There is now officially a second stimulus package reportedly worth $66 Billion to help stabilize our economy, supported by the Australian government released today (22/03/2020)
The economic support package includes:
- Support for households including casuals, sole-traders, retirees and those on income support
- Assistance for businesses to keep people in jobs
- Regulatory protection and financial support for businesses to stay in business
“We want to help businesses keep going as best they can and for as long as they can, or to pause instead of winding up their business. We want to ensure that when this crisis has passed Australian businesses can bounce back,” the PM said.
Key Points
- $10,000.00 super payments this financial year (30 June 2020) and next financial year under hardship circumstances.
- Sole traders and casuals to be able to receive job seeker payments and support their income.
- Payments of $20,000.00 to $100,000.00 to businesses depending on size in a direct stimulus payment.
- Business loans of up to $250,000.00 as unsecured loan. 6 month no payments then balance payable over three year plan. Interest rates to be advised.
- Changes to insolvency laws to allow companies to increase to amount that is considered trading insolvent.
- Changes to forced liquidation from $2,000.00 to $20,000.00 and from 28 days to respond to 6 months.
The Stimulus plan
The new package has three parts and is compromised of 10 main components.
It is aimed at supporting business, households and critically sole traders that don’t employee staff. A detailed breakdown will be provided once information is officially released.
For people on government support payments the COVID-19 virus stimulus will provide an additional $550.00 per fortnight including sole traders affected by the virus. This takes the job seeker payment to roughly $1,100.00 per fortnight. The idea of this will significantly assist people in entertainment and travel industries that have been drastically affected by the current trading conditions.
The stimulus will allow more people to gain access to funds such as super which is capped at $10,000.00 this financial year and $10,000.00 next year and be considered tax free payments. If you are a sole trader or casual employee and have seen decrease of 20% or more you will be able to access this under hardship provision via a proposed system through the ATO. This will allow you to strengthen your cash position and provide some security for more Australians to endure the current economic conditions.
Importantly the second part is to support small businesses to SME’s.
All employing SME’s will receive at least $20,000.00 and some of the larger ones will receive $100,000.00. This is capped to businesses to turning over $50,000,000.00. This payment will be automatically applied through our tax system. Maintaining lodgements up to date will be essential for the ATO to measure what payment is applicable. This payment will be made on or after the 28th of April at this stage.
Boosting Cash Flow for Employers
The Government is providing up to $100,000 to eligible small and medium sized businesses, and not‑for-profits (including charities) that employ people, with a minimum payment of $20,000. These payments will help businesses and not-for-profits cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff.
Under the enhanced scheme from the first package, employers will receive a payment equal to 100 per cent of their salary and wages withheld (up from 50 per cent), with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $10,000. The payment will be available from 28 April 2020.
The payments are tax free, there will be no new forms and payments will flow automatically through the ATO. This measure will benefit around 690,000 businesses employing around 7.8 million people, and around 30,000 NFPs (including charities). It will be interesting to see how this is applied against ATO accounts and further information will follow in due course.
Lending
The $40 billion dollar scheme will provide loans of up to $250,000.00 loans for three years with no payments required for 6 months. These are unsecured loans backed 50% by the government.
These funds will allow employers to not only sustain during the outbreak and impact that businesses are facing but grow on the other-side.
Third component
The third component will provide a regulatory shield around insolvency laws. Plans to increase the threshold of which a creditor can force liquidation from $2,000.00 to $20,000.00 from 28 days to 6 months of response.
Directors will also receive reprieve from personal liability during this time of trading insolvent. It will be interesting to see what other reprieves will be given to directors.
More info to follow after the official PM release.
Powell Enterprises are business accountants based in Tuggerah on the central coast and Mayfield Newcastle New South Wales that service between Sydney, Central Coast and Newcastle area. We cater to businesses from startup to under $50 million providing expert compliance and business advice.