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COVID-19: The Federal Government's Second Stimulus Package

Written by Sarah Pogson . March 23, 2020
13 min read

Prime Minister Scott Morrison and Treasurer Josh Frydenberg have announced the Federal Government’s second tranche of the Economic Stimulus Package with a substantial expansion on the initial stimulus package. A further $66 billion is set to be injected into the hands of those who are most likely to be impacted first by COVID-19, being small businesses and those on income support.

Both the PM and Treasurer announced these measures during a press release this morning, providing details on new initiatives as well as expanded variations on previous measures with the aim to keep Australians in jobs, and businesses in business. Below we have listed these initiatives based on the current information available.

Contents

Supporting Individuals and Households

  • Coronavirus Supplement of $550 per Fortnight – from 27 April 2020 for six months, available to those individuals that receive the following payments: JobSeeker Payment, Sickness Allowance, Youth Allowance for jobseekers, Parenting Payment (Partnered), Parenting Payment (Single), Partner Allowance, Sickness Allowance and Farm Household Allowance. More details available here.
  • Expanding Eligibility and Qualification for Payments – From 27 April 2020, for six months, eligibility for JobSeeker Payment and Youth Allowance will be expanded to assist sole traders and self-employed people and people caring for someone infected or in isolation as a result of contact with Coronavirus. An income test will need to be met of income less than $1,075 per fortnight to be eligible.
  • Temporary Waivers for JobSeeker Allowance Payments – From 27 April 2020, the Government will temporarily waive the assets test, the ordinary waiting period (already waived to 12 June 2020), the liquid assets waiting period, the seasonal workers preclusion period and the newly arrived residents waiting period.
  • Income Support Stimulus Payments – a further $750 tax free payment to be eligible for social security, veteran and other income support recipients and eligible concession card holders. This will be paid from 13 July 2020. This is in addition to the initial one-off stimulus payment of $750 announced on 12 March 2020. This is only available to those individuals who are not eligible for the Coronavirus Supplement – e.g. those who receive the aged pension, carers allowance, family tax benefit and a Commonwealth Seniors Health Card. More details available here.
  • Deeming Rates Cut by 0.25% – as at 1 May 2020, the social security deeming rate will be 2.25% and the lower deeming rate will be 0.25%, in line with the RBA cuts in the last week. This is in addition to the 0.5% reduction in upper and lower social security deeming rates on 12 March 2020. More details available here.
  • Ease of Access to Payments – From 27 April 2020, the Government will temporarily remove the requirement for an Employment Separation Certificate, proof of rental arrangements and verification of relationship status.
  • Early Access to Superannuation in 2020 & 2021 Financial Years – eligible people who are impacted and are under financial distress as a result of the Coronavirus will be able to access $10,000 from their superannuation funds from April 2020. This will be available for the 2020FY and the 2021FY resulting in a total of $20,000 in funds that can be accessed from their own superannuation. These withdrawals will be tax free and not subject to the standard tax implications of superannuation withdrawals. You will be eligible for early access to your superannuation if you are eligible to receive the Coronavirus Supplement, you are unemployed or you are a sole trader or casual worker whose work hours or income have decreased by 20% or more as a result of the Coronavirus.

    Applications will be available online via a declaration to the Australian Taxation Office.
    Further details and eligibility requirements are available here.

  • Minimum Pension Withdrawal Rates for 2020 & 2021 Financial Years – the rates for the 2019-20 and 2020-21 minimum pension withdrawals have been halved from the default drawdown rate requirement e.g. if you are under 65, your minimum pension withdrawal has decreased to 2% for the 2019-20 and 2020-21 financial years (down from 4%). Any excess withdrawals over the reduced minimum withdrawal percentage, if already withdrawn, cannot be returned to the fund unless an eligible contribution is being made (e.g. concessional and/or non-concessional contributions). More details available here.
    Further details on the measures impacting individuals and households are available here.

Supporting Businesses

  • Boosting Cash Flow for Employers – expanding on the initial measure introduced, employers can now access up to $100,000 if they are an eligible small or medium-sized business or a not-for-profit with turnover under $50 million. The new minimum payment is $20,000 (increased from $2,000). This measure has now been split into two payments as follows:
    • 1st Payment for March to June 2020: 100% of PAYGW withheld on salary and wages will receive 100% of amount withheld, up to a maximum of $50,000. Employers that pay salary and wages will receive a minimum of $10,000 even if they are not required to withhold. Only available to active eligible employers established prior to 12 March 2020. Credits will be made available in the activity statements of the employing entity. Payments will vary depending on the lodgement basis:
      • Monthly lodgers – will receive an automatic credit in their March 2020 BAS, equal to 300% of the PAYGW, up to $50,000. If 300% doesn’t equate to $50,000 then there will be an additional credit in the June BAS to cap you to $50,000 based on the total PAYGW for March, April, May & June 2020.
      • Quarterly lodgers - will receive an automatic credit in their March and June 2020 BAS, equal to 100% of the PAYGW, up to $50,000.
    • Additional Payment for July to October 2020: If the employing entity continues to be active, payments will vary depending on the lodgement basis:
      • Monthly lodgers – will receive an automatic credit in the activity statement system equal to 25% of their June, July, August and September 2020 PAYG withheld, capped at $50,000.
      • Quarterly lodgers – will receive an automatic credit in the activity statement system equal to 50% of their June and September 2020 PAYG withheld, capped at $50,000.

A reminder that employers who do not withhold over $20,000 will automatically receive $20,000 as a minimum repayment if their total withholding does not reach $50,000 over the eligible periods.

More information on the cash flow assistance for businesses is available here.

  • Temporary Relief for Financially Distressed Businesses
    • Temporary increased threshold and time to respond for statutory demands from creditors – the minimum threshold has been temporarily increased six months from $2,000 to $20,000 for creditors to issue a statutory demand.
    • Temporary increase in the threshold for a creditor to initiate bankruptcy proceedings – the statutory time-frame has been increased for six months, changing the failure to respond bankruptcy notice from 21 days to six months.
    • Temporary relief for directors from any personal liability for trading while insolvent – directors will be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business. This will apply for six months. The debts incurred by the company during the period will still be payable by the company. Egregious cases of dishonesty and fraud will still be subject to criminal penalties.
    • Temporary flexibility in the Corporations Act 2001 – the Treasurer will be given a temporary instrument-making power in the Corporations Act 2001 to temporarily amend provisions of the Act to provide relief from specific obligations or to modify obligations to enable compliance with legal requirements during the Coronavirus crisis. This will apply for six months. Any instrument made under the power will apply for up to six months from the date it was made.

Further information on the temporary relief for financially distressed businesses is available here.

Supporting the Flow of Credit

  • Guarantee of 50% to SME Lenders – to support new short-term unsecured loans of up to $250,000 per borrower, with a term up to three years with a six month repayment holiday. No assets will need to be provided as security for the loan. The scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.
  • Quick and Efficient Access to Credit for Small Businesses – a six month exemption of specific “responsible lending obligations” for small businesses to any credit for any business purpose (including new credit, credit limit increases, credit variations and restructures).
  • Supporting the Flow and Reducing the Cost of Credit (RBA) – RBA will put downward pressure on borrowing costs for household and businesses. Banks will have access to funding at a fixed interest rate of 0.25% - reinforcing the benefits of a low cash rate and in turn reducing interest rates for borrowers.
  • Australian Prudential Regulation Authority – Temporary changes to the expectations regarding bank capital rations, supporting banks’ lending to customers.

We suggest you contact your bank to see how these measure apply to your personal loans and/or your business loans. With the RBA cutting the cash rate again by 0.25 basis points in the last week, the large banks in Australia have followed suit and continue to implement further changes with continued slashing of interest rates and repayments for certain loans put on hold. It is best to contact your bank during these times and understand how they can help both your personal and business circumstances.

Further information on the support for the flow of credit is available here.

As you can see, the measures introduced today are a substantial increase to the initial measures introduced and will encompass more Australians in the eligibility for accessing support. Note that some of these measures will still need to pass through the legislative system, however given the circumstances it is hard to think that they will not be supported by the opposition.

Our updates to you will continue as more information becomes available.

If you would like to discuss any of these measures and what they mean for you and your business, our team is available to assist you. Please don't hesitate to talk with us on (02) 4229 2211 or you can send your enquiry online.

*The above information was correct at the time of printing and subject to change*
Written by Sarah Pogson . March 23, 2020
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