The world is encountering an unprecedented event with the unfolding coronavirus pandemic. The advent of COVID-19 has greatly disrupted entire industries, social gatherings, and generally, life as we know it. As people have begun socially distancing themselves, businesses have transitioned to operate online (where they can). Unsurprisingly, the growing pandemic and continuously changing climate has left businesses unable to conduct their regular operations – some have been forced to close down as a result. If you’re a small business that’s currently struggling as a result of coronavirus, Shoebox Books and Tax wants to help.
Small businesses are the backbone of Australia. While the future is currently uncertain, it’s as important as ever that small business owners are supported through access to as many incentives provided during this bleak time. Therefore, to help small businesses understand what they’re entitled to claim during this time, and what the government and banks are currently doing to support them, we outline all of the initiatives, incentives, and packages that have been, or will soon be, implemented.
To see if you’re eligible, we’ll expand on what some of the more prominent incentives mean and how they can assist your small business.
Six-Month Loan Repayment Deferral
As part of the small business relief package, many banks will freeze loan repayments for up to six months in response to cashflow problems caused by the coronavirus pandemic. After the six month period, small business owners will not have to pay any large sum, but rather will be given the option to extend their loan or increase their repayments.
In a recent media release the ACCC announced, "The package will allow for the deferral of principal and interest repayments for loans to small businesses, in all sectors, impacted by the COVID-19 pandemic.”
So far this incentive is offered by ABA member banks who agree to participate, which at this stage includes AMP Bank, ANZ, Bank Australia, Bank of Queensland Limited, Bendigo and Adelaide Bank Limited, Commonwealth Bank of Australia, HSBC, Macquarie Bank, National Australia Bank, Suncorp Bank and Westpac.
To be eligible, you must be a small business with less than $3 million in total debt owed to credit providers. These deferrals have been made available as of the 23rd of March.
Many banks are also offering to defer home loan repayments as many face financial insecurity due to the economic downturn resulting from the coronavirus crisis.
Everyone has in some way felt the nasty effects of COVID-19. For many, this virus has taken a financial toll on their livelihoods. Over the past few weeks, we have seen many businesses forced to close or slow down business operations due to a drop in sales, and unfortunately, as a result of this, many employees have been let go. Whilst it seems a recession is on the cards, the government is taking measures to ensure this doesn’t happen and to soften the blow of coronavirus’s negative effects on the economy. To help us bounce back, the government has introduced cashflow grants to help small-to-medium sized businesses weather the storm. After all, small and medium businesses make up a large portion of our economy – they make up 99%
of all Australian businesses, and employ over 2 million people.
On the 22nd of March, the Australian government announced a second stimulus package for struggling small-to-medium businesses. This package allows businesses access to cash grants of up to $100,000, with a minimum of $20,000 being provided to those eligible. This is a boost from the original Boosting Cash Flow for Employers measure where the government was providing $25,000 to businesses, with a minimum payment of $2,000.
As part of this enhanced measure, an additional payment is also being proposed for the July– October 2020 period. This means that eligible businesses will receive an additional grant equal to the original payment they received – that’s potentially two payments of $100,000. According to Business.gov.au, "This additional payment continues cash flow support over a longer period, increasing confidence, helping employers to retain staff and helping entities to keep operating.”
No forms are required to apply, and the payments are tax free. If you meet the eligibility criteria, you will automatically receive payment. Also, as the payments are automatically calculated by the ATO, there is little groundwork for businesses in regards to record-keeping. To be eligible for these payments, you must meet the following requirements.
Those Eligible for the Cashflow Grant must:
- Have an aggregated turnover of under $50 million per annum (your eligibility will be based on the turnover from the previous year).
- To be eligible for the additional payment, your business should continue to be active.
- The payment will be credited to your business upon the lodgement of your BAS (if this places you in a refund position, the ATO will refund you money). To check the specifics on when you will receive payment, check here.
Measures have also been introduced to encourage small businesses to retain apprentices and trainees. Fifty per cent (50%) of an apprentices or trainee’s wage can be subsidised within a nine month period (from the 1st of January to the 30th of September). This is a total of $21,000, per eligible apprentice or trainee ($7,000 per quarter).
- Small businesses that employ fewer than 20 full-time employees who retain apprentices or trainees.
- Business of any size that re-engage an eligible out-of-trade apprentice or trainee.
- Group Training Organisations who retain or re-engage apprentices or trainees.
- Employers who pass the eligibility assessment undertaken by an Australian Apprenticeship Support Network (AASN) provider.
Instant Asset Write-off
An instant asset write off helps businesses in a twofold approach: it helps them acquire new assets needed to better the operation of their businesses, and it helps them get a tax break on these assets instantly.
In response to COVID-19, the government has increased the threshold for the cost of new assets – this figure has lifted from $30,000 to $150,000 per asset. Being able to instantly write off assets means businesses can claim an instant tax deduction for the 2019-20 financial year.
So far, this incentive will run from the 12th of March to the 30th of June. Eligible businesses include companies that have an annual turnover of up to $500 million (up from $50 million originally). Check with the ATO’s website
for more information on eligibility criteria.
Accelerated Depreciation on Assets
Evidently, it’s a good time to acquire new assets as the government and ATO are also providing a 50% deduction on the cost of asset depreciation (check eligible assets
) on top of existing depreciation deductions. This will apply for eligible assets acquired from the 12th of March to the 30th of June, and is applicable to businesses with an annual turnover under $500 million.
For reference, if you were previously eligible to claim a 30% depreciation deduction per year, you are eligible to claim an extra deduction of 50% of the asset’s value. For more information, check out some of the examples from Business.gov.au
As further incentive for employers to keep their staff on payroll, the government has also introduced (as of the 31st of March) the JobKeeper Allowance. This consists of businesses receiving fortnightly $1500 payments per employee for six months. Under this scheme, employees will earn this amount regardless of how many hours they’ve worked.
The incentive behind this is to keep employers and employees connected through this pandemic so that businesses can reactivate their business operations quickly after this event is over, without having to rehire and retrain staff. The payment will cover all full-time, part-time, and casual employees – those that are self-employed and charities are also eligible. These payments are set to roll in from May, however, will be backdated to the 31st of March, so it will be necessary for businesses to fund their employees on their own for a little while. Of course, come May, this money will be reimbursed.
In regards to eligibility, Business.gov.au outlines that all businesses with an annual turnover of under $1 billion that has fallen by 30% will be eligible. Businesses with an annual turnover of $1 billion or more must prove a fall of 50% to be eligible. Businesses must also not be subject to the major bank levy. For more information and to apply, click here
The next few months present a challenging time for many businesses who will need to restructure their business model and strategy. Although the future might seem bleak, there is a light at the end of the tunnel. Experts
are confident the Australian economy can and will bounce back in the aftermath of Coronavirus, and the government’s stimulus packages will cushion the blow felt by the economy. Right now, we all just need to keep pushing on.
Businesses need to support each other, and the team at Shoebox is working to get critical information out to small businesses on how to cope during this difficult time. To stay updated on key financial information as it unfolds and learn more about money management, follow our blog
For extra support, lean on our experienced bookkeepers to guide you through this difficult time. Many businesses may find solace talking to a bookkeeper or accountant for financial advice. With expert bookkeepers around Australia, Shoebox is ready to work with your business and get you back on your feet. Get a free consultation
today and see how we can help.