Economic Stimulus Package

The Federal Government has announced a $17.6 billion economic plan to keep Australians in jobs, provide businesses with tax breaks and cashflow help as well as to provide support to Australian households as the world deals with the significant challenges posed by the spread of the coronavirus.

The Government’s economic stimulus package has four parts:

Support for business investment

• From 12 March 2020, the instant asset write off threshold is to be increased from $30,000 to $150,000 and access expanded to include businesses with aggregated annual turnover of up to $500 million (up from $50 million) until 30 June 2020.
• To increase business investment and to support economic growth by providing an investment incentive, starting on 12 March 2020 and continuing through to 30 June 2021, by accelerating depreciation deductions. Businesses with turnover of less than $500 million will increase depreciation deductions claimed on assets by 50% in their tax returns with no corresponding reduction in written down value of assets. This will not apply to second-hand assets. Eligible assets will need to be first used or installed ready for use by 30 June 2021.

 Cash flow assistance for businesses

• To help provide temporary cash flow support to employers the government will provide a tax free payment up to $25,000 for eligible small and medium-sized businesses. Businesses with a turnover of less than $50 million that employ staff, between 1 January 2020 and 30 June 2020, will be eligible. The payments will be made based on 50 per cent of their PAYG withheld report on the Business Activity Statements or Instalment Activity Statements between 1 January 2020 and 30 June 2020, up to the $25,000 limit. Where this results in a refund, the government have advised that these will be paid within 14 days.
• To support small businesses who provide jobs to around 120,000 apprentices and trainees the government has offered a 50% wage subsidy for apprentice and trainees wages paid from 1 January 2020 to 30 September 2020. Eligible employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter). Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.

Stimulus payments to households to support growth

• A one-off $750 stimulus payment is to be made to pensioners, social security, veteran and other income support recipients and eligible concession card holders. The payment will be tax free and will not count as income for Social Security, Farm Household Allowance and Veteran payments. There will be one payment per eligible recipient. If a person qualifies for the one off payment in multiple ways, they will only receive one payment. Payments will be made from 31 March 2020 on a progressive basis, with over 90 per cent of payments expected to be made by mid-April.

Assistance for severely-affected regions

• The Government has set aside an initial $1 billion allocation to provide support to those sectors, regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on industries such as tourism, agriculture and education. This will include the waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and Commonwealth National Parks. They will also waive park entry fees for Kakadu, Uluru and Booderee National Parts for the remainder of 2020. It will also include additional assistance to help businesses identify alternative export markets or supply chains. Targeted measures will also be developed to further promote domestic tourism. Further plans and measures to support recovery will be designed and delivered in partnership with the affected industries and communities.

The Government is also offering administrative relief for certain tax obligations, including deferring tax payments up to four months. This is similar to relief provided following the bushfires and is to be assessed on a case-by-case basis.  In addition, the ATO will consider ways to enhance its presence in other significantly affected regions to make it easier for people to apply for relief, including considering further temporary shop fronts and face-to-face options.

The Government also committed an additional $2.4 billion to support our health system to manage any further outbreak in Australia and to cover 50 per cent of additional hospital costs incurred by states and territories related to the diagnosis and treatment of patients with, or suspected of having, the Coronavirus.

The Government are acting quickly to legislate the implementation of this package, however, please be aware that no legislative material is currently available.

Should you have any queries regarding the above information, please contact us on (08) 9316 7000.

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Q & A – Could my hobby be the beginning of a feasible business?

Q: I make some money on the side from my hobby – what is the difference between a hobby and a business?

A:  The tax, legal and administrative obligations and reporting requirements that are involved in running a business are what differentiates it from a hobby. The way in which you conduct your hobby may even be considered a business irrespective of the fact you never intended it to be a business. You need to consider the following indicators in determining whether your hobby is in fact a business or has the characteristics of a business:

• Is there a significant commercial purpose? Are there existing businesses that provide similar or comparable products?
• Is there an intention to make a profit or do you believe the activity is profitable?
• Are these activities conducted regularly or repetitively? Are you ordering, making and/or selling items regularly?
• Do you conduct your activities in an organised, planned or businesslike manner? Do you have a separate bank account for your hobby activities? Having a separate bank account or paying an ecommerce platform a fee to set up an online store may indicate your activities are conducted in a businesslike manner.

If you think these indicators may apply, you may be running your hobby as a business.

Q: I think my hobby has the characteristics of a business, do I need to get an ABN and TFN?

A: You are not required to have an ABN if your annual GST turnover is, or estimated to be, under $75,000. Once your annual GST turnover is over $75,000 you are required to have an ABN and be registered for GST. Although you may not be required to have an ABN, there are benefits to applying for one. Having an ABN will avoid payers withholding tax from your payments and allows you to register for GST and PAYG withholdings. Once you are registered for GST, you will be able to claim a GST credit for any GST you have paid for goods, services or materials you have used in your business.

As your hobby is performed by you as an individual, once it takes on the characteristics of a business you will be acting as a sole trader. Acting as a sole trader, the business income and expenses will be reported under the individual’s personal tax file number and included in the individual’s income tax return under the section for business items – There is no separate tax return for sole traders.

Q: There seems to be a lot of work involved in turning my hobby into a business, what are the benefits of turning my hobby into a business?

A: Turning your hobby into a business will allow you establish a legitimate business identity that connects your customers to you and your product. A business is also able to claim tax deductions for business expenses such as advertising, bank charges, home office expenses, education and training, merchant fees, business motor vehicle expenses and much more. Depreciation on assets used in your business can also be claimed over several years. If your business is not as profitable as you originally intended it might end up making a business loss. You may be able to offset your business losses against some of your personal assessable income for that year if you satisfy certain tests, otherwise you can carry it forward and claim the deduction in a future profitable year.

Q: I don’t think my hobby satisfies the characteristics of a business; can I continue to sell my products or services as a hobbyist without an ABN?

A: You are allowed to sell or gift your products as a hobbyist for the cost of materials without an ABN; If you sell your goods or services for a profit there is an intent to make a profit and your hobby will have the characteristic of a business. If you wish to sell or gift your products to a business however, you will be required to either provide an ABN or provide evidence that you are acting as a hobbyist. If you do not provide an ABN or are unable to prove that your activities are conducted as a hobby, the business that is purchasing your product must withhold the highest rate of tax from any payment made to you above $75.

Should you have any queries regarding the above information, please do not hesitate to contact us on (08) 9316 7000.

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