organisations and charities are also included.
The ATO will pay this as an automatic credit to the business upon lodgement of your business activity statement or instalment activity statement. The credit can offset the business’ tax liabilities and the ATO will refund remaining credit within 14 days. Clients don’t need to fill out any new forms and the payments are tax-free.
Eligibility criteria to receive small and medium business payments to help with cashflow.
To be eligible the business must:
The payments will be delivered in two tranches:
Eligible small and medium businesses, not-for-profits and charities, which employ staff and withhold tax from their wages can plan to receive cash refunds of 100% of the tax withheld up to $50,000 (or a minimum of $10,000) for the March and June 2020 quarters and up to $50,000 (or a minimum of $10,000) from July to October 2020. Eligible employers should ensure they lodge their business activity statements (BAS) on time as credits are delivered on lodgement.
Eligible employers can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wage paid during the nine months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).
Support will also be provided to the National Apprentice Employment Network, the peak national body representing Group Training Organisations, to co-ordinate the re-employment of displaced apprentices and trainees throughout their network of host employers across Australia.
Eligibility criteria for wage subsidy:
The following relief measures will be implemented for eligible businesses for six months.
For owners or directors of a business who are currently struggling due to the Coronavirus, the ATO will tailor solutions for their circumstances, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.
If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.
DisclaimerThe information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.