On 12 March 2020, the Australian Government announced an A$17.6 billion package to combat the economic challenges posed by COVID-19.
The package has four parts:
This has two components – an increase in existing tax breaks for asset purchases to support increased investment and cash subsidies to support employment.
An immediate tax deduction is available for the purchase of any depreciating asset with a cost up to A$150,000. This applies on a per asset basis for purchases up to 30 June 2020 and covers new and secondhand assets.
Only businesses with a group aggregated annual turnover of less than A$500 million can access the immediate tax deduction.
For companies conducting R&D in Australia, the cost of assets used for Australian R&D activities can be included in their R&D Tax Incentive claim.
The threshold reverts to AU1,000 from 1 July 2020.
The Federal Government has introduced a 15-month incentive (until 30 June 2021) by way of accelerated depreciation deductions for the purchase of new depreciating assets.
There is a 50% immediate deduction for the cost of those new assets, with the remaining 50% balance being depreciated over time under existing tax depreciation rules.
Only businesses with a group aggregated annual turnover of less than A$500 million can access the accelerated depreciation deductions.
These measures are also available to companies conducting R&D in Australia.
Two subsidy measures for employers have been introduced to alleviate cash flow pressure and support employment. The first is an automatic reduction of an employer’s obligation on salary and wages tax on monthly wages. The second is a subsidy for the employment of trainees or apprentices. These subsidies are tax free in the hands of the employer.
This measure is designed to subsidise the ongoing tax on salary and wages for the period March 2020 to 30 June 2020. It applies to businesses with an aggregated annual turnover of less than A$50 million. The minimum subsidy is A$2,000 and the maximum is A$25,000 per employer.
In practice, this is effected by reducing the tax levied on the monthly wages. All employers are required to file regular statements that disclose the gross wages, and then pay the applicable tax (known as Pay As You Go withholding tax – “PAYG”). The ATO will administer these subsidies by way of a credit (reduced PAYG amount payable) on these statements.
While the administration of this subsidy will vary for companies reporting PAYG on a monthly or quarterly basis, the subsidy amounts and period covered are the same.
Eligible employers (fewer than 20 full-time employees) can apply for a wage subsidy of 50% of wages for trainees or apprentices over a period of 9 months from 1 January to 30 September 2020. This subsidy is also available for new employers of trainees or apprentices. The apprentice or trainee must have been in training with a small business as at 1 March 2020.
Employers will be reimbursed up to a maximum of A$21,000 (A$7,000 per quarter) per trainee or apprentice.
This involves a once-off A$750 payment to low income Australians, including pensioners, other social security recipients, and veterans on income support.
In addition, there is a specific A2.4 billion health package aimed at primary care, aged care, and even research. Specifically, A$30 million has been allocated from the Medical Research Future Fund for research into vaccines, anti-viral medicine and respiratory diseases.
Since writing this the Federal Government, with no specific details as yet, has noted it will release another round of economic measures. We will keep you up to date on these measures when they are released.
Acclime is uniquely positioned to assist all its clients, including inbound companies, with their activities in Australia. These are significant measures that are intended to overcome the likely negative economic impacts on the Australian economy and in that way support most Australian businesses, including companies coming into the Australian market.
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