Australia

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Return to homepage  |  Last updated: 18 November, 2020

Since the onset of the COVID-19 pandemic, the Australian Government has provided $257 billion in direct economic support to cushion the blow and strengthen the recovery. The 2020-21 Budget commits a further $98 billion including, $25 billion in direct COVID-19 response measures and $74 billion in new measures to create jobs, bringing the Government's overall support to $507 billion. 

• The Australian Taxation Office (ATO) announced an extension of the time available for businesses to pay their employees, and still be able to claim back the first JobKeeper payments.
• According to an ATO release, businesses suffering from a significant reduction in turnover due to COVID-19 will now have until 8 May 2020 to determine that all eligible employees have received a minimum of $3,000* in gross wages for the first two fortnights of the JobKeeper support period.
• The Commissioner of Taxation also extended until 31 May 2020 (from 30 April 2020) the date for enrolment for the initial JobKeeper periods.
• These extensions do not negate an obligation for businesses to determine that they continue to pay eligible employees $1,500 in each JobKeeper fortnight or the other eligibility criteria.
• The Commissioner of Taxation granted a one-week deferral of the due date for the monthly JobKeeper payment declaration, commencing from June 2020.
• The JobKeeer declaration now needs to be completed between the 1st and 14th day of each month, to confirm the operating circumstances of the employer and eligibility for the payment, but it is not a re-test of eligibility. As part of the declaration, employers need to confirm:
• Their eligible employees, including if employees change or leave their employment
• Their current and projected goods and services tax (GST) turnover (or alternative turnover factor)
• The sooner a business can submit its monthly declaration for the month just passed, the sooner the employer will be reimbursed for JobKeeper periods (measured by fortnights) for that month.
• The Australian Taxation Office (ATO) released “practical compliance guideline” (PCG) 2020/4 in relation to the JobKeeper program and payments under the program.
• The JobKeeper program was established to provide employment-related relief in response to the coronavirus (COVID-19) pandemic.
• JobKeeper 2.0 has been announced extending the program until March 2020 while tapering the levels of payment down.

Economic stimulus

• The Australian Government handed down its Budget on 6 October 2020. The Budget focuses on immediate stimulus and tax relief and will be the focus of the legislative agenda over the coming sitting periods. Key measures include:
• A temporary business investment allowance for businesses with a turnover of up to $5 billion;
• Loss carry back provision which will enable businesses with turnovers of up to $5 billion to write off any losses incurred until June 2022 against profits made on or after 2018-19, before the coronavirus pandemic.
• The bringing forward of Stage 2 of the Personal Income Tax Plan from 2022-23 to 2020-21, meaning an instant tax reduction for some salary earners. In total, these tax cuts deliver $17.8 billion in additional tax relief over the forward estimates, including $12.5 billion over the next 12 months.
• a $4 billion Job Maker Hiring Credit that will be payable for up to 12 months for employers who hire eligible employees aged 16-35

Restructuring

Small Business Insolvency Reforms (for businesses that have less that $1m liabilities):

• The Government has extended temporary insolvency relief until 31 December 2020. A new small business insolvency regime will commence from 1 January 2021. Among other things, the new process will involve a small business restructuring practitioner helping the business prepare the plan, certify the plan to creditors, and oversee disbursements once the plan is in place. There will also be safeguards in place to prevent corporate misconduct.
• This new streamlined restructuring process is in contrast to the current regime where owners effectively lose control of their business, with an administrator being placed in control and determining any restructuring plan to be put to creditors.
• Given the timeframes involved, the Government is moving ahead with legislation quickly. The Exposure Draft Bill and Explanatory Materials has been issued for consultation and a submission has been prepared in response. More detailed  rules and regulations will be released for consultation in November.
• Temporary relief for directors from any personal liability for trading while insolvent; and
• Providing temporary flexibility in the Corporations Act 2001 to provide targeted relief for companies from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.
• Providing more scope to respond to creditors
  • A creditor issuing a statutory demand on a company is a common way for a company to enter liquidation. The Federal Government is temporarily increasing the current minimum threshold for creditors issuing a statutory demand from $2,000 to $20,000. This will apply for six months.
  • The statutory timeframe for a company to respond to a statutory demand will be extended temporarily from 21 days to six months. This will apply for six months.
  • The time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.
• Temporary relief from directors’ personal liability
• are personally liable if a company trades while insolvent. Through this temporary personal liability relief, the Government is aiming to:
  • Stop directors of companies, that would be ordinarily viable save for COVID-19, from electing to enter into insolvency due to the personal consequences from trading whilst insolvent;
  • Enable directors to increase their focus on managing companies through the COVID-19 crisis as opposed to be concerned by the implications for their own personal positions;
  • Avoid a situation whereby there are insolvencies en-masse in a short space of time which, due to the sheer number of the companies in insolvency, may dilute the ability of companies to be rehabilitated. In this situation, assets may not be saleable given the sheer volume of insolvencies so may be realized for minimal value or parked away.

These arrangements have been extended until 31 December 2020.

Agribusiness

• The Federal Government’s second announcement of economic stimulus measures has a distinct focus on supporting individuals, families and small-medium enterprises to continue to function business-as-usual wherever possible.
• In addition to those provisions already made in Tranche 1, the Tranche 2 announcements will particularly benefit recipients of the Farm Household Allowance, small-medium sized agribusinesses and employers of apprentices and trainees (important for various downstream food processing and manufacturing sectors).
• This announcement also reinforces support offered by other institutions and regulatory bodies, such as Guarantee Schemes and access to, and reduced cost of, credit.

• The Australian Border Force announced the temporary prohibition on the non-commercial export of certain goods and items that contribute to controlling and preventing the spread of the coronavirus, which as of 30 March 2020, includes: 
  • Disposable face masks;
  • Disposable gowns;
  • Disposable gloves;
  • Goggles, glasses and eye visors
  • Alcohol wipes;
  • Hand Sanitizer.
• There are a number of exemptions including allowing for the exports when they are by an Australian manufacturer or where the export of these products is part of a normal business activity, provided the goods are not sent through international mail.  The Australian Border Force has announced a new concession to provide a free rate of customs duty on certain medical and hygiene products imported for the immediate response to the COVID-19 pandemic. Item 57 and Customs By-Law No. 2019608 to Schedule 4 of the Customs Tariff Act 1995 (Cth) provides a free rate of customs duty for goods that generally attract a duty rate of 5 percent, imported during the period 1 February 2020 to 30 July 2020. Goods covered by the By-Law include personal protective equipment; face masks, gloves, clothes or gowns, goggles, glasses, and other similar products.

• Restrictions are being eased across the country on a state and territory basis depending on local epidemiology. The state of Victoria has moved from Stage 4 restrictions to Stage 3 which involves the re-opening of restaurants, cafes and other non-permitted industries.
• Bars, cafes, restaurants and pubs are open but must comply with COVID safe plans. The four square meter rule still applies in most indoor venues.
• Most workers can return to offices, but are encouraged to work remotely. In Victoria it is a public health directive to work from home if you can.
• Schools are back open across the country, with cleaning and social distancing measures in place.
• Gyms and indoor recreational centers are open with customer limits and strict hygiene protocols.
• A travel ban is in place that prevents all non-Australian citizens and non-residents from entering Australia.
• Interstate travel from Victoria is restricted to essential workers and hotel quarantine applies on arrival, however this is due to be relaxed by the end of the month for NSW. Travel to South Australia, Queensland, Northern Territory and Tasmania requires a permit but travel is relatively unrestricted. West Australian borders will open to very low risk states in mid-November. 
• Retail outlets were never forced to close under stage 3 but many that did have now reopened.

Main sources of information

• Australian Government, The Treasury
• Queensland and Australian Governments 
• Australia: JobKeeper payment and enrolment timelines extended (COVID-19)
• Australia – ATO Guidance: Impact of COVID-19 on Taxation of Internationally Mobile Employees
• Australia: State governments provide land tax relief (COVID-19)
• Australia: 2020-21 Federal Budget

Tax: Justin C Davis – jcdavis@kpmg.com.au
Restructuring: Matt Woods – mwoods1@kpmg.com.au / James Stewart – jstewart13@kpmg.com.au
Legal: Kate Marshall – katemarshall@kpmg.com.au