Government stimulus package Mark II – Big, bold… and concisely summarised
Economists call it “helicopter money” – governments sending money directly to businesses and people to stave off a recession or minimise one. And yesterday’s announcement is a Black Hawk next to Mark I’s gyrocopter.
The government yesterday announced a second round of stimulus measures totaling $66.1 billion, following on from last week’s $105 billion RBA/government finance assistance measures, in addition to 12 March’s $17.6 billion package. This totals to $189 billion worth of measures – 9.7% of GDP – which include the helicopter money and a suite of other measures to cushion the worsening economic fallout from the coronavirus. The standout word in the Prime Minister’s media release was this: hope.
The newly announced measures include:
- Boosting cash flow for employers:
- Increase in the Mark I maximum direct payment/credit for business employers (group-wide turnover <$50 million) from $50,000 to $100,000.
- Must now have been an employer before 12 March 2020.
- It’s not clear if it’s $100,000 per group, or $100,000 per employer entity within a group. It appears to be the latter, but we will see when the Bill is released.
- Extend the above to not-for-profits and charities who are employers.
- Increase the minimum above payment/credit from $2,000 to $20,000.
- Two-stage set of payments.
- Across March-June BASs: Payment/credit for 100% of PAYG withholding (up to $50,000).
- Across June-September BASs: Additional payment equal to total of above (up to $50,000).
- The goal is to incentivise employers to keep staff, whom they of course will continue to need when we come out the other side.
- Temporary relief for financially distressed businesses:
- Relief for directors from personal liability for trading while insolvent (except in cases of dishonesty or fraud).
- Increased threshold (from $2,000 to $20,000) at which creditors can issue a statutory demand, and extended response deadline.
- Increased threshold for creditor-initiated bankruptcy.
- ATO open to easier payment terms for outstanding tax debts; lighter approach to withholding enforcement, Director Penalty Notices.
- Treasurer to be given power to modify or provide relief from obligations under the Corporations Act.
- The above measures will apply for six months.
- Supporting the flow of credit:
- Small-to-medium enterprise (SME) business loan guarantee scheme:
- The government will provide a guarantee of 50% to eligible lenders of unsecured loans to be used for working capital.
- Maximum loan facility of $250,000 per borrower.
- Term of up to three years, with initial six-month repayment holiday.
- For businesses with turnover up to $50 million (interestingly, not specified as group-wide turnover).
- Subject to lenders’ credit assessment processes, with the expectation of looking through this short-term difficult period.
- Scheme to support $40 billion of lending (ie, $20 billion guaranteed).
- Cut red tape, with a six-month exemption from responsible lending obligations for lenders to SMEs.
- $15 billion for the Australian Office of Financial Management to invest in structured finance markets used by smaller lenders.
- RBA’s $90 billion term funding facility for the banking industry, to put downward pressure on borrowing costs.
- APRA temporarily easing expectations for banks’ capital ratios.
- Earlier access to superannuation:
- Individuals in financial distress due to the coronavirus can access up to $10,000 of their superannuation – one time – before 1 July 2020.
- Can access up to a further $10,000 – again, one time – from 1 July for approximately another three months.
- Eligible if satisfy any one of certain criteria, including being unemployed, in receipt of certain welfare payments, made redundant, reduced hours.
- Also available for sole traders whose business was suspended, or suffered a 20%+ reduction in turnover.
- Tax free, and will not affect Centrelink or Veterans’ Affairs payments.
- Apply through myGov, from mid-April. Must certify meet eligibility criteria.
- If approved, the ATO will issue a determination, and provide to your superannuation fund.
- Separate arrangements will apply if you are a member of a self-managed superannuation fund. Further guidance to follow.
- Unused funds can be contributed back to superannuation (within contribution caps).
- $715 million support for Australian airlines and airports.
- Support for retirees:
- Temporary 50% reduction in minimum drawdown requirements for superannuation account-based pensions.
- For example, for the 65-74 age bracket, will reduce from 5% to 2.5%.
- Further reduction in upper and lower social security deeming rates.
- Income support for individuals:
- Temporary additional $550 per fortnight supplement for recipients of certain payments (eg, Jobseeker Payment, Youth Allowance, Parenting Payment).
- Available for the next six months.
- Expanded access to above income support payments, including sole traders/self-employed.
- Payments to support households:
- The Mark I one-off $750 payment over March-April to pensioners, social security, veteran and other income support recipients will be followed up by a second $750 payment in July (except those eligible for above supplement).
The details are subject to the relevant laws being passed, for which a package of Bills will be introduced into Parliament today for urgent consideration. The 2020 federal Budget has also been delayed until 6 October.
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