Posts tagged with: Business

Your Guide to the Coronavirus Economic Stimulus Package for businesses

Posted on September 17, 2020

A nation of small businesses

If you suddenly have to shut your doors and your business revenue becomes a fraction of what it used to be, maybe even zero, and you have to continue paying rent and your workers, how long will you survive?

When a small business runs out of cash, the business dies. So, we have a real crisis on our hands.

Accounting for 98% of all Australian businesses and employing 2.2 million people, the engine room of our economy is on the brink of disaster. So, the Government has announced a stimulus that will give small business owners some encouragement.

Previously, we brought you part 1 of a 3-part series on how the Government will support individuals and households. In this article, we turn our attention to the backbone of the Australian economy – small businesses.

The numbers

At this moment, we are realising how important small business is in our economic landscape. According to a recent statistics report by the Australian Small Business and Family Enterprise Ombudsman:

  • Small business accounts for nearly 98% of all Australian businesses, employing 2.2 million people
  • Out of a total of 2.3 million businesses, 878,000 employ
  • Of the 878,000 that employ, 823,000 are small businesses (94%)
  • Of the 823,000 small businesses, 628,000 are micro-businesses (76%)
  • 62% of Australian businesses are sole traders with no employees
  • 27% are micro-businesses with 1-4 employees
  • 8.5% are small businesses with 5-19 employees
  • Over 4 years, the survival of non-employing businesses is at 59.6% which is less than the average of 64.5%. In comparison, large businesses have a survival rate of 85.6%
  • The highest proportion of business owners is in the 45-59 age group
  • The greatest barrier to innovation faced by micro and small businesses is access to funds (23%) and lack of skills (22.6%)

Support for businesses

To manage cash flow and keep people employed, the Australian Government has released the following support package.

JobKeeper Payment

We’ve included this in our Part 1, here it is again.

What is it?

This is a wage subsidy of $1,500 per fortnight, per employee, available to businesses and not-for-profits significantly impacted by the Coronavirus, so they can continue paying their employees. Payments will be made to the employer monthly in arrears by the Australian Taxation Office (ATO). The subsidy starts on 30 March 2020, with the first payment to be received by the employer in the first week of May.

Who is eligible to claim?

  • Businesses with an annual turnover of less than $1 billion where their turnover has fallen or will likely fall by 30% or more; or
  • Businesses with an annual turnover of more than $1 billion where their turnover has fallen or will likely fall by 50% or more; or
  • Self-employed individuals, if they meet the turnover tests mentioned above; or
  • Not-for-profits registered with the Australian Charities and Not-for-Profit Commission (ACNC) if their turnover has or will likely fall by 15% or more, relative to a comparative period.

Where you have more than 1 employer, only 1 employer will be eligible to receive the payment.

How do you claim?

Eligible employers must elect to participate by applying to the ATO as, at the time of writing, this can be done by visiting the ATO website and registering for JobKeeper updates.

Cash flow support for small and medium businesses

What is it?

This temporary cash flow boost is done through 2 sets of payments from 28 April 2020 to support employers to retain employees. The payments will be a minimum of $20,000 and up to $100,000, delivered through credits in the activity statement system when the activity statements are lodged.

The first cash flow boost is based on the amount of the business PAYG withholding. The credit will be equal to 100% of the amount withheld, with a minimum of $10,000 even if the amount withheld is zero.

The second cash flow boost is based on the value of the initial cash flow boost at a rate of 50% (for quarterly lodgers) and 25% (for monthly lodgers).

Who is eligible to claim?

  • A small or medium business that:
    • held an ABN on 12 March 2020 and continue to be active;
    • has a turnover under $50 million;
    • made eligible payments (like salary, wages, director fees, retirement/termination payments, compensation payments, voluntary withholding from payments to contractors) that the business is required to withhold from.
    • derived business income in the 2018-19 income year and lodged its 2019 tax return on or before 12 March 2020;
    • made GST taxable, GST-free or input-taxed sales in a previous tax period and lodged the relevant activity statement on or before 12 March 2020.
  • Not-for-profit organisations that:
    • held an active ABN on 12 March 2020;
    • have a turnover of less than $50 million; and
    • made payments to employees.
  • Charities registered with the Australian Charities and Not-for-profits Commission if they meet the eligibility criteria.

How do you claim?

Businesses don’t need to apply. It will automatically be applied to the accounts of eligible businesses when activity statements are lodged for the relevant periods. The cash payments will initially be applied to reduce liabilities to the ATO, however, if the business is in a refund position, the refund will be received within 14 days.

Temporary relief for financially-distressed businesses

What is it?

This package aims to reduce the threat of insolvency and wind up for businesses struggling due to the Coronavirus. They include:

Temporary higher thresholds and more time to respond to demand from creditors

  • For a period of 6 months for companies, there will be a higher threshold from $2,000 to $20,000 and more time to respond to demands from creditors from 21 days to 6 months;
  • For a period of 6 months for individuals, the minimum amount of debt required for a creditor to initiate bankruptcy proceedings will be increased from $5,000 to $20,000 and time to respond to demands will also be increased from 21 days to 6 months; and
  • For debtors who make a declaration of intention to enter voluntary bankruptcy, the period of protection from unsecured creditors will be extended from 21 days to 6 months.

Temporary relief from directors’ personal liability for trading while insolvent

  • For 6 months, directors will be relieved from personal liability for insolvent trading;
  • Cases of dishonesty and fraud will continue to be subject to criminal penalties; and
  • Any debts incurred will still be payable.

Treasurer to be given a temporary instrument-making power under the Corporations Act (the “Act”)

  • For 6 months, power will be granted to the Treasurer to amend provisions of the Act or modify obligations, to provide relief from obligations to enable compliance with legal requirements.

Increasing the instant asset write-off

What is it?

The Instant Asset Write-Off (IAWO) threshold will be increased from $30,000 to $150,000. This means businesses will be able to immediately deduct purchases of eligible assets up to $150,000 for new or second-hand assets. From 1 July 2020, the IAWO for small businesses with a turnover of less than $10 million will revert to $1,000.

Who is eligible to claim?

Business with a turnover threshold of up to $500 million (up from $50 million) can apply.

Backing business investment

What is it?

For 15 months, depreciation deductions will be accelerated so that eligible businesses get a deduction of 50% of the cost of new assets first used or installed by 30 June 2021.

Who is eligible to claim?

Businesses with turnover below $500 million purchasing new assets.

Supporting apprentices and trainees

What is it?

It’s a wage subsidy of 50% of the apprentice’s or trainee’s wage paid between 1 January 2020 and 30 September 2020, up to a maximum of $21,000 per eligible apprentice or trainee.

Who is eligible to claim?

Small businesses employing less than 20 employees who retain an apprentice or trainee.

How do you claim?

Employers can register from early April 2020, with final claims to be lodged by 31 December 2020.

Assistance for severely affected regions and sectors

Support for Coronavirus-affected regions communities and industries

What is it?

The Government has set aside a total of $1 billion to support regions, communities, and industries disproportionately affected by the impact of the Coronavirus, including industries such as tourism, agriculture, and education, through existing or newly-established initiatives or programs. There is no set date at the time of writing. Some of the measures include:

  • Waiving of the Environmental Management Charge for tourism businesses that operate in the Great Barrier Reef Marine Park;
  • Assistance to help businesses identify alternative export markets or those affected by disruptions in the supply chain; and
  • Promotion of tourism.

Who is eligible?

The affected industries and communities will be working with the Deputy Prime Minister to develop the plans.

Support for Australian airlines and airports

What is it?

The package will be in the form of relief from a range of taxes and Government charges to reduce the impact on international and domestic air travel including reimbursement of aviation fuel taxes, relief from Airservices Australia charges, rebate for Domestic Aviation Security, and additional funding for Regional Aviation Security. The package will be in place for 8 months from 1 February 2020 to 30 September 2020.

Who is eligible?

Businesses conducting commercial and aeromedical aircraft operations who are subject to taxes and charges, covered by the package.

Australian Tax Office (ATO) Administrative Relief

What is it?

Similar to the relief provided following the bushfires, the ATO will provide relief for taxpayers affected by the pandemic, on an individual basis. This includes deferring tax payment for up to 6 months, allowing variation to PAYG instalment amounts to zero for the March 2020 quarter, and setting up temporary shop fronts to assist small businesses. Also, the ATO will look to enhance its presence in other regions to allow people to learn more about the relief options.

Who is eligible?

All taxpayers affected by the outbreak can contact the ATO on 1800 806 218 or visit the website on www.ato.gov.au.

Final Word

In the wake of the Coronavirus outbreak, some small businesses are closing their doors, maybe permanently, but there’s hope. What our Government wants to do is to ensure that small businesses have a cash lifeline to last them until they can open up again.

Most businesses are not well-prepared to come into this crisis. What’s important is knowing what is available and then understanding how to access support.

Just like family, employees need to be taken care of by business owners. Stay safe, stay healthy. Let’s look out for each other.

Are you suffering from overwhelm knowing what steps you should be taking? Reach out to the HCG Team and let’s review what you should be doing now here.

Here are links to some useful resources:

https://hallconsulting.com.au/wp-content/uploads/2020-COVID-19-Stimulus-Support-Guide-HCG-Revision-03.pdf

https://www.ruok.org.au/

https://www.health.gov.au/

https://headspace.org.au/

https://mindspot.org.au/

https://www.ato.gov.au/

Small Business Counts report (2019) https://www.asbfeo.gov.au/sites/default/files/documents/ASBFEO-small-business-counts2019.pdf

Australian Small Business and Family Enterprise Ombudsman: https://www.asbfeo.gov.au

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Market Essentials – April 2020

Posted on September 17, 2020

Business closures, a rapidly rising unemployment level and
a plummeting share market have been the immediate major
impacts of the unprecedented government measures put in place
in March to stop the spread of the coronavirus.
The government restrictions also include measures that will
directly affect the real estate market in Australia.
Auctions and open house inspections were banned from midnight
on Wednesday 25 March for the foreseeable future. Almost 2,600
auctions that were scheduled to go ahead in the last weekend of
March alone across Australia were immediately cancelled.

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Keeping on top of industry changes

Posted on September 17, 2020

Chris Hall and Venetta Sacha attended the 2016 BusNSW Member Annual conference in Wollongong. The conference provided to more than 200 bus operators, government representatives and industry suppliers the opportunity to expand their knowledge on current issues and changes happening to the industry.

Our clients John King and Gerard King were actively involved in discussions with many other operators on the effect of these changes to their government contracts and KPIs. John King from Premier Motor Services could not be more proud with the excellent on-time-running KPIs of his bus company in Wollongong and meeting his other contract requirements. Focused on systems and delivery of great customer satisfaction, John has built a strong management team and is running bus and coach services with over 400 buses and coaches from 14 depots. He passionately contributed from the interactive industry panel his view on the operators’ key issues for the next 3 years.

BusNSW 2016John King, Venetta Sacha and Chris Hall at busNSW

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Ups & Downs: Managing in uncertain times

Posted on September 17, 2020

How do you create certainty in uncertain times? Much of what we do personally to grow and protect our wealth, and commercially for the businesses we manage is subject to unpredictability and change.

The answer is that there are no certainties in life – sorry about that. But, this doesn’t mean that you can’t take charge and protect against uncertainty – you just need to know where and how to look at it.

Where we are at

Government spending will continue to be a focus this year with the interest on Government debt now running at $1 billion per month according to Treasury. There are only a few ways the Government has of dealing with the increasingly ominous debt trend; initiatives to lift productivity and growth to boost tax revenues, spending cuts, and increased taxes or a reduction in tax concessions. This year, for you personally, your SMSF, and your business, you should keep this in mind when trying to manage change as Government policy is likely to provide both opportunities and risks in the short and long term.

For you

Your wealth

In the last 9 months, we have seen a huge drop in the value of equity markets, especially here in Australia. The All Ordinaries Index sat at close to 5,955 points at the end of April 2015. As at 21 January 2016, the index was 4,896 points. A drop of over 1,000 points or close to 18%.

It’s a volatile market and difficult to know what to do beyond “don’t panic.” Most of the leading economists are predicting continued growth despite the market being easily spooked. It’s important to know your individual position and the likely impact of change on you – investing vs paying down the mortgage, different investment types, SMSF vs retail funds. Reacting with the crowd to change is never a good idea. If you haven’t already, talk to one of our advisers about your options.

Also bear in mind the impact of Government policy. Negative gearing currently costs more than Australia’s defence budget. It’s likely to be cut back or grandfathered out of existence at some point.

Got kids?

The reforms to social welfare in the last few Federal Budgets didn’t quite make it through the Senate in full. But, times have changed and Palmer United is no longer the Senate ‘king pin’ it once was – directing traffic on Government policy and social reform.

One change that did pass Parliament was the ‘no jab, no pay’ reforms. From 1 January 2016, if your kids are not immunised then your family is no longer eligible for subsidised childcare or the Family Tax Benefit Part A end of year supplement.

Extensive reforms introduced to Parliament pre-Christmas will change the structure of childcare subsidies to consolidate the current system of multiple subsidies to just one. The new subsidy will be income and activity tested. While these reforms will not take effect until 2017 (assuming they pass Parliament) it’s important to understand that change is coming and its impact on you.

In general, if you currently receive family tax benefits and your household income is getting towards the upper threshold limits, you should do a quick check and see if you can still cover your expenses if any benefit payments you currently receive were removed. Further reforms to refocus benefits on lower income families are likely.

Work in the not-for profit sector or for hospitals or ambulance services?

From 1 April 2016, changes to salary sacrificed meal entertainment and entertainment facility leasing benefits come into effect. A single grossed-up cap of $5,000 will apply to these benefits from this date. Many people in these sectors benefit from these concessions so it’s important to check the changes and the implications to you.

Living outside of Australia?

From 1 January 2016, Family Tax Benefit A will be reduced for people outside of Australia. Families will only be able to receive FTB A for 6 weeks in a 12 month period while they are overseas.

Also, if you have a Higher Education Loan and live overseas for 6 months or more, from 1 January 2016 you will be required to make repayments of your HELP debt if your worldwide income exceeds the minimum repayment threshold at the same repayment rates as debtors in Australia.

Stocktake debt

Every so often it’s important to review what you’re spending money on and why. Debt is a big issue for most as we accumulate debt in different forms over time – home loans, investments, credit cards, etc. If this sounds like you, it’s almost guaranteed you are paying too much. It’s time to take stock and see what debt you have and if there is a way of getting a better deal.

Your Business

Look at the trends and opportunities

Many of the ‘dramatic’ changes that impact on mature business models – online retail vs traditional retailers, the shift from paper publishing to online publishing, the demise of packaged electronic products on shelves to download delivery, or for example, the impact of Uber on taxi services – were reasonably predictable. There were recognisable indicators for each of these changes well before they had a direct impact on Australian businesses. Online retailing existed decades before denting bricks and mortar retail sales in any recognisable way, and as soon as faster internet speeds enabled quicker downloads the packaging and B2B sale of most electronic products became unnecessary. Tech company Uber started in 2009, spreading exponentially around the world well before it launched in Australia in 2014. If anything, Uber proves that the foundation of any industry can be shaken dramatically in less than a few years.

In many cases, these ‘disruptive’ businesses offered something to consumers not reliably fulfilled by the existing market – efficiency, access, range, and importantly, greater consumer control not just acceptance of what is on offer.

As business operators, it’s important to constantly assess the impact of trends on our current business and product range and work toward the ‘what ifs’.

Trends also exist in Government policy and can have a positive or negative effect on your business. At present, the Government is firmly focussed on boosting business productivity and investment. There are a wide range of incentives to stimulate spending and the entrepreneurial spirit:

P  Crowd funding – funding is difficult for entrepreneurial start-up businesses in Australia. New frameworks are currently being developed to formalise crowd and other funding sources to encourage investment opportunities beyond bank finance.
P  Employee share schemes (ESS) – new rules introduced last year bolster the tax benefits for employees of ESSs and provide special concessions for start-ups. Further changes should follow shortly.
P  Accelerated depreciation – small business and primary producers can access a range of concessions that enable them to offset expenses in the same year as the expense – rather than depreciating the expense over time.
P  Tax relief for restructures – changes to be introduced this year should allow small business to change their business structure without the risk of triggering CGT and other income tax implications. So, it is a good time to check whether your structure is right for your long-term business plans.

Your Superannuation

There is almost no doubt that the current raft of concessions available to superannuation will change. To lock in your access to the current concessions, you should focus on maximising the tax-free component of your superannuation. If you haven’t already, come and see us to have a chat as there are different strategies that can be utilised depending on your situation.

SMSF and related party loans

The ATO is looking closely at related party loans in SMSFs. If your fund has borrowed money from a related party, for example a member of the fund, to acquire an asset and the terms of that loan are not at arm’s length or well documented, then you need to get the paperwork and the loan terms in order ASAP. While the ATO have stated that they are not necessarily looking at arrangements before the 2014-15 income year (unless it comes up in audit), you can expect a much closer scrutiny from now on.

Super and Social Security

The social security income test tightened on 1 January 2016 for superannuants. If you receive defined benefit income from your superannuation, a larger portion of this income will now be taken into account when applying the relevant social security income tests – capping the proportion of income that can be excluded at 10%. This affects aged care fees, income support payments, the Low Income Health Care Card, etc.

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Small businesses sitting on a retirement gold mine

Posted on September 17, 2020

Having a clear and planned exit strategy in place is a big part of making sure your future is protected.
This doesn’t just include being prepared in the event of death, sickness or divorce but also in selling your business.

This article from the Australian Financial Review shows that perhaps the biggest danger may just be in selling your business. To see what you should be wary of you can read the full article; http://www.afr.com/business/small-business/small-businesses-sitting-on-a-retirement-gold-mine-20151208-gliw1n

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