As the situation around coronavirus (COVID-19) continues to evolve, Woodward & Co. Accountants and Advisors are available to assist you with any commercial and financial matters in regards to your business and investments.
A number of initiatives have been announced to assist businesses and investors impacted by the economic uncertainty or experiencing financial hardship, which we have summarised below:
Federal Government stimulus
The Federal Government’s stimulus package has seven key parts for small businesses:
1. Asset write-off
The instant asset write-off threshold has been increased from $30,000 to $150,000 until 30 June 2020 i.e. those assets can be immediately written off.
2. Accelerated asset depreciation
A 15-month investment incentive will operate to accelerate certain depreciation deductions through to 30 June 2021. Businesses will be able to immediately deduct 50% of the cost of a new asset in the year of purchase, with existing depreciation rules applying to the balance of the asset’s cost.
3. Refund of PAYG withholding on employee wages
Tax-free payments of up to $50,000 with a minimum payment of $10,000 based on their PAYG withholding obligations. These payments are for businesses with a turnover of less than $50 million that employ staff, between 1 January 2020 and 30 June 2020. These businesses will receive payments of 100 per cent of their withholding on Business Activity Statements or Instalment Activity Statements from 28 April.
Then an additional payment is also being introduced in the July to October 2020 period. Eligible entities will receive an additional payment equal to the total of the payments above they have received commencing 21 July 2020. This means that eligible entities will receive at least $20,000 and up to a total of $100,000 under both payments.
4. Apprentices & Trainees
Eligible employers can apply for a wage subsidy of 50% of an apprentice’s or trainee’s wage for up to 9 months from 1 January to 30 September 2020.
5. Income support for individuals
Over the next six months, the Government is temporarily expanding eligibility to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight. This will be paid to both existing and new recipients of Jobseeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.
This will also apply to sole traders who have found their work has dried up due to the coronavirus. The assets test and the waiting period have been abolished. The income test still applies.
6. Temporary relief for financially distressed businesses
The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and to initiate bankrupt proceedings against an individual as well as temporarily increasing the time companies and individuals 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 targeted relief from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.
This means increasing the threshold at which a creditor can pursue insolvency proceedings (from $2,000 to $20,000), and giving people up to six months to respond, over the current 21 days. The most significant item though is businesses will be able to trade while insolvent.
The ATO will tailor solutions for owners or directors of business that are currently struggling due to the Coronavirus, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.
7. Support for immediate cash flow needs for SMEs
Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50 percent to SME lenders to support new short-term unsecured loans to SMEs. This would include loans of up to $250,000 over 3 years, with no payments required for 6 months.
QLD Government stimulus
The QLD Government’s stimulus package has three key parts for small businesses:
1. Queensland COVID-19 Jobs Support Loans
A $500 million loan facility has been established to support Queensland businesses, impacted by COVID-19, to retain employees and maintain their operations. The loan facility will comprise low interest loans of up to $250,000 with an initial 12-month interest free period.
2. Payroll tax support
Businesses with up to $6.5 million in wages may be able to apply for a relief package to defer lodging and paying payroll tax returns until 31 July 2020. You may be eligible for the relief package if your current turnover, profit, customers, bookings, retail sales, supply contracts or other factors—compared with normal operating conditions—have been directly or indirectly affected by COVID-19.
3. Support for exporters
The $1.1 million ‘Market Ready’ initiative will provide tailored export advice to small and medium size enterprises (SMEs) on leveraging opportunities in the Chinese online market, support brand development by providing market intelligence and expert advice for exporters entering new markets and host China market development forums to provide practical export advice.
NSW Government stimulus
The NSW Government’s stimulus package has two key parts for small businesses:
1. Payroll tax support
Payroll tax for businesses with payrolls of up to $10 million will be waived for three months (the rest of 2019-20). This means these businesses will save a quarter of their annual payroll tax bill in 2019-20.
The Government is also bringing the next round of payroll tax cuts forward, meaning the payroll tax threshold will rise to $1 million in the financial year 2020-21.
2. Fee waiver
The NSW Government will waive a range of fees and charges for small businesses including bars, cafes, restaurants and trades.
Loan assistance - Businesses
The banks have advised small businesses can apply for a six-month break from making repayments on their loans. Note interest will continue to accrue during the payment holiday, adding to the amount eventually due when the crisis lifts. At this stage this doesn’t apply to residential mortgages however the Australian Banking Association are monitoring the situation and you should speak with your lender if you are experiencing financial hardship at any stage over the next few months.
Individual banks may also be reducing rates on some loan products, and providing additional resourcing and extended hours for commercial lending teams to ensure faster decision times. If you need assistance with securing your funding lines or cash flow planning please don’t hesitate to contact our office.
Commercial Property Landlord/Tenant support
We are starting to see commercial property business tenants across the country requesting rent relief, and this will likely continue over the next few months. This will be a difficult situation for landlords as in addition to loss of income, most landlords rely on rent payments to pay for the mortgage on their properties.
Tenants should consider their lease documents, the relief measures available above, their coverage for loss of income under existing insurance policies (and any pandemic exclusions), and have accurate and up to date financial records and key performance indicators to demonstrate the loss of income when discussing with their landlord. Equally, landlords should be considering these same items for discussions with their tenants and lenders.
Please contact our office if you need support or would like to discuss any business or investment matters over the next few months.