The Government has announced a broad range of measures in an attempt to insulate small business from the effects of the Coronavirus, or COVID-19 as it is otherwise called. These measures will also hopefully prevent the economy into lapsing into a full-on recession.
The measures announced are as follows:
Delivering Support For Business Investment
Increasing the instant asset write off threshold from $30,000 to $150,000 for businesses with a turnover less than $500 million until 30 June 2020.
In addition to this measure business would also be able to claim extra depreciation on new assets purchased between 12 March 2020 and 30 June 2021. As an example, if a business purchased new plant and machinery for $200,000 on 20 June 2020, if this was added into a small business simplified depreciation pool the normal depreciation would be 15% of $200,000 for the 2020 year, or $30,000. Under the newly announced support businesses would now be able to deduct 50% of the cost of the asset upfront ($100,000) and the remaining $100,000 would be depreciated at the normal 15%, thus claiming a total of $115,000 in depreciation for the 2020 year, lowering profit and therefore tax payable.
Please note the above does not apply to buildings or other capital works expenditure. In addition, whilst the instant asset write off applies to both new and second-hand assets, the extra deprecation measure only applies to new assets.
Cash Flow Assistance For Businesses
The government plans to boost cashflow for businesses who employ staff. The government plans to credit against amounts owing on BAS and IAS 50% of the withholding tax reported. The minimum payment would be $2,000 with the maximum being $25,000. The payment would be tax free.
Our understanding of this is that if a client lodges a BAS or IAS reporting PAYG withholding between March 2020 and June 2020, 50% of the tax will be credited back against what is owed. An example would be reporting PAYG Withholding tax on a BAS of $10,000 for the March quarter, that business would receive a $5,000 credit against that BAS, thus reducing the total owed.
Assistance For Businesses With Apprentices And Trainees
Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wages for up to 9 months from 1 January 2020 to 30 September 2020. This is transferable in that if an apprentice or trainee has been let go by a previous employer and your business employs them, the subsidy will come across to the new employer.
$750 One-Off Cash Payment
In addition to the above measures the federal government will be making a one-off $750 cash payment to pensioners, social security, veteran and other income support recipients and eligible concession card holders from 31 March 2020, with most expected to be paid by mid-April.
Qld Government Assistance
Just yesterday Annastacia Palaszczuk announced the Qld Government would be offering $500m in loans to support businesses affected by Coronavirus. These loans would be interest free for the first 12 months. In addition, the already announced payroll tax deferral would be extended to all businesses across the state if applied for.
Regarding loan assistance, the max loan on offer would be up to $250,000. The idea behind this is that hopefully this will enable small business to retain staff. Unfortunately not all the detail is out yet though. It has been indicated that more information will be available at www.qrida.qld.gov.au from the end of this week.
Unfortunately the above measures as of right now may not be anywhere near adequate to ensure cashflow is still there when needed in the business. For those businesses looking at the prospects of significant falls in revenue these other measures could be considered:
· Having discussions with your lender(s) about postponing repayments of loans and/or financing or seeking further financing capacity.
· Varying PAYG instalments if profit is going to be less and/or registering for PAYG withholding monthly to receive any benefits sooner.
· Entering into a payment arrangement with the ATO or deferring obligations.
· Having discussions with any key creditors to check in on whether they may be able to relax normal account payment policies.
· Minimizing or deferring capital expenditure to preserve cash
· Increasing the businesses abilities to sell products online
· Reducing overheads to the bare necessities
· Sell or lease out assets the business doesn’t require
· Having open discussions with staff about what lies ahead and what may happen in the event of a government lockdown.
· Seek our professional advice early if cashflow maybe of a concern
As always, the devil is in the detail and with the Coronavirus constantly evolving it would be prudent to discuss eligibility and all these measures with us before making any decisions, in case circumstances change or are adjusted.
Stay safe everyone and if would like to discuss the above we can be contacted on 07 3808 5144.