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Below are some examples to the different parts of  the Federal Government Stimulus Package which will make it easier for you to understand how it all works:

To read about the packages click HERE.

1.  Boosting Cash Flow for Employers

a) Sarah’s Construction Business

Sarah owns and runs a building business in South Australia and employs 8 construction workers on average full-time weekly earnings, who each earn $89,730 per year. Sarah reports withholding of $15,008 for her employees on each of her monthly Business Activity Statements (BAS). Under the Government’s changes, Sarah will be eligible to receive the payment on lodgment of her BAS. Sarah’s business receives:

  • A credit of $45,024 for the March period, equal to 300 per cent of her total withholding.
  • A credit of $4,976 for the April period, before she reaches the $50,000 cap.
  • No payment for the May period, as she has now reached the $50,000 cap.
  • An additional payment of $12,500 for the June period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.
  • An additional payment of $12,500 for the July period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.
  • An additional payment of $12,500 for the August period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.
  • An additional payment of $12,500 for the September period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.

 

b) Sean’s Hairdresser Salon

Sean owns a hairdresser’s salon on the Gold Coast. He employs 12 hairdressers, with average salary of $50,000 per year. Sean reports withholding of $8,788 for his employees in each of his monthly BAS.

Under the Government’s changes, Sean will be eligible to receive the payments on lodgment of his relevant BAS. Sean’s business will receive:

  • A credit of $26,364 for the March period, equal to 300 per cent of his total withholding.
  • A credit of $8,788 for the April period.
  • A credit of $8,788 for the May period.
  • A credit of $6,060 for the June period, before he reaches the $50,000 cap.
  • Sean will also receive an additional payment of $12,500 for the June period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.
  • An additional payment of $12,500 for the July period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.
  • An additional payment of $12,500 for the August period, equal to 25 per cent of his total Boosting Cash Flow for Employers payments.
  • An additional payment of $12,500 for the September period, equal to 25 per cent of his total.

 

c) Tim’s Courier Run

Tim owns and runs a small paper delivery business in Melbourne and employs two casual employees who each earn $10,000 per year. In his quarterly BAS, Tim reports withholding of $0 for his employees as they are under the tax-free threshold. Under the Government’s changes, Tim will be eligible to receive the payment on lodgment of his BAS. Tim’s business will receive:

  • A credit of $10,000 for the March quarter, as he pays salary and wages but is not required to withhold tax.
  • An additional payment of $5,000 for the June quarter, equal to 50 per cent of his total Boosting Cash Flow for Employers payments.
  • An additional payment of $5,000 for the September quarter, equal to 50 per cent of his total Boosting Cash Flow for Employers payments.

 

d) Help for the Homeless Op-Shop

Help for the Homeless, a registered charity, runs an op-shop to support its programs and employs 5 part-time workers with an average income of $30,000 per year. It reports total withholding of $3,510 for its employees for each quarterly BAS. Under the Government’s changes, Help for the Homeless will be eligible to receive the payment on lodgment of its BAS as it is a charity. Help for the Homeless receives:

  • A credit of $10,000 for the March quarter, the minimum payment.
  • An additional payment of $5,000 for the June quarter, equal to 50 per cent of its total Boosting Cash Flow for Employers payments.
  • An additional payment of $5,000 for the September quarter, equal to 50 per cent of its total Boosting Cash Flow for Employers payments.

 

 

2.  Income Support for Individuals

a) Example Leonie

Leonie is in her mid-30s, with two dependent children aged 10 and 12 and works as a telephone consultant for a travel agency. The economic downturn due to Coronavirus has caused the travel agency where she works to close for a six-month period and resulted in Leonie’s hours being reduced to zero. Leonie will be eligible to apply for Jobseeker Payment and the Coronavirus supplement under the new streamlined process. Leonie can apply on line and make a declaration about her identity, residency status, income and that she has had her hours reduced to zero as a result of the economic downturn due to Coronavirus. Leonie is eligible for Jobseeker Payment and will receive $1,171.50 per fortnight, comprising:

  • Jobseeker Payment single, with dependent child rate of $612.00 per fortnight; plus
  • Energy Supplement of $9.50 per fortnight; plus
  • Coronavirus supplement of $550 per fortnight.

Leonie will also receive Family Tax Benefit Part A and Part B of $483 a fortnight. Having recently left employment, Leonie is already job ready. An employment service provider will look to match Leonie’s skills with available opportunities (for example, in another Call Centre) so Leonie’s skills can be used in another industry and Leonie can get another job quickly.

b) Example Chris

Chris is a sole trader, running an architecture practice, specialising in home renovations. Chris’ practice has been successful over the years, and he has been able to build up a reasonable amount of assets during his career, to a level that would ordinarily make him ineligible for an income support payment. The economic downturn due to Coronavirus has adversely affected Chris’ business, and his income has been reduced to zero. Chris will be able to apply for the new Jobseeker / Coronavirus supplement and will not have his assets included as part of the eligibility assessment for the payment. He will also not be required to serve a Liquid Asset test Waiting Period, as that has been waived. Chris is eligible for the

Jobseeker payment and, as he is married, will receive:

  • Jobseeker Payment partnered rate of $510.80 per fortnight; plus
  • Energy Supplement of $7.90 per fortnight; plus
  • Coronavirus supplement of $550 per fortnight This brings Chris’ total fortnightly income support payment to $1,068.70.

3.  Early Access to Superannuation

a) Example Ed

Ed the bartender Ed works in a popular bar in Melbourne. As a result of the Coronavirus, Ed has had his work hours reduced from 40 hours on average in the second half of 2019 to 20 hours per week on average in May 2020. As a result, Ed determines that his hours over the last month have reduced by more than 20 per cent compared to the average of his hours over the last six months of 2019.

Ed decides to apply for the early release of $8,000 of his superannuation in May 2020 to help pay his rent and other living expenses. Ed self-certifies that he is eligible for early release on myGov. He could have applied for up to $10,000, but chose not to. Ed cannot seek any further early release of superannuation in 2019-20 on the grounds that he has been affected by the adverse economic effects of the Coronavirus.

However, Ed finds after 1 July 2020 that his hours continue to be reduced by more than 20 per cent compared to the average of his hours in the last six months of 2019. Ed decides to make a second application and self-certifies through myGov that he is eligible for early release. He is able to apply again for a release of up to $10,000 of his superannuation. Ed submits a second application for the full amount of $10,000 this time. For each application, the ATO approves Ed’s early release and notifies both him and his superannuation fund. Ed has received a total of $18,000 of his superannuation in two separate payments. He will not be taxed on this amount and is free to spend this money on anything he chooses, or save it for future expenses. He is also free to recontribute any unused amounts to his superannuation in the future (within his contribution caps).

b) Rachel the sole trader

Rachel is a sole trader with a catering business. At the end of July 2020, Rachel seeks to apply for an early release from her superannuation for the 2020-21 financial year.

Due to the economic effects of the coronavirus, Rachel’s turnover for July is $5,000 compared to $10,000 on average per month for the second half of 2019. Rachel therefore determines that her turnover has reduced by more than 20 per cent compared to her average turnover over the last six months of 2019.

Rachel self-certifies that she is eligible for early release and applies to have $10,000 released from her superannuation.

4. Instant Asset Write-off

a)  Business benefits from increased asset threshold

Owen owns a company, ON Point Farms Pty Ltd, through which he operates a farming business in the Central Wheat Belt of Western Australia. ON Point Farms Pty Ltd has an aggregated annual turnover of $25 million for the 2019-20 income year. On 1 May 2020, Owen purchases a second- hand tractor for $140,000, exclusive of GST, for use in his business.

Under existing tax arrangements, ON Point Farms Pty Ltd is not able to immediately deduct assets costing more than $30,000 and instead would depreciate the tractor using an effective life of 12 years. Choosing to use the diminishing value method, ON Point Farms Pty Ltd would claim a tax deduction of $3,899 for the 2019-20 income year.

Under the new $150,000 instant asset write-off, ON Point Farms Pty Ltd would instead claim an immediate deduction of $140,000 for the purchase of the tractor in the 2019-20 income year, $136,101 more than under existing arrangements. At the company tax rate of 27.5 per cent, Owen will pay $37,427.78 less tax in 2019-20.

This will improve ON Point Farms Pty Ltd.’s cash flow and help his business withstand and recover from the economic impact of the Coronavirus.

b) Business benefits from increased turnover threshold

Samantha owns a company, Sam’s Specialty Roasters Pty Ltd, through which she operates a large food processing business in Brisbane. Sam’s Specialty Roasters Pty Ltd has an aggregated annual turnover of $150 million for the 2019-20 income year. On 1 May 2020, Samantha purchases five new conveyor belts for her production facility for $40,000 each, exclusive of GST, for use in her business.

Under existing tax arrangements, Sam’s Specialty Roasters Pty Ltd is not eligible for the instant asset write-off and instead would depreciate the conveyor belts using an effective life of 15 years. Choosing to use the diminishing value method, Sam’s Specialty Roasters Pty Ltd would claim a total tax deduction of $4,456 for the 2019-20 income year.

Under the new $150,000 instant asset write-off, Sam’s Specialty Roasters Pty Ltd would instead claim an immediate deduction of $200,000 for the purchase of the conveyor belts (i.e. $40,000 for each conveyor) in the 2019-20 income year, $195,544 more than under existing arrangements. At the company tax rate of 30 per cent, Samantha will pay $58,663.20 less tax in 2019-20.

This will improve Sam’s Specialty Roasters Pty Ltd.’s cash flow and help her business withstand and recover from the economic impact of the Coronavirus.

5. Investment Incentive

a)  Middle-sized business benefits from the BBI

J Construction Solutions Pty Ltd has an aggregated annual turnover of $200 million for the 2020-21 income year. On 1 July 2020, J Construction Solutions Pty Ltd installs a $1 million truck mounted concrete pump for use in the business.

Under existing tax arrangements, J Construction Solutions Pty Ltd could claim 30 per cent depreciation in the first year (based on the asset’s effective life of 6⅔ years).

Under the new BBI, J Construction Solutions Pty Ltd can claim a depreciation deduction of $650,000 in the 2020-21 income year. This consists of 50 per cent of the concrete pump’s value under the new BBI ($500,000) plus 30 per cent of the remaining $500,000 under existing depreciation rules ($150,000). This is $350,000 more than under existing tax arrangements.

At the company tax rate of 30 per cent, J Construction Solutions Pty Ltd will pay $105,000 less tax in the 2020-21 income year (30 per cent of $350,000). This extra tax benefit is worth $14,000 to J Construction Pty Ltd over the asset’s life (at an interest rate of 5 per cent). This will improve J Construction Solutions Pty Ltd.’s cash flow and lower the after-tax cost of the concrete pump to the business.

b) Small business benefits from the BBI

Joan and Bruce own a company, NC Transport Solutions Pty Ltd, through which they operate a haulage business on the North Coast of New South Wales.

NC Transport Solutions Pty Ltd has an aggregated annual turnover of $8 million for the 2019-20 income year. On 1 May 2020, Joan and Bruce purchase a new truck for $260,000, exclusive of GST, for use in their business.

Under existing tax arrangements, NC Transport Solutions Pty Ltd would depreciate the truck using their small business simplified depreciation pool. Under the pooling rules, NC Transport Solutions Pty Ltd 4 would deduct 15 per cent of the asset’s value upon entry to the pool, leading to a tax deduction of $39,000 for the 2019-20 income year.

Under the new BBI, NC Transport Solutions Pty Ltd would instead claim an up-front deduction of 50 per cent of the truck’s value ($130,000) before placing the asset in their small business simplified depreciation pool. Joan and Bruce would then claim a further 15 per cent deduction on the depreciated value of the truck ($19,500). As a result of the two deductions, Joan and Bruce will be able to claim a deduction totaling $149,500 in the 2019 20 income year, $110,500 more than under existing arrangements. At the company tax rate of 27.5 per cent, Joan and Bruce will pay $30,387.50 less tax in the 2019-20 income year.

6. Apprentices and Trainees Support 

David’s Plumbing

David’s Plumbing is a small business that employs 10 people, including two full-time Australian Apprentices. Taylor is a first year Australian Apprentice, aged 20, undertaking a Certificate III qualification. She commenced her apprenticeship with David’s Plumbing on 6 February 2020. Taylor receives a weekly wage of $532.89. Lisa is a third year Australian Apprentice, aged 29, undertaking a Certificate IV qualification. She commenced her apprenticeship with David’s Plumbing on 18 November 2017. She receives a weekly wage of $772.71. David’s Plumbing are eligible for Supporting Apprentices and Trainees which pays 50 per cent of the apprentices’ wages that have been paid by David’s Plumbing since 1 January 2020. David’s Plumbing will receive:

  • $9,059 subsidy for employing Taylor from 6 February 2020 to 30 September 2020; and
  • $15,068 subsidy for employing Lisa from 1 January 2020 to 30 September 2020.

 

Should you have any questions, please contact us on 08 6263 4466 or email questions@accoladeaccounting.com.au