Update: on 22 March 2020 the Government announced a significant expansion to its initial economic response. Our article covering the revised package is available here.

The package includes an additional Government commitment of $2.4 billion for Australia’s health system and a broader package of approximately $17.6 billion targeting four key areas:

• Delivering support for business investment
• Cash flow assistance for employers
• Stimulus payments to households to support growth
• Assistance for severely affected regions

Many charities and not-for-profits may benefit from some aspects of the Government’s broader package, as outlined below.  At this time, the legislation for this package is yet to be made, however.

Delivering support for business investment

The Government proposal to increase the availability of tax deductions for asset write-offs and investments for businesses with an aggregated annual turnover of less than $500 million may be relevant to those charities and not-for-profits who do not have income tax exemption.  Most registered charities have this exemption.

The proposal is that:

• until 30 June 2020, the instant asset write-off threshold will be increased from $30,000 to $150,000 and become available (previously $50 million); and
• until 30 June 2021, allowing for accelerated depreciation deductions (up to 50% of the cost of an eligible asset on installation).

Cash flow assistance for employers

The Government intends to assist small and medium-sized businesses with cash payments.  Charities and not-for-profits who meet the criteria (to be confirmed in legislation) could receive cash flow assistance as follows:

• up to $25,000 (minimum $2,000) if they are eligible small and medium-sized businesses with turnover of less than $50 million and employ staff; and
• a wage subsidy of 50% of an apprentice or trainee’s wages for up to 9 months from 1 January 2020 to 30 September 2020 for small businesses that employ an apprentice or trainee.

Stimulus payments to households to support growth

The Government will provide a one-off tax-free payment of $750 payment to social security, veteran and other income support recipients and eligible concession cardholders.

Many charities and not-for-profits employ or are involved in caring for vulnerable people who may be entitled to receive these payments.

Assistance for severely affected regions

The Government will set aside $1 billion to support regions most significantly affected by COVID-19.  This may include the waiver of fees and charges for tourism businesses, assistance in identifying alternative export markets or supply chains, other measures to promote domestic tourism, and administrative relief from the Australian Tax Office for those affected by the outbreak on a case-by-case basis.  Charities and not-for-profits who may operate such businesses (perhaps as social enterprises) may benefit from this.  At this time there are not yet any severely affected regions identified.

Next steps

The final details of the package will not be known until such time as the bills are passed and the Government has published any necessary subordinate instruments or guidelines.  The Government is expected to introduce bills into Parliament in its final sitting week of March 2020 for urgent consideration and enactment.

There is currently some advocacy to make sure that charities and not-for-profits are not excluded from the package.

Further details

For further details about how these measures may be of benefit to you please contact Alex Milner (Partner).

Further background materials from Treasury are available here: https://treasury.gov.au/coronavirus and here: https://treasury.gov.au/sites/default/files/2020-03/Overview-Economic_Response_to_the_Coronavirus.pdf

Other COVID-19 updates

In the coming week, we intend to publish other updates regarding the legal implications of the COVID-19 situation in Australia for charities and not for profits.

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