The second stimulus package released by the Government aims to cushion the economic impact of the Coronavirus by boosting income support payments, amending superannuation rules, providing cash support of up to $100,000 for small businesses and relaxing corporate insolvency laws.

Despite these measures, the government has warned that there are no quick solutions and that business should prepare for 6 months of disruption. They have also indicated that further stimulus will be required.

Here’s what it means for you.

For Business

Tax free payments of up to $100,000 for small business and not for profit employers

Businesses with an annual turnover of less than $50 million that employ workers will receive between $20,000 and $100,000 to enable them to keep operating, pay their rent, electricity and other bills, and retain staff.

These payments will be released in two stages, with the first payment (of a minimum of $10,000 and a maximum of $50,000) available from 28 April 2020 and the second payment (of the same amount) available from July 2020.

Solvency Safety Net

A safety net has been put in place to protect businesses in temporary financial distress, lessening the threat of actions that can be taken against them that could lead to insolvency. This includes:

• A temporary 6 month increase in the threshold at which creditors can issue a statutory demand on a company from $2000 to $20,000
• The time a company has to respond to statutory demands has increased from 21 days to 6 months
• For 6 months, directors will be provided with temporary relief from personal liability for trading while insolvent

Sole traders and self-employed eligible for Jobseeker payment

The eligibility criteria to access income support payments will be relaxed to provide support for the self-employed and sole traders whose income has been reduced. There are also waivers on asset tests in these circumstances and waivers on some waiting periods.

Access to working capital

The government’s Coronavirus SME guarantee scheme will protect eligible financial institutions by guaranteeing 50% of new loans to SME’s, up to $20 billion. This measure has been introduced to ensure small business can still access capital where required.

Temporary relief from some Corporations Act requirements

The Treasurer has been given temporary power to amend the Corporations Act  to provide relief or modifications to specific compliance obligations.

For Individuals

Early release of superannuation

From mid-April, individuals in financial distress will be able to access up to $10,000 of their superannuation in 2019-2020 and an additional $10,000 in the 2020-2021 financial year.  These withdrawals will be tax free and will not affect Centrelink or Veterans’ Affairs payments.

To be eligible to access super, individuals will need to be:

• Unemployed; or
• 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
• Made redundant on or after 1 January 2020; or had your working hours reduced by 20% or more; or – for sole traders – your business was suspended or there was a reduction in your turnover of 20% or more.

Those eligible will need to apply directly to the ATO.

Temporary reduction in minimum superannuation drawdown rates and a reduction in deeming rates

Superannuation minimum drawdown requirements for account based pensions and similar products have been reduced by 50% in 2019-2020 and 2020-2021.

Additionally, from 1 May 2020 superannuation deeming rates will be reduced further to a lower rate of 0.25% and upper rate of 2.25%

Fortnightly $550 Coronavirus supplement to existing income support recipients

For 6 months, an additional $550 per fortnight will be paid to both existing and new recipients in the eligible payment categories. The payment will be made to those receiving:

• Jobseeker payment (including those transitioning to the jobseeker payment)
• Youth allowance jobseeker
• Parenting payment
• Farm household allowance
• Special benefits recipients

In addition, eligibility for income support payments will be expanded to include:

• Permanent employees who have been stood down or have lost their job
• Casual workers
• Sole traders
• The self employed
• Contract workers who meet the income test

Asset testing for these payments has also been reduced and will be waived for 6 months, while income testing will still apply. The payment is not available to workers who have access to any employer entitlements such as annual or sick leave, or income protection insurance.

Second $750 payment to households

A second payment of $750 will be made to social security, veteran and other income support recipients and eligible concession card holders residing in Australia. The first payment will be made from 31 March 2020 and the second payment will be made from 13 July 2020.

Bankruptcy safety net

There is a temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor. The minimum amount has increased from $5000 to $20,000. In addition, the time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to 6 months.

We know that these are uncertain and scary times.  We are committed to helping each of our clients in any way we can, and will continue to work from home for as long as we can if we are required to close our office. If you have any questions or concerns regarding any of the information above, please don’t hesitate to get in touch with your TJL Client Manager or call our office on (02) 6554 9511.