2020 has been a challenging year. The economic impact of the coronavirus pandemic has been felt across the entire country.
To counter the drastic effects there has been an unprecedented amount of financial support provided to both individuals and businesses.
Federal, State and Local
Financial support has been rolled out from all levels of government, from the Federal Government, through to each state and territory, and down to the individual local government areas.
There are programs and grants available to help businesses survive through lockdowns, trading restrictions and creating COVID safe working conditions.
What does this support mean for the economy?
There is no doubt the willingness to provide fiscal and monetary stimulus has avoided a far more extreme recession than we have seen so far.
The level of support is far greater than we have ever seen before with Government payments peaking at 35% of GDP earlier this year.
This undoubtedly has saved many thousands of jobs, as can be seen by the difference between the actual and effective unemployment data. The effective unemployment rate includes those who have lost their jobs and stopped looking for a replacement one.
According to Government reports, small business – defined as $2 million turnover or less – remains a very important cog in the economy, accounting for about 35% of GDP and employing around 2.2 million people. These initiatives demonstrate a clear focus to support jobs and recovery in this sector.
Overall, we expect there will be long-term impacts of COVID – behavioural change, larger debt and lower trend growth rates.
But it’s quite clear these would likely have been far worse if not for the significant Government interventions we have seen.
Today, we look at a number of the key support packages available for businesses and acknowledge the Government’s dedication to supporting the Australian economy through some of the most difficult days ever experienced.
The JobKeeper program was originally legislated back in April to provide eligible businesses and their employees critical financial support. The initial payment scheme saw employers paid $1,500 per fortnight per eligible employee.
The program was reviewed and the second tranche of the scheme was announced in July and came into effect on 28 September. There were changes to the eligibility and new payment rates that were determined by the number of hours the eligible employee worked.
From 28 September 2020 to 3 January 2021, these rates are $1,200 per fortnight if the employee works more than 20 hours per week, or $750 per fortnight if they work less than 20 hours per week.
This rate drops again from 4 January 2021 to 28 March 2021. The payment amounts will be $1,000 and $650 respectively. Currently, there is no information published relating to the JobKeeper program’s continuation past 29 March 2021.
In the recent Federal Budget, the Government announced a new temporary employment incentive – the JobMaker Hiring Credit. It is currently going through the legislative process, but if it passes, claims can be lodged from February 2021.
The ATO’s website outlines the details:
“Eligible employers will have access to a JobMaker Hiring Credit for each new job they create over the 12 months from 7 October 2020, for which they hire an eligible employee, for a maximum claim period of 12 months from their employment start date.
Employers will register with us and make claims quarterly, with claims commencing in February 2021.
The JobMaker Hiring Credit will be:
- $200 per week for each eligible employee aged 16 to 29
- $100 per week for each eligible employee aged 30 to 35.
An employer cannot claim JobKeeper and JobMaker Hiring Credit at the same time.
To be eligible, employers must:
- hold an Australian Business number (ABN)
- be up-to-date with their tax lodgement obligations
- be registered for Pay As You Go (PAYG) withholding
- be reporting through Single touch payroll (STP).
Eligible employees must have worked an average of at least 20 hours per week over the quarter for the employer to qualify for the payment.”
You can read more information online.
Boosting cash flow
The boosting cash flow for employers initiative is designed to help small and medium businesses manage their cash flow during the economic downturn. The measure is delivered as two separate cash payments and is intended to support the operational costs of the business. It can be utilised to pay rent, bills or equipment leases, or even to help retain staff.
Eligible businesses receive between $20,000 and $100,000 from the Government delivered via the ATO. The funds are tax-free and are received when they lodge their activity statements up to the month or quarter of September 2020.
To be eligible, the business must have an aggregated annual turnover less than $50million. The full list of eligibility criteria can be reviewed on the ATO website.
An additional employment focused measure is the Boosting Apprenticeship Commencements program. Eligible businesses and group training organisations can apply for the new wage subsidy. The Department of Education, Skills and Employment outlines the program:
“The $1.2 billion Boosting Apprenticeship Commencements wage subsidy will support businesses and Group Training Organisations to take on new apprentices and trainees, to build a pipeline of skilled workers to support sustained economic recovery.
Any businesses or Group Training Organisation that engages an Australian Apprentice on or after 5 October 2020 may be eligible for a subsidy of 50 per cent of wages paid to an apprentice between 5 October 2020 and 30 September 2021, to a maximum of $7,000 per quarter.”
You can read more about eligibility and the structure of the subsidy on the Government’s fact sheet.
Instant asset write-off
To encourage business spending and support cash flow management by reducing tax, the instant asset write-off limits were significantly extended in March 2020. Business.gov.au website explains:
“The instant asset write-off threshold has been increased from $30,000 to $150,000 and expanded access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million).
This applies from 12 March 2020 until 31 December 2020, for new or second‑hand assets first used or installed ready for use in this timeframe.”
Victorian business resilience package
Here in Victoria, the State Government introduced the Business Resilience Package, an investment of $3 billion to help thousands of businesses across the state that have been impacted by the COVID-19 restrictions.
“$3 billion in cash grants, tax relief and cashflow support will be delivered to Victorian businesses that have been most affected by coronavirus (COVID-19) restrictions. The package will help businesses survive and keep Victorians in jobs.”
Temporary relief for financially distressed businesses
For businesses that have been severely affected by the economic downturn there is a temporary measure that has been introduced. It includes changes to bankruptcy laws.
The Treasury’s Fact Sheet outlines the package:
“The elements of the package are:
- A temporary increase in the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive;
- A temporary increase in the threshold for a creditor to initiate bankruptcy proceedings, an increase in the time period for debtors to respond to a bankruptcy notice, and extending the period of protection a debtor receives after making a declaration of intention to present a debtor’s petition;
- Temporary relief for directors from any personal liability for trading while insolvent; and
- Providing temporary flexibility in the Corporations Act 2001 to provide targeted relief for companies from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.”
This is designed to provide a safety net for businesses that would be profitable and viable if not for the impact of the health crisis. It is expected that these businesses will be able to return to normal operations once restrictions are lifted.
To find out more about support for business and employers you can visit the ATO website or the Government’s Business website. If you have any questions relating to your own personal financial situation, please contact our team today.