Government stimulus package Mark II – Big, bold… and concisely summarised

Economists call it “helicopter money” – governments sending money directly to businesses and people to stave off a recession or minimise one. And yesterday’s announcement is a Black Hawk next to Mark I’s gyrocopter.

The government yesterday announced a second round of stimulus measures totaling $66.1 billion, following on from last week’s $105 billion RBA/government finance assistance measures, in addition to 12 March’s $17.6 billion package. This totals to $189 billion worth of measures – 9.7% of GDP – which include the helicopter money and a suite of other measures to cushion the worsening economic fallout from the coronavirus. The standout word in the Prime Minister’s media release was this: hope.

The newly announced measures include:

1. Boosting cash flow for employers:

• Increase in the Mark I maximum direct payment/credit for business employers (group-wide turnover <$50 million) from $50,000 to $100,000.
  • Must now have been an employer before 12 March 2020.
  • It’s not clear if it’s $100,000 per group, or $100,000 per employer entity within a group. It appears to be the latter, but we will see when the Bill is released.
• Extend the above to not-for-profits and charities who are employers.
• Increase the minimum above payment/credit from $2,000 to $20,000.
• Two-stage set of payments.
  • Across March-June BASs: Payment/credit for 100% of PAYG withholding (up to $50,000).
  • Across June-September BASs: Additional payment equal to total of above (up to $50,000).
• The goal is to incentivise employers to keep staff, whom they of course will continue to need when we come out the other side.

2. Temporary relief for financially distressed businesses:

• Relief for directors from personal liability for trading while insolvent (except in cases of dishonesty or fraud).
• Increased threshold (from $2,000 to $20,000) at which creditors can issue a statutory demand, and extended response deadline.
• Increased threshold for creditor-initiated bankruptcy.
• ATO open to easier payment terms for outstanding tax debts; lighter approach to withholding enforcement, Director Penalty Notices.
• Treasurer to be given power to modify or provide relief from obligations under the Corporations Act.
• The above measures will apply for six months.

3. Supporting the flow of credit:

• Small-to-medium enterprise (SME) business loan guarantee scheme:
  • The government will provide a guarantee of 50% to eligible lenders of unsecured loans to be used for working capital.
  • Maximum loan facility of $250,000 per borrower.
  • Term of up to three years, with initial six-month repayment holiday.
  • For businesses with turnover up to $50 million (interestingly, not specified as group-wide turnover).
  • Subject to lenders’ credit assessment processes, with the expectation of looking through this short-term difficult period.
  • Scheme to support $40 billion of lending (ie, $20 billion guaranteed).
• Cut red tape, with a six-month exemption from responsible lending obligations for lenders to SMEs.
• $15 billion for the Australian Office of Financial Management to invest in structured finance markets used by smaller lenders.
• RBA’s $90 billion term funding facility for the banking industry, to put downward pressure on borrowing costs.
• APRA temporarily easing expectations for banks’ capital ratios.

4. Earlier access to superannuation:

• Individuals in financial distress due to the coronavirus can access up to $10,000 of their superannuation – one time – before 1 July 2020.
• Can access up to a further $10,000 – again, one time – from 1 July for approximately another three months.
• Eligible if satisfy any one of certain criteria, including being unemployed, in receipt of certain welfare payments, made redundant, reduced hours.
  • Also available for sole traders whose business was suspended, or suffered a 20%+ reduction in turnover.
• Tax free, and will not affect Centrelink or Veterans’ Affairs payments.
• Apply through myGov, from mid-April. Must certify meet eligibility criteria.
• If approved, the ATO will issue a determination, and provide to your superannuation fund.
• Separate arrangements will apply if you are a member of a self-managed superannuation fund. Further guidance to follow.
• Unused funds can be contributed back to superannuation (within contribution caps).

5. $715 million support for Australian airlines and airports.
6. Support for retirees:

• Temporary 50% reduction in minimum drawdown requirements for superannuation account-based pensions.
  • For example, for the 65-74 age bracket, will reduce from 5% to 2.5%.
• Further reduction in upper and lower social security deeming rates.

7. Income support for individuals:

• Temporary additional $550 per fortnight supplement for recipients of certain payments (eg, Jobseeker Payment, Youth Allowance, Parenting Payment).
• Available for the next six months.
• Expanded access to above income support payments, including sole traders/self-employed.

8. Payments to support households:

• The Mark I one-off $750 payment over March-April to pensioners, social security, veteran and other income support recipients will be followed up by a second $750 payment in July (except those eligible for above supplement).

The details are subject to the relevant laws being passed, for which a package of Bills will be introduced into Parliament today for urgent consideration. The 2020 federal Budget has also been delayed until 6 October.