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On 12 March 2020, the Federal Government announced its first package (AUD17.6 billion) of measures to respond to the current economic challenges confronting the Australian economy as a result of the continued spread of the coronavirus (COVID-19). This was followed by a second package announced on 22 March 2020 which brought the total relief by all arms of Government to AUD189 billion at that stage. One week later, a further AUD130 billion JobKeeper package was announced on 30 March 2020, following a comprehensive health package announced on the previous day. Subsequent announcements were then made to extend and expand these initial packages.
The focus of the relief measures is supporting businesses and employers to keep operating as best and for as long as they can and so as to be in the best-placed position when this crisis has passed to help keep Australians in jobs. From a tax perspective, this includes significant concessions for capital investment in the form of enhanced tax write-offs for depreciable assets, as well as cash flow assistance to almost all business and not-for-profit employers.
Enhanced tax concessions for capital investment
The following concessions are available in relation to business capital investment for depreciating assets and apply from 12 March 2020 to all businesses with an annual aggregated turnover of up to AUD500 million:
Increasing the instant asset write-off by expanding the existing depreciating asset write-off so that it provides an immediate tax deduction for the cost of a depreciating asset, whether new or second-hand, which has a cost of less than AUD150,000 (up from the existing AUD30,000 limit). This is a temporary expansion and was originally announced to apply to eligible depreciating assets that are first used, or installed ready for use, from 12 March 2020 up until 30 June 2020. On 9 June 2020, the Government announced a further extension of this measure until 31 December 2020, such that it now applies to eligible depreciating assets that are first used or installed ready for use from 12 March 2020 until 31 December 2020. In the 2020-21 Federal Budget, the Government extended the time period for qualifying assets that are acquired by 31 December 2020, to be first used or installed ready for use under this measure until 30 June 2021.
Backing Business Investment with an accelerated depreciation deduction for all newly acquired depreciating assets (and it does not apply to second-hand assets). This concession provides a tax deduction of 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost. This measure applies to eligible new depreciating assets acquired from 12 March 2020 and first used or installed by 30 June 2021. There is no limit to the cost of a depreciating asset that can qualify for this concession.
A new and improved depreciating asset write-off was announced in the 2020-21 Federal Budget on 6 October 2020 to apply to business with an annual aggregated turnover of up to AUD5 billion. This measure - referred to as temporary full expensing - will in many cases override the above listed initial measures, which going forward will be limited to assets or entities that do not qualify for the new measure.
These measures have the potential to apply to approximately 99 per cent of Australian businesses. Multinational businesses will need to carefully consider eligibility having regard to the aggregated turnover threshold which, in accordance with existing tax law, also takes into account the ordinary business income of connected and affiliated entities (Australian or foreign), whether or not it is assessable in Australia.
2. ATO administrative relief available
Deferring the payment date of amounts due through the business activity statement (BAS) including Pay As You Go (PAYG) instalments and income tax assessments, FBT assessments and excise.
Allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to gain quicker access to net GST refunds to which they may be entitled.
Allowing businesses to vary PAYG instalment amounts (including to zero). Businesses that vary their PAYG instalment can also claim a refund for any prior instalments made in respect of the same income year.
Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities.
Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low-interest payment plans.
As part of a broader package of measures to provide relief for financially distressed businesses, the ATO will also work with businesses and directors of businesses that are struggling to meet their tax obligations to tailor solutions to their circumstances, including withholding enforcement actions including Director Penalty Notices and wind-ups.
Access to these relief measures is assessed on a case by case basis. Taxpayers are encouraged to reach out to their tax agent and/or liaise with the ATO directly.