CLIENT ALERT: CORONAVIRUS – GOVERNMENT ANNOUNCES ADDITIONAL
On 22 March 2020, the Federal Government announced its second stimulus package
to protect the Australian economy from the economic impact of the coronavirus. The
second set of economic responses, combined with previous actions, total $189 billion.
So what additional measures have been outlined in the second stimulus package?
Additional measures, primarily targeted at SMEs and individuals, include:
1. Boosting cash flow for employers
The Government is enhancing the Boosting Cash Flow for Employers measure it announced
on 12 March 2020. The Government is providing up to $100,000 to eligible small and mediumsized
businesses, and not for-profits (NFPs) that employ people, with a minimum payment of
$20,000. These payments will help businesses and NFPs with their cash flow so they can keep
operating, pay their rent, electricity and other bills and retain staff.
This measure will benefit around 690,000 businesses employing around 7.8 million people,
and around 30,000 NFPs (including charities).
Small and medium-sized business entities with aggregated annual turnover under $50
million and that employ workers are eligible. NFPs, including charities, with aggregated
annual turnover under $50 million and that employ workers will now also be eligible. This
will support employment at a time where NFPs are facing increasing demand for services.
Under the enhanced scheme, employers will receive a payment equal to 100 per cent of
their salary and wages withheld (up from 50 per cent), with the maximum payment being
increased from $25,000 to $50,000. In addition, the minimum payment is being increased
from $2,000 to $10,000.
An additional payment is also being introduced in the July – October 2020 period (in addition
to the March – June 2020 period payments). Eligible entities will receive an additional
payment equal to the total of all of the Boosting Cash Flow for Employers payments they
have received. This means that eligible entities will receive at least $20,000 up to a total of
$100,000 under both payments.
2. Temporary relief for financially distressed businesses
The Government is temporarily increasing the threshold at which creditors can issue a
statutory demand on a company and the time companies have to respond to statutory
demands they receive. The package also includes temporary relief for directors from
any personal liability for trading while insolvent, and providing temporary flexibility in the
Corporations Act 2001 to provide temporary and targeted relief from provisions of the Act
to deal with unforeseen events that arise as a result of the Coronavirus health crisis.
The ATO will tailor solutions for owners or directors of business that are currently struggling due
to the Coronavirus, including temporary reduction of payments or deferrals, or withholding
enforcement actions including Director Penalty Notices and wind-ups.
3. Support for immediate cash flow needs for SMEs
The Coronavirus SME Guarantee Scheme will provide support for these businesses. Under
the Scheme, the Government will provide a guarantee of 50 per cent to SME lenders for new
unsecured loans to be used for working capital. This will enhance these lenders’ willingness
and ability to provide credit, which will result in SMEs being able to access additional
funding to help support them through the upcoming months.
SMEs with a turnover of up to $50 million will be eligible to receive these loans.
The Government will provide eligible lenders with a guarantee for loans with the following
– Maximum total size of loans of $250,000 per borrower.
– The loans will be up to three years, with an initial six month repayment holiday.
– The loans will be in the form of unsecured finance, meaning that borrowers will not
have to provide an asset as security for the loan.
Loans will be subject to lenders’ credit assessment processes with the expectation that
lenders will look through the cycle to sensibly take into account the uncertainty of the
current economic conditions.
As part of the loan products available, the Government will encourage lenders to provide
facilities to SMEs that only have to be drawn if needed by the SME. This will mean that the
SME will only incur interest on the amount they draw down. If they do not draw down any
funds from the facility, no interest will be charged, but they will retain the flexibility to draw
down in the future should they need to.
The Scheme will commence by early April 2020 and be available for new loans made by
participating lenders until 30 September 2020.
4. Income support for individuals
Over the next six months, the Government is temporarily expanding eligibility to income
support payments and establishing a new, time-limited Coronavirus supplement to be
paid at a rate of $550 per fortnight. This will be paid to both existing and new recipients
of JobSeeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household
Allowance and Special Benefit.
5. Payments to support households
The Government is providing two separate $750 payments to social security, veteran and
other income support recipients and eligible concession card holders. The first payment
will be made from 31 March 2020 and the second payment will be made from 13 July
2020. Around half of those that benefit are pensioners. This payment will help to support
confidence and domestic demand in the economy.
To be eligible for the second payment, you must be residing in Australia and be receiving
one of the payments or holding one of the concession cards that were eligible for the first
payment, except for those who are receiving an income support payment that is eligible to
receive the Coronavirus supplement.
6. Temporary early release of superannuation
The Government is allowing individuals affected by the Coronavirus to access up to $10,000
of their superannuation in 2019-20 and a further $10,000 in 2020-21. Individuals will not need
to pay tax on amounts released and the money they withdraw will not affect Centrelink or
Veterans’ Affairs payments.
To apply for early release you must satisfy any one or more of the following requirements:
– you are unemployed; or
– you are eligible to receive a job seeker payment, youth allowance for jobseekers,
parenting payment (which includes the single and partnered payments), special
benefit or farm household allowance; or
on or after 1 January 2020:
– you were made redundant; or
– your working hours were reduced by 20 per cent or more; or
– if you are a sole trader — your business was suspended or there was a reduction
in your turnover of 20 per cent or more.
7. Temporarily reducing superannuation minimum drawdown rates
The Government is temporarily reducing superannuation minimum drawdown requirements
for account-based pensions and similar products by 50 per cent for 2019-20 and 2020-21. This
measure will benefit retirees holding these products by reducing the need to sell investment
assets to fund minimum drawdown requirements.
8. Reducing social security deeming rates
On 12 March, the Government announced a 0.5 percentage point reduction in both the
upper and lower social security deeming rates. The Government will now reduce these
rates by another 0.25 percentage points.
As of 1 May 2020, the upper deeming rate will be 2.25 per cent and the lower deeming rate
will be 0.25 per cent. The reductions reflect the low interest rate environment and its impact
on the income from savings. The change will benefit around 900,000 income support
recipients, including around 565,000 Age Pensioners who will, on average receive around
$105 more of the Age Pension in the first full year the reduced rates apply.
Specific details of the above measures, and initial measures, can be located from the
following link. Note as of the date of publication these measures are yet to be legislated.