WHAT CAN YOU GET FROM THE STIMULUS PACKAGES?
Continuing our previous newsletter, we now present an update on the latest announcements, explicitly focusing on the developments made by accountants in Sydney. It is important to note that the information provided so far has been in press releases, and further details may emerge once the legislation is enacted. We anticipate completing this process promptly to eliminate any lingering uncertainties. Below, we have compiled a summary of the currently available packages between the 12th and 22nd of March.
SUPPORT FOR BUSINESSES
Boosting Cashflow for Employers
- The original measures announced on 12 March have now been extended so that employers can receive up to $100,000 and a minimum of $20,000. The details of this incentive are as follows:
- Available for businesses that were established on 12 March. We await clarity on whether the business needs to be registered for PAYGW on that date.
- For businesses with an aggregated annual turnover of < $50M and that employ workers.
- Employers will receive 100% of the PAYG withheld in the March BAS, with the maximum first payment up to $50,000 (minimum payment is now $10,000). This will be received as a credit against all tax liabilities in the March BAS, due for lodgement and payment on 28 April.
- An additional payment has been introduced in the July – October period. The additional payment will be up to another $50,000 over the period up to the lodgement of the September BAS. The calculation is quite complex, but you can see its mechanics in the examples on the below link.
- Available for businesses that were established on 12 March. We await clarity on whether the business needs to be registered for PAYGW on that date.
- Support to retain Apprentices and Trainees is as follows:
- Eligible employers can apply for a wage subsidy of 50% of the apprentice and trainee’s wages from 1 January 2020 to 30 September 2020.
- Up to a maximum of $21,000 per apprentice or trainee ($7,000 per quarter).
- Available to businesses employing < 20 full-time employees.
- The apprentice or Trainee must have been training with a small business as of 1 March 2020.
- Employers can register for the subsidy from early April—final claims by 31 December 2020.
- For information on how to apply, contact the Australian Apprenticeship Support Network.
- Eligible employers can apply for a wage subsidy of 50% of the apprentice and trainee’s wages from 1 January 2020 to 30 September 2020.
Instant Asset Write Off
- As we reported in our last newsletter about the 12 March package, nothing has changed since that date. You can now instantly write off assets purchased between 12 March 2020 and 30 June 2020, which cost < $150,000.
- This benefit is extended to businesses with a < $500 million turnover.
- The write-off threshold will revert back to $1,000 from 1 July 2020.
- Business investment incentives with accelerated depreciation deductions are also available for eligible assets first used or installed by 30 June 2021—details in the link below.
Payroll Tax and NSW Tax Relief
The NSW state government has brought certain concessions to help with businesses and payroll tax liabilities as follows:
- Employers with group wages of < $10 million are eligible.
- Eligible employers will have their 2019/2020 payroll tax liability reduced by 25%. The final calculation of the reduction will be quantified when the annual reconciliation is lodged by 28 July 2020.
- Until then, eligible employers will not have to make payroll tax payments for the months of March, April and May 2020. Once we get clarification, we will advise whether the actual payroll tax returns for those months must be lodged. The actual wages paid must still be reported in the annual reconciliation.
- The threshold before payroll tax is applicable to increase to $1 million from 1 July 2020.
- A range of unspecified fees and charges for small businesses, including tradespersons, cafes, cars and restaurants, will be waived.
There are similar concessions for other states, which can be found on the relevant websites for those states.
https://www.revenue.nsw.gov.au/taxes-duties-levies-royalties/payroll-tax
Credit and facilities support
- Coronavirus SME Guarantee Scheme
- Will provide a guarantee of 50% to SME lenders (i.e. banks) for new unsecured loans to be used for working capital. This hopefully will enhance lenders’ ability to provide finance to SMEs.
Some of the details around this are:
- To be eligible, the SME turnover < $50 million.
- The maximum loan size is $250,000 per borrower.
- Loans are for up to 3 years and an initial six-month repayment holiday.
- Loans will be unsecured, so no other assets are needed as security.
- Loans are still subject to banks’ credit assessment processes, including proving an ability to repay after the first six months of the repayment holiday.
- Commences in early April and is available for new loans until 30 September 2020.
- To be eligible, the SME turnover < $50 million.
- Will provide a guarantee of 50% to SME lenders (i.e. banks) for new unsecured loans to be used for working capital. This hopefully will enhance lenders’ ability to provide finance to SMEs.
- Quick and Efficient access to credit for Small Businesses
- The government will provide an exemption from the usually responsible lending obligations for lenders providing credit to SMEs for the next 6 months.
- Applies to any credit for business purposes, including new credit, credit limit increases, variations, and restructures.
- The government will provide an exemption from the usually responsible lending obligations for lenders providing credit to SMEs for the next 6 months.
- Supporting the Flow of Credit and the ability for Banks to lend
- Reserve Bank announced on 19 March a package that will put downward pressure on borrowing costs for households and businesses. Banks will have access to funding at a fixed rate of 0.25%.
- Relaxing the required bank ratios enables them to lend to businesses more efficiently.
- Reserve Bank announced on 19 March a package that will put downward pressure on borrowing costs for households and businesses. Banks will have access to funding at a fixed rate of 0.25%.
https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Supporting_the_flow_of_credit_1.pdf
Temporary Relief for Financially Distressed Businesses
The elements of this package include:
- Temporary higher thresholds and more time to respond to creditors’ demands.
- A creditor can’t issue a statutory demand in the next 6 months unless the debt outstanding is > $20,000.
- A company has 6 months to respond to a creditor’s demand instead of 21 days.
- Personal bankruptcy cannot be initiated unless the outstanding debt is > $20,000, which applies for the next 6 months.
- A creditor can’t issue a statutory demand in the next 6 months unless the debt outstanding is > $20,000.
- Temporary Relief from Director’s Personal Liability for trading while Insolvent
- To avoid the possibility that company boards will make quick decisions on whether their companies are trading while insolvent, Directors will be relieved from personal liability associated with insolvent trading for the next 6 months.
- Applies to debts incurred in the ordinary course of business.
- To avoid the possibility that company boards will make quick decisions on whether their companies are trading while insolvent, Directors will be relieved from personal liability associated with insolvent trading for the next 6 months.
Assistance for Severely affected Regions and Sectors
The Government will set aside $1 billion to support regions, communities and industries disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on tourism, agriculture and education. The Government will determine which regions and industries will be targeted and implement recovery plans.
There are also concessions for certain fuel taxes and charges for airlines and airports.
Australian Tax Office Relief
The ATO will provide administrative relief for certain obligations for taxpayers affected by the Coronavirus outbreak on a case-by-case basis, as follows:
- Deferment of payments of certain taxes for up to 6 months. As always, there is also the ability to arrange payment arrangements.
- Allowing variation of pay-as-you-go instalments (PAYGI) for businesses for the March quarter to zero. This may allow a refund of PAYGI already paid in the September and December quarters.
- All taxpayers affected should contact us to determine the best way to access these concessions.
SUPPORT FOR INDIVIDUALS
The federal government has announced the following support to assist individuals during the next 6 months.
- Expanded eligibility to income support, including providing access for permanent employees who are stood down or lose employment, sole traders, self-employed and contract workers that meet income tests. There will be reduced assets means testing. Income means testing will still be applicable. Additionally, the one-week waiting period will be waived.
- New time-limited Coronavirus supplement to be paid at $550 per fortnight. This will be paid to existing and new recipients of the eligible categories. It will commence on 27 April 2020 and will apply for 6 months.
- Early access to Superannuation is now available. It is a temporary measure for the 2020 and 2021 financial years. Eligible individuals can apply online through myGov to access up to $10,000 of their super before 1 July 2020. They can access a further $10,000 from 1 July 2020 for approximately 3 months. The amount withdrawn will be tax-free and not affect your Centrelink benefits. You will be able to apply from mid-April.
To be eligible, you must satisfy one of the following:
- You are unemployed.
- You are eligible to receive an eligible social security allowance.
- On or after 1 January 2020, you were made redundant, your working hours were reduced by 20% or more, you are a sole trader, your business was suspended, or your turnover was reduced by 20% or more.
- You are unemployed.
https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Income_Support_for_Individuals.pdf
https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Early_Access_to_Super_1.pdf
SUPPORT FOR HOUSEHOLDS
Support for households is forthcoming in the form of:
- Two separate tax-exempt $750 payments to resident social security and other income support recipients and eligible concession card holders exist. It will not count as income for social security purposes.
- The first payment (announced on 12 March) will be available between 12 March and 13 April. It will be paid automatically into your bank account from 31 March 2020.
- The second payment will be available on 10 July 2020. It will be paid automatically into your bank account from 13 July 2020.
https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Payments_to_support_households.pdf
SUPERANNUATION FUND AND SOCIAL SECURITY RELIEF
To avoid the need to crystallise losses on investments at the worst possible time, the Government allows superannuation funds to reduce the superannuation minimum drawdown requirements for account-based pensions and similar products by 50% for the 2019/2020 and 2020/2021 income years.
Additionally, from 1 May, the lower and upper deeming rates for Centrelink purposes will become 0.25% and 2.25%, respectively.
There is a lot of information to absorb above. Please review and contact your client manager to discuss your specific circumstances.
WHAT SHOULD YOU BE DOING TO SURVIVE THE CRISIS?
Well, we can safely say in the 50 years this firm has been in business, we have never experienced anything like what is happening now. Like all crises, well-managed businesses will have the best chance of surviving.
It would be best if you did whatever you could and took any actions to survive the turmoil.
We encourage you to contact us to discuss the issues with your client manager, but in the meantime, some of the areas you should be looking at are listed below.
- Cash is King. The number 1 priority is to go through your figures and work out, based on whatever assumptions you can formulate in this crazy time, what the cash flow of your business looks like over the next 9 months. Work out where the holes are and plan how to fill them. Do the forecasts and budgets (profit & loss and cash flow) on several scenarios. We have always suggested 3 versions with different assumptions – the pessimistic, realistic and optimistic. You can start making plans for all scenarios once you know the facts.
- Once you know the cash flow position, you can start determining what strategies you need to implement to ensure your survival. Plan based on the pessimistic scenario above; anything above that is a bonus. The type and level of strategy you undertake, of the ones listed below, will depend on how dire the cash flow situation is during the period.
- Strategies to be considered:
- Look at the high costs in your business and start determining what can be cut or decreased. What can be cut now? What next set of costs can be cut if things worsen? What costs must stay as they pay for themselves?
- Chase debtors. With the downturn, your debtors will also be trying to conserve funds. You are more likely to be paid if you are vocal about your need. The loudest to shout is likely to be the one that is paid. This is the most important job in the business in the coming months.
- Approach your bank to shore up your finance facilities to cover future holes in cash flow. Take advantage of the concessions in the attached article on relaxing bank lending requirements. Ensure the bank is on board, understands your plan, and supports them. Communication is the key here. You will need their help to get through this. In particular, the banks allow repayment holidays under certain conditions, so contact them to see if you are eligible.
- Start looking at staffing levels. Do you need to put off staff, and if so, how? Permanently or do you cut the number of days being worked? Do you renegotiate wage rates as an interim measure? Are redundancies needed, and what will they cost? Research and discuss with HR experts, lawyers, and ourselves to ensure it is done correctly if you decide to take this measure. To help staff put off, you may want to educate them about the stimulus available for individuals shown in the attached article.
- Look at any contractors you engage to see if they can be put off. What are the terms of the current contract you have with them?
- Start looking at supplier contracts. Can you adjust the terms or ask for some relief? This includes possibly approaching the landlord if the current lease is becoming onerous. Hopefully, landlords and suppliers will be open to temporary relief until the business environment improves.
- Defer paying creditors for as long as possible. While you must keep your good credit name intact, you will need to manage cash flow during the period. This may mean you have to string out some payments. You may need to discuss this with your creditors, especially if you need them to supply products in the future.
- Superannuation has to be paid by the 28th of the month after each quarter. If you currently, as a matter of habit, pay every month, there is no reason not to defer the payments until the end of the quarter. It will help with cash flow in the period up till then.
- Remember the payroll tax concessions and take advantage of them over the next few months.
- Check suppliers are going to be able to supply you with the products you need. Do they have capacity? Will they deliver on time? Will the supply of goods and products you need be adversely affected by the crisis?
- Access every concession you can from the stimulus package. What tax breaks can you get? What help will the banks be able to provide you? Are there any concessions available from Centrelink? Every little bit helps, so research and be first in line to access the concessions.
- Look at the high costs in your business and start determining what can be cut or decreased. What can be cut now? What next set of costs can be cut if things worsen? What costs must stay as they pay for themselves?
If you start with the above strategies, you will ensure you survive the turmoil of the next 12 months. You need to look after number 1, which means you must be the one still around to take advantage of the good times when the crisis subsides. Please review the above and discuss the measures with your client manager. We are here to help, so if you have any questions, feel free to reach out and contact us.
Kreston Stanley Williamson Team
Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
