How COVID-19 Stimulus Can Reduce SMEs Tax Burden - What to Know
The Australian government has provided a $17.6 billion stimulus package, making small and medium enterprises (SMEs) eligible for a cash grant of up to $25,000. That means that if your business has a turnover of up to $50 million and employs staff from the beginning of the year until the 30th of June, you are entitled to receive funding.
The federal government’s grant is intended for reducing the overall tax burden among businesses. If you’re eligible to receive the stimulus funds, this will give you a way to manage your taxes as the funding is tax-free.
Here’s what you need to know about the stimulus package:
1. The government extends asset write-off
An asset write-off is available for up to $30,000 purchases for businesses with a turnover of $50 million or less. Those numbers were bumped to $150,000 and $500 million, respectively, which will apply until the end of June. This instant write-off gives businesses additional spending power for assets and equipment that would be utilised for operations. With this, businesses will also obtain an immediate tax deduction upon spending.
This extension means that any asset to be acquired before the end of June that costs under $150,000 can be written off. These assets include cars and utility vehicles, computers and related equipment, office furniture, appliances like TVs, and office furnishes in general, solar panel systems for office use, and general office equipment and tools.
If you’re eligible for this recently expanded asset write-off, you’ll gain a substantial advantage by making large purchases until the end date. What’s most helpful is the fact that you’ll also receive a tax deduction for your purchases, which, for most businesses, would translate to a win-win situation.
Additionally, this write-off greatly helps businesses in regaining momentum and find ways to sustain their business until the issue of the virus lingers.
2. There is up to $25,000 tax-free cash stimulus
The cash assistance an eligible business can receive amounts to $2,000 minimum to $25,000 maximum. Not much is known about how this budgeting will be determined, but businesses can use any amount they get as a substitute cash flow amid the wrath of the pandemic to normal operations.
While the government will still announce the exact details,
The Australian Tax Office (ATO) is likely to be in charge of the cash grants. Eligible businesses will receive cash equal to 50 per cent of their Pay As You Go (PAYG) withheld. This payment will be credited to their Business Activity Statement (BAS) for the quarter ending in June 2020.
3. SMEs can enjoy further assistance in the form of administrative concessions
Businesses affected by the viral outbreak will also be able to defer tax payments for up to four months. They can opt for a monthly Goods and Services Tax (GST) reporting for quicker access to GST refunds, and vary PAYG instalment amounts to zero for Q2 2020. They can also remit interest and penalties incurred from 23 January 2020, and enter into low-interest payment plans for existing tax liabilities.
The relief from the government will allow businesses to keep up with drastic changes during these trying times. With cash assistance and tax deferrals, SMEs can now restructure their operations and manage their taxes that would otherwise have been more difficult to settle due to the pandemic.
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