What you need to know: COVID-19 stimulus packages

By Mark Chapman | 22 Apr 2020 View comments

With many franchised businesses hard hit by the coronavirus, the various government stimulus packages could make the difference between survival and collapse for both the businesses themselves and their employees. 

So, what are the key stimulus measures available to businesses?

JobKeeper payments

JobKeeper is an ambitious wage subsidy scheme to provide payments of $1,500 per fortnight to millions of Australians.

Payments will be made via businesses impacted by the coronavirus. These businesses will be able to access a subsidy from the Government to continue paying their employees. 

Affected employers will be able to claim a fortnightly payment of $1,500 per eligible employee from 30 March 2020, for a maximum period of six months, which must then be passed on to employees.

The subsidy will start on 30 March 2020, with the first payments to be received by employers in the first week of May. 

Payments will be made to the employer monthly in arrears by the Australian Taxation Office. These will then be paid on to eligible employees with PAYG tax deducted in the normal way.

These payments will be taxable so will need to be included in your business tax return as income. 

Which businesses are eligible?

Businesses are eligible for the subsidy if: 

  • their business has a turnover of less than $1 billion and their turnover will be reduced by more than 30 per cent relative to a comparable period a year ago (of at least a month); or
  • their business has a turnover of $1 billion or more and their turnover will be reduced by more than 50 per cent relative to a comparable period a year ago (of at least a month); and
  • the business is not subject to the Major Bank Levy (so, employees of the big banks are not eligible). 

For businesses that are not able to demonstrate that their turnover is down 30 per cent compared to a comparable period a year ago (for instance, new businesses that did not exist a year ago), the Commissioner of Taxation will have the discretion to consider additional information that the business can provide to establish that they have been significantly affected by the impacts of the coronavirus.

Employers must confirm that each eligible employee is currently engaged in order to receive JobKeeper Payments.  

Qualifying businesses must register an intention to apply on the ATO website and assess that they have or will experience the required turnover decline. They will also need to provide information to the ATO on their eligible employees, including the number of eligible employees engaged as at 1 March 2020 and those currently employed by the business (including those stood down or rehired).

I’m a sole trader. Do I qualify?

Businesses without employees, such as sole traders, can take part in the scheme and will need to register with the ATO. 

If you meet the criteria, you will need to:

  • provide an ABN for your business;
  • nominate yourself to receive the payment
  • provide your Tax File Number and provide a declaration that your turnover has dropped by 30 per cent compared to a comparable period (say, this time last year). 

You will need to provide a monthly update to the ATO to declare their continued eligibility for the payments.

Payments of $1,500 per fortnight will be made monthly to your bank account.

Cashflow assistance

Tax-free payments of up to $50,000 for eligible small and medium businesses (with a turnover of less than $50 million that employ staff), based on their PAYG withholding obligations. 

This is not a cash payment but it is a credit equal to 100 per cent of the PAYG amounts withheld from salary and wages paid to employees. The minimum payment is $10,000 and not-for-profit organisations are included in this scheme.

The way this will work is that businesses that lodge activity statements on a quarterly basis will be eligible to receive the credit for the quarters ending March 2020 and June 2020. Businesses that lodge their BAS on a monthly basis will be eligible for the credit for the March 2020, April 2020, May 2020 and June 2020 lodgements.

An additional payment equal to this amount will also be available from July to October 2020. This makes the total amount available under this scheme $100,000 (and a minimum of $20,000).

Payments will be automatically credited by the ATO through the activity statement system and will only be made to active eligible businesses established prior to 12 March 2020.

Payments under this scheme are only available to businesses with employees. Sole traders will generally miss out unless they have employees as will businesses structured through trusts that pay trust distributions (but not wages) to family beneficiaries who work in the business.

Stringent anti-avoidance rules are built into the scheme to ensure that non-qualifying businesses don’t restructure their affairs to artificially qualify for the payments.