The government’s economic response to the Coronavirus (COVID-19) outbreak include temporary tax-related measures to support business investment, including increasing and extending the instant asset write-off and accelerating depreciation deductions, as well as the ATO providing administrative relief.
The measures form part of the government’s economic response totalling $17.6b (or 0.9% of annual GDP) to address four key areas including:
- two tax measures to deliver support for business investment (see below)
- cash flow assistance for employers, including
- boosting cash flow for employers: providing employers with an aggregated annual turnover below $50m a tax-free payment equal to 50% of Pay As You Go (PAYG) amounts withheld, with a minimum payment of $2,000 and a cap of $25,000 to be delivered as a credit upon lodgment of the employer’s activity statements with the ATO from 28 April 2020. Eligible businesses that pay salary and wages will receive a $2,000 minimum payment even if they are not required to withhold tax. The ATO will refund monies if this measure places the business in a refund position, and
- apprentice and trainee wage subsidy: providing eligible small businesses a wage subsidy of 50% of an apprentice or trainee’s wage from 1 January to 30 September 2020, capped at $21,000
- a one-off stimulus payment of $750 to social security, veteran and other income support recipients and eligible concession card holders, and
- assistance for severely affected regions and communities (including ATO administrative relief discussed below).
The government will introduce a package of Bills into Parliament in the final Autumn sitting week of 22 to 26 March 2020 for urgent consideration and implementation of the measures.
Tax measures to support business investment
The government announced the following two temporary measures to support business investment.
- Increasing the instant asset write-off: the instant asset write-off threshold is increased from $30,000 to $150,000 and access is expanded to include businesses with an aggregated annual turnover below $500m (up from $50m). This measure applies from 12 March 2020 to 30 June 2020 to new or second-hand assets first used, or installed to be ready for use in this timeframe.
- A 15-month investment incentive to accelerate depreciation deductions : businesses with an aggregated turnover below $500m will be able to deduct 50% of the cost of an eligible asset on installation, with existing depreciation (or capital allowance) rules applying to the balance of the asset’s cost. The measure applies from 12 March 2020 to 30 June 2021 to new assets that can be depreciated under Div 40 of ITAA 1997 (ie plant, equipment and specified intangible assets, such as patents). It does not apply to second-hand Div 40 assets, or buildings and other capital works depreciable under Div 43 of ITAA 1997.
ATO administrative relief
The ATO will provide administrative relief for some tax obligations for people affected by the coronavirus outbreak, on a case-by-case basis.
Businesses impacted by the coronavirus should contact the ATO to discuss relief options. Options include:
- deferring by up to four months the payment date of amounts due through the business activity statements (BAS, including PAYG instalments), income tax assessments, FBT assessments and excise
- allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to
- allowing businesses to vary PAYG instalment amounts to zero for the April 2020 quarter; businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters
- remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities, and
- working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low-interest payment plans.
Employers will still need to meet their ongoing super guarantee obligations for their employees.
To make it easier for people to apply for relief, the ATO will be increasing its presence in the areas of highest impact. A temporary shopfront with staff specialising in assisting small business will be established in Cairns within the next few weeks. It will also consider ways to enhance its presence in other significantly affected regions. Additional temporary shopfronts and face-to-face options are currently under consideration.
The ATO will also continue to work with the tax profession, other government agencies and local organisations to make sure other impacted communities are also supported.
Outside of business, the ATO will also work with individuals experiencing financial hardship, and their tax agents, and will apply appropriate tax relief measures for serious and exceptional circumstances, such as where people cannot pay for food or accommodation. Unlike the ATO bushfire relief measures, which applied automatically to particular geographic areas, assistance measures for those impacted by COVID-19 will not be automatically implemented. Anyone impacted by COVID-19 should contact the ATO to request assistance on its Emergency Support Infoline 1800 806 218.