While it’s still early days, and COVID-19 can feel like a waiting game for our health and economy, the good news is: business owners can expect some relief from both Federal and State Governments.
Seven measures are now in place, including financial assistance, more lenient insolvency laws and wage subsidies to help business owners retain staff and pay bills.
It’s only a matter of time, and there’s help available to tide us over.
What’s the Government doing to help?
The Government’s third economic response package has emerged, meaning $189 billion has now been invested in helping SMEs keep their companies moving.
Here’s an overview of the current support available to Australian businesses, including eligibility criteria for the seven measures in place.
1. Boosting cash flow for employers
This new measure will help take some of the financial pressure off small businesses to retain staff and pay bills, in order to keep their business running.
This measure started as a minimum payment of $2,000 (now $10,000) and a maximum payment of $25,000 (now $100,000). Eligible employers that withhold tax on their employees’ salary will receive a payment equal to 100 percent of the amount withheld, up to a maximum payment of $50,000 (up from $25,000).
If your small business was registered before March 12, 2020, good news—you’re eligible to receive payment. If your business is a charity, registered with the Australian charities and Not-for-profits commission, you will be eligible for payment even if your business was registered after this date. The Government realises that new charities will emerge in response to the COVID-19 crisis, and they must be supported.
Provided you’re eligible to receive the payment, there’s no need to make any claims. From 28 April 2020 (after lodging your upcoming activity statements) the ATO will automatically credit your business.
Eligible businesses will receive a minimum payment of $10,000, regardless of whether they are required to withhold tax for their employees.
For more information on eligibility criteria, refer to the government’s fact sheet on boosting cash flow for employers during the COVID-19 pandemic.
2. Temporary relief for distressed businesses
Temporary changes to insolvency laws are being enforced to further cushion the impact of COVID-19 on businesses who are struggling to stay afloat.
Prior to COVID-19, creditors were able to issue a statutory demand once a company owed $2,000, but this figure has since increased to $20,000. A statutory demand is a formal document issued by creditors requiring a business to repay their debt within a strict window of 21 days.
This new threshold means creditors cannot demand money from a business until that business has racked up at least $20,000 owing, providing businesses with more room to breathe during this difficult time.
Companies also have more leniency on the amount of time they have to respond to statutory demands they receive (six months, up from 21 days).
In addition, the threshold for bankruptcy proceedings has increased from $5000 to $20,000, and company directors will be relieved of their duties in preventing insolvency for the next six months.
If you’re a small business in distress due to coronavirus, you can take advantage of these new thresholds, but keep in mind they apply to statutory demands served after March 25, 2020. All increases to thresholds mentioned above are temporary only, and at this stage, will be in place for six months.
3. Increasing the instant asset write off threshold
The government has expanded their instant asset write off program, allowing SMEs to instantly write off assets until the end of 2020.
Initially, the program allowed small businesses to claim tax deductions on assets that cost under $30,000. But, since the recent outbreak of COVID-19, that figure has risen to $150,000. This will help support both SMEs and larger corporations. You can choose to deduct a single asset, or multiple if you wish, as long as each asset costs less than $150,000.
Businesses with annual turnover of up to $500 million (up from $50 million) can now take advantage of the instant asset write off. The proposal applies from 12 March 2020 until the end of 2020, so any assets (whether new or used) purchased and installed within this timeframe can be deducted.
Some items businesses can typically write-off under the scheme include:
- Work vehicles
- Tools and machinery
- Computer hardware e.g. desktop computers and printers
- Office fit-outs and furniture
- Storage solutions e.g. sheds and containers
For a full list of eligible assets, check out the ATOs general depreciation rules.
4. Support for business investment
The government is incentivising business owners to invest by accelerating depreciation deductions for a limited time period (15 months). You can now deduct 50 percent of an asset’s total cost upon installation, provided it’s an eligible asset as per the government’s definition. To be eligible, your business must also have up to $500 million turnover.
Businesses with turnover that exceeds $500 million will not be eligible for the investment incentive.
5. Supporting apprentices and trainees through wage subsidies
Currently training up an apprentice? You can apply for a subsidy that equals 50 percent of their wage for a total of nine months (from 1 January 2020 to 30 September 2020). This wage subsidy is available for both apprentices and trainees, provided they have been with your business since March 1 2020.
If you’re eligible, you’ll be reimbursed up to $21,000, or $7,000 per quarter (per trainee).
This wage subsidy will support up to 70,000 small businesses, employing around 117,000 apprentices.
To qualify, you must be a small business with less than 20 full-time employees, and you will have employed your apprentices/trainees on or after 1 March 2020. If you’re eligible, you can register for the subsidy anytime between early April 2020 to 31 December 2020.
6. Support for coronavirus-affected regions and communities
The Government has planned to set aside $1 billion to support communities and regions most severely affected by COVID-19 in Australia. The funds will be distributed as needed, during the current outbreak and recovery period, to assist in rebuilding businesses and economies.
As our airline industry continues to suffer immensely since the emergence of coronavirus, several taxes and Government charges have been waived from airline companies. This will save the industry up to $715 million in total.
7. Subsidies for employee wages through The JobKeeper program
As of March 31, 2020, an additional $130 billion has been invested in the stimulus package to subsidise employee wages. This should help small business owners who have been hit hardest by the COVID-19 pandemic retain their staff.
You’ll be able to claim a payment of $1,500 per employee each fortnight, starting from March 30 2020 for up to six months.
The JobKeeper program is very much aligned with the Government’s core strategy of supporting Australian businesses and their staff, not only during this economic crisis, but afterwards as well—such measures will allow us to bounce back quickly and with minimal disruption when Coronavirus soon becomes history.
Take care, stay safe and hang in there—we’ll get through COVID-19 together. In the meantime, chat with our lending experts on 1300 780 568 to find out whether a tailored finance solution could tide your business over. With the right plan in place, you might even end up dodging a bullet and coming out stronger than ever.
The information in this post is correct and current at the time of writing, 30th March 2020.
Brent is the Director of Operations at Valiant, bringing a wealth of knowledge from 18 years of experience in the finance industry. He’s worked with banks and fin-techs in the consumer & commercial space, where he discovered his passion for helping SMEs.