An Update: COVID-19 Australian government’s economic response – What’s for charities and not-for-profits?
March 2020 | Insights | Alex Milner
Further update: on 5 April 2020, the Treasurer announced further changes to the Government's JobKeeper package, including significant changes for charities registered with the ACNC. We are expecting the legislation for this updated package to be released this Wednesday and we will provide an update once the legislative package is available for review.
Many charities and not-for-profits will benefit from some aspects of the Australian Government’s a revised package totalling approximately $189 billion as part of its economic response to the COVID-19 situation in Australia.
The revised package incorporates and expands upon the government’s initial approximately $20 billion packages (discussed here).
The revised package targets three areas:
- Support for individuals and households;
- Support for businesses (including not-for-profits); and
- Supporting the flow of credit.
Many charities and not-for-profits may benefit from some aspects of the Government’s broader package, as outlined below. At this time, the legislation for this package has passed Parliament and is awaiting sent, but many important details will not be known with certainty until the Government publishes implementing regulations and guidelines.
Some States and municipal Councils have also announced separate measures in addition to the measures announced by the Federal Government. We intend to cover those packages separately.
Support for individuals and households
These measures may be relevant for many charities and not-for-profits who employ or are involved in caring for vulnerable people who may be entitled to receive these payments. The measures are as follows:
- Temporary Income support for individuals – a new six month expanding eligibility to income support payments and a Coronavirus supplement of $550 per fortnight, payable to recipients of Jobseeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit. “Jobseeker” was previously known as “Newstart”.Two Payments to support households – $750 payments to social security, veteran and other income support recipients and eligible concession card holders. This amount will be paid twice for all eligible recipients, except those who are also entitled to a Coronavirus supplement (who will only receive one payment).
- Temporary early release of superannuation – entitlement for eligible individuals to apply for access of up to $10,000 from their superannuation (once in this tax year and again in the next tax year). The actual amount accessible will be subject to approval (and is not guaranteed).
- Temporarily reducing superannuation minimum drawdown rates - for account-based pensions and similar products by 50 per cent for the next two tax years.
- Reducing social security deeming rates by 0.75% which will have the effect of increasing the aged pension.
Support for businesses (including not-for-profits)
Cash flow assistance for employers/supporting apprentices and trainees
The Government intends to provide:
- up to $100,000 (minimum $20,000) to eligible small and medium-sized businesses and not-for-profits with turnover of less than $50 million and who employ staff.
- a wage subsidy of 50% of an apprentice or trainee’s wages for up to 9 months from 1 January 2020 to 30 September 2020 for small businesses that employ an apprentice or trainee.
Increasing the instant asset write-off and accelerated depreciation
The Government is increasing the availability of tax deductions for asset write-offs and investments for businesses with an aggregated annual turnover of less than $500 million. This may be relevant to those charities and not-for-profits who do not have income tax exemption, noting that most registered charities have such an exemption already.
The proposal is that for businesses with an annual turnover of less than $500 million:
- until 30 June 2020, the instant asset write-off threshold will be increased from $30,000 to $150,000.
- until 30 June 2021, allowing for accelerated depreciation deductions (up to 50% of the cost of an eligible asset on installation).
Support for Coronavirus-affected regions and communities
The Government will set aside $1 billion to support regions most significantly affected by COVID-19. This may include the waiver of fees and charges for tourism businesses, assistance in identifying alternative export markets or supply chains, other measures to promote domestic tourism, and administrative relief from the Australian Tax Office (ATO) for those affected by the outbreak on a case-by-case basis. Charities and not-for-profits who operate such businesses (perhaps as social enterprises) may benefit from this. At this time there are not yet any severely affected regions identified.
Temporary relief for financially distressed businesses
The Government has announced a number of measures to assist distressed businesses including temporarily increasing the threshold for statutory demands and increasing response periods, temporary relief for directors from trading whilst insolvent and increased flexibility under the Corporations Act 2001 to address unforeseen events that may arise due to the Coronavirus outbreak. The ATO may also provide temporary reduction or deferral of payments and temporarily withhold enforcement actions on a case-by-case basis.
Supporting the flow of credit
The Government has announced the following measures:
- The “Coronavirus SME Guarantee Scheme” - a 50% government guarantee for unsecured lending to ‘SME entities’ up to $40 billion (in aggregate); these loans will be up to $250,000 for up to 3 years (with an initial six month repayment holiday) and be available to SMEs (including sole traders) with turnover < $50 million; relevantly, the definition of ‘SME entity’ will be contained in regulations which are yet to be published - and so it is uncertain whether it will be available to charities or not-for-profits.
- A temporary exemption for lenders to existing small business customers from the ‘responsible lending obligations’.
The final details of the package will not be known until such time as the Government publishes any necessary subordinate instruments or guidelines. The Government is also expected to announce further support measures, although the details and extent of these measures remain unknown.
For further details about how these measures may be of benefit to you please contact Alex Milner (Partner).
Other COVID-19 updates
As the situation develops and new measures are announced, we will continue to publish other updates regarding the legal implications of the COVID-19 situation in Australia for charities and not for profits.