The Australian business community and public are worried. This is a time of great stress and anxiety for all Australians. My partner Tom and I put forward this summary of emergency economic measures to our clients and the wider small business community to explain the incentives and measures with the aim of reassuring everyone that we will be ok and get through this together.
The measures are broken down into Federal and State based measures and will include the webpage contact details of the relevant government departments for people to make further inquiries if they need to clarify anything or gain more information. The detail underlying the measures at this stage is still emerging. Once legislation or legislative instruments are released this further detail will be communicated.
Federal Government Measures
The Federal Government Measures are the most comprehensive of the governmental responses. This release will focus on the measures for small business (please be aware other Federal Government measures have also been announced). The Federal Contact can be reached at the following link.
Employer Cash Boost
The Government is providing up to $100,000 to eligible small and medium sized businesses, and not-for-profits (including charities) that employ people, with a minimum payment of $20,000. This is to be in two cashflow boosts.
First Payment/(s) – Cash Flow Boost 1
Employers will receive a payment equal to 100% of their salary and wages withheld, with the maximum payment being $50,000. In addition, the minimum payment is $10,000. Where this is a monthly withholder the payment will be 300% of the monthly amount withheld for March 2020 to align with the treatment for Quarterly lodgers.
Second Payment – Cash Flow Boost 2
An additional payment is also being introduced in the July – October 2020 period. Eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments they have received.
This means that eligible entities will receive at least $20,000 up to a total of $100,000 under both payments. This additional payment continues cash flow support over a longer period, increasing confidence, helping employers to retain staff and helping entities to keep operating. The cash flow boost provides a tax-free payment to employers and is automatically calculated by the Australian Taxation Office (ATO). There are no new forms required.
The first payment will be delivered by the ATO as an automatic credit in the activity statement system from 28 April 2020 upon employers lodging eligible upcoming activity statements. Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld, up to a maximum payment of $50,000. Eligible employers that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.
Eligibility – Cash Flow Boost 1
In order to be eligible for Cash Flow Boost 1 all the following conditions must be met by the business with:
- Aggregate annual turnover under $50 million based on the prior year of turnover.
- The business employs workers and pays PAYG withholding for them.
- The payments will only be available to active eligible employers established prior to 12 March 2020.
These measures are a prerequisite for obtaining the Cash Flow Boost 2 payments as well.
Eligibility – Cash Flow Boost 2
In order to be eligible for Cash Flow Boost 2 all the following conditions must be met by the business with:
- The criteria for Cash Flow Boost 1 are all satisfied.
- the business entity must continue to be active.
The timing of payments and calculations are important for this measure and details are released.
Timing of Payments – First Cash Flow Boost Payments
These can be represented by the following table:
Type of lodger
Business Activity Statement
|Credit Amount as % of Withholding|
|100% up to $50,000|
|100% up to $50,000 less Mar 20 QTR|
|300% up to $50,000|
|100% up to $50,000 less Previous lodgement|
|100% up to $50,000 less Previous lodgements|
|100% up to $50,000 less Previous lodgements|
Timing of Payments – Additional Payments
For monthly activity statement lodgers, the additional payments will be delivered as an automatic credit in the activity statement system. This will be equal to a quarter of their total initial Boosting Cash Flow for Employers payment following the lodgment of their June 2020, July 2020, August 2020 and September 2020 activity statements (up to a total of $50,000).
For quarterly activity statement lodgers the additional payments will be delivered as an automatic credit in the activity statement system. This will be equal to half of their total initial Boosting Cash Flow for Employers payment following the lodgment of their June 2020 and September 2020 activity statements (up to a total of $50,000).
Eligible employers can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wage paid during the 9 months from 1 January 2020 to 30 September 2020.
Where a small business is not able 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). Support will also be provided to the National Apprentice Employment Network, the peak national body representing Group Training Organisations, to co-ordinate the re-employment of displaced apprentices and trainees throughout their network of host employers across Australia.
The subsidy will be available to small businesses employing fewer than 20 full-time employees who retain an apprentice or trainee. The apprentice or trainee must have been in training with a small business as at 1 March 2020.
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. Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network (AASN) provider.
Distressed Company and Individuals – Various Measures
A creditor issuing a statutory demand on a company is a common way for a company to enter liquidation. The Government is temporarily increasing the current minimum threshold for creditors issuing a statutory demand on a company under the Corporations Act 2001 from $2,000 to $20,000.
This measure will apply for six months. Normally, not responding to a demand within the specified time creates a presumption that the company is insolvent. The statutory timeframe for a company to respond to a statutory demand will be extended temporarily from 21 days to six months. This measure will also apply for six months.
To assist individuals, the Government will make a number of changes to the personal insolvency system regulated by the Bankruptcy Act 1966. 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 measure will apply for six months.
Failure to respond to a bankruptcy notice is the most common act of bankruptcy. The time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months. The extension will give a debtor more time to consider repayment arrangements before they could be forced into bankruptcy. This measure will also apply for six months.
When a debtor declares an intention to enter voluntary bankruptcy by making a declaration of intention to present a debtor’s petition there is a period of protection when unsecured creditors cannot take further action to recover debts. This period will be temporarily extended from 21 days to six months. This measure will give debtors more time to consider the options that are best for them. This will apply for six months. Creditors, many of whom are themselves small businesses, will still have the right to enforce debt against companies or individuals through the courts.
Trading While Insolvent Protection
Directors are ordinarily personally liable if a company trades while insolvent. This can lead to boards of directors feeling under pressure to make quick decisions to enter into an insolvency process if there is any risk that the company will experience periods where it will be trading while insolvent.
To make sure that companies have confidence to continue to trade through the Coronavirus health crisis with the aim of returning to viability when the crisis has passed, directors will be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business.
This measure is designed to relieve the director of personal liability that would otherwise be associated with the insolvent trading. It will apply for six months. Temporary relief from personal liability for insolvent trading will apply with respect to debts incurred in the ordinary course of the company’s business.
Egregious cases of dishonesty and fraud will still be subject to criminal penalties. Any debts incurred by the company will still be payable by the company.
Instant Asset Write Off
The Government is increasing the instant asset write-off threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.
The Government is introducing a time limited 15 month investment incentive to support business investment and economic growth over the short-term, by accelerating depreciation deductions.
The key features of the incentive are:
- benefit—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;
- eligible businesses—businesses with aggregated turnover below $500 million; and
- eligible assets—new assets that can be depreciated under Division 40 of the Income Tax Assessment Act 1997 (i.e. plant, equipment and specified intangible assets, such as patents) acquired after announcement and first used or installed by 30 June 2021.
This measure does not apply to second-hand Division 40 assets, or buildings and other capital works depreciable under Division 43.
SME Guarantee Scheme (commencing early April 2020)
This scheme provides working capital support to businesses by the government guaranteeing 50% of new unsecured loans. The loans are:
- for a maximum of $250k
- period of three years (with an initial first six month holiday on repayments)
- subject to your lenders' credit assessment processes
Quick Access to Credit
The government has provided an exemption from responsible lending obligations for lenders providing credit to existing small business customers. Details on this are scarce however, if you're in need of credit now is a good time to pick up the phone and speak with your bank manager. Other things you may want to discuss with them are:
- the ability to change from principal and interest to interest only
- the option of deferring loan repayments
- any fee waivers they're currently offering
Tax Office Merit Based Temporary Relief
The Tax Office will consider temporary relief and deferral requests on a case by case basis. The ability to obtain hardship and deferral of obligations will be considered in light of the Covid-19 crisis. These applications should be made by your advisors or with their advice.
State Government Measures
The State based measures are also generous and targeted. This release will focus on the measures for small business. The State Contact can be registered using the following link.
Payroll Tax Relief
As part of the package, the State Government will provide full payroll tax refunds for the 2019-20 financial year to small and medium-sized businesses with payroll of less than $3 million. This assistance is a refund, not a loan.
The same businesses will also be able to defer any payroll tax for the first three months of the 2020/21 financial year until 1 January 2021.
State Government Landlord Rent Relief & Land Tax Deferral
Commercial tenants in government buildings can apply for rent relief – a move private landlords are also being encouraged to undertake – and 2020 land tax payments will be deferred for eligible small businesses.
State Government Supplier Relief & Waiving Liquor Licensing fees
The State Government will pay all outstanding supplier invoices within five business days – releasing up to $750 million into the economy earlier. The private sector is urged to do the same where possible. The State Government will also support the hospitality sector by waiving liquor licensing fees for 2020 for affected venues and small businesses.
State Government Merit Based Grant
The State Government will also provide $500 million to establish a Business Support Fund. The fund will support the hardest hit sectors, including hospitality, tourism, accommodation, arts and entertainment, and retail.
The Government will work with the Victorian Chamber, Australian Hotels Association and Ai Group to administer the fund, which will help these businesses – which may not be eligible for payroll tax refunds due to their size – survive and keep people in work.
The economic stimulus measures of both State and Federal Governments will likely continue to evolve. The measures are designed to support small and medium sized businesses. Appropriate planning and advice is critical to businesses at this time. Please contact the firm if you have any questions or even just to chat about your current pressures. We are here to help and guide all our clients and the wider community through this unprecedented crisis.