09 April 2020

Protecting you and your business from the Coronavirus

Wash hands, social distance and stay home: Australians are now familiar with the steps to protect themselves and their families against Coronavirus.

But how do business owners protect their livelihoods?

The Coronavirus outbreak poses a significant threat to both our healthcare system and the economy:

“the full economic effects from the virus remain uncertain, the global and domestic outlook has deteriorated... There is uncertainty around the impact on confidence, people’s ability to work and business cash flow”.[1]

This article sets out steps you and your business could take to ensure it is best positioned to recover quickly from the effects of the Coronavirus crisis.

Secure Relief from the Federal Government

The Federal Government has announced “the most significant support for the Australian economy and community since the war”.[2] This consists of a series of financial relief incentives to help Australian businesses and workers affected by the COVID-19 pandemic. Availing themselves of the relief afforded by the Federal Government will be a crucial step for businesses.

In summary, the Federal government has provided the following financial relief for business owners:

JobKeeper Payment

On 30 March 2020, the Federal government announced it would introduce a JobKeeper payment, being a temporary wage subsidy to businesses, in order to keep more Australians in jobs through the course of the Coronavirus outbreak. The Federal government estimates that 6 million workers will be eligible to receive the payment, which will be $1,500 per fortnight for each employee (before tax) for up to six months.

On 8 April 2020, the Federal Parliament passed urgent legislation which amended the Fair Work Act 2009 (Cth) and which give the Commissioner of Taxation general administration of the Coronavirus economic response payments under the Coronavirus Economic Response Package Omnibus (Measures No 2) Bill 2020 (Cth) and the Coronavirus Economic Response Package (Payments and Benefits) Bill 2020 (Cth), respectively.[3]

The rules to establish the JobKeeper scheme will be made under section 20 of the Coronavirus Economic Response Package (Payments and Benefits) Act 2020. An exposure draft of the rules was released temporarily. The information currently available concerning eligibility to participate in the scheme is based upon the draft rules, fact sheets [4] and FAQs [5] previously provided by Treasury. The rules, once released in final form, may not be entirely consistent with the exposure draft and Treasury information. Your business will be eligible for the JobKeeper payment if it[6] meets the following conditions:

has a turnover[7] of less than $1 billion and you estimate your turnover has fallen or will likely fall by 30% or more;
has a turnover of $1 billion or more (or part of a consolidated group) and your estimate of your turnover has fallen or will likely fall by 50% or more.
is not subject to the Major Bank Levy.
employed the employee as at 1 March 2020 and still does employ the employee.[8] Single Touch payroll data will enable the ATO to pre-populate employee details. However, eligible businesses that do not use a tax agent to lodge should obtain a myGovID as soon as possible.

To establish that your business has faced or is likely to face a 30 per cent or more or 50 per cent or more fall in turnover, you will need to establish that business turnover has fallen in the relevant month or quarter (depending on the Business Activity Statement (BAS) reporting period of that business) relative to business turnover in a corresponding period a year earlier. If your business was not in operation in a previous year or your turnover from a previous year was not representative of your usual or average turnover, the Commissioner of Taxation has discretion to consider additional information to determine that your business has been adversely affected by the impact of the coronavirus and set out alternative tests to establish eligibility. Businesses that are in liquidation are not eligible for the JobKeeper payment.

Employees will be eligible for the JobKeeper payment if the employee is:

an Australian citizen, the holder of a permanent visa or a Special Category (Subclass 444) Visa Holder and also a resident for Australian tax purposes as at 1 March 2020.
A full time or part-time employee or a casual employee who has been employed regularly with the same employer for at least 12 months as at 1 March 2020 (including those stood down).
not in receipt of a JobKeeper payment from another employer. An employee who qualifies for and receives the JobKeeper payment will be unable to receive the JobSeeker payment.

You can register your interest in the JobKeeper payment scheme at: www.ato.gov.au/Job-keeper-payment/

The JobKeeper payment is designed to ensure an employee earning less than $1,500 before tax a fortnight (even if they have been stood down) are topped up to $1,500 a fortnight. An employee earning $1,500 or more a fortnight, will be paid as normal and the subsidy will assist your business to continue to operate.

The JobKeeper scheme is supplemented with changes to the Fair Work Act 2009 (Cth) which provide employers with powers to issue directions to employees in receipt of the Jobkeeper payment to not work on particular days or reduce hours. The key condition of such a direction is that the employee cannot be usefully employed for the employee’s normal days or hours during the JobKeeper enabling stand down period, because of changes attributable either to the COVID-19 pandemic or government initiatives to slow the transmission of the virus.

The ATO will administer the JobKeeper payments to your business, monthly in arrears, commencing in early May. Superannuation guarantee obligations will continue except it will not apply to any top-up for those employees who were earning less than $1,500 per fortnight.

Expanding the instant asset write-off

The Federal government has expanded the net for businesses to claim an immediate deduction for depreciating assets (instant asset write-off) in two ways: it has expanded the entities which are eligible to claim the write-off and it has expanded the assets to which the write-off applies.

Your business can claim the instant asset write-off under the new rules if it:[9]

is a small business entity (broadly, if your entity has a turnover of $10 million or less) or is a medium business entity (broadly, if your entity has a turnover of between $10 million and $500 million); and
purchased depreciating assets that cost less than $150,000, provided the asset is first acquired at or after 7.30 pm (ACT time) on 12 May 2015, and first used or installed ready for use on or after 12 March 2020, but before 1 July 2020.

A similar deduction has also been introduced for improvements to depreciating assets already used or installed ready for use in a previous income year.

Accelerating depreciation deductions

The Federal government has amended the law to temporarily allow small and medium business entities to deduct depreciation expenses at an accelerated rate, if it is a small or medium business entity (broadly, if it has a turnover of under $500 million, as discussed above), provided that certain conditions are met. The accelerated rate is an additional 50% of the cost, or (in the case of small business entities using the simplified depreciation rules) an additional 42.5% of the cost.

Your business could be eligible to apply the accelerated rate of deduction, if:[10]

(a) it purchases an asset which is new and has not previously been held or installed ready for use;

(b) it has not claimed depreciation deductions (including the instant asset write-off) for the asset; and

Cash flow boost

The Federal government will provide “cash flow boost” payments to eligible entities for the periods March to September 2020, in order to encourage the retention of employees through the coronavirus downturn. Eligible entities will receive one cash flow boost payment of between $10,000 and $50,000 (based on the amount salary and wages withheld) for the period March to June 2020, and a second cash flow boost payment (equal to the first) for the period July to September 2020.

Broadly, your business might be eligible to receive a cash flow boost if it is a small or medium business entity that held an ABN on 12 March 2020 and continues to be active, had an aggregated turnover under $50 million based on your prior year turnover and made an eligible payment (such as salary, wages, director fees or voluntary withholding from payments to contractors) that you were required to withhold.[11]You must lodge your BAS to receive the cash flow boost. The first cash boost will be delivered as credits in the activity statement system from 28 April 2020 with the second cash boost credited the following quarter or month depending on your lodgement period.

Access to capital: Coronavirus SME Guarantee Scheme

The Government will establish the Coronavirus SME Guarantee Scheme. The scheme will help small and medium enterprises access working capital. Under the scheme, the Federal government may guarantee loans by a financial institution to loans to small and medium business. The power to grant a guarantee is prescribed by legislative criteria, namely that the loan is likely to assist in dealing with the economic impacts of the Coronavirus and that the loan is made by a constitutional corporation.[12]

Secure Financial Relief from the NSW Government

The NSW Government have announced a series of financial relief incentives to help NSW businesses.

Waiver and deferral of payroll tax

The NSW government have introduced measures for businesses with payrolls of up to $10 million including:

A 25 per cent reduction of annual payroll tax when you lodge your annual reconciliation, which is due on 28 July. If you lodge and pay monthly, no payments are required for the months of March, April or May.
The deferral of payroll tax for six months.[13] We can assist with your application to enter into a deferral arrangement.

For businesses with payrolls of over $10 million - the deferral of payroll tax for six months (up to $4 billion deferred). You do not need to make your payment for the March period, normally due on 7 April 2020.

In 2020-2021, there will be reductions in payroll tax by raising the payroll tax threshold to $1 million (currently, $900,000).

$10,000 relief under Small Business Support Grant

The NSW government will put $750 million into the Small Business Support Fund.

NSW Treasurer Dominic Perrottet has said that “these measures will provide much needed cash flow and boost the liquidity of business at a critical time”.[14]

To be eligible businesses will need to:

have between 1-19 employees and a turnover of more than $75,000;
a payroll below the NSW Government 2019-20 payroll tax threshold of $900,000;
have an Australian Business Number as at 1 March 2020, be based in NSW and employ staff as at 1 March 2020;
be highly impacted by the Public Health (COVID-19 Restrictions on Gathering and Movement) Order 2020 (NSW) made on 30 March 2020;
use the funding for unavoidable business costs such as utilities, overheads, legal costs and financial advice; and
provide appropriate documentation upon application.

Highly impacted industries include retail trade, accommodation and food service, rental, hiring and real estate services, administrative and support services and arts and recreation services.

Applications for a small business grant of up to $10,000 will be available through Service NSW within a fortnight and remain open until 1 June 2020.

Land Tax - extending deadlines for payment

Whilst there is currently no moratorium on land tax, Revenue NSW have put in place a number of measures to assist you, such as extending deadlines for payments and applying leniency for late payment. If you require assistance with your application to the Tax Debt Team, we can assist you.

For commercial landlords and tenants that sign up to the National Cabinet Mandatory Code Of Conduct – SME Leasing Principles During COVID-19 released on 7 April 2020 to apply for tenancies where the tenant is eligible for JobKeeper or is a SME, NSW Government will look at providing the equivalent of at least a three month land tax waiver and three month land tax deferral. Landlords must pass on the benefits of such moves to the tenants.

NSW together with most states and territories are yet to announce measures to assist residential tenants and landlords, after the National Cabinet declined to set a baseline beyond a six-month moratorium on evictions.

Authors: Lisa To, Peter Kramer and Jeremy Tjeuw

[1] Explanatory Memorandum, Coronavirus Economic Response Package Omnibus (Measures No 2) Bill 2020 (Cth) 9.

[2] Federal Treasurer, Josh Frydenberg on 23 March 2020 announcing the economic stimulus measures in response the outbreak of coronavirus

[4] https://treasury.gov.au/sites/default/files/2020-04/Fact_sheet_supporting_businesses_0.pdf

[5] https://treasury.gov.au/sites/default/files/2020-04/JobKeeper_frequently_asked_questions_0.pdf

[6] This includes self-employed individuals, non-government schools and private vocational education providers. ACNC-registered charities are eligible if their estimated turnover has or is likely to fall by 15%.

[7] Turnover is calculated as it is for GST purposes and is reported on Business Activity Statements. It includes all taxable supplies and all GST free supplies but not input taxed supplies.

[8] Employees on parental leave from you are eligible provided they do not receive parental leave pay from Services Australia.

[9] Coronavirus Economic Response Package Omnibus Act 2020 (Cth) Schedule 1.

[10] Coronavirus Economic Response Package Omnibus Act 2020 (Cth) Schedule 2.

[11] Coronavirus Economic Response Package Omnibus Act 2020 (Cth) Schedule 3; Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020 (Cth)

[12] Guarantee of Lending to Small and Medium Enterprises (Coronavirus Economic Response Package) Act 2020 (Cth)

[13] Treasury Legislation Amendment (COVID-19) Act 2020 No 2 (NSW)

[14] NSW Treasurer Dominic Perrettet Media Release of 7 April 2020.