24 July 2020

On Monday 23 March 2020, the Australian Federal Parliament passed two coronavirus economic stimulus packages, worth $17.6 billion and $66 billion.

Subsequently on 30 March 2020 the Government announced the JobKeeker package, a new wage subsidy plan, and on 2 April 2020 a package to support early childhood education and care. The Treasurer announced on 5 April 2020 a reduced threshold for certain charities for JobKeeper eligibility. 

These measures were passed in a special sitting of Parliament on 8 April 2020. On 9 April 2020, a legislative instrument was registered containing rules for the JobKeeper payment.

On 21 July 2020, the Treasurer announced amendments to the JobKeeper and JobSeeker coronavirus measures (refer to the Business Stimulus section for these changes), and subsequently announced extensions to some existing measures on 23 July 2020.

The stimulus packages include a range of important support measures for individuals and small businesses.

ASIC has also announced relief measures to assist the financial advice industry to advise clients on these measures and to provide consumers with affordable and timely advice during the pandemic.

This summary provides coverage of the key issues of most interest to financial services professionals and both their individual clients and small business clients.

Economic stimulus packages

This summary provides coverage of the key issues of most interest to financial services professionals and both their individual clients and small business clients.

1. Support for individuals and households

Temporarily reducing superannuation minimum drawdown rates

The minimum drawdown requirements for superannuation account-based pensions and similar products have been reduced 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.

The reduction applies for the 2019-20 and 2020-21 income years.

Document Default minimum drawdown rates (%)
Reduced minimum drawdown rates for 2019-20 and 2020-21 (%)

Under 65

4 2

65-74

5 2.5

75-79

6 3

80-84

7 3.5

85-89

9 4.5

90-94

11 5.5

95 or more

14 7

 

Example: Mike is a 66 year old retiree with a superannuation account-based pension

The value of Mike’s account-based pension at 1 July 2019 was $200,000. Under current minimum drawdown requirements, Mike is required by legislation to drawdown 5 per cent of his account balance over the course of the 2019-20 and 2020-21 income years.

This means Mike has to drawdown $10,000 by 30 June 2020 to comply with the minimum drawdown requirements.

Following the temporary reduction in minimum drawdown requirements, Mike will now only be required to drawdown 2.5 per cent of his account balance, that is, $5,000, by 30 June 2020. If Mike has already withdrawn over $5,000 for 2019-20, he is not able to put the amount above $5,000 back into his superannuation account.

Australian Government Fact Sheet: Providing support for retirees

 

Temporary early release of superannuation

Individuals affected by the coronavirus may 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.


Eligibility

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 JobSeeker 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.

This condition of release is not available to market linked or transition to retirement income streams. However, those in transition to retirement income streams may partially commute to an accumulation account and use this condition of release to access benefits from the new accumulation account.

Applications for the 2020-21 condition of release must be made by 24 September 2020. In its Economic and Fiscal Update on 23 July 2020 the Australian Government proposed to extend this date to 31 December 2020.

This condition of release is not available to temporary residents in 2020-21.


How to apply

Those eligible for this new ground of early release can apply directly to the ATO through the myGov website: www.my.gov.au. They will need to certify that they meet the above eligibility criteria.

Australian Government Fact Sheet: Temporary Early Access to Superannuation

 

Social security deeming rates changes

As of 1 May 2020, the upper deeming rate became 2.25 per cent and the lower deeming rate 0.25 per cent. The reductions reflect the low interest rate environment and its impact on the income from savings.

The change benefits around 900,000 income support recipients, including around 565,000 people on the Age Pension who, on average, receive around $105 more from the Age Pension in the first full year that the reduced rates apply.

Australian Government Fact Sheet: Providing support for retirees

 

Coronavirus supplement

The Australian Government has temporarily expanded eligibility to income support payments and established a new, time-limited Coronavirus Supplement to be paid at a rate of $550 per fortnight. This Supplement is payable to both existing and new recipients of JobSeeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit from 27 April 2020 to 24 September 2020.

The Australian Government has announced the continuation of the Coronavirus Supplement at a reduced rate of $250 per fortnight from 25 September 2020 until 31 December 2020.

Eligibility criteria for certain income support payments are currently suspended, including the:

  • Assets test
  • Ordinary Waiting Period
  • Liquid Assets Waiting Period
  • Seasonal Work Preclusion Period
  • Newly Arrived Resident’s Waiting Period

From 25 September 2020, the Assets test and Liquid Assets Waiting Period will be reintroduced. The Ordinary Waiting Period, Newly Arrived Resident’s Waiting Period and Seasonal Work Preclusion Period will continue to be waived until 31 December 2020.

Australian Government Fact Sheet: Income support for individuals

 

Up to two support payments of $750

A one-off $750 stimulus payment to pensioners, social security, veteran and other income support recipients and eligible concession card holders was announced on 12 March 2020.

The payment is tax free and will not count as income for Social Security, Farm Household Allowance and Veteran payments. It was paid automatically from 31 March 2020.

A second payment of $750 was made from 13 July 2020. This payment was made to those residing in Australia and receiving one of the payments (or holding one of the concession cards) that were eligible for the first payment, except for those who were eligible to receive the coronavirus supplement (that is, those eligible for JobSeeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit).

Australian Government Fact Sheet: Payments to support households

 

Early childhood education and care relief package

On 5 April 2020, the Government registered legislation that temporarily changed the funding arrangements for the early childhood education sector. The Government paid 50 per cent of a child care service’s fee revenue (or 50 per cent of the existing hourly rate cap if that is lower) calculated based on the number of children in care during the fortnight preceding 2 March 2020 (before parents began withdrawing children in large numbers). The funding was subject to a number of conditions, including that services remained open (or closed because a health agency has advised or required the service to be closed due to the coronavirus) and that families were not charged a fee, including an out of pocket or gap fee. This was paid in addition to any JobKeeper Payment the child care service was eligible to receive. The funding applied from 6 April 2020 and ended on 12 July 2020, with the Child Care Subsidy resuming from 13 July 2020. Child care services also became ineligible for the JobKeeper Payment from 20 July 2020.

From 13 July 2020 until 27 September 2020, the Government will pay 25 per cent of the child care service’s fee revenue (based on the same reference period outlined above). The activity test, used to determine a family’s eligibility for Child Care Subsidy, will also be eased until 4 October 2020.  

The plan supports families while also ensuring as many of the sector’s 13,000 child care and early learning services as possible can keep their doors open for workers and vulnerable families who need those services.  Around one million families are set to receive free child care.

2. Business stimulus

JobKeeper Payment (30 March 2020 to 27 September 2020)

The JobKeeper Payment helps businesses affected by the coronavirus cover the costs of their employees’ wages, and more people to retain their jobs and continue to earn an income. The scheme involves the Australian Government paying employers a wage subsidy at a flat rate of $1,500 per employee per fortnight for up to six months. The JobKeeper Payment was backdated to 30 March 2020 for employers who registered by 31 May 2020 for JobKeeper fortnights in April and May 2020. Employers who register after 31 May 2020 will receive JobKeeper Payment on a prospective basis.

There is no cap on the number of employees eligible for the subsidy. This amount is equivalent to around 70% of the Australian median wage and in the accommodation, hospitality and retail industries, it is equivalent to the full median wage.


Eligible employers (30 March 2020 to 27 September 2020)

Employers with turnover of less than $1 billion are eligible if they experience at least a 30% decline in revenue since 1 March in a month versus the prior year. Businesses with annual turnover of $1 billion or more are eligible if their turnover falls by more than 50%.

Employers must apply to the Australian Taxation Office (ATO) to participate in the scheme and provide supporting information demonstrating the impact felt in their business. Employers will also need to continue to report to the ATO the number of eligible employees employed by their business each month.

Self-employed individuals (businesses without employees) that meet the turnover tests that apply for employers are eligible to register one person, who is actively engaged in operating the business, for JobKeeper Payments. Eligible individuals include a sole trader, partner in a partnership, beneficiary of a trust and a director or shareholder of a company.

Charities that are registered with the Australian Charities and Not-for-Profits Commission (other than a school or university) will be eligible for the JobKeeper Payment if they have suffered a 15 per cent decline in turnover as a result of the coronavirus.  This measure is to support a sector which is expected to have a significant increase in demand for its services. Schools and universities are subject to turnover tests noted earlier.


Eligible employees (30 March 2020 to 27 September 2020)

Employers will receive the payment for each eligible employee. Employees are eligible where they:

  • are currently employed by an eligible employer (including if stood down or rehired)
  • were employed by the eligible employer (or another entity in their wholly-owned group) either as:
    • a full-time, part-time or fixed-term employee at 1 March 2020; or
    • a long-term casual employee (employed on a regular and systematic basis for at least 12 months) as at 1 March 2020 and not a permanent employee of any other employer.
  • were aged 18 years or older at 1 March 2020 (if you were 16 or 17 you can also qualify for fortnights before 11 May 2020, and continue to qualify after that if you are independent or not undertaking full time study).
  • were either:
    • an Australian resident (within the meaning of the Social Security Act 1991); or
    • an Australian resident for the purpose of the Income Tax Assessment Act 1936 and the holder of a Subclass 444 (Special Category) visa as at 1 March 2020.
  • were not in receipt of any of these payments during the JobKeeper fortnight:
    • government parental leave or Dad and Partner Pay under the Paid Parental Leave Act 2010; or
    • a payment in accordance with Australian workers compensation law for an individual's total incapacity for work.

Only one employer can claim the JobKeeper Payment in respect of an employee.

Self‐employed persons will be eligible to receive JobKeeper Payment where they meet the relevant turnover test, and are not a permanent employee of another employer.


Extension of the JobKeeper Payment (28 September 2020 to 28 March 2021)

The Australian Government has announced an extension of the JobKeeper Payment, which was originally due to run until 27 September 2020 and will now continue to be available to eligible businesses (including the self-employed) and not-for-profits until 28 March 2021.

Employees will continue to receive the JobKeeper Payment through their employer during the period of the extension if they and their employer are eligible and their employer is claiming the JobKeeper Payment. However, the amount of the JobKeeper Payment will change from the rates set out above.

From 28 September 2020 to 3 January 2021, the JobKeeper Payment rates will be:

  • $1,200 per fortnight for all eligible employees who, in the four weeks of pay periods before 1 March 2020, were working in the business or not-for-profit for 20 hours or more a week on average, and for eligible business participants who were actively engaged in the business for 20 hours or more per week on average in the month of February 2020; and
  • $750 per fortnight for other eligible employees and business participants.

From 4 January 2021 to 28 March 2021, the JobKeeper Payment rates will be:

  • $1,000 per fortnight for all eligible employees who, in the four weeks of pay periods before 1 March 2020, were working in the business or not-for-profit for 20 hours or more a week on average and for business participants who were actively engaged in the business for 20 hours or more per week on average in the month of February 2020; and
  • $650 per fortnight for other eligible employees and business participants.

Businesses and not-for-profits will be required to nominate which payment rate they are claiming for each of their eligible employees (or business participants).

The Commissioner of Taxation will have discretion to set out alternative tests where an employee’s or business participant’s hours were not usual during the February 2020 reference period. For example, this will include where the employee was on leave, volunteering during the bushfires, or not employed for all or part of February 2020.

Guidance will be provided by the ATO where the employee was paid in non-weekly or non-fortnightly pay periods and in other circumstances the general rules do not cover.

The JobKeeper Payment will continue to be made by the ATO to employers in arrears. Employers will continue to be required to make payments to employees equal to, or greater than, the amount of the JobKeeper Payment (before tax), based on the payment rate that applies to each employee.


Eligible employers (28 September 2020 to 28 March 2021)

From 28 September 2020, businesses and not-for-profits seeking to claim the JobKeeper Payment will be required to demonstrate that they have suffered an ongoing significant decline in turnover using actual GST turnover (rather than projected GST turnover).

In order to be eligible for the first JobKeeper Payment extension period of 28 September 2020 to 3 January 2021, businesses and not-for-profits will need to demonstrate that their actual GST turnover has fallen in the both the June and September quarters 2020 relative to comparable periods (generally the corresponding quarters in 2019).

For the period of 4 January 2021 to 28 March 2021, businesses and not-for-profits will again need to demonstrate that their actual GST turnover has significantly fallen in each of the June, September and December 2020 quarters relative to comparable periods (generally the corresponding quarters in 2019).

To be eligible for JobKeeper Payments under the extension, businesses and not-for-profits will still need to demonstrate that they have experienced a decline in turnover of:

  • 50 per cent for those with an aggregated turnover of more than $1 billion
  • 30 per cent for those with an aggregated turnover of $1 billion or less
  • 15 per cent for Australian Charities and Not-for-profits Commission (ACNC) registered charities (excluding schools and universities).

Registered religious institutions responsible for religious practitioners will continue to be eligible to receive the JobKeeper Payment provided they meet existing eligibility requirements and the additional turnover tests during the extension period.

Where a business or not-for-profit does not meet the additional turnover tests during the extension period, their eligibility prior to 28 September 2020 is not affected.

The JobKeeper Payment will remain open to new recipients, provided they meet the existing eligibility requirements and the additional turnover tests during the extension period.

Other eligibility rules for businesses and not-for-profits and their employees remain unchanged.


Eligible employees (28 September 2020 to 28 March 2021)

The eligibility rules for employees remain unchanged.

Register via the ATO website: Enrol for the JobKeeper payment  

Australian Government Fact Sheet: JobKeeper Payment - Information for Employers

ATO Law Companion Ruling 2020/1: JobKeeper payment – decline in turnover test

ATO guidance regarding time: JobKeeper key dates

Australian Government Fact Sheet: Extension of the JobKeeper Payment

 

Boosting cash flow for employers

Up to $100,000 is available to eligible small and medium-sized 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.

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.

The payment will be delivered by the ATO as an automatic credit in the activity statement system from 28 April 2020 upon employers lodging eligible upcoming activity statements.

An additional payment is also being introduced in the July – October 2020 period. 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.

Australian Government Fact Sheet: Cash flow assistance for businesses

 

Temporary relief for financially distressed businesses

It’s vital that businesses have a safety net to ensure that when the crisis has passed, they can resume normal business operations. The Australian 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.

Australian Government Fact Sheet: Temporary relief for financially distressed businesses
 

Increasing the instant asset write-off

The instant asset write-off threshold has been increased from $30,000 to $150,000 and has been expanded to include businesses with aggregated annual turnover of less than $500 million (up from $50 million). This change applies to assets purchased between 12 March 2020 and 31 December 2020 (inclusive).  

Australian Government Fact Sheet: Delivering support for business investment

 

Backing business investment

A time limited 15-month investment incentive (through to 30 June 2021) has been introduced to support business investment and economic growth over the short term, by accelerating depreciation deductions.

Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.

Australian Government Fact Sheet: Delivering support for business investment

 

Supporting apprentices and trainees

Small business support is available to retain apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage. Initially this was for a period of 9 months from 1 January 2020 to 30 September 2020, however, this has been extended for a further 6 months until 31 March 2021. Eligibility for the subsidy has been expanded to include medium sized businesses with fewer than 200 employees, who had an apprentice in training with the business on 1 July 2020.

Where the business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).

Support will also be provided to the National Apprentice Employment Network, the peak national body representing Group Training Organisations, to co-ordinate the re-employment of displaced apprentices and trainees throughout their network of host employers across Australia.

Australian Government Fact Sheet: Cash flow assistance for businesses


Support for coronavirus-affected regions and communities

$1 billion is set aside to support regions most significantly affected by the coronavirus outbreak. These funds will be available to assist during the outbreak and the recovery. In addition, the Australian Government is assisting our airline industry by providing relief from a number of taxes and Australian Government charges estimated to total up to $715 million.

Australian Government Fact Sheet: Assistance for severely affected regions and sectors


Coronavirus Business Liaison Unit

A Coronavirus Business Liaison Unit has been established within the Commonwealth Treasury to engage with business on a regular basis and provide updates to government on crucial issues.


HomeBuilder

On 4 June 2020 the Australian Government announced the HomeBuilder program aimed at supporting jobs in the residential construction sector. The HomeBuilder program will provide eligible owner-occupiers (not just first home buyers) with a grant of $25,000 to build a new home or substantially renovate an existing home.

HomeBuilder applicants will be subject to the following eligibility criteria:

  • you are a natural person (not a company or trust);
  • you are aged 18 years or older;
  • you are an Australian citizen;
  • you meet one of the following two income caps:
    • $125,000 per annum for an individual applicant based on your 2018-19 tax return or later; or
    • $200,000 per annum for a couple based on both 2018-19 tax returns or later;
  • you enter into a building contract between 4 June 2020 and 31 December 2020 to either:
    • build a new home as a principal place of residence, where the property value does not exceed $750,000; or
    • substantially renovate your existing home as a principal place of residence, where the renovation contract is between $150,000 and $750,000, and where the value of your existing property does not exceed $1.5 million;
  • construction must commence within three months of the contract date.

Australian Government Fact Sheet: HomeBuilder

Australian Government FAQ: Frequently asked questions

3. ASIC relief to support financial advice on stimulus and other measures

On 14 April 2020, ASIC announced temporary relief measures that will assist the financial services industry in providing consumers with affordable and timely advice during the pandemic. These measures are covered by a legislative instrument registered on 14 April 2020. Important conditions apply to the relief,  these are covered in detail in the legislative instrument and explanatory statement and summarised in ASIC’s 14 April 2020 media release, and FAQs.

Subject to meeting the important conditions, the instrument provides temporary relief to:

  • allow financial advisers not to give a Statement of Advice (SOA) to a client when providing advice about the early release scheme, subject to several conditions, including:
    • clients must be provided with a record of advice (ROA), which meets certain content requirements;
    • the advice fee, if any, is capped at $300;
    • the advice provider must establish that the client is entitled to the early release of their superannuation; and
    • the client must have approached the advice provider for the advice;
  • permit registered tax agents to give advice about the early release of superannuation to their existing clients without needing to hold an Australian financial services (AFS) licence, subject to several conditions;
  • give advice providers up to 30 business days (instead of 5 business days) to give a SOA after time-critical COVID-19 advice is provided; and  
  • enable a Record of Advice (ROA) to be given instead of an SOA for COVID-19 advice, in certain defined circumstances to existing clients of financial advisers.

This relief will end on 15 October 2020.

4. Support for charities

Incentive for philanthropic entities

On 6 May 2020, the Government announced a new incentive for philanthropic funds to make additional donations in 2019-20 and 2020-21.

Guidelines for Private Ancillary Funds (PAFs) and Public Ancillary Funds (PuAFs) require funds to distribute a minimum amount each year. For PAFs this is 5 per cent while PuAFs must distribute 4 per cent of the market value of the fund’s net assets.

The announced amendments will provide a credit to a fund where its donations exceed the minimum distribution threshold in the relevant years. The amount of the credit will be half of the total percentage by which the fund’s distributions exceed the minimum threshold. To qualify for the credit, the fund’s donations must be at least 4 per cent above the minimum percentages across 2019-20 and 2020-21. This credit can be applied to reduce the minimum distribution amount for future years at a maximum rate of 1 per cent each year.

For example, a PAF makes a distribution of 8 per cent for 2019-20 and 6 per cent for 2020-21. Total distributions for 2019-20 and 2020-21 exceed the minimum distribution requirement by 4 per cent. The PAF will receive a credit of 2 per cent (ie half of the excess) and this credit may be used to reduce the minimum distribution by up to one percentage point per year from 2021-22 until the credit is exhausted.

Australian Government media release: Incentivising increased support for charities in response to COVID-19