Tax-free payments for small and medium businesses have been increased to $100,000 each. Small and medium businesses will also now have access to cheap government guaranteed loans as part of the government’s $66 billion Coronavirus rescue package.

The $100,000 can be used for wage subsidies. However workers who have been stood down or laid off can access a new welfare wage tied to them.

This second stimulus package by the government will not be the last, as Treasurer Josh Frydenberg has indicated that a third stimulus package will very likely be needed.

When accounting for the first stimulus package worth $17.6 billion along with $105 billion given to banks last week by the Reserve Bank of Australia and the government we have a total of $189 billion thrown at the crisis – Which makes up roughly 9.7 per cent of GDP.

The key measure of the first stimulus package is the $25,000 tax-free payment for businesses with aggregated annual turnover less than $50 million per year. However, this measure has now been amended to allow for a maximum tax-free payment of $100,000 per business (with a minimum total payment of $20,000), with the scheme now being made accessible for not-for-profit charities as well.

Thus, upon lodgement of activity statements from 28 April 2020, eligible businesses which pay salaries and wages will now receive a minimum tax-free payment of $20,000. The tax-free payment will broadly be calculated and paid by the ATO as an automatic credit to an employer. This amount is a significant jump from the original $2,000 amount in the first stimulus package.

Under the new scheme, businesses that pay the Australian Taxation Office income tax on their employees’ salaries and wages on either a quarterly or monthly basis will now receive a payment worth 100 per cent of the amount withheld, up to a maximum of $100,000 per business. However, eligible employers that pay salary and wages are entitled to receive a minimum (tax-free) payment of $20,000 in two stages, even if they are not required to withhold PAYG tax.

Coronavirus SME Guarantee Scheme

Also as part of this stimulus package, is the new $40 billion loan facility for small and medium businesses. This measure set up to complement an announcement by the banks that they would freeze repayments on business loans for six months, at a cost to the banks of $8 billion.

Under the scheme, the government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs.

The measure is known as the “Coronavirus SME guarantee Scheme” and the government and banks will each contribute $20 billion for loans to be administered by the banks. No fees will be applied under this scheme, which will be made accessible to new or existing customers of banks and non-bank lenders.

Early Release of Superannuation

The government also now has a measure in place which will allow individuals experiencing financial stress as a result of the Coronavirus epidemic to access up to $10,000 of their superannuation in 2019-2020 and an additional $10,000 in 2020-2021.

Eligible individuals can apply for this scheme online through myGov before 1 July 2020. They can also access as a further $10,000 from 1 July 2020 for another three months. No tax will need to be paid on the amounts released and the amounts withdrawn will not affect Centrelink or Veterans’ Affairs payments.

The treasury estimates that the total cost of this measure will be close to $1.2 billion over the forward estimates period.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.