It seems the whole world is talking about COVID-19, which given the latest updates is understandable.
However, the constant bombardment of news and advice on social distancing, self-isolation, empty supermarket shelves and talk of business closures has left many of us feeling worried, stressed, overwhelmed and uncertain about what the future holds.
This can have a detrimental impact on our economy, finances, businesses and mental health.
A key thing to remember during times like this is that although we may be in for a challenging time ahead, there isn’t a lot we can control individually.
The most important thing to do right now is to focus on what you CAN control within your circle, and detach from the rest.
This includes looking after yourself, the people around you and the operations of your business/ job. It also involves only listening to the direct advice of Government officials and Public Health organisations.
Today we’re going to cover as much as we can in the simplest way possible.
We hope that this will help you gain a better understanding of what does and does not apply to you right now.
The Impact on Businesses
The Federal Stimulus is something that has received a lot of attention over the previous weeks. But for most people, a lot of the changes have been misinterpreted, misunderstood and confusing at best.
That’s why we’re going to do our best to break it all down as simply as we can for you here.
1) Additional Cash Flow for Employers
OK, this is a key one and has brought a lot of confusion among business owners with many thinking that they are getting a cash payout. This is not exactly the case!
All employers with a combined annual turnover of under $50 million (based on prior year turnover) are entitled to a payment of $20,000 – $100,000 from the government, to help with cash flow. BUT, although they refer to it as a “payment”, it’s highly unlikely that business owners will receive this amount in cash, contrary to what many think.
Instead, eligible businesses will receive a payment equal to 100% of their PAYG withholding taxes (if any) withheld from employees’ salary and wages from January to June 2020 period.
If you are a business that pays salary and wages, you may be entitled to receive a minimum payment of $10,000, even if you’re not required to withhold tax. But again, contrary to what many think, this payment is unlikely to be paid in cash.
Instead, a credit of the eligible amount will be made to the taxpayer’s Integrated Account with the ATO.
Simply, this means that if you have any outstanding debts or payments to the ATO, these payments will be used to pay off this debt before you actually see any money refunded back to you. If you don’t have any outstanding debts, the ATO will deliver the refund to you within 14 days. The delivery of such payment is yet to be confirmed.
Clients on quarterly PAYG Withholding lodgements will see the credits once their March 2020 BAS has been lodged. This payment will be TAX FREE.
Those on a monthly reporting cycle should see the credit from April 2020 onwards.
IMPORTANT NOTE: LODGING YOUR MARCH 2020 BAS
Due to the stimulus payments being accessed through the lodgement of future Business Activity Statements (BAS), we strongly RECOMMEND that you meet with us before BEFORE you lodge to review it.
That way we can ensure that you are maximising your entitlements, stimulus payments and eligible benefits as much as possible.
2) Apprentice and Trainee Wage Subsidy
Now, this is a big one for tradies…
- The government is offering employers a wage subsidy of 50% of an apprentice’s or trainee’s wage from 1 January to 30 September 2020. However, this is capped at $7000 each quarter per each eligible apprentice or trainee.
- Businesses with less than 20 full-time staff will be eligible, however employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will be eligible for the subsidy.
- Eligible businesses will need to register for this subsidy from April 2020 with final claims to be lodged by the 31st of December 2020.
3) Business Lending Guarantee
The Government will provide a guarantee of 50% to Small and Medium Enterprise lenders for new unsecured 3 year loans of up to $250,000 per borrower to be used for working capital. These loans will be up to three years, with an initial 6 month repayment holiday.
- The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.
- Loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look through the cycle to sensibly take into account the uncertainty of the current economic conditions.
- The Scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.
4) Payroll Tax Refunds
- Small and medium-sized enterprises with a payroll of less than $3 million will have their payroll taxes refunded, given they have paid them to the State Revenue Office for the current financial year since July 2019 to March 2020.
- Further, payroll taxes for the June quarter will be waived by the State Revenue Office.
- This refund alone is expected to cost the Victorian Government around $550 Million.
- According to the latest updates, these refunds should start to come in from Friday.
5) Increases to the Instant Asset Write-Off
- Another proposed change is that the threshold for instant asset write-offs for business will be increased from $30,000 to $150,000 for each asset.
- They are also going to expand access to businesses with an aggregated annual turnover of up to $500 million (up from $50 million).
- The increase will only be available from 12 March to 30 June 2020 for new or second-hand assets first used or installed ready for use by 30 June 2020.
- This means that an asset acquired before or after this period will not be eligible for the increased instant asset write off.
6) Temporary Relief for Financially Distressed Businesses
These measures are designed to give a safety net for businesses to ensure that when this crisis has passed, they can resume normal business operations.
It includes lessening the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business.
- A temporary increase in 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.
- A temporary increase in the threshold for a creditor to initiate bankruptcy proceedings, an increase in the time period for debtors to respond to a bankruptcy notice, and extending the period of protection a debtor receives after making a declaration of intention to present a debtor’s petition.
- Temporary relief for directors from any personal liability for trading while insolvent.
Other Business Measures
If so, here’s a list of support measures that the ATO have put forward to help you, especially if you are experiencing financial difficulty.
Some of the options available to assist impacted businesses include:
- Deferring the payment date of amounts due through the business activity statement by up to six months (BAS, including PAYG instalments), income tax assessments, FBT assessments etc).
- Allowing businesses to opt into monthly GST reporting to get quicker access to GST refunds (if any). This is if they are on a quarterly reporting cycle.
- Allowing businesses to vary Pay As You Go (PAYG) instalment amounts to zero in March 2020 quarter BAS, if they’re wanting to 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.
- Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low interest payment plans.
- A time-limited 15-month investment incentive (through to 30 June 2021) which will operate to accelerate certain depreciation deductions. This measure will also be available to businesses with a turnover of less than $500 million, which will be able to immediately deduct 50% of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost. As announced, this measure is proposed to only apply to new depreciating assets first used, or installed ready for use, by 30 June 2021.
Although these concessions are available, employers still need to meet their ongoing super guarantee obligations for their employees.
The Importance of Having a Business Continuity Meeting
As your accountants and advisers, we want to do everything we can to help you during this time.
That is why we are now offering a new temporary service called the: COVID-19 Business Continuity Plan (BCP). The BCP addresses 7 key areas that affect you and your business:
- Cash Flow
- Protection of your Assets – including personal assets like your family home.
- Banks and Funding
- Management Team planning
- Your Employees
- Customers & Suppliers
- Mental Health
This plan will also give you guidance to help you keep your business alive.
To take advantage of the Business Continuity Planning you have 2 options available.
- Get a PDF version of our COVID-19 Business Continuity Plan
- A 1-hour Business Assistance Meeting with us, including an in depth review of the COVID-19 Business Continuity Plan
During the Business Assistance Meeting we will discuss:
- The main Coronavirus updates
- Your personalised Business Continuity Plan
- Help to answer any concerns you have for your business
- Explain possible solutions to support your business during this time
- And guide you through the best actions to take
- You will also get your own personalised copy of the Business Continuity Plan (Summary PDF) which we will review with you during the meeting.
If you’re interested in booking a Business Assistance Meeting, or would like to get a copy of the Business Continuity Plan, contact us on (03) 9762 7344.
HRM & Staffing
For business owners, one of the most distressing things about times like this is the need to lay off staff.
Having these conversations with staff can bring a lot of distress, but unfortunately sometimes it has to be done to keep the business alive in the long run.
We received some advice from one of our HR associates regarding staff. In summary, she recommends challenged business owners to have conversations with their staff regarding whether they would like to take unpaid stand down or to go on paid leave.
According to section 524 of the Fair Work Act 2009 (Cth), a company can make the decision to stand down employees without pay due to the following circumstances:
- Stoppage of work that the employer cannot be held reasonably responsible for, and
- The employer cannot usefully redeploy the employee(s),
Think of it like pressing the “pause” button on the employment relationship.
The employee is still legally employed and accrues leave entitlements, but does not get paid.
Alternatively, the employee may choose to take a period of paid leave, such as annual leave or long service leave, but:
- The employer is not obliged to pay leave entitlements out,
- The employee generally cannot be forced to use up their accrued leave.
Managing staff during this time can be tricky.
We are here to help support you as best as possible, and are happy to recommend you to professionals who are experts in this field if you need help.
The Impact on Individuals
In addition to businesses, the new government stimulus is also focused on helping individuals during this difficult time.
The following policies have been added including:
1) Direct Payments
The government is planning to make two payments of $750 each to social security, veteran and other income support recipients and eligible concession card holders residing in Australia.
These payments will be tax free and the first one will be paid from March 31st. The second payment will follow in July 2020.
2) Temporary early release of superannuation:
Individuals affected by Coronavirus will be able to access up to $10,000 in each financial year 2019/20 and 2020/11.
At this stage there will be no tax on these payments and accessing Superannuation early will not impact Centrelink related benefits.
3) Temporary reduction of superannuation minimum pension:
Minimal pension payments draw down requirements are being changed to reduced account-based and similar products by 50% for the current financial year and year 2020-21.
For some, this could be a very disheartening and emotionally taxing time. This is why we need to focus on supporting and caring for one another as much as we can.
If you or a loved one are struggling emotionally there are organisations available that you can contact for help or to offload to.
Beyond Blue, as an example offers 24/7 support. You can contact them on 1300 22 4636 or at beyondblue.org.au/get-support/ for online chat and email.
Alternatively, if you require immediate support, call Lifeline on 13 11 14 and always call triple zero (000) in an emergency.
Don’t suffer in silence. These things are often easier to manage when shared.
Contact us today on (03) 9762 7344.
All the best & keep healthy and safe!