The Australian Government’s economic response to coronavirus
The Coronavirus outbreak not only affects people’s health and the health systems, it is also having significant economic implications.
The Australian economy is already feeling the effects of the global Coronavirus outbreak. Tourist and student arrivals have been significantly lower than they were in late 2019, and demand for some premium agricultural products has fallen. The reduction in tourism demand comes on top of the effects on tourism from the summer’s bushfires, which caused some travellers to cancel or delay their trips to Australia. The effect on the education sector is significant, with over 100,000 Chinese international students not in Australia when the travel ban was actioned.
On 12 March 2020, the Australian Government announced its economic response to the Coronavirus in the form of a $17.6 billion economic stimulus package. The package is intended to support confidence, employment and business continuity. It is designed to support business investment, help small businesses manage short-term cash flow challenges, provide targeted support to individuals and assistance to the most severely affected communities and regions.
1. Delivering support for business investment
The Government is backing businesses to invest to help the economy withstand and recover from the economic impact of the Coronavirus. The two business investment measures in this package are designed to assist Australian businesses and economic growth in the short term, and encourage a stronger economic recovery following the Coronavirus outbreak.
- Increasing the instant asset write-off
From today, the Government is increasing the instant asset write-off threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020. In 2017-18 there were more than 360,000 businesses that benefited from the current instant asset write-off, claiming deductions to the value of over $4 billion.
- Backing business investment
The Government is introducing a time limited 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.
2. Cash flow assistance for businesses
This assistance will support businesses to manage cash flow challenges resulting from the economic impacts of the Coronavirus and help businesses retain their employees. These two measures are designed to support employing small and medium enterprises and to improve business confidence.
- Boosting cash flow for employers
The Boosting Cash Flow for Employers measure will provide up to $25,000 back to small and medium-sized businesses, with a minimum payment of $2,000 for eligible businesses. The payment will provide cash flow support to businesses with a turnover of less than $50 million that employ staff. The payment will be tax free.
- Supporting apprentices and trainees
The Government is supporting small business to retain their apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.
3. Stimulus payments to households to support growth
This measure will assist around 6.5 million lower income Australians, which will support confidence and domestic demand in the economy.
- Stimulus payments
The Government will provide a one-off $750 payment to social security, veteran and other income support recipients and eligible concession card holders. Around half of those that will benefit are pensioners.
There will be one payment per eligible recipient. For example, if a person qualifies for the one-off payment in multiple ways, they will only receive one payment.
The payment will be tax free and will not count as income for Social Security, Farm Household Allowance and Veteran payments.
4. Assistance for severely affected regions
This measure provides $1 billion to support regions most significantly affected by the Coronavirus outbreak.
- Support for Coronavirus-affected regions and communities
The Government has set aside $1 billion to support those regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on industries such as tourism, agriculture and education.
This will include the waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and the waiver of entry fees for Commonwealth National Parks. It will also include additional assistance to help businesses identify alternative export markets or supply chains. Targeted measures will also be developed to further promote domestic tourism.
The Australian Tax Office (ATO) is also providing administrative relief for some tax obligations for people affected by the Coronavirus outbreak, on a case-by-case basis. The ATO will set up a temporary shop front in Cairns within the next few weeks with dedicated staff specialising in assisting small business. In addition, it will consider ways to enhance its presence in other significantly affected regions, making it easier for people to apply for relief. The ATO is considering further temporary shop fronts and face-to-face options.
The Government will move quickly to implement this package. To that end, a package of Bills will be introduced into Parliament in the final Autumn sitting week in March 2020 for Parliament’s urgent consideration and passage.
Following passage of the Bills through Parliament, the Government will then move to immediately make, and register, any supporting instruments.
In addition, the Morrison government has signalled a second round of stimulus is coming for sectors bearing the brunt of the economic shock triggered by the coronavirus pandemic including airlines, tourism, events, sport and the arts. All the latest updates on stimulus package will be available on our social media and newsletter.
For more information or for our assistance in accessing any of these measures, please contact us now.