Calm your farm: $25,000 Coronavirus rebate explained
The Australian Government today announced a cash stimulus package for small business in wake of the Coronavirus and the downturn in economic conditions.
But what on earth does it mean. Facebook groups for business owners today have gone into overdrive with many people flat out asking “when do I get my $25,000 deposited into my bank account”.
Now before you start rubbing your hands together in glee, let’s break down the government jargon, the accounting terminology and let’s put things into perspective.
- You will not receive an automatic payment of $25,000 in your bank account. Plain and simple that is not the case at all. Sorry – don’t shoot the messenger.
- The $25,000 rebate is a rebate based on the level of tax on wages reported on your activity statements for March 2020 and June 2020 (or monthly activity statements for March 2020 – June 2020).
- The rebate you are entitled to is 50% of the reported tax on wages
- Over the course of the eligibility period, you can receive up to a maximum of $25,000
- If you don’t employ anyone (so a sole trader, perhaps with contractors only), you may not be eligible for any part of this particular rebate
- The rebate will be applied as part of the BAS and reduce the overall amount owing.
- If the rebate puts you into a refund position, the ATO can take up to 14 days (however I would suggest it could take longer) to refund any amount to you.
- There is a minimum amount of $2000 for the first activity statement for those eligible business owners with employees who don’t reach the tax threshold to report tax on wages.
- Link to the Government pdf regarding the stimulus (plus other announcements) can be found here
So how do you know if you are an eligible business:
- Turnover must be under $50 million
- Must have employees (so many sole traders will be eliminated if they don’t have external staff)
Why doesn’t everyone get this (now warning, this is my opinion).
The government wants to make sure that the most amount of people can retain their jobs based on this current economic downturn due to Coronavirus. By giving a rebate to those who are employing staff, those business owners are more likely to keep those staff on, and continue to be able pay their wages. In a cash flow crisis, the last thing people want to worry about each day when they go to work is whether or not they will leave at the end of the day unemployed.
Is it the best the government can do – well bloody hell I am not stupid enough to get into that argument. What I will say, is that the government’s intention is for business owners who are eligible for this particular rebate, to hopefully then spend that money back into the economy, back into other small business operations, supporting other freelancers and contractors, and in effect, boosting other peoples income. So hopefully, and I truly mean hopefully, we will all benefit.
So whilst we would all love a magical unicorn to deposit $25,000 into our bank account, that is not going to happen.
Only time will tell what the impact will be on our economy, but I am pleased the government is recognising that small business is tough right now. Really tough. And if something is not done, well I simply don’t want to think about the level of fatalities we will see.
Please note there are other government initiatives announced today, so please do your research and speak to your accountant before making any rash and expensive business decisions.