What the Coronavirus Stimulus Package Means for the Automotive Industry

Car Part World News

Apr 03rd, 2020

What the Coronavirus Stimulus Package Means for the Automotive Industry

The coronavirus has taken the world by storm and passed its first one-million mark (1,016,372 cases globally as of today, 03 April 2020, 6:00 GMT). Governments have adopted various programs to slow down the rate of infection and cushion the financial impact on their citizens. On the 12th of March, Prime Minister Scott Morrison announced measures to roll out funds to help its citizens cope as the fight against COVID-19 intensifies. 

The government would inject a $17.6 billion stimulus package to help sustain economy. It is intended to support business investment, provide SMEs much needed cash flow assistance, support areas, regions, and communities severely affected by the pandemic, and tide over Australian households. There is also an SME guarantee scheme that supports lending.

By the end of March, the measures from the federal government, states, and the reserve bank totalled over $330 billion. 

What Is the Importance of This Stimulus Package to the Economy?

The fiscal stimulus package is the government's way of injecting more money into the economy to give it an adrenaline shot during this challenging period. Incentives include providing cash handouts directly to households so that the same money can be injected back into the economy through spending. It will keep people employed, ensuring that they continue to offset their liabilities as they continue to spend on daily necessities. 

This is the government’s way of helping Australians keep their jobs and cushion those who lose work. The package also covers veteran income support recipients and concession cardholders. 

Wage subsidies for non-profit charities and small businesses with a turnover of less than $50 million were increased to $25,000 cash refund to a maximum payment of $100,000. 

Steps Taken By the Federal Government

The federal government has released funds for the payment of welfare benefits and business wage subsidies. It will also supplement jobseeker payments and job keeper payments for employers to pass on to employees to keep them in their work. 

The Reserve Bank of Australia and the Federal Government announced plans to release funds to banks to enable them to continue lending to businesses. 

Steps Taken By State Governments

The New South Wales state government increased the health funding to $700 million as part of its stimulus package. They also deferred payroll tax and injected more funds to boost employment services in the state. 

The Victoria state government released funds to support workers transitioning to new jobs, support businesses, and mitigate effects the pandemic has had on hardest-hit sectors, including tourism, accommodation, entertainment, and retail, among others.

Queensland's state waived five months of payroll tax for businesses and released some funds for the households.

The West Australian government released funds to cover, among other things, household charges until the next financial year (that is, 31 June 2021). The state also announced plans to double the Energy Assistance Payment for vulnerable citizens, including pensioners.

The Tasmanian state government made efforts to fast track maintenance, provide interest-free loans to affected businesses, purchase equipment, and supplies, additional fund staffing to combat COVID-19, and provide payment to individuals and families who are required to self-isolate.

The Australian Capital Territory citizens got a $150 rate rebate and businesses to a $2,622 credit for their commercial rates bill. 

The Northern Territory state government provided its citizens and businesses with funds for home renovations and business upgrades, respectively. They also created a small business survival fund. 

How Do the Exemptions Work?

Some state government stimulus packages offer citizens exemptions from household charges for a specified period. It DOES NOT mean that you are FULLY EXEMPT from paying the household charges. It means that there will be NO INCREASES to the bills which were set to rise this year due to inflation. 

This year’s budget included a 2% increase to these charges – water, electricity, and car licenses and registration – based on the projected effects of inflation. So funds were rolled out to spare the people from this increased costs (estimated at $127).

What Does It Mean for the Automotive Industry?

For one, businesses with a turnover of less than $500 million will get a 50% reduction in the cost of an eligible asset on installation. 

Small and medium businesses will receive a one-off grant of $17,500. So if your business, whether you are a car or car parts dealer, has a payroll of $1-4 million, you may avail of this grant. 

Also, if you pay less than $7.5 million in taxable wages, you may apply for the deferment of payroll tax payment to 21 July 2020.  

What Does It Mean for New Car Buyers?

The stimulus package includes an instant asset tax write-off from $30,000 to $150,000. This is an enticing offer and would probably push you towards going for more expensive higher-tier cars. But you need to be careful. Why? There are other taxation laws in play that will limit what you can depreciate. 

Though the legislation is still in its initial stages, depreciating limits will most likely continue to apply. So the proposed write-off of up to $150,000 will benefit persons spending the previous $30,000 threshold to about $60,000 (though there is confusion around this maximum amount).

Business owners who think this arrangement could fund their new cars may be wrong because instant write-off works differently. The Australian Taxation Office (ATO) is not in the business of funding taxpayers. Instead, the write-off arrangement pulls forward how quickly you can get a tax deduction by shortening the depreciation period of the car. 

This does not mean that you save on tax; you will still pay, but over a short period, then you are eligible for a tax deduction. But you will have the much-needed cash flow during these tough times.

Also, note that the write-off will only apply until 30 June. So if the write-off is the reason you ordered that expensive set of wheels you wanted to have, this information can help you decide whether to buy or rethink your decision.


The coronavirus has decimated populations and continues to threaten humanity. It has brought with it a financial crisis, even giving us a glimpse of the Great Depression. The Australian government is shaken, yet is doing all it can to ensure that businesses and individuals who are affected get the much-needed reprieve. The Prime Minister himself mentioned how difficult it is “to imagine the world on the other side” of the COVID-19 pandemic. Yet, we have to prevail over this crisis as a people and come out of it as one. 

Meanwhile, let’s adhere to the strict social distancing requirements and take all precautions to fight the virus. The COVID-19 crisis is yet another blow to the car parts industry, and it will affect us no doubt. But it, too, shall pass, and we will be stronger for it.

By Eric Anyega