Response to COVID-19: Tax Measures at the Commonwealth, State and Territory levels

The Commonwealth, State and Territory governments have introduced a range of stimulus measures to assist businesses and workers during this challenging time. We outline below some of the key announcements.

Budget delayed

The 2020 Federal Budget will now be delivered on Tuesday, 6 October 2020. It was originally scheduled to be delivered on 12 May 2020, but has been delayed to allow the Commonwealth Government time to assess the impact of COVID-19 and the current stimulus package.

Administrative measures of the Australian Taxation Office

The Australian Taxation Office (ATO) is in the process of implementing a series of administrative measures to assist businesses experiencing financial difficulty as a result of the COVID-19 pandemic, including allowing businesses:

• to defer the payment date of amounts due under business activity statements (BAS) (including PAYG instalments), income tax assessments, fringe benefit tax assessments and excise by up to 6 months;

• operating on a quarterly reporting cycle to opt into monthly GST reporting (for the purpose of allowing faster GST refunds);
• to vary PAYG instalment amounts to zero for the March 2020 quarter. Businesses that undertake this option may also claim a refund for any instalments made for the September 2019 and December 2019 quarters;
• to remit any interest and penalties incurred on or after 23 January 2020; and
• to enter into low interest payment plans to pay their tax liabilities.

We note that employers are still required to meet their ongoing superannuation guarantee obligations for their employees.

The assistance measures will not be automatically applied so businesses affected by the COVID-19 pandemic should contact the ATO to request assistance on the Emergency Support Infoline (1800 806 218).

Increasing the Instant Asset Write-off

From 12 March 2020, the instant asset write-off:

• threshold is increased to $150,000 (up from $30,000); and
• eligibility is expanded to businesses with an aggregated annual turnover of less than $500 million (up from $50 million).

The changes apply to new or second hand assets first used or installed ready for use between 12 March 2020 and 30 June 2020. The instant asset write-off applies on a per asset basis so multiple assets can be written-off. The aim of the changes is to provide cash flow benefits to businesses that are investing during this difficult period.

Business Investment Incentive

The Commonwealth Government is introducing a temporary (15 month) investment incentive for businesses with an aggregate turnover of below $500 million. A deduction of 50% of an eligible asset will apply (with the existing depreciation rules applying to the balance of the asset’s cost).

Eligible assets include new assets that can be depreciated under Division 40 of the Income Tax Assessment Act 1997 (Cth) (ITAA) (ie plant, equipment and specified intangible assets). It does not apply to second-hand Division 40 assets or buildings and other capital works depreciable under Division 43 of the ITAA. The incentive applies to assets first used or installed by 30 June 2021.

Boosting Cash Flow for Employers

The Commonwealth Government is providing up to $100,000 to eligible small and medium sized businesses and not-for-profits (including charities) that employ people with a minimum payment of $20,000. To be eligible the entities must have an aggregate annual turnover under $50 million (based on prior year turnover).

Eligible employers that withhold tax to the ATO on their employees’ salary/wages will receive a payment equal to 100% of the amount withheld up to a maximum payment of $50,000. Those employers who are not required to withhold tax will receive a minimum payment of $10,000.

The payment is tax-free and will be delivered as an automatic credit in the taxpayer’s BAS from 28 April 2020. It will therefore be necessary for businesses to prepare and lodge a BAS for the GST period ending 31 March 2020.

An additional payment may also be made in the July – October 2020 BAS period. Eligible entities will receive a further payment, meaning that they will receive a total of at least $20,000 and up to $100,000 under both payments.

Payments are available to active eligible employers established before 12 March 2020 and eligible charities registered with the ACNC (regardless of when registration occurs).

State Payroll Tax measures

The following payroll tax measures are being introduced to support businesses affected by COVID-19:

New South Wales

• Businesses paying payroll tax in NSW with total grouped Australian wages of $10 million or less for the 2019/20 financial year will have their annual payroll tax liability reduced by 25% when they lodge their annual reconciliation (due on 28 July 2020).
• For businesses that lodge and pay monthly and whose total Australian wages are $10 million or less for the 2019/2020 financial year, no payment for March, April or May 2020 will be required. These businesses will now receive a three month deferral as well.
• Deferral of payroll tax for business with payrolls over $10 million for 6 months.
• For the 2020/2021 financial year, the tax-free threshold increases from $900,000 to $1 million.

Victoria

• Businesses with annual taxable wages up to $3 million will have their payroll tax for the 2019/2020 financial year waived. Eligible businesses must continue to lodge returns but will not be required to make further payments.
• The State Revenue Office will contact eligible businesses in relation to reimbursements payable for payroll tax already paid.
• Eligible businesses can also defer paying payroll tax for the first quarter of the 2020/2021 financial year.

Queensland

• For businesses specifically affected by COVID-19, 2 months’ worth of payroll tax will be refunded. A business is directly or indirectly affected by coronavirus if their current turnover, profit, customers, bookings, retail sales, supply contracts or other factors are negatively affected compared with normal operating conditions.
• Small and medium businesses will receive a 3 month payroll tax holiday.
• All Queensland businesses will be eligible for a 6 month payroll tax deferral from 1 February 2020.
• The Office of State Revenue will also work with affected businesses to create repayment plans for the deferred tax liabilities. Applications for deferral and/or refunds can be made online.

South Australia

• For businesses with an annual grouped payroll of up to $4 million, a 6 month waiver of payroll tax.
• Eligible businesses will not be required to pay payroll tax from April to September 2020.
• Businesses with grouped annual wages above $4 million can defer payroll tax payments for 6 months if they can demonstrate significant cash flow effects due to COVID-19.

Western Australia

• The tax-free threshold will be increased to $1 million on 1 July 2020 (bringing this change forward 6 months). Employers that cancel their registration due to the increased threshold will need to wait until the annual reconciliation function is available (August 2020) for adjustments to their tax liability.
• Payroll tax will be waived from March to June 2020 for employers whose Australian taxable wages are less than $7.5 million as at 30 June 2020. Employers are required to retain evidence of their Australian taxable wages as at 29 February 2020 showing their entitlement to claim the waiver.
• Payroll tax will for March to June 2020 will be automatically waived for employers with Australian taxable wages of less than $5 million as at 29 February 2020. Employers must lodge returns for March to June 2020 and record WA wages in the ‘exempt (other) wages’ field to apply the waiver.
• For employers with Australian taxable wages of $5 million or more (but less than $7.5 million) or new employers from 1 March 2020, payroll tax from March to June 2020 will be waived at annual reconciliation. An application form must be completed and submitted online. If the application is approved, the lodgement due date will be extended to 21 July 2020.
• If an employer’s 2019-2020 annual Australian taxable wages are $7.5 million or more, the employer will need to complete their returns and pay tax for the months that were deferred. If the employer is concerned about meeting its payroll tax obligations, they can apply online for an interest-free payment arrangement.
• The above measures require the lodgement and payment of all returns up to and including the February 2020 return.
• A one-off grant of $17,500 is available for employers (or groups of employers) whose Australian taxable wages are between $1 million and $4 million. Grants will be automatically paid by cheque at the completion of the annual reconciliation process.

Tasmania

• Payroll tax will be waived for the entire 2019/2020 year for hospitality, tourism and seafood industry businesses.
• Small to medium businesses with an annual payroll of up to $5 million in Australian wages can apply for a payroll tax waiver for the entire 2019/2020 year if the businesses can demonstrate that their operations have been affected by COVID-19.  
• A youth employment payroll tax rebate scheme will be introduced from 1 April 2020.

Australian Capital Territory

• Payroll tax will be waived for 6 months for businesses in the hospitality, creative arts and entertainment industries.
• Interest free deferrals of payroll tax will commence on 1 July 2020 for businesses up to a payroll tax threshold of $10 million in Australian taxable wages.  The interest free deferral is available until 1 July 2022.

Northern Territory

• The Northern Territory Government has extended the payroll tax exemption for hiring Territory employees to 30 June 2021. To be eligible for the exemption employers are required to increase the number of Northern Territory residents employed above their baseline count. The baseline count is the number of employees employed full time, part time or under contract as at 30 April 2018.

Other state taxation measures

• Queensland is offering low-interest loans of up to $250,000 (interest free for 12 months) to impacted businesses.
• The Northern Territory has announced that under the Business Improvement Scheme, all eligible businesses will receive a $10,000 grant. They will have access to an additional $10,000 if they contribute $10,000 of their own funds.  The grant is available to businesses that are legal entities who hold a valid Australian Business Number (as at the date the program is open). The business must operate in the Northern Territory, have a significant permanent presence there and employ Northern Territory residents.

• Tasmania has announced, among other things:

  • A one-off grant of $5,000 to hire an apprentice or trainee.
  • Increasing the Small Business Interest-Free Loan Scheme from $20m to $50m for businesses with annual turnover of less than $10 million.
  • Implementing a new $40m Small Business Grants Program with $20m set aside for an emergency grants program of $2,500 cash payments.
• Western Australia has announced from 23 March 2020 it will remit full penalty tax for late payment of tax liabilities for taxpayers who can demonstrate that COVID-19 had directly or indirectly affected their financial circumstances.  New payment arrangements will be interest-free for taxpayers who can demonstrate they are unable to pay their tax.
• South Australia has announced the following land tax relief:

  • Businesses with outstanding quarterly bills for 2019-2020 will be able to defer payments for up to 6 months.

  • For 2020-2021 Land Tax Transitional Fund relief will be increased from 50% to 100% based on existing relief criteria guidelines.  Transitional relief is available for taxpayers who have an increase in their land tax assessment as a result of changes in aggregation of land owned as at 16 October 2019. To be eligible for the relief, the increase in land tax must be greater than $2,500 and less than $102,500.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).