Suitable for: Anyone who is a sole trader
Tax Difficulty: Easy
Airtax Experience: First-time users
Time to Read: 2-3 minutes
Last updated: 24 March 2020
As a result of the coronavirus (COVID-19) outbreak, the government has announced (and may continue to announce) a number of initiatives to support sole traders without employees through this period of crisis. The aim of this article is to summarise these measures in a simple, easy-to-understand format, so that you’re aware of what is available to you as a sole trader.
Announcements and initiatives in this area are constantly evolving, and although we plan to continually revise this guide it may not necessarily be up-to-date. We will do our best to ensure this information is as accurate as possible, however, you should also refer directly to state or federal announcements.
- Increase to the instant asset write-off threshold
- Backing Business Investment (BBI)
- Increased and accelerated income support
- Early access to superannuation
- Tax support
- Job Hub
- Other initiatives
Increase to the instant asset write-off threshold
Normally as a small business operator you are able to claim a deduction for the entire business portion of depreciating assets you purchase in a tax year that cost up to $30,000 in your income tax return. Assets that cost more than the relevant threshold can't be immediately deducted, and are instead deducted over time using the small business pool (depreciation).
The government has increased this threshold to $150,000 to incentivize and assist small to medium businesses in purchasing assets that help them perform their enterprise (including sole traders). This higher threshold will apply to assets first used or installed ready for use between 12 March 2020 and 30 June 2020.
For example, if you purchased a $50,000 truck on 24 March, 2020, which is entirely used for your parcel delivery business, under normal circumstances you would only be able to claim a portion of the cost of this asset as a deduction in this year’s tax return. Now, with the increased threshold at $150,000, you are able to claim the entire $50,000 truck purchase as a deduction in this year’s income tax return. This would result in a greater reduction of your business profits in this tax year, which in turn assists in minimising your taxable income (and therefore, tax owed).
You can find information about this here.
Alternatively, you can speak to a PwC tax specialist to get more detailed guidance on this topic in relation to your tax return through our Tax Assist service, which you can read more about here.
Backing Business Investment (BBI)
Normally, business assets that are purchased which exceed the instant asset write-off threshold are depreciated at varying rates depending on the nature of the asset, and this forms a deduction that is claimed on the income tax return over a number of years.
This latest government incentive (BBI) allows businesses with turnover of up to $500m to claim an additional deduction of 50% of the cost of an eligible new (not second-hand) depreciating asset in the first year, alongside existing depreciation rules which apply to the balance of the asset’s cost. This applies to eligible assets which exceed the instant asset write-off threshold of $150,000 and are acquired and first used or installed between 12 March 2020 and 30 June 2021.
Depreciation can be a complicated topic, so if you need further guidance on this you can refer to this link or you can speak to a PwC tax specialist in relation to your tax return through our Tax Assist service.
Increased and accelerated income support
The government has also implemented the Coronavirus Supplement ($550 cash payment per fortnight), as well as expanded access to existing support payments to individuals in Australia, commencing from 27 April 2020.
In order to be eligible for the Coronavirus Supplement payment, you need to be eligible for one of the following income support payments:
- JobSeeker payment (and all payments progressively transitioning to JobSeeker Payment; those currently receiving Partner Allowance, Widow Allowance, Sickness Allowance and Wife Pension)
- Youth Allowance JobSeeker
- Parenting Payment (Partnered and Single)
- Farm Household Allowance
- Special Benefits recipients.
Anyone who is eligible will receive the full rate of the Coronavirus Supplement, which is $550 per fortnight on top of their existing support payments.
A key component of this initiative is the expanded access that will be provided to the above income support payments. Notably, the Jobseeker Payment and Youth Allowance Jobseeker criteria will be expanded to include the following groups, who may be stood down or lose their employment:
- Sole traders
- Casual workers
- Contract workers who meet the income tests as a result of the economic downturn due to COVID-19.
You can read more about these initiatives, including eligibility and how to apply, here.
Early access to superannuation
Eligible individuals will be allowed to withdraw up to $10,000 from their superannuation accounts in the 2019-2020 financial year, and a further $10,000 in the next financial year in the event that the amount is required to assist the person to deal with the adverse economic effects of Coronavirus. If eligible, you will be able to apply to the ATO from mid-April, 2020. Importantly, there is no tax payable on these withdrawals.
To be eligible to withdraw from your super, you must satisfy at least one of the following requirements:
- You’re unemployed
- You’re eligible to receive a JobSeeker payment, Youth Allowance for JobSeekers, Parenting Payment (which includes the single and partnered payments), special benefit or farm household allowance
- On or after 1 January, 2020:
- You were made redundant
- Your working hours were reduced by 20% or more
- If you’re a sole trader, your business was suspended or there was a reduction in your turnover/revenue of 20% or more.
The money withdrawn from your super will also not affect Centrelink or Veterans' affairs payments.
If you’re eligible, the first step is to apply through the myGov website. Once your application has been processed, the ATO will let you know about the outcome of your application and supply you with a determination if you are approved. The ATO will then pass this onto your superannuation fund, who will make payment to you directly. There is no need for you to contact your super fund. Just make sure all of your personal information and bank details are up-to-date with them.
You can read more about this initiative, and instructions for how you can apply, here.
The Australian Taxation Office (ATO) has in place a number of special procedures that assist taxpayers (including sole traders) with navigating difficult times, such as the COVID-19 outbreak. If you ever need support with making payments or managing lodgement deadlines, it is important to remember that the ATO has a number of different ways in which they can assist you.
You can find out more about these measures here.
The Australian Government has launched an online Job Hub. Many companies have had to cut their workforce, however, there are some areas of the economy which have an increased demand for workers such as health and care sectors, transport and logistics, some areas of retail, mining services, manufacturing, agriculture and government sectors.
If you’re looking for work, view open opportunities here.
There are also initiatives that have been introduced which will not directly impact you as a sole trader, however, may support you indirectly in the future. These include Assistance for affected regions, communities and industries, as well as the Coronavirus SME Guarantee Scheme, which supports lenders of small to medium sized business.
Depending on the duration and impact of the COVID-19 pandemic, there may be further initiatives announced by the government. We will do our best to update this article with every new announcement, however you should check with the federal government publications here if you have any doubts.