Month: March 2020

On the morning of Sunday 22 of March, our prime minster Scott Morrison unveiled a second stimulus package totalling $66 billion. I’m going to be running through these updated incentives, particularly those that directly affect Australian small business.

Now I’ve been a little bit slow in covering these off, with the main reasons being:

1. We’ve been waiting for the package to be passed through as law. This didn’t happen until Monday evening after the package was announced on Sunday morning.

1. There were some grey areas which we tax professionals were still waiting for guidance on.

1. I’ve been very busy this week guiding my clients through these new measures, so it’s been a busy week of phone calls, emails and Zoom meetings!

Now as I write this blog, there are already talks about a third stimulus package, so will eventually cover those off in the future. But seriously, things are moving so quickly!

Stimulus Package

The package has three parts:

• Supporting individuals and households
• Support for businesses
• Supporting flow of credit

Small to medium-sized businesses: between $20,000 and $100,000 to help with cashflow

Remember in my last video I spoke about a ‘cashflow’ incentives between $2k to $25k. The government has bumped this up between $20 to $100k for eligible businesses. 100% of PAYG withholding obligations aka tax on employee wages will be reduced. This increased from the original 50% to now ALL of PAYGW! This incentive is particularly relevant for a number of my clients.

Again this isn’t going to be ‘magic cash’ in the bank as such – it’s much more complicated than that. It’s going to be reducing ATO payment obligations as part of your BAS with potentially cash incentive after the application of X, Y, Z. I hate when the media uses the term ‘cash payment’. It implies some sort of instant government money of $X – THIS IS NOT THE CASE!

This depends on a number of things like tax on wages amount, any GST payable, existing ATO BAS debt. It’s actually applied over a number of months so the cash flows through an extended period to keep the wheels on our economy rolling. So, if you lodge a monthly or quarterly activity statements and have employees, speak to your tax professional to find out what you are entitled to as they will do the nitty gritty calculations.

Welfare recipients: second $750 payment & additional $550 per fortnight

In my first stimulus package blog I spoke about the $750 cash payment that was being dished out to people on Jobseeker Payment, Youth Allowance, Parenting Payment, Farm Household Allowance and Special Benefit recipients on 31 March 2020. A second $750 is going out on the 13 July 2020.

The government will temporarily double Jobseeker payment, providing people with an additional $550 a fortnight. The payment will be available to sole traders and casual workers, provided they meet income tests. However, the assets test and waiting period waived.

This $550 increase in time limited and will be applied for a period of 6 months. There’s no doubt we are going to see more and more people losing jobs and needing access to government welfare. This will also apply to, for example, sole traders who have found their work has dried up due to the coronavirus. For more specific details the new welfare payments, contact Centrelink…that’s even if you can get through…

Access to superannuation up to $10k for 2020 & 2021 financial year

In a totally unprecedented move, the government is allowing people to access up to $10k from their superannuation in this financial year and 2021 financial year. The withdrawal will be tax free and designed to assist those if financial hardship. So that’s up to $10k in 2020 and another $10k in 2021.

I am reluctant say any more on this as professionally I can’t provide super advice. Just know that there is an option to withdraw from super if you meet the eligibility conditions and please seek further professional advice if you have questions. The decision to withdraw for super should not be taken lightly, especially if you are young, like me.

Small business loans of up to $250k

*QUEENSLAND SPECIFIC*

The Commonwealth is offering to guarantee low interest loans of up to $250k for up to 10 years. This includes no repayments or interest charged for the first year. I’m not going to run through this is detail, but main eligibility requirements include:

1. Be an eligible business which holds and ABN and is registered for GST, or an incorporated non-profit organisation;
2. Have one or more equivalent full-time employees in Queensland;
3. Have operated the business or non-profit organisation since 1 July 2017;
4. Have suffered loss of income as a result of COVID-19

The loan applications are open until 25 September 2020 or until funding is fully committed, do it sounds like a first come, first served basis. It’s important to have you books up to date to even be able to apply for funding, so reach out to your bookkeeper or accountant to get updated ASAP!

For more details on this visit Queensland Rural and Industry Development Authority website:

http://www.qrida.qld.gov.au/current-programs/covid-19-business-support/queensland-covid19-jobs-support-scheme

Increased flexibility in insolvency & bankruptcy law

This includes 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. Most significantly, businesses will be able to trade while insolvent.

In summary, look after each other. Stay safe and keep positive. We are all in this together.

Following the World Health Organisation’s announcement confirming the Coronavirus’ as PANDEMIC, our government has put together a scheme to keep our economy rolling on. On the morning of Thursday 12 of March, our prime minster Scott Morrison presented a number of measures, including cash payouts and small business relief resulting in $17.6 billion stimulus package. I’m going to be running these, particularly the incentives that directly affect small business here in Australia.

As quoted, “the measures are designed to support business sticking with investment they had planned and encouraging them to bring investment forward to support economic growth over the short term”. 

The package has four parts:

• Supporting business investment
• Providing cash flow assistance to help small and medium sized business to stay in business and keep their employees in jobs
• Targeted support for the most severely affected sectors, regions and communities;
• Household stimulus payments that will benefit the wider economy

Immediate asset write off $30k to $150k

Let’s run through the first small business incentive, the increase of the immediate asset write off from $30k to $150k. Now this is crazy! For those who don’t know what the immediate asset write off is, it’s a tax benefit where up to the specific threshold, now $150k, small businesses can immediately write off or claim a deduction for a new assets purchased. For example, if you are a small business looking to purchase some particularly expensive, new manufacturing equipment, says it costs $90k, then you can go out and purchase this asset right now and claim a full tax deduction.

This threshold will be applied from 12 March 2020 to 30 June 2020, so essentially the government wants you to spend money (buy assets) and claim the tax benefit over a period of about 3 and a half months.

Now a word of warning, just because you can claim a higher tax deduction for new assets purchases doesn’t mean you should. These decisions need to be made wisely and there’s no point spending a dollar to get a fraction of tax back. But you can see how this incentive is trying to get small business to SPEND!

Also, don’t be sucked into misleading ads where some business may try to sell you something based on $150k ‘tax back’, which sounds like you would be immediately entitled to and we know is this not necessarily the case. Every time the government releases a new tax incentive all these weird and wonderful ads pop up informing consumers of the wrong entitlements. You’ve been warned!

Small businesses with apprentices: up to $21,000 to keep apprentices in work through wage subsidies

Now let’s talk wage subsidies! Employers with less than 20 full-time employees may be entitled to apply for Government funded wage subsidies amounting to 50% of an apprentice’s or trainee’s wage. This applies for up to nine months from 1 January 2020 to 30 September 2020. The maximum subsidy for each apprentice or trainee is $21,000. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice. So, it’s clear that the government is doing its best to keep people in jobs!

Small to medium-sized businesses: between $2,000 and $25,000 to help with cashflow

Did someone say $25k tax free incentive? For eligible small businesses, payments from $2k to $25k may be accessed to provide cashflow support between 1 January 2020 and 30 June 2020. This is based on PAYG withholding obligations, which you might know as tax withheld on employee wages. Businesses will receive payments of 50% of their Business Activity Statements or Instalment Activity Statement from 28 April with refunds to then be paid within 14 days.

Unfortunately, it’s not going to be some money that’s magically appears in your bank account like maybe your tax refund does. It’s going to be reducing ATO payment obligations as part of your BAS with the rebate being as little as $2k. So, if you lodge a monthly or quarterly activity statements with PAYG withholding payments, stay tuned!

Just to note, if you are a sole trader who doesn’t have any employees, therefore don’t pay tax on wages, this isn’t going to apply to you – sorry. Again, it’s clear the government wants small business owners to keep people in jobs by reducing normal tax obligations.

Welfare recipients: an extra $750 per person

So what’s all this about a $750 cash payment? The government has confirmed it will provide one-off payments of $750 to people on Newstart and to pensioners, in order to boost the economy by getting people spending #Centrelink. The payment is tax-free and will not count as income. It is estimated that around half of those who will benefit will be pensioners – so the oldies be like #cashmoney #dolladollabillyo – no, I’m joking! These payments will commence to be automatically made from 31 March 2020. So if you get a government welfare benefit, good news for you. For the rest of us, unfortunately no cash bonus.

With a good chunk of this going to pensioners, I’m not sure how much this will stimulate the economy. If we see the majority saving and not spending, like we did with the $1,080 ‘tax bonus’ we got for lodging 2019 tax returns then it’s not going to work as it’s intended…only time will tell.

Administrative relief & assistance to directly affected regions

There is also administrative relief from the ATO for some tax obligations and assistance to severely affected regions. We recently saw something similar at the start of the year where directly bushfire affected communities automatically had their December 2019 BAS lodgement deadlines extended until May 2020.

In summary, those on welfare and small business owners get the direct benefit, that will have an eventual flow on effect to the greater community. It’s cash in pockets to spend on local and small business, so don’t think “Oh, I’m missing out”, you’ve got to look at the bigger picture. This type of stimulus package definitely something we haven’t seen since the 2008 Global Financial Crisis. From my point of view I think Australia’s economic state going to get worse before it gets better, but I’m really hoping I’ll be proved wrong! Not to say we need to panic just yet.

I’ve already seen clients struggle to get new stock with China in shut down and the subsequent implications along the supply chain. With a slowdown in travel, our tourism will suffer, so it’s going to be a matter of how big the impact is and how long it will last.

For small business owners, keeping trading on with business as usual as best you can, but as the economy slows down there’s definitely going to be some challenges ahead. Business is never easy, right? Keeping on top of cashflow is going to be so important and making the right business decisions as this the economic landscape continues to change. I don’t want to sound all ‘doom and gloom’ but being a business owner means understanding your finances and making the right business decisions so you can do the best for you and your business. It’s about being proactive, not reactive!