Category: blog

If you are like me, you have been receiving an absolute overload of news both on what is actually occurring with the spread of the COVID-19 virus, as well as what the Government is doing to support everyone in this highly unusual situation.

With that in mind, I thought it would be worthwhile to put together a brief email summarising some of the major Government assistance initiatives (please note that due to the limited applicability of some of the initiatives and my desire to keep this email to a relatively short length, the below list is not to be taken as a comprehensive coverage of all the items available).



For Businesses – Irrespective of whether your turnover has fallen

Cash flow Boost for business – In an attempt to keep businesses operational, the ATO will provide tax free cash flow boosts of between $20,000 and $100,000.  These payments will in effect pay up to 100% of the tax that the business has withheld from their employee’s wages and salaries (as well as from a few other less common payments such as compensation payments).

This payment will be delivered via a credit against the businesses BAS obligations on 28th April & 28th July 2020 (assuming the business lodges their BAS quarterly).

Note that the minimum payment a business will receive is $10,000 for each of these periods, irrespective of how much tax they are withholding from their staff.  As such, small business operators may be entitled to receive quite a sizable boost when compared to the size of their business operations.



For Businesses – When business turnover is down >30%

JobKeeper Payments – In an attempt to encourage businesses to continue to retain their staff, the government will pay businesses $1,500 per fortnight (per eligible employee) for them to pass onto their employees as a salary.  The full amount of this must be passed through to the employee, irrespective of whether they were earning less than the $1,500 per fortnight before (i.e. if you employed someone part time, and their income was say $1,000 per fortnight, the employer must then pay them $1,500 per fortnight as part of this arrangement). 

Code of Conduct for Commercial Tenancies – In light of the financial impact on business, the Government has set down a mandatory code of conduct between landlords and businesses who have been impacted by COVID-19 to a large enough extent that they are eligible for the JobKeeper payments.  This means that a landlord must engage with the business (tenant) to come to an agreement on rent. 

South Australia Emergency Grant for Small Business – The SA government is providing emergency grants of $10,000 for small businesses that have been “highly impacted” by COVID-19.  This grant is more restrictive than the Australian Government Grant, as some of the requirements are that the business has turnover of at least $75,000, maximum annual payroll of $1.5m and so forth.  The SA Government has said that those businesses that are eligible for the “JobKeeper” Payment will be deemed to have been “highly impacted” (the other conditions will still apply).  I assume that there may be scope to prove that if your turnover is not down 30%, that you may be able to detail how you are “highly impacted” to still gain access to this grant.



For Employees who have lost their job or are looking for a job

JobSeeker Payment – The Government has loosened the requirements to access the JobSeeker Payment (for those looking for work), so that people can obtain the benefit sooner, and that they can obtain it with less asset testing restrictions. 

In addition to the standard JobSeeker payment for those seeking work, those eligible will also receive a $550 per fortnight ‘Coronavirus supplement’ on top of the JobSeeker payment.

Early Access to Super – If you have met one of the following conditions:

• Being unemployed, or
• Being eligible for the JobSeeker Payment, Youth Allowance for job seekers, Parenting Payment, Special Benefit or Farm Household allowance, or
• On or after 1 January 2020
  • You were made redundant, or
  • Your working hours reduced by 20 percent or more, or
  • If you are a sole trader who has had their business suspended or had a reduction in turnover of 20% or more

Then, irrespective of age, you may be eligible to withdraw up to $10,000 from your superannuation tax free before 1st July 2020, and then up to another $10,000 between 1st July 2020 and 24th September 2020.



For individuals receiving certain Government Pensions or Allowances

Economic Support Payment – For individuals who are in receipt of one or more of a number of different Government Benefits, including (but not limited to) the Aged Pension, Disability Support Pension, Carer Allowance, Family Tax Benefit or Austudy, they will receive two rounds of the Economic Support payment.

Additionally, if someone holds a Commonwealth Seniors Health Care Card, Pensioner Concession Card or receives a Department of Veterans Affairs Pension (plus a few other less common items), they too will receive this payment.

The payment will come in the form of a $750 payment that eligible people would have already received or will receive by the end of the coming week, plus a second $750 payment that will be paid from 13th July 2020 on-wards.  Note however that you won’t receive the second payment if you are in receipt of the above mentioned ‘Coronavirus supplement’.


I hope that the above has helped to explain some of the many ways the Government is assisting everyone to financially get through the COVID-19 situation.  Naturally there are a number of requirements for accessing the above items, so please feel free to call or email with any queries you may have.

Regards

David Kayser

Are we there yet….

Not quite, but we are getting close. Just as I’ve being saying for quite some time, our economy is travelling along pretty well. This ‘feel’ for how things have been going has now really started to show up in the profits businesses are earning, and as a follow on of that in the taxes that they are paying.

This has then resulted in the Federal Government being in the fortunate position of sharply increasing tax revenues (to the tune of $6 billion extra income than was expected in December last year), which in turn has meant that we are all the more closer to having a balanced budget (i.e. ‘are we there yet’), after a decade of deficits which has seen our government debt blow out from $0 to around $340 billion.

So what does a government do when the numbers are starting to look like they will be back in the black, they start spending of course.

Whilst ordinarily I would like to see us get back in the black first, this time I wholeheartedly agree with what they are doing, and that is that the government is looking to keep it’s foot on the accelerator to ensure that the economy keeps growing. After all, we need a growing economy to pay for the services that we all expect.

Have they spent it in the right areas, well everyone will have their own opinion on what is the highest priority, so I’ll leave that analysis for everyone to make themselves.

Obviously the budget is just a wish list of what the government wants to do, and it has to get their proposals legislated, but if we assume (yes, that’s a huge assumption) that their proposals come into effect, then the below is how I would break down the positives and negatives:

Positive No. 1 – Reduce the impact of ‘bracket creep’
I’m not going to comment on whether the ‘right’ people are being relieved of some of the effects of bracket creep (where you pay more tax on your income primarily as a result of inflation pushing your income up), but it is good to see that the 37% personal tax bracket will only start to kick in from an income of $90,000 (instead of $87,000) from 1/7/18.

Positive No. 2 – Assistance to Lower Income Earners
This proposal will result in a new tax offset being available to assist anyone earning under $125,333 to reduce their tax. The media is all abuzz with this this morning about people complaining how the “$10 a week” tax reduction is so small etc etc. I personally think people should stop complaining, and realise that $530 a year (the maximum someone can receive) is something that they didn’t have before, and just be happy with it. As I said earlier there will always be people with different views on what is the most important thing to do, and if someone is so upset about receiving the $530, then perhaps they can donate it to charity, as I know there are many people who have had to put up with increasing costs like electricity and gas, who will be very happy about this extra cash in their pocket.

Positive No. 3 – Big movements in the personal tax scales in the future
I won’t write too much on this one as I believe it’ll have a hard time getting legislated, but essentially, the government is proposing to ‘flatten out the tax scales’, meaning that the 32.5% tax rate will cover a lot wider range of incomes, and the 37% scale will disappear altogether. See below for the proposed changes:

Positive No. 4 – Protecting Small Super Balances
The government is proposing that exit fees be banned on all super fund. Whilst most funds nowadays do not charge exit fees (or if they do they are relatively small), it’ll be great to see these fees removed from ‘old legacy type’ super funds, which have in the past being able to hold the member captive in the fund unless they wanted to pay these exit fees.

Positive No. 5 – Extending the Small Business Instant Asset Write Off
This has now been extended for a few years running, so it is great to see that small businesses will be able to continue to claim an immediate tax deduction for assets costing up to $20,000 – hence, if they need to buy new computers or machinery they can get the tax deduction in the year they buy it, rather than having to wait and claim it over a number of years.

Positive No. 6 – Extending the Pension Loan Scheme
This is effectively a reverse mortgage on a pensioners house. It allows an aged pensioner to effectively draw down on their equity over time to assist them in meeting their cost of living. The maximum combined Aged Pension and Pension Loan will now be 150% of the maximum Aged Pension – i.e. if you receive the full Aged Pension, you can also draw down another 50% of this amount against your home.

Positive No. 7 – Money for Medical Research
This one is certainly not on the front page of the papers across the country, but buried away in the details of the budget is that more money will be allocated to support medical research. I strongly believe that this is a great program. Not only may it improve people’s lives who are living with various diseases, but it is also a way of creating highly skilled jobs in Australia, which we can only hope leads to great new technologies that our country can earn a royalty from (i.e. like the CSIRO did with WiFi & CSL with the HPV vaccine).

Negative No. 1 – ‘Opt-In’ for Life Insurance in Super
I’m going to be a little controversial here. This is being written up in the media as a positive, in that super fund members under 25 or those with small super balances will need to specifically request that their super fund holds insurance for them, rather than it being the default that the fund automatically provides insurance for them (yes, at a cost, albeit quite a minor cost at younger ages).

The reason this is a negative is that I know from assisting numerous people who have become sick, injured, or passed away young, that this insurance (that quite often they didn’t even know that they had) has been a massive financial windfall for them, and has greatly assisted their families when these unfortunate events occur.

Negative No. 2 – ???
Again, I’ll perhaps be a little controversial here, but I’m going with there isn’t another major negative that I have discovered in the budget papers as yet.

As I mentioned earlier there may be things that are in different positions on someone’s personal priority list (i.e. should tax cuts come before increases in Newstart, or should tax cuts be targeted to a different group of people etc) – but with the exception of the ordering of priorities, I believe that this is a pretty good budget, that is designed to keep the economy growing so that we as a country can afford to pay for the services that we expect over our lifetime.

So, from where I sit, that seems to be the main points (there may be more to follow as I read it all in more detail).

There are of course many other announcements, most of which are minor in detail, and as such I won’t go into them here.

So with that said, thanks for reading, and if you have any queries please feel free to call or email.

Regards,

David Kayser