In the wake the global disruption brought on by COVID-19 industries and economies are suffering across the board. What is not known is the depth or longevity of the current state of volatility.
As families, communities and businesses wrestle with how to respond and the direction with which to move forward governments are releasing a range of stimulus packages to keep things moving.
In Australia the federal government’s economic measures are targeted a range of areas of the economy the majority of which are focused on keeping businesses spending and money flowing through the economy.
While new projects and expenditure plans can benefit from these steps and they could add weight to a business case, it is not anticipated programs such as instant asset write-off (IAWO) will trigger the initiation of new spending from business. The strategy revolves around businesses and CFOs taking advantage of the immediacy of the program to give increased returns by continuing investments and projects that are already in the planning or delivery phases.
To help understand what the key components of the package are and how your business might benefit we’ve detailed some insights below;
- Increasing the instant asset write off – the government is proposing to increase the threshold for the instant asset write off from $30,000 to $150,000 and expand access to businesses with an aggregated annual turnover of up to $500 million (up from $50 million). The increase will only be available from 12 March to 30 June 2020 for new or second-hand assets first used or installed ready for use by 30 June 2020.Note : When purchasing a motor vehicle, the luxury car limit may reduce this benefit to an immediate deduction of $57,581 rather than the full $150,000.
- Accelerated depreciation – the government is proposing an accelerated deprecation deduction for eligible assets acquired from 12 March and first used or installed by 30 June 2021. Eligible taxpayers will receive a deduction of 50 per cent of the cost of the eligible asset on installation, with existing depreciation rules applying to the balance. Eligible businesses are those with an aggregated turnover below $500 million. Eligible assets are those that can depreciated under Division 40 of the Income Tax Assessment Act 1997 (that is plant, equipment and specified intangible assets, such as patents), but does not apply to second-hand Division 40 assets, or buildings and other capital works depreciable under Division 43.
- Cash Flow Boost for employers – employers with an aggregated annual turnover of under $50 million (based on prior year turnover) will receive a payment of $2000 to $25,000 from the government to help with cash flow. Eligible businesses will receive a payment equal to 50 per cent of taxes withheld from employees’ salary and wages up to $25,000.
- Eligible businesses that pay salary and wages will receive a minimum payment of $2000, even if they are not required to withhold tax.
- The payment will be delivered as a credit in the activity statement system from 28 April 2020 upon businesses lodging eligible upcoming activity statements. Where this places the business in a refund position, the ATO will deliver the refund within 14 days.
- Apprentice and trainee wage subsidy – the government will offer employers a wage subsidy of 50 per cent of an apprentice’s or trainee’s wage from 1 January to 30 September 2020, capped at $7000 each quarter per each eligible apprentice or trainee. Businesses with less than 20 full-time staff will be eligible, however employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will continue to be eligible for the subsidy.
See more info:
ATO support measures for those affected by coronavirus outbreak: Here
Government announces coronavirus stimulus package: Here