Economically, Australia is facing its sharpest recession since the Great Depression. This is due to Covid-19, which is set to be remembered as one of the most impactful periods of human history. Thankfully, the Australian government is here to help in conjunction with an expansionary monetary policy from the Reserve Bank of Australia (RBA). The RBA cut rates to a record low 0.25% before its next scheduled meeting and committed to engaging in quantitative easing for the first time in history to stimulate the struggling economy.
Australia's cash rate
The Australian Government’s stimulus hence targets individuals and businesses in many different ways. Overall, the government has committed to spending $189 billion across all stimulus packages (a whopping 9.7% of annual GDP).
How the Stimulus helps Tenants Individually
Temporary early release of superannuation. Individuals impacted by COVID19 may access up to $10,000 of their superannuation in FY2019/20 and a further $10,000 in FY2020/21 without suffering a tax liability on any released amounts. The money will not impact Centrelink or other benefits payments.
Temporarily reducing minimum drawdown requirements for superannuation. Requirements for account-based pensions reduced by 50% for FY2019/20 and FY2020/21 (reduces pressure to sell investments to fund superannuation requirements).
Reducing social security deeming rates. Deeming rates will be reduced by 0.75% for both the upper and lower bounds (upper deeming rate will be 2.25%, lower deeming rate will be 0.25%).
Individual income support. There will be a 6-month increase in eligibility for income support payments along with a $550/fortnight payment throughout the current crisis period.
Household support payments. There will also be two $750 payments to social security, veteran and other income support recipients.
How the Stimulus helps Tenants’ Businesses
Temporary relief for financially distressed businesses.Creditors can issue statutory demands on a company and increase companies’ response times to any statutory demands received. There is relief for company directors from any personal liability for trading while insolvent. The Corporations Act 2001 will provide relief from provisions of the Act to deal with any coronavirus-related unforeseen events. The ATO will also offer a temporary reduction of payments and withhold punishments such as Director Penalty Notices and business wind-ups.
Incentivising business investment. There will thus be a 15-month investment incentive to support immediate business investment and economic growth by accelerating depreciation deductions. Businesses with revenue <$500 million can deduct 50% of the cost of an eligible asset on installation. According to pre-existing depreciation rules, the balance of the asset depreciates. This will support nearly all businesses over the next two years, lowering business taxes by an estimated $6.7 billion
Boosting employers’ cashflow. Additionally, the Government will provide up to $100,000 for eligible (revenue <$50 million) small and medium-sized employers with a minimum payment of $20,000 to help with cash flow for rent, bills and staff. Employers will receive a payment equal to 100% of their salary and wages withheld (maximum payment of $50,000).
Increasing the instant asset write-off. The Government is increasing threshold from $30,000 to $150,000 and expanding access to include businesses with revenue <$500 million until 30 June 2020 (this is estimated to support nearly all businesses)
Supporting apprentices and trainees. Employers can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wage for 9 months from 1 January 2020 to 30 September 2020. Additionally, apprentices and trainees are reimbursed by up to $21,000. This action supports around 70,000 small businesses which employ around 117,000 apprentices.
Access to credit for small businesses. Finally, the Government is cutting red tape by providing a temporary exemption from responsible lending obligations for lenders providing credit to existing small business customers.
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