Posted on 16/3/2020
There are several initiatives targeting businesses that are tried and true stimulus measures.
Currently, the instant asset write-off threshold is $30,000 per asset and the eligible turnover threshold is $50M.
From the date of the announcement until 30 June 2020, businesses with an aggregated turnover of less than $500M can immediately write-off the cost of an asset where the cost of the asset is $150,000 or less.
The threshold applies on a per asset basis, so eligible businesses can immediately write-off more than one asset acquired during the remainder of the financial year (prior to 30 June 2020).
For businesses with a small business entity depreciation pool that has a pool balance of $150,000 or less at the end of the financial year, the entire pool balance may be written off (deducted).
Mr MacDonald runs a farm in the South East with a prior year turnover of $4M. Mr MacDonald’s business acquires a new header unit for $85,000. Under the current rules, as the asset’s cost exceeds $30,000, Mr MacDonald is required to deduct (depreciate) the new header unit over its effective life under either the diminishing value or straight-line method. Where Mr MacDonald acquires the new header unit between 12 March 2020 and 30 June 2020, Mr MacDonald may claim an instant deduction equal to 100% of the unit’s cost.
Businesses with an aggregated turnover of less than $500M will be able to write-off 50% of the cost of an eligible asset (once installed ready for use), with existing depreciation rules applying to the balance of the asset’s cost.
The initiative is limited to a 15-month period from the date of announcement through to 30 June 2021.
Given the instant asset write-off discussed above, this initiative will apply to assets with a cost exceeding $150,000 until 30 June 2020 and to assets over $30,000 in the 2021 financial year.
Assume Mr MacDonald also buys a truck & trailer for $200,000. Under the current rules, as the asset’s cost exceeds $30,000, Mr MacDonald is required to deduct (depreciate) the truck & trailer over its effective life under either the diminishing value or straight-line method. Where Mr MacDonald acquires the truck & trailer between 12 March 2020 and 30 June 2020, Mr MacDonald may claim an up-front 50% deduction ($100,000) as the truck & trailer’s cost exceeds $150,000. The remaining $100,000 in written down value is claimed under the normal depreciation rules.
Businesses with employees and a prior year aggregated turnover of less than $50M will receive a tax-free payment of up to $25,000 (minimum payable of $2,000).
The payment will be arranged by the ATO via a credit in the activity statement system from 28 April 2020 upon businesses lodging upcoming activity statements. The amount of the payment will be determined as follows:
Peter runs a hairdressing salon and employs 8 full time hairdressers who earn $89,730 per year. In the months of March, April and June for the 2019-20 income year, Peter reports withholding of $15,008 for his employees on each Business Activity Statement (BAS).
Peter will be eligible to receive payment on the lodgement of each BAS as follows:
Eddie runs a toupee shop and employs two part time toupee fitters who each earn $10,000 per year. In the March and June 2020 quarterly BAS, Eddie reports withholding of $0 for his employees as they are under the tax-free threshold.
Tim will be eligible to receive the payment on lodgement of his BAS. Eddie’s business will receive:
If Eddie begins withholding tax for the June quarter, he would need to withhold more than $4,000 before he receives any additional payment.
Small businesses employing less than 20 full-time employees can apply for a wage subsidy equal to 50% of an apprentice’s or trainee’s wage paid for up to 9 months (from 1 January 2020 to 30 September 2020). The subsidy is limited to $21,000 per apprentice/trainee.
If a small business is not able to retain the apprentice, the subsidy will be available for any new employer that employs that apprentice.
In the shadows of former PM Kevin Rudd’s $950 payment to individuals earning less than $100,000, the Federal Government is offering more targeted cash payments as follows: