The Government announced several stimulus measures in response to the economic impact of the Coronavirus that effect super, tax and social security. The key changes include a new time-limited condition of release of super, tax concessions for small businesses and additional payments for certain social security recipients.
The Prime Minister, Scott Morrison has announced the Federal Budget will be delayed until 6 October 2020, stating it is not sensible to forecast the economy – and thus the economic impacts of any proposed changes – at this time.
We will continue to monitor the stimulus package and provide relevant updates as more information becomes available.
Eligible people financially impacted by the Coronavirus situation may access up to $10,000 of their super before 1 July 2020. A further $10,000 can be accessed from 1 July 2020 for approximately three months (the exact timing will depend on the passing of the legislation).
To be eligible to access lump sums from super, a person must be:
These payments are tax-free and not treated as income under the Centrelink income test.
Steps to follow to apply for the lump sum payment from super:
Self-managed super funds (SMSFs) will use a different process which will be released shortly.
This measure will provide some cash flow to those affected sole traders and employees who are on reduced hours or who are stood down because of the COVID-19 crisis.
Effective: 2019/20 and 2020/21 financial years
As outlined in the table below, the minimum age pension payments required from account-based pensions and similar products will be reduced by 50% for 2019/20 and 2020/21:
Default minimum drawdown rates (%)
Reduced rates by 50% in 2019/20 and 2020/21 income years (%)
|95 and older||14||7|
Pensioners who invest in growth investments may crystallise smaller capital losses as they may dispose of a smaller proportion of their investments to meet minimum pension payments. This may allow any remaining growth investments to potentially grow in value when the markets recover.
Effective date: 12 March 2020
Up to two, separate, tax-free $750 lump sum payments may be paid to people who receive one of the following payments or who hold any of the following concession cards, as shown in Table 2 below. A person who holds more than one of these will only receive a maximum of two lump sums. A person can only receive one $750 payment in each round of payments even if they qualify for each round of payment in multiple ways. For example, someone receiving a Carer Payment and Carer Allowance may receive a first payment of $750 and a second payment of $750, but they won’t receive four lots of $750.
Those who are eligible for the Coronavirus Supplement will only receive the first lump sum payment and will not be eligible for the second lump sum payment.
To be eligible for these payments the person must be residing in Australia.
The first payment will be paid from 31 March 2020.
Those who lodged a claim for an eligible payment or concession card at any time between 12 March 2020 to 13 April 2020, which is subsequently approved, will also receive the first payment.
The second payment will be made from 13 July 2020.
Table 1: Eligible payments and concession cards
|Individuals receiving the following income support payments are eligible for up to two $750 lump sums||Individuals receiving the following income support payments may receive the first lump sum of $750 but will receive the $550 per fortnight 'Coronavirus Supplement' instead of the second $750 lump sum|
The payments will not be treated as income for Social Security, Department of Veterans’ Affairs (DVA) and Farm Household Allowance purposes.
This means a single person may receive up to $1,500 and couples may receive up to $3,000 from the first and second payments.
Effective: from 27 April 2020
The Government will expand access to income support payments which will provide access to the Coronavirus Supplement. The Coronavirus Supplement is a $550 fortnightly payment for a time-limited period of six months which will be paid to eligible beneficiaries, see column two of Table 1 above. Eligible beneficiaries will receive the full rate (equal to $550 per fortnight).
To provide more access to income support payments other arrangements during the time-limited six-month period include:
Those who are receiving employer entitlements, such as sick leave or annual leave, and those receiving income protection insurance, may not receive Jobseeker Payment and Youth Allowance Jobseeker.
New applicants are encouraged to lodge claims for eligible payments online through their myGov account for faster processing. Applications can also be done by phone.
Effective: 1 May 2020
The upper deeming rate for income in excess of the income threshold will reduce from 3% to 2.25%, and the lower deeming rate from 1% to 0.25%.
|Deeming rate (1 May 2020)||Single||Pensioner couple (combined)|
|0.25%||First $51,800 ($129.50)||First $86,200 ($215.50)|
|2.25%||On amounts exceeding $51,800||On amounts exceeding $86,200|
As the coronavirus situation is expected to last for most of the remainder of this year, many pensioners and income support recipients will experience a significant reduction in the value of their investments which are assessed under Social Security, DVA and Aged Care assets tests. This decline in value, combined with the reduction of deeming rates from 1 May 2020, is expected to make more people eligible for the Age Pension or other types of income support. Many people who are currently receiving part pensions and less than the full rate of income support may receive increased entitlements.
Effective date: announcement (23 March 2020) until 30 June 2020
The instant asset write-off threshold is set to increase from $30,000 to $150,000 until 30 June 2020.
From 1 July 2020, this threshold reduces to $1,000 (for businesses with less than $10 million turnover)
The measure applies to new or second assets first used, or installed ready for use, between 12 March 2020 until 30 June 2020 (inclusive). Certain assets are excluded, for example, horticultural plants and capital works deductions.
The threshold applies on a per asset basis, so eligible businesses can immediately write-off multiple assets.
Expanding the threshold will mean an additional 5,300 businesses who employ around 1.9 million Australians will be able to access this concession for the first time
Clients should confirm the entitlement to the tax deduction with their accountant.
The ATO will provide relief for certain tax obligations for taxpayers impacted by the coronavirus outbreak on a case-by-case basis. Similar relief was provided to bushfire victims.
Effective date: from March 2020
The Government has announced a maximum payment of $100,000 and a minimum payment of $20,000 to eligible small and medium businesses, not-for-profits and charities, to help with cash flow to keep operating, pay their bills and retain employees.
Eligibility criteria to receive small and medium business payments to help with cashflow.
To be eligible the business must:
The payments will be delivered in two tranches:
Delivery of payments
The ATO will deliver payments as automatic credits to the entity upon lodgement of their business activity statement. If this places the entity in a refund position, the ATO will deliver the refund within 14 days. No new forms are required.
Payments are tax-free to the employer.
Eligible small and medium businesses, not-for-profits and charities, which employ staff and withhold tax from their wages can plan to receive cash refunds of 100% of the tax withheld up to $50,000 (or a minimum of $10,000) until July 2020 and up to $50,000 (or a minimum of $10,000) from July to October 2020. Eligible employers should ensure they lodge their business activity statements (BAS) on time as payments are delivered as a cash refund within 14 days of the lodgement date.
Effective: 1 January 2020 to 30 September 2020
Eligible employers can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wage paid during the nine 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. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).
Support will also be provided to the National Apprentice Employment Network, the peak national body representing Group Training Organisations, to co-ordinate the re-employment of displaced apprentices and trainees throughout their network of host employers across Australia.
Eligibility criteria for wage subsidy:
Effective: not disclosed
The following relief measures will be implemented for eligible businesses for six months.
For owners or directors of a business who are currently struggling due to the Coronavirus, the ATO will tailor solutions for their circumstances, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.
If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.
The information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.