These are scary times. As a business owner, they’re even scarier. With COVID-19 creating massive drops in the market that saw the benchmark at its lowest level since 1987, governments asking non-essential businesses to shut down and shoppers choosing to stay home rather than spend, Australian business owners are feeling the pinch.
After the announcement of a $17.6B government stimulus package on the 12th March, the government has now released its second-stage stimulus package of $66B which should come as some relief to stressed-out business owners. With the media touting tax reliefs for small businesses, wage assistance, and low-interest payment plans, there’s a lot of information to sift through. We’ve gone through the document and pulled out what’s most relevant for you.
[Stay up to date on the latest stimulus announcements plus Fact Sheets here: https://treasury.gov.au/]
1) Business Investment Support
The Australian government has pushed the threshold for instantly writing off assets from $30,000 to $150,000 and including businesses with an annual turnover of $500 million - up from $50 million. This measure will remain in place until June 30, 2020, and will support over 3.5 million businesses
This is meant to provide a significant incentive for businesses to purchase new equipment and receive an immediate tax deduction which could significantly reduce your 2020 tax bill.
Any business with an annual turnover of less than $500 million may also receive an accelerated depreciation of an additional 50% of the cost during the year of purchase. This 50% can be claimed upfront, while the remainder will continue at traditional depreciation rates.
2) Cash flow Assistance
The 1st stimulus package also includes an injection of $6.7B in the hopes of boosting cash flow for Small and Medium-sized businesses during the economic downturn. Over 700,000 businesses will receive a tax-free credit between January 1, 2020, and June 30, 2020, that’s worth between $2,000 and $25,000.
It will be delivered as a credit within the next Business Activity Statement (BAS), equalling 50% of the total PAYG withholding amount.
As an owner, you don’t have to do anything, just lodge your BAS as normal. Just note, if your employees aren’t required to withhold tax - i.e casual staff earning below the tax-free threshold, you’ll receive a minimum payment of $2,000.
This initial package is also aimed at keeping apprentices in work. If you’re a small business with less than 20 employees, you could receive up to $7,000 in wage assistance per apprentice, per quarter over the next six months. Note, to be eligible, the apprentice must’ve been employed by you and in active training before March 1, 2020.
The 2nd package goes a step further to ease the financial burden for SMEs. The government is granting both small businesses and non profits a tax-free, cash payment of up to $100,000, with a minimum payment of $20,000 for eligible companies in an effort to avoid laying off staff. These can be redeemed as a credit by the Tax Office from late April onwards.
3) Other options available to assist SMEs
- Business owners have the option to defer payments by up to four months through your Business Activity Statement, income tax assessments, fringe benefits tax assessments, and excise.
- Opt-in for monthly GST reporting to get quicker access to any refunds you may be entitled to
- Remit any interest or penalties incurred after January 23, 2020, that have been applied to tax liabilities and allowing owners to enter into low-interest payment plans
- Businesses can take out a guaranteed, unsecured loan up to $250,000 for up to three years.
For more information on the government’s economic response to the virus, you can read their statement here.
You can also access their specific Fact Sheets with helpful examples:
This is a challenging time for many business owners, but there’s also an opportunity to reflect, regroup and refocus for when we come out on the other side.
Learn more about how you can safeguard your business during COVID-19, or speak to one of our advisers today.
CEO and Founder, Exit Advisory Group
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