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Your Guide to the Coronavirus Economic Stimulus Package for businesses

Posted on April 10, 2021

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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