Running a business can be challenging at the best of times let alone when you’re having to deal with a pandemic. Covid-19 is proving to be quite a disruption to daily life and especially to businesses, across the globe.  We are all in this together and it is our responsibility to help each other and navigate our way out of this disruption to our life and to our economy.

I will update you regularly with Government initiatives as well as business insights which will keep you focused on cash preservation and on the numbers that will help guide your business through the coronavirus pandemic.

Government Stimulus Package

After the initial government stimulus package launched on 12th March, Prime Minister Scott Morrison announced a more extensive stimulus on 22nd March to help keep the economy moving forward during the ongoing spread of Covid-19.

The main points of the package are:

  1. If you are a small business with turnover of less than $50m:
    • you can claim 100% of PAYG reported in the activity statements from January to June 2020 for a tax-free payment of up to $50,000, with a minimum payment of $10,000
    • payments will be automatically credited via the activity statement system
    • an additional payment equal to this amount will also be available from July to October 2020, making the total available payments $100,000 with a minimum payment of $20,000
  2. There is increased protection for Directors and solvency rules via:
    • Temporary 6 month increase from $2,000 to $20,000 for threshold at which creditors can issue a statutory demand on a company
    • An increase in the time companies have to respond from 21 days to 6 months
    • Personal liability for trading insolvent has been removed for the next 6 months
    • Bankruptcy Safety Net – there is a temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor from $5,000 to $20,000.
  3. Access to working capital via the Government providing a guarantee of 50% to SME lenders to support new short-term unsecured loans with the following terms:
    • Maximum total size of loans of $250,000 per borrower
    • Loans will be up to three years, with an initial six-month repayment holiday
    • Loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan

 NSW Payroll Tax Initiatives

 The NSW Government has offered relief for businesses in the form of:

  1. 25% reduction in annual tax liability if Australian grouped wages is less than $10m
  2. Payroll tax not required for March, April and May
  3. Payroll tax threshold to increase from $900,000 to $1m commencing 1st July 2020

ATO Support

There is a great deal of empathy towards small business and so long as you’re communicating with the ATO, they are open to putting in place payment plan for outstanding debt including quarterly PAYG instalment variations.

Support for Business Investment

  1. Tax Saving via an increase of instant asset write off threshold from $30,000 to $150,000 until 30th June 2020, for businesses with turnover of less than $500 million.
  2. Tax Saving via 50% investment allowance to the purchase of eligible assets until 30th June 2021 for businesses with turnover of less than $500 million. Existing depreciation rules will apply to the balance of the asset’s cost.

Assistance for Apprentice and Trainee’s Wages

A wage subsidy of 50% of an apprentice’s or trainee’s wage for nine months. The subsidy of up to a maximum of $21,000 will be available to businesses employing fewer than 20 FTE who retain an apprentice or trainee, or, where a small business is not able to retain an apprentice, the subsidy will be available to a new employer.

Cash flow preservation and cash flow management

In the coming months in particular, it is critical that cash is a) preserved and b) managed whilst you are navigating your way through the impact of coronavirus on your business.

Cash preservation means that you should negotiate payment plans with your suppliers; look at rent reductions or lease variations with your Landlord; and hold off on all non-essential purchases which are not revenue generating.

Cash management is ensuring that you put in place a cash flow forecast and understand your break-even position so that you are informed and pro-active with your decision making. It is best to work through a couple of worst-case scenarios, understand your response times and what the business needs to do to stay afloat under each scenario. There are some very helpful tools that you can use to help understand your future position more clearly.

Let Us Help

 If your business has a turnover of over $1m, ABJ Solutions is offering a complimentary 30 minute zoom meeting to help answer your questions and model some of your critical decisions for you. Get in touch with us today so that we can help you through this challenging time.