Coronavirus Stimulus Package

The Third

What does it mean for you?

On 30 March 2020, the Federal Government released its Third Stimulus package. Also, the Victorian Government has grants available for small businesses. On top of these announcements, the Australian Government and the Australian Taxation Office have released some guidelines relating to dealings with commercial tenancies and your Self-Managed Superannuation Fund.

SMALL BUSINESS

JobKeeper Payment

Businesses will be able to claim a fortnightly payment from the Government for $1,500 per eligible employee from 30 March 2020 for a period of 6 months. The first payment is expected to be paid by the first week of May.

Are you an eligible employer to receive this?

  • Your business has a turnover of less than $1b and your turnover has reduced by more than 30% relative to a comparable period a year ago (of at least a month); and
  • You must have been in an employment arrangement with eligible employees as at 1 March 2020 and can confirm that each eligible employee is still employed.

Self Employed individuals with no employees and Not for Profit entities that meet the $1b test can apply for the JobKeeper Payment.

Who is an eligible employee?

  • Currently employed by an eligible employee
  • Were employed by the employer at 1 March 2020
  • Are full-time, part-time or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1st March 2020)
  • Are at least 16 years old
  • Are an Australian citizen or allowed to work under a working visa
  • Are not in receipt of a JobKeeper Payment from another employer.

What are the obligations of the employer?

  • Register an interest to apply for the JobKeeper Payment on the Australian Taxation Office website .
  • Provide all the relevant information to the Australian Taxation Office of all eligible employees. If you use Single Touch Payroll, most of the data will be prepopulated.
  • Eligible employers must ensure that all eligible employees receive, at a minimum, $1,500 per fortnight, before tax. For example, if an employee is receiving $3,000 per fortnight, the $1,500 can be retained by the employer to assist paying this employees wage. If the employee is paid $1,000 per fortnight, the employer must pay them $1,000 plus an additional $500 before tax, even if they are part time. Note that it will be the option of the employer if you want to pay 9.5% superannuation on any additional wage paid due to the JobKeeper Payment.
  • Employers must notify employees that they are receiving the JobKeeper Payment.
  • Provide information to the Australian Taxation Office on a monthly basis, including the number of eligible employees currently employed.

Examples:

Employer with employees on different wages.

Adam owns a real estate business with two employees. The business is still operating at this stage but Adam expects that turnover will decline by more than 30 per cent in in the coming months. The employees are:

  • Anne, who is a permanent full-time employee on a salary of $3,000 per fortnight before tax and who continues working for the business; and
  • Nick, who is a permanent part-time employee on a salary of $1,000 per fortnight before tax and who continues working for the business.

Adam is eligible to receive the JobKeeper Payment for each employee, which would have the following benefits for the business and its employees:

  • The business continues to pay Anne her full-time salary of $3,000 per fortnight before tax, and the business will receive $1,500 per fortnight from the JobKeeper Payment to subsidise the cost of Anne's salary and will continue paying the superannuation guarantee on Anne's income;
  • The business continues to pay Nick his $1,000 per fortnight before tax salary and an additional $500 per fortnight before tax, totalling $1,500 per fortnight before tax. The business receives $1,500 per fortnight before tax from the JobKeeper Payment which will subsidise the cost of Nick's salary. The business must continue to pay the superannuation guarantee on the $1,000 per fortnight of wages that Nick is earning. The business has the option of choosing to pay superannuation on the additional $500 (before tax) paid to Nick under the JobKeeper Payment.

Adam can register his initial interest in the scheme from 30 March 2020, followed subsequently by an application to ATO with details about his eligible employees. In addition, Adam is required to advise his employees that he has nominated them as eligible employees to receive the payment. Adam will provide information to the ATO on a monthly basis and receive the payment monthly in arrears.

Employer with employees who have been stood down without pay.

Zahra runs a beauty salon in Melbourne. Ordinarily, she employs three permanent part-time beauticians, but the government directive that beauty salons can no longer operate has required her to shut the business. As such she has been forced to stand down her three beauticians without pay.

Zahra's turnover will decline by more than 30 per cent, so she is eligible to apply for the JobKeeper Payment for each employee, and pass on $1,500 per fortnight before tax to each of her three beauticians for up to six months. Zahra will maintain the connection to her employees and be in a position to quickly resume her operations.

Zahra is required to advise her employees that she has nominated them as eligible employees to receive the payment. It is up to Zahra whether she wants to pay superannuation on the additional income paid because of the JobKeeper Payment.

If Zahra's employees have already started receiving income support payments like the JobSeeker Payment when they receive the JobKeeper Payment, they will need to advise Services Australia of their new income.

VICTORIAN STATE GOVERNMENT TAX RELIEF

On 28 March 2020, the Victorian Premier announced a new Government grant of $10,000 that will be available to small Victorian business operators that employ staff.

To be eligible to apply for the grant, the business will need to:

  1. employ staff;
  2. hold an ABN as at 16 March 2020 and have turnover of greater than $75,000 for the 2020 financial year;
  3. have annual wages of less than $650,000 in the 2020 financial year; and
  4. have been directly impacted by Government closure measures.

To obtain a grant, eligible businesses need to apply online via the Business Victoria website by 1 June 2020.

BANKING MEASURES

Bank Loan Repayment Deferral

The Australian Banking Association (ABA) announced that banks will extend the 6-month loan repayment deferral package to 30,000 more businesses. Businesses with total business loan facilities of up to $10m (up from the $3m small business threshold) will now be able to defer principal and interest repayments for loans attached to their business for 6 months.

The ABA said banks have also agreed to not enforce business loans during this 6-month period for non-financial breaches of the loan contract (such as changes in valuations). The new measures will apply in all sectors of the economy, and on an opt-in basis, under the conditions that:

  • for commercial property landlords, they provide an undertaking to the bank that for the period of the interest capitalisation, they will not terminate leases or evict current tenants for rent arrears as a result of COVID19;
  • the customer has advised that its business is affected by COVID-19;
  • the customer was current in terms of existing facilities 90 days prior to applying;
  • interest is capitalised - meaning either the term of the loan is extended or payments are increased after the deferral period.

Please ensure that you communicate with your bank to ensure that you are getting these benefits.

COMMERCIAL PROPERTY MATTERS

Tenants – 6-month moratorium on Evictions

A common set of principles have been provided to aid commercial property tenancies as follows:

  • a temporary 6-month moratorium on eviction for non-payment of rent to be applied across commercial tenancies impacted by severe rental distress due to coronavirus;
  • tenants and landlords are encouraged to agree on rent relief or temporary amendments to the lease;
  • the reduction or waiver of rental payment for a defined period for impacted tenants;
  • the ability for tenants to terminate leases and/or seek mediation or conciliation on the grounds of financial distress;
  • commercial property owners should ensure that any benefits received in respect of their properties should also benefit their tenants in proportion to the economic impact caused by coronavirus;
  • landlords and tenants not significantly affected by coronavirus are expected to honour their lease and rental agreements; and
  • cost-sharing or deferral of losses between landlords and tenants, with Commonwealth, state and territory governments, local government and financial institutions to consider mechanisms to provide assistance.

NOTE – This also applies to Self-Managed Superannuation Fund arrangements who lease property to a related party. The Australian Taxation Office has confirmed that it will not take compliance action for the 2019-20 and 2020-21 financial years where an SMSF landlord gives a tenant (who is also a related party) a temporary rent reduction during this period. Without this Australian Taxation Office concession, an SMSF with real property investment would typically contravene the SIS Act (and trigger the non-arm's length income provisions) if the trustee charges a related party a price that is less than market value. Therefore, ensure that 9 months' rent is paid at market value for the period 1st July 2019 – 31st March 2020 and if you are affected by Coronavirus, ensure that any variation from the lease agreement is documented.

More support to come

This latest support package is unlikely to be the last as the Government responds to a rapidly evolving health crisis and progressive shutdown of all but essential economic activity.

If you have any questions about your investment strategy or entitlements to government payments, please don't hesitate to call our office.