We have not experienced an economic disruption like COVID19 since a major war. To all the business owners adapting to the change, along with the medical staff on the front line, you are our heroes.
While medical staff save lives, you are providing a livelihood with purpose.
Thank you.
We know it’s an incredibly stressful time for you, so we have summarised the Australian Federal Government stimulus packages. Please use this as a guide and seek guidance from your tax practitioner.
Having traded through the global financial crisis and seeing the financial markets daily, we have been able to prepare our clients and associates for COVID19 - Bob Ratnarajah
We are happy to help any business planning during this critical stage.
Before we dive into the funding, we want to revisit the other ways businesses can preserve cash at this point:
1 – Limit or defer your fixed rent
2 – Defer your bank loans
3 – Retain the staff you need with limited hours for variable staff.
4 – You’ll already limit all your variable costs
To see the detail these, go to How to Preserve Your Plant-Based Business,& Adapt to COVID19 Storm.
Since our article, the federal government has promised to bring legislation to support tenants of commercial & residential properties during this time. While this is yet to pass legislation, now is the time to speak up about asking for a rent reduction if your business/job has been impacted by government restrictions.
Here's what we will cover. .
- $130B Job-keeper Payment to Keep Australian Working.
- Boosting Cash Flow for Employers
- Supporting Apprentices and Trainees ($21k/apprentice)
- Increasing the Instant Asset Write-off
- Backing Business Investment
- Coronavirus SME Guarantee Scheme
- Temporary Relief for Financially Distressed Businesses.
- ATO – options available to assist businesses impacted by COVID19
$130B Job-keeper Payment to Keep Australia Working.
Who is it for:
Any business (sole trader/trust/company/partnership) with revenue less than $1 billion & your revenue has decreased by 30% or greater since the 1st of March, for over a minimum one-month period. Eligible employees include full time & part-time stood down employees, and casual employees who have been with their employer for at least 12 months.
*** please note casual staff working with a business for less than 12 months are not currently covered. This is being debated in parliament and could change***
Funding: Employers will receive a payment of $1,500 (before tax) per fortnight for eligible employees. The payment will be paid to employers, for up to six months, for each eligible employee that was on their books on 1 March 2020 and is retained or continues to be engaged by that employer. For employees who have been stood down, they will need to re-engage with the business. The first payments will be made in the first week of May (and back dated to the 1 March) from the Australian Taxation Office.
Actions: Retrenched staff need to sign back on the books with your business. You can apply for the Job Keeper program and you will be paid in the first week of May. Register here:
Impact: You have the funding to keep the staff you need, when you come out of COVID19 restrictions in 3-12 months. However, you will need to manage your cashflow, because you will have payments for March & April, and you are refunded in May. If you need a cash flow buffer, see other bonuses below.
Boosting Cash Flow for Employers
Who is it for: The Government is providing up to $100,000 to eligible small and medium sized businesses, and not‑for-profits (including charities) with a turnover of less than $50 million that employ staff.
Eligibility: The entities above that derived business income in the 2018–19 income year and lodged its 2019 tax return on or before 12 March 2020; or made GST taxable, GST-free or input-taxed sales in a previous tax period (since 1 July 2018) and lodged the relevant activity statement on or before 12 March 2020.
Funding: The Government is providing up to $100,000. The first payment will be available from 28 April 2020 (BAS) and then will receive a payment equal to 100% of their PAYG and delivered as a credit in their BAS, with a minimum $10,000 payment and up to $50,000. Even if there PAYG is zero, with part time casuals, they will still be entitled to a minimum of $10,000.
A second payment, matching the first will be distributed for the June and Sep BAS periods.
Action: Speak to your accountant about submitting all your BAS & tax returns on time.
Impact: Timing of the BAS submission. This is a business cash boost and does not need to be declared. Also, eligible entities will receive an additional payment equal to the total of all the Boosting Cash Flow for Employers payments received. These payments will be from 28 July 2020
Supporting apprentices and trainees ($21k/apprentice)
Who is it for: Eligible employers who have less than 20 staff, who retain and train apprentice staff, can apply for a wage subsidy of 50 per cent of an apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020. If a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.
Funding: Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter).
Action: Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network (AASN) provider. You have until 31st of December 2020 to submit the claim and the funds will be received following the submission.
Impact: This will aid your business cashflow and provide funding for apprentice staff hire of $21,000 per staff.
Increasing the Instant Asset Write-off
Who is it for: Businesses with turnover less than $500 million. For assets first used or installed ready for use from 12 March until 30 June 2020, the Government is increasing the instant asset write-off threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.
Funding: capital items are usually depreciated over a period of time. The Government is increasing the instant asset write-off threshold from $30,000 to $150,000. This will allow you to deduct any large capital expense in the current financial year and reduce your tax liability.
Action: If you are considering making any large purchases now is a good time to reinvest into the business.
Timing: Currently this provision is entitled to business with turnover less than $50 million. This is due to revert to $1,000 for small businesses (turnover less than $10 million) from 1 July 2020.
Backing Business Investment
Who is it for: Businesses with a turnover of less than $500 million 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’s cost.
Funding: 50% of large capital items can be expensed in financial years 2020 or 2021.
Action: If you are considering making any large purchases now is a good time to reinvest into the business.
Timing: The capital item needs to be installed before 30 June 2021 and the expense can be claimed for the respective tax year
Coronavirus SME Guarantee Scheme
Who is it for: Sole traders, partnerships and businesses with turnover less than $50 million.
Funding: The government will guarantee 50% of new loans issued by eligible lenders to SME. Maximum total loan size of $250,000
Action: The decision on whether to extend credit, and management of the loan, will remain with the lender. However, the Government expects that lenders will look through the cycle to sensibly take into account the uncertainty of the current economic conditions when determining whether credit should be extended.
Timing: Starting from Apr 2020, the new loans are available until the 30th of September. The loans will be up to 3 years. With an initial 6 month repayment holiday. The borrower will NOT need to provide security
More information: https://treasury.gov.au/coronavirus/sme-guarantee-scheme
Temporary Relief for Financially Distressed Businesses
Who is it for: All business owners and directors.
Benefit: The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive. The package also includes temporary relief for directors from any personal liability for trading while insolvent, and providing temporary flexibility in the Corporations Act 2001 to provide temporary and targeted relief from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis
Action: If this is an issue with creditors, make sure you have a sound financial & business plan to pivot your business.
Impact: A creditor issuing a statutory demand on a company is a common way for a company to enter liquidation. The Government is temporarily increasing the current minimum threshold for creditors issuing a statutory demand on a company under the Corporations Act 2001 from $2,000 to $20,000. This will apply for six months.
ATO – Options Available to Assist Businesses Impacted by COVID19
This relief is useful if you’re experiencing cash-flow challenges.
- Deferring by up to 4 months the payment date of amounts due through BAS (including PAYG instalments), income tax assessments, FBT assessments and excise.
- Allow businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.
- Allowing businesses to vary PAYG instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
- Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities.
- Allowing affected businesses to enter into low-interest payment plans for their existing and ongoing tax liabilities.
The ATO assistance is not automatic, taxpayers must first contact the ATO to request assistance, and if eligible, the ATO will tailor the assistance package for the relevant taxpayer. graph text here.
The above information has been gathered from the following websites:
https://treasury.gov.au/coronavirus/businesses