Australian Government Corona Virus ( COVID-19 ) Economic Stimulus Method 4 | Subsidies for apprentices and trainees

What is the Tax Benefit?

Eligible businesses can apply for a wage subsidy of up to 50% of an apprentice's or trainee's wages for the 9-month period from 1 January 2020 to 30 September 2020.

The announcement is silent on the meaning of the term "small business". Presumably, it applies to those that meet the definition in the Income Tax Act, being an entity with an aggregated turnover of less than $10 million.

The subsidy is stated to be available to new employers who retain apprentices of another small business where that other small business could not. It is not clear whether the new employer also needs to be a small business themselves.

How could this potentially impact cash flow?

Businesses should consider whether future employment can be provided through an apprenticeship or a traineeship. While the subsidy only covers the period to 30 September, this may result in a significant cash flow saving to a business looking to make an investment in certain skilled workers.

Unlike the cash payment to employers, the measure does not state whether the subsidy will be tax-free and may therefore be assessable to the small business. This may have the effect of clawing back the deduction obtained for originally paying the relevant part of the wage.

What are the next steps?

The time period in which entities can access the stimulus package is limited and therefore action should be taken immediately. It is therefore critical to consider your position, whether you can qualify for the measures and the potential impact of the measures and how the rules apply. Many of these measures could assist clients in accessing much needed cash in the short term.

Contact your accountant to review your situation and determine what action is required.

Take a detailed read of the official government website which explains further details click here. There are some very good practical examples at the end of the page when going to the above link, so please read the whole article.

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