THE Federal government has announced a $17.6 billion economic stimulus package proposed to support businesses, keep Australians in jobs and support households.
The stimulus package will take effect immediately with legislation to be introduced and passed when parliament sits in late March
The package includes:
p Support for business investment
An increase in the instant asset write-off threshold from $30,000 to $150,000 (ex GST). The measure will be extended to include businesses with aggregated turnover of less than $500m.
The increase in the instant asset write-off threshold will only be available until June 30, 2020, leaving limited time for eligible businesses to utilise the measure.
The introduction of a limited time 15-month investment incentive.
The incentive will run through to June 30, 2021 and will enable businesses with a turnover of less than $500 million to deduct an additional 50 per cent of the cost of an eligible asset in the year of purchase.
We assume this measure applies to assets that are not eligible for the instant asset write off.
The introduction of this measure indicates the government may not be intending to extend the instant asset write-off beyond June 30, 2020, replacing it instead with an accelerated depreciation measure.
We will need to confirm this is the case once legislation has been introduced to parliament.
Farming businesses are machinery intensive and the introduction of these measures could provide significant tax savings to the average farmer.
Unfortunately, the $150,000 instant asset write-off is only available for eligible items acquired and installed ready for use before June 30, 2020.
This very short window of opportunity may reduce the effectiveness of this measure through unavailability of machinery items that farmers may wish to acquire.
p Cash flow assistance for business
Eligible small to medium-sized businesses will receive a cash boost of a minimum $2000 up to a maximum of $25,000.
The payment will only be available to businesses with a turnover of less than $50m who employ staff between January 1, 2020 and June 30, 2020.
The payment will be tax free.
The government has indicated the payments will be processed as a 'refund' of 50 per cent their Business Activity Statement ('BAS') or Instalment Activity Statement ('IAS') from April 28, 2020.
We assume the 50pc relates to PAYG withholding reported in the BAS/IAS, refunds will be processed within 14 days.
We also assume the cash boost, which is connected to the lodgement of the BAS or IAS will be refunded directly to employers and not offset against ATO liabilities.
Eligible employers can apply for a wage subsidy of 50pc of their apprentice's or trainee's wage for up to nine months from January 1, 2020 to September 30, 2020.
Where small business is unable to retain an apprentice, the subsidy will be available to a new employer that employs the apprentice.
Many farmers have employees and the "cash boost" could be cash flow beneficial - and it is tax free.
Stimulus payments to certain households
Pensioners, social security, veteran and other income support recipients and eligible concession cardholders will be eligible for a one-off $750 stimulus.
Assistance for severely affected regions
$1b will be available to support certain targeted measures designed to assist those sectors, regions and communities that have been disproportionately affected by the economic impacts of the coronavirus.
This is expected to include those heavily reliant on industries such as tourism, agriculture and education.
ATO administrative relief
The Commissioner of Taxation has also announced the ATO will be using its administrative powers to assist taxpayers impacted by the coronavirus.
This is proposed to include the deferral of eligible tax payments up to four months, relief will be assessed on a case by case basis and further detail is available on the ATO website.
The stimulus measures are welcomed, but businesses experiencing the impact of reduced cashflow from the flow-on effects of coronavirus, bushfires and flooding from extreme weather conditions, may not have the cash available to utilise the increased instant asset threshold between now and June 30, 2020.
The measure may provide only minor immediate benefit to businesses with current year or carried forward losses.
That aside, this package makes it vital for all farmers to reassess their financial plans including asset acquisition plans to ensure they maximise the benefits of the package.