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Breakdown of the COVID-19 Government Stimulus Package 2020

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Published 25th March 2020
Everything you need to know in our Government stimulus package summary.

High-Level Summary

    • Total stimulus package now equates to $189b
    • $17.6b initial stimulus package to assist employers and welfare recipients
    • $90b from the RBA to assist banks with being able to borrow more money to lend to struggling businesses
    • $15b from the Federal government to deliver easier access to finance
    • $66b second stimulus package to assist employers, those who have had their jobs affected, businesses and sole traders

Cash for Employers

  • Small and medium-sized businesses and not-for-profit employers who have an annual aggregated turnover of less than $50million, will be able to access tax-free payments of up to $100,000 per employer. 
  • Eligibility businesses are those who have a turnover of less than $50million. Eligibility will be based on prior year turnover
    • The first payment will be capped at $50,000, paid after 28 April 2020
    • The second payment will also be capped at $50,000, paid after 28 July 2020
  • The magnitude of the payment will be equal to 100% of their PAYG withheld on salary and wages, up from only 50% that was mentioned initially. 
  • The maximum cap on these payments have been increased from $25,000 to $50,000 for a total maximum payment of $100,000
    • The minimum payment has been increased from $2,000 to $10,000
    • These payments will be paid via a businesses Business Activity Statement (BAS)
  •  Eligible businesses who pay salary and wages but are not required to withhold PAYG will receive a maximum payment of $20,000 (increased from $2,000 in the first package announced) 
  • This is a payment that is not repayable but to assist businesses to keep their workers employed

 

An example of how the payments work 

Sarah owns and runs a building business in South Australia and employs eight 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.

Under the government’s changes, Sarah will be eligible to receive the payment on lodgement 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.
  • Under the previously announced “boosting cash flow for employers” measure, Sarah’s business would have received a maximum payment of $25,000.
  • Under the new enhanced “boosting cash flow for employers” measure, Sarah’s business will receive $100,000. This is an additional $75,000 to support her business and help her retain her staff

Example source: https://www.afr.com/politics/federal/pm-unleashes-another-66b-more-to-come-20200321-p54cjc

Covid-19 Small/Medium Enterprise Guarantee Scheme

  • To assist small and medium businesses, the Government will underwrite $20billion worth of loans as they guarantee up to 50% of loans to small and medium enterprises, up to $40billion
  • This will begin in early April and will apply to eligible businesses with annual turnovers of up to $50million
  • It will also include an upfront 6-month freeze on repayments, meaning repayments on the loans applied for, will only be required to start being repaid after 6 months
  • The loans will not be secured, but used only for working capital purposes 
  • New and existing bank customers will be eligible to apply for a loan for up to $250,000 over a 3-year term

Temporary relief for financially distressed businesses

  • The threshold at which a creditor can take action to initiate insolvency or bankruptcy has temporarily increased from $2,000 to $20,000
  • Companies and individuals will also have up to six months to respond instead of 21 days
  • Relief for directors for personal liability when the company is trading while insolvent
  • The Corporations Act 2001 will be amended to assist with relief for companies to deal with unforeseen events that arise as a result of the coronavirus.

Household Payments

  • An additional $750 will be paid to social security, veteran and eligible concession card holders recipients
  • This excludes those who are receiving an income support payment that is eligible to receive the coronavirus supplement
  • The second payment will be made from 13 July 2020

Coronavirus supplement

  • An additional payment of $550 per fortnight, deemed the time-limited Coronavirus supplement, will be paid to both existing and new recipients of the JobSeeker Payment, Youth Allowance jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.
  • This will be paid for the next 6 months on top of their payment each fortnight
  • Businesses and Individuals who find themselves earning less than $1,075 a fortnight will also be eligible for this supplement
  • If an individual is already receiving a welfare payment, this additional payment will automatically get paid to them
  • If you don’t currently receive welfare payments, you may be eligible if you:
    • Are unemployed
    • A sole-trader, self-employed, a casual or contract worker whose income has reduced
    • Caring for someone who’s affected by Coronavirus

Early Release of superannuation

  • In response to the financial distress experienced by Covid-19, individuals who are eligible will be able to access up to $20,000 from their superannuation, over the next two financial years
  • To be eligible for this scheme:
    • You must be unemployed; or
    • You must be 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.
  • Eligible individuals will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
  • $10,000 can be accessed this financial year, and the other $10,000 can be accessed next financial year
  • If eligible for the withdrawal, individuals can apply online through myGov before 1 July 2020 for the first withdrawal
  • From 1 July 2020, the second withdrawal will be accessible for another 3 months

The state governments have also created payroll tax relief supplements. You can read an update here.