Positive initiatives to assist small business

Small business response to COVID-19 – we’re all in this together
March 18, 2020
Financial support for individuals and households
March 25, 2020

Positive initiatives to assist small business

Over the past few days there have been a range of positive initiatives announced by government, semi-government and the banking institutions to support small businesses, their owners and their employees. These include:

Federal Government Stimulus Package – Stages 1 & 2

  • Increasing instant asset write off. The instant asset write offs for small business assets will be increased from $30,000 to $150,000 and be available to businesses turning over less than $500 million (compared to $50 million previously). This offer applies to new or second-hand assets first used or installed ready for use from the announcement until 30 June 2020.
  • Backing Business Investment. Businesses turning over less than $500 million will be able to claim half the cost of eligible business assets as an instant tax deduction. The remaining cost of the business asset will be depreciated under the existing depreciation rules. This applies to new or second-hand assets first used or installed ready for use from the announcement until 30 June 2021
  • Supporting Apprentices and Trainees. Eligible employees will be able to apply for a wage subsidy of 50 per cent of their apprentices’ or trainees’ wages paid during the 9 months from 1 January 2020 to 30 September 2020. Eligible employers are small businesses employing fewer than 20 full-time employees who retain an apprentice or trainee. Employers will be reimbursed up to maximum of $21,000 eligible apprentice or trainee ($7,000 per quarter).
  • Boosting Cash flow for Employers. The Government will provide tax free payment of up to $100,000 for eligible employers.

An ‘eligible employer’ has business turnover of less than $50 million. The new tax-free payment will take the form of a “credit” in the activity statement system. Payments are in two phases:

Phase 1

Employers to receive a credit of 100% of PAYG withholding tax from wages paid to employees during the relevant period (January 2020 – June 2020) up to a maximum amount of $50,000.

Phase 2

Eligible employers will receive another series of credits equal to those received in phase 1 and these credits will occur in the period post 1 July period.

Small businesses that pay salaries and wages to employees but are not liable to withhold PAYG withholding tax are also eligible for receipt of government stimulus package relief.

Tax Payment Example – Sparky Electrical Pty. Ltd
The Company employs 1 business owner and 10 employees
They pay their GST and PAYG withholding tax quarterly.
The Company’s BAS payment for the quarter ended 31 March, 2020 is as follows:
$61,000 GST Payable
$60,000 PAYG withholding tax payable
$121,000 Total Tax payable

The date for lodgement and payment of the BAS will be 28 April, 2020,
Under the Phase 2 stimulus package, Sparky Electrical Pty. Ltd. will receive a credit equal to 100% of the March 2020 quarter PAYG withholding payment capped at $50,000,
The amount payable by Sparky Electrical Pty. Ltd. for the March 2020 BAS is $71,000.

  • Coronavirus SME Guarantee Scheme. The Government will guarantee up to 50% of new borrowings made to SME’s by eligible lenders.

In general, the loan conditions are as follows:
The maximum borrowing amount is $250,000 per borrower.
Loans will be unsecured up to 3 years with an initial 6-month repayment deferral.
The Loans will be unsecured and not supported by any security.
All loans will still be subject to the lenders credit assessment processes.

  • The Government has increased notional timeframes for payment of outstanding accounts

This has been done to reduce the likelihood of any threat or action that would unnecessarily force the closure of a business or lead to any undue filing of personal bankruptcy. More information is to be provided in due course.

Victorian Government initiative to support small business

The Victorian Government will refund payroll tax already paid in the 2020 financial year where the annual payroll of the employer is less than $3 million.
The refund of 2020 payroll tax payments will flow back to Victorian businesses as early as next week.
Any payroll tax refunds received are to be treated as a refund and not as a loan.
Future payroll tax liabilities for the 2021 financial year have been deferred for payment until 1 January, 2021.

Financial Assistance offered by the Australian banking industry

Last week Anna Bligh, the CEO of Australian Banking Association, advised that the banking industry is looking to support small business given the uncertainty in the current economic climate.

The proactive and positive initiatives proposed by the big 4 banks include the following:

  • Deferral of business loan repayments
  • Extension of loan repayment periods and potential access to additional borrowings
  • Reduced interest rates on business borrowings
  • Deferral of credit card repayments
  • Access to Term Deposit funds without break fees
  • Waiving some banking fees and charges.

It is expected that the second tier banks will consider the above and follow suit.
Each bank has a different offering and the degree to which the new initiatives will extend to personal banking is yet to be determined.
Please review your banks website for additional information:

Summary

Some of these initiatives are yet to receive Royal Assent but we expect that the legislation will be passed by Parliament in due course.  These initiatives are positive, proactive and designed to help support small business owners and their employees.

Strategic Accountants and Business Advisors are here to help you. Please do not hesitate to call Mark Wilson on 9896 5100 or 0407 328 758 should you have any questions or queries in relation to any of the above.