In the last couple of weeks, the Australian government has announced three separate stimulus packages aimed at helping those impacted by the ongoing COVID-19 crisis.
The team at Equitise has put together a summary of the government support being offered to small and medium businesses. We hope this information is helpful in navigating these uncertain times.
1. JobKeeper Payment (Wage Subsidy)
As one of the latest announcements, the JobKeeper payment is a subsidy to businesses that will keep more Australians in jobs throughout the course of the coronavirus outbreak.
Affected businesses can claim a fortnightly payment of $1500 per eligible employee from 30 March 2020. This payment is for a maximum of 6 months.
To be eligible:
- A business (with a turnover less than $1 billion) must have lost at least 30 percent of their turnover over a month long-period compared to last year
- All workers (including self-employed) can access this money, but casuals would need to have been with their employer for at least a year.
- Workers who have been stood down can access this payment, but those who have been made redundant cannot
For further information click here and register your interest on ato.gov.au.
2. Boosting Cash Flow for Employer
Available from 28 April 2020, the Boosting Cash Flow for Employer measure will allow eligible businesses to receive up to $100,000 for operating expenses. This would help cover rent, pay bills and retain staff.
To provide this relief, the government will pay 100% of the PAYG Withholding ($10,000 minimum to $50,000 maximum) on wages lodged in the March 2020 and June 2020 Business Activity Statement. Any refunds will be processed within 14 days of lodgement.
To be eligible: A business must have an aggregate annual turnover under $50 million, established prior to 12 March 2020 and employ workers
Click here for further information.
3. Temporary Relief for Financially Distressed Businesses
The government has temporarily increased the threshold at which creditors can issue a statutory demand on a company and initiate bankruptcy proceedings. Individuals and companies will also be given more time to respond to these statutory demands, and directors will have temporary relief from any personal liability for trading whilst insolvent.
The package also includes temporary relief for directors from any personal liability for trading while insolvent, and providing temporary flexibility in the Corporations Act 2001 to provide temporary and targeted relief from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.
The ATO will also tailor solutions for owners or directors of business that are currently struggling due to the Coronavirus, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups. Find out more.
4. Increasing the instant asset write-off
To support Australian Businesses, the government has increased the instant asset write-off threshold from $30,000 to $150,000 and expanded the eligibility criteria to cover businesses with an aggregated turnover of less than $500 million. This would help businesses claim a tax deduction and will be in place until 30 June 2020. Find out more
5. Backing Business Investment
The government has introduced a time-limited 15 month investment incentive (until 30 June 2021) that will allow businesses to deduct the cost of depreciating assets at an accelerated rate.
To be eligible for the accelerated rate of deduction, a business must have an aggregated turnover of less than $500 million and the depreciating asset must:
- Be new and not previously held by another entity (other than as trading stock)
- Not be an asset to which an entity has applied depreciation deductions or the instant asset write-off rules
- Be first held on or after 12 March 2020, and used before 30 June 2021
Click here for more information.
6. Supporting Apprentices and Trainees
In a move to support small businesses retain their apprentices and trainees, eligible employers can apply for a government wage subsidy that will cover 50% of the apprentice’s wage or trainee’s wage up to 30 September 2020. In the event a small business cannot retain an apprentice, the subsidy will be available to a new employer that employs that apprentice. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7000 per quarter). Find out more.
7. Tax Relief
The ATO has decided to provide administrative relief for businesses impacted by the Coronavirus. This would be assessed on a case-by-case basis. To find further information talk to your accountant and contact the ATO’s emergency support and Infoline on 1800 806 218.
8. SME Guarantee Scheme
The government has announced that it will guarantee 50% of new short-term unsecured loans issued by eligible lenders to small and medium businesses. With businesses across the economy experiencing disrupted cash flow and unable to meet existing obligations, this scheme can provide a business up to $250,000 to be used for working capital. To apply for this scheme, you will need to contact your current financial institution. Find out more here.
9. Financial Institutions
As a result of the new measures implemented by the Government, the Reserve Bank of Australia and the Australian Prudential Regulation Authority, there has been an increase in the ability of lenders to provide credit in a timely and accessible manner.
Below is a summary of some of the initiatives introduced by the Big 4 Banks as a response to the COVID-19 health crisis.
- All impacted customers can request a 6-month payment deferral on loan repayments for term loans, with interest being capitalised.
- Temporarily increased access to overdraft facilities for the next 12 months
- Reduced variable interest small business loan rates by 0.25%
- All impacted customers can defer the principal and interest payments of their business term loans, business auto loans, equipment finance facilities and equipment loans, for six months
- Reduced the interest on overdrafts and small business cash-based loans by 2% and 1% respectively, effective Monday 6 April 2020
- For 3 months, Westpac will automatically refund all eligible merchant service customers their merchant terminal fee
- Offering a 12 month, 1.7% p.a interest loan of up to $500,000 for personal, business and SMSF customers
- Customers who are experiencing financial hardship can defer the repayment to their business credit cards
- Automatically defer their customers business and equipment loan principal and interest repayments for 3 months, and allow customers to extend it to 6 months.
- Until May, Commbank will waive certain merchant fees for eligible business customers
- Reduced interest rates by 1% on small business loans, effective 3 April 2020
- Reduced the variable rates on their small business loans by an additional 100-basis points. This is on top of a 25-basis point reduction earlier in March.
- Allow customers to apply to defer their principal and interest payments for up to 6 months on a range of business loans.