Government Stimulus Stage 2 - Business Cash Flow Assistance

The Federal Government released Stage 2 of its Stimulus Package this week and the measures have now been passed into law.

In particular, some of the concessions announced as part of Stage 1 of the Stimulus Package have now been expanded and increased, to provide cash flow assistance for eligible businesses (to manage cash flow challenges and to help businesses retain employees), in the form of:

• Specific payments that are based on the amount of PAYG withheld from salary and wages paid to employees (and other similar payments such as termination payments, director's fees and payments to contractors that are subject to voluntary withholding arrangements); and

• Wage subsidies paid to eligible employers who retain an apprentice or trainee.

Boosting cash flow for employers

Small and medium-sized businesses and not-for-profit entities, with an aggregated annual turnover of less than $50 million (usually based on their prior year's turnover, including turnover of entities which are 'connected' or 'affiliates') that employ people, may be eligible to receive a total payment of up to $100,000 (with a minimum total payment of $20,000), based on their PAYG withholding obligations, in the following two stages:

Stage 1 payment (credit)

Commencing from the lodgment of activity statements from 28 April 2020, eligible employers that withhold PAYG tax on their employees' salary and wages will receive a tax-free payment equal to 100% of the amount withheld, up to a maximum of $50,000.

Eligible employers that pay salary and wages will receive a minimum (tax-free) payment of $10,000, even if they are not required to withhold PAYG tax.

The tax-free payment will broadly be calculated and paid by the ATO as an automatic credit to an employer, upon the lodgment of activity statements from 28 April 2020, with any resulting refund being paid to the employer. This means that:

• Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020; and

• Monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgments.  It is important to note that the payment for the March 2020 activity statement will be calculated as being three times the actual amount withheld (in other words, calculated as 300% of the March amount).

Stage 2 additional payment (credit)

For employers that continue to be active, an additional (tax-free) payment will be available in respect of the June to October 2020 period, basically as follows:

• Quarterly lodgers will be eligible to receive the additional payment for the quarters ending June 2020 and September 2020, with each payment being equal to 50% of their total initial (or Stage 1) payment (up to a maximum of $50,000).

• Monthly lodgers will be eligible to receive the additional payment for the June 2020, July 2020, August 2020 and September 2020 activity statement lodgements, with each additional payment being equal to a quarter of their total initial (or Stage 1) payment (up to a maximum of $50,000).

The ATO will automatically calculate and pay the additional (tax-free) payment as a credit to an employer upon the lodgment of their activity statements from July 2020, with any resulting refund being paid to the employer.

There is a critical condition to be eligible for this cash flow assistance concession; the employers must be established before 12 March 2020 (ie. the date Stimulus Package Stage 1 was announced).  In other words, the above payments will only be available to active eligible employers (who held an ABN) as at 12 March 2020.

It is also important to note that eligibility for the above payments is subject to a specific integrity rule which is designed to stop artificial or contrived arrangements that are implemented to obtain access to this measure.

Wages Subsidies for apprentices and trainees

Employers with less than 20 full-time employees, who retain an apprentice or trainee who was in training with the employer as at 1 March 2020, may be entitled to Government funded wage subsidies equal to 50% of the apprentice's or trainee's wage paid during the nine months from 1 January 2020 to 30 September 2020.

Employers can register for the subsidy from early April 2020.  Final claims for payment must be lodged by 31 December 2020.  Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network ('AASN') provider.