Wednesday 12th Aug, 2020

COVID-19 stimulus package: what it means for businesses in rail

The federal government has announced a $17.6 billion economic plan to keep Australian businesses in business, so what does this mean for the rail sector?

As the entire global economy faces significant challenges posed by the spread of the coronavirus, stimulus packages have been implemented across the nation to support small and medium sized businesses.

Prime Minister Scott Morrison said as part of the plan up to 6.5 million individuals and 3.5 million businesses would be directly supported by the package.

Caroline Wilkie, Australasian Railway Association (ARA) CEO said stimulus measures announced by the New Zealand, Australian commonwealth and state governments for small and medium enterprises, such as direct payments, asset write offs, apprentice wage subsidies, accelerated depreciation, and payroll tax exemptions will be of benefit to eligible businesses in the rail supply chain.

“However it is likely that additional government support will be necessary,” she said.

Similarly, Luke Wisbey manager – rail for civil engineering and plant hire company Brefni, noted that there is room for current stimulus measures to go further.

“The $17bn support package offered by the Federal Government is quite a significant sum and highlights the enormity of the situation facing business across all sectors including the rail industry,” said Wisbey.

“Although the package offered is substantial, the individual initiatives represent relatively small spends at a time when the economy faces mass bankruptcies. In order for businesses to survive the likely drops in revenue the crisis will generate, the government needs to be considering corporate level funding rather than ad hoc initiatives.”

Wilkie said passenger rail operators are reporting significant reductions in patronage and visible social distancing between customers on Australian and New Zealand rail networks.

At this stage, services have not been reduced. Other ARA members across the freight, contractor and supply chain are also reporting challenging conditions.

“ARA is uniting its members across all sectors of the industry to collectively address the COVID-19 situation and continues to work with our members to assess the industry impact and to engage with the government on areas where assistance can provide the most benefit,” Wilkie said.

What financial support is available?

The federal government will invest $6.7bn to boost tax-free cash flow for employers. The payment will provide cash flow support to businesses with a turnover of less than $50m that employ staff from the beginning of this year to June.

Up to $25,000 is available to help pay wages or for investment to protect against a downturn in activity.

Businesses with turnover less than $500m will be able to access a 15 month investment incentive by accelerating depreciation deductions. These businesses are also eligible for an expanded instant asset write-off for asset investments of up to $150,000. 

Similar to the relief provided following the bushfires, the Australian Taxation Office (ATO) will provide administrative relief for certain tax obligations on a case-by-case basis. 

If you’re a quarterly pay as you go (PAYG) instalments payer you can vary your PAYG instalments on your activity statement for the March 2020 quarter. Wisbey noted that thresholds here limit the amount of available assistance,

“The 50 per cent allowance on PAYG capped at $25,000 limits the target pool and those companies still need to pay net wages and super. For SME businesses, support with wages are of most concern. We support the wage assistance initiative for apprentices and trainees.”

What about investment in my business?

From March 12, businesses with a turnover of less than $500m will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset cost.

A time-limited 15 month investment incentive to support business investment and economic growth over the short term, by accelerating depreciation deductions. 

How will my state support my business?

State governments across Australia have announced their own stimulus packages which includes state support for the waiver of payroll tax, fees and charges for businesses, and additional maintenance and cleaners of transport assets.  

In NSW, the state government has announced that more than $250m will be invested to employ additional cleaners of public infrastructure, including TfNSW’s external operators statewide. This is in addition to the $450m for the waiver of payroll tax for businesses with payrolls of up to $10m for three months and raising the threshold limit to $1m in 2020-21.

Thresholds here also exclude some businesses, highlighted Wisbey.

“The proposed NSW holiday on Payroll tax is good and should be extended until the end of the year at least. The threshold has also been lifted to $1m before it kicks in. However, this is an absolute tax on employment & the threshold should be north of $5m to be more effective.”

The Queensland government will create a new $500m loan facility, interest free for the first 12 months, to support businesses to keep Queenslanders in work and extend the coronavirus payroll tax deferral to all businesses across the state.

Western Australia’s state government stimulus package includes $114 million in measures to support Western Australian small and medium businesses.

Ben Wyatt, WA Treasurer said “the state government’s stimulus package works hand in glove with the commonwealth government, and ensures these additional measures complement the stimulus announced by the Prime Minister last week.”

Specific state and territory information and assistance for businesses can be found on the federal government’s website.


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