COVID-19 >< $$$$

So I know we aren’t supposed to be in panic mode but the announcements from the governments stimulus package yesterday sent me into a mild panic attack. I’ve been fairly level headed about the whole situation, even attending a large event in Sydney last week but after the announcement yesterday I couldn’t help but think “if they are announcing this now – what will happen at the Budget in May?” I’m really hoping they’ve saved something good for one of my favourite days of the year.

There were some tax free payments for individuals in the form of $750 for those on social security, veteran, concession and other income support payments.

For businesses:

  • The instant asset write off has been increased from $30,000 to $150,000 for businesses with a turnover of less than $500m (where the ‘m’ stands for MILLION!) until June 30, 2020.
  • There’s some additional depreciation deductions for the next 15 months for new assets.
  • The ATO won’t be giving a standardised administrative relief for the Coronavirus outbreak but they are saying that they will consider assistance for tax obligations on a ‘case by case’ basis.
  • Employers of apprentices and trainess who employ 20 full time employees (or less) may be entitled to a subsidy of up to 50% of the wage for 9 months with a maximum of $21k.
  • And last but not least, possibly my favourite of all – tax free payments of up to $25,000 for businesses with turnover of less than $50m that pay PAYGW.

Let’s unpack what some of these really mean:

The instant asset write off has steadily been rising over the past 2 years and while the jump from $30k to $150k certainly isn’t small – the businesses that this is being made available to has increased literally overnight. Before Thursday March 12th only businesses with a turnover of $50m or less could utilise the $30k asset write off and after Thursday the 12th it is businesses with $500m and $150k. Depending on the industry you are in, the economic impact of the corona virus is going to vary however from speaking with various clients over the past month or so – I know that many are concerned about the domino effect on the market in general and in this way, cashflow is king. I question how many businesses will be inclined to make large capital purchases that were not already on their budget or projected expenditure plan? It will however be a wonderful tax benefit for those who do take advantage of this opportunity – it’s going to make tax planning very fun for me this year.

The refund of PAYGW (wages tax) for employers is one of the most exciting things that I’ve seen in a long time. Big statement but it’s true. This will actually do what it is intended to do – help employers keep their staff in jobs. The way this is expected to mechanically play out is that the BAS and IAS (if you lodge wages monthly with the ATO) are done in March, April, May and June and the ATO will refund 50% of the PAYGW (wages tax) amount in each of those months within 14 days – to your bank account. You will receive the funds from the ATO until you reach the maxiumum threshold of $25k. If you are an employer who has chosen to cease paying yourself wages to assist with cashflow during these uncertain times, now is the time to re-consider. The 50% payment is tax free however your employees will still gain the benefit of the full PAYGW credit and you will still receive the full tax deduction for their gross wages. All business owners should pick up the phone and speak to their accountant about this government announcement – it is a great opportunity.

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