COVID-19: Updated information for businesses

In the space of only a week, the coronavirus (COVID-19) crisis has resulted in several shifts of government policy and an increased burden on business conditions. This is due to social distancing requirements, with a greater number of people either unable to work or doing so from home.

This update of our original article brings together the different elements of the federal and state government’s stimulus packages as they apply to businesses.

Here’s what you need to know:

Federal stimulus package for small and medium business

This content is a summary from our original article: Coronavirus and cash flow: measures to boost cash flow for employers

The federal government has increased its support of eligible small and medium-sized businesses that employ workers up to $100,000 (with a minimum of $20,000) to help boost cash flow.

Businesses will now receive a credit to their account for an amount equal to 100 per cent (up from 50 per cent) of their ‘Pay As You Go’ withholding from wages of up to $50,000, increased from $25,000. This will be administered through the BAS lodgement system across the March and June 2020 quarters.

The government has also announced that, for the July to September period, eligible businesses will receive a further payment equal to the total of ‘Boosting Cash Flow for Employers’ payments that they had previously received up to a maximum of a further $50,000.

Federal Coronavirus SME Guarantee Scheme

Where a business needs to access new debt to support itself through the coronavirus crisis, this scheme will provide a guarantee of 50 per cent of the debt to small and medium enterprise (SME) lenders for new unsecured loans to be used for working capital. SMEs with a turnover of up to $50 million will be eligible to receive these loans.

The government will provide eligible lenders with a guarantee for loans with the following terms:

• Maximum total size of loans of $250,000 per borrower
• The loans will be up to three years, with an initial six-month repayment holiday
• The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.

Loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look through the cycle to sensibly take into account the uncertainty of the current economic conditions.

These facilities are being promoted to be drawn as needed (i.e. like an overdraft) so that businesses only incur interest as they draw down.

Should you need assistance in presenting your financial statements and tax returns as part of the application process, please do not hesitate to reach out to your LDB adviser.

In support of this scheme, the Reserve Bank of Australia reduced official interest rates by a further 0.25% to an all-time low. Additionally, they are taking direct action through debt markets designed to further reduce interest rates for households and businesses.

Temporary relief for financially distressed businesses

ASIC has implemented a temporary increase to the threshold at which creditors can issue a statutory demand on a company, and the time companies have to respond to statutory demands they receive.

This includes temporary relief for directors from any personal liability for trading while insolvent, and providing temporary flexibility in the Corporations Act 2001 to provide relief, which will apply for 6 months.

Creditors seeking to issue a statutory demand will now only be able to do so for debts above $20,000 (up from $2,000). The timeframe to respond will temporarily increase from 21 days to 6 months.

While it primarily affects individuals, businesses should also note changes to the personal insolvency system. The threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will temporarily increase from its current level of $5,000 to $20,000. This will apply for 6 months.

Creditors, many of which are also small businesses, will still have the right to enforce debt against companies or individuals through the courts.

Apprenticeship support scheme

Eligible employers can apply for a wage subsidy of 50 per cent of an apprentice’s or trainee’s wage for up to 9 months from January 1, 2020 to September 30, 2020. Where a small business cannot afford to retain an apprentice, the subsidy will be available to a new employer.

Employers will be reimbursed up to a maximum of $21,000, per eligible apprentice or trainee ($7,000 per quarter).

This scheme is available to small businesses employing fewer than 20 full‑time employees who retain an apprentice or trainee. Employers of any size and Group Training Organisations that re‑engage an eligible out‑of‑trade apprentice or trainee will be eligible for the subsidy. The apprentice or trainee must have been in training with a small business as at March 1, 2020.

Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network (AASN) provider.

This measure will support up to 70,000 small businesses, employing around 117,000 apprentices.

Employers can register for the subsidy from early April 2020. Final claims for payment must be lodged by December 31, 2020.

Immediate asset write-off increased

The threshold for the instant asset write-off has increased from $30,000 to $150,000 with eligibility expanded from businesses with $50 million turnover to $500 million turnover.

This applies to the purchase of all new or second‑hand assets first used or installed ready for use between March 12, 2020 and June 30, 2020. These changes do not take effect until new laws are passed however, this is expected to receive bi-partisan support.

The threshold is due to revert to $1,000 for small businesses (turnover less than $10 million) from July 1, 2020.

Accelerated depreciation deduction arrangements

For assets more than $150,000, the government has extended accelerated depreciation deductions which features a deduction of 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.

This is eligible to all businesses with a turnover of less than $500 million and applies to assets acquired after the announcement and first used or installed by June 30, 2021. It does not apply to second-hand Division 40 assets, or buildings and other capital works depreciable under Division 43.

ATO support

After the fires, floods and now the coronavirus, the ATO is approachable and being considerate to the needs of businesses during this time.

While you can’t defer your obligations indefinitely, they will be receptive to any reasonable proposal of a payment plan. We are already aware, anecdotally, of six month stays of payment.

The ATO still expects all lodgements to be made on time, and will then grant deferrals of payment as appropriate. LDB can support you in this, so please contact your adviser.

Victorian economic survival package

This content is a summary from our original article: Victorian economic survival package to help businesses and employees-package-to-help-businesses-employees/

Payroll Tax

Victorian payroll tax paid up to date for the FY2020 financial year will be refunded in the form of direct payments to small and medium-sized businesses with payroll of less than $3 million for the 2019/20 financial year.

No paperwork is required if you qualify and payments will commence flowing to businesses from later this week.

Commercial tenants

Commercial tenants renting in government buildings can apply for rent relief. The government is encouraging private landlords to do the same.

It was flagged by the Prime Minister last night that we can expect to hear an announcement in respect to this tonight.

Land tax

Eligible businesses will have their 2020 land tax payments deferred. Unfortunately, no more information on this is available at this time.

Government supplier invoices

The state government will pay outstanding supplier invoices within five days to help improve cash flow for small businesses.  Note that the standard payments are within 30 days.

Liquor licenses

The premier announced it will waive liquor licensing fees for affected venues and small business for 2020 in order to support the hospitality sector.

Business Support Fund

The state government has established a $500 million Business Support Fund to provide hardship payments, small grants and tailored support targeted at those businesses hardest hit.

The fund will support numerous sectors, including hospitality, tourism, accommodation, arts, entertainment and retail.

We will advise further information about how this fund will be accessed as it becomes available.

Working for Victoria Fund

The state government will also establish a $500 million ‘Working for Victoria Fund’. The fund will assist people who have lost their jobs, targeting casual workers and employees who have been stood down.

For those who have lost their jobs, the fund will provide employment opportunities that will help the government fight against the current situation, such as cleaning public infrastructure or delivering food.

Managing your business during the coronavirus pandemic

This is an update of our content originally published at: How LDB can support your business during the coronavirus (COVID-19) outbreak

The coronavirus crisis is impacting businesses across Australia in many different ways. There are fundamental good business practices to implement to ensure your survival. We recommend the following key areas be addressed:

• Implement solid cashflow forecasting. Ensure you understand the impact on sales receipts, supplier payments, and overheads such as rent. We recommend this be calculated and estimated on a weekly basis for the coming months. As we pass the initial impacts of the shutdowns by various parts of the community, it will be clearer to you what the overall impact on your own business in terms of both demand and supply. Consider the financial impact of each of these changes and be ready to update your assumptions in what is an extremely changeable set of circumstances.

• Manage staffing needs. If your business is suffering a dramatic reduction in staffing requirements, limit your use of casual staff and the hours of part-time staff, and implement your full-time staff across the business as necessary. Wherever possible, reduce your onsite staff to the minimum and ensure everyone else is working from home with appropriate support. Keep in mind that should you need to reduce staff in the short term, you will likely need these staff again once the crisis is over. Most will be supportive of a reduction in hours of work to support the business and preserve their position. Keep in mind your obligations – Fair Work Australia has some guidance here.

• Consider your customers. How are your key customers trading and what are their priorities to ensure survival? Ensure you understand what drives their loyalty, their current status, what they may do should trading get difficult as this phase becomes protracted, the impact on their business if we move to Phase 3 which will likely entail only the most critical businesses can remain open.

• Contact your suppliers. It is worth noting that most of the above customer-oriented factors apply equally to your suppliers. Continue to engage with your regular suppliers and ensure continuity of supply for the critical stock needed in your own business. Ensure you have a solid relationship with them and can call on them in this time of need.

• Banking. We are aware that various financial institutions are offering up to 6-month deferrals of repayments. Please note that interest will continue to accrue in this time. Will your business require further assistance from your banking/finance relationships to make it through? Be aware of the Federal Coronavirus SME Guarantee Scheme as detailed above.
• Landlords and rent. If needed, consider whether you can approach your landlord for a rental reduction throughout the crisis, or at least a deferral while cashflow is tight. Many landlords would prefer a lower rent over a vacant property at this time. Anecdotally, we have heard of rental reductions of between 50 per cent and 80 per cent, even from larger shopping centres. This will place landlords under immense pressure where they have used debt to support the purchase of the property. While banks may be allowing for deferrals of repayments as mentioned above, interest has not been relieved and is continuing to capitalise.

The PM intimated last night that we can expect further announcements in respect to this matter.

LDB will continue to support you

LDB Group is operating as usual, with many of our team members now working from home. We are grateful to our partners who have ensured that our technology platform allows us to continue to support you through this difficult time. Although sometimes the network may be congested, you should still be able to reach us.

We have put in place the best measures we can to support the resilience of our business. Should you need our support, please do not hesitate to call (03) 9875 2900 or send us a message via the contact form below.