The Australian Government and banking institutions have united to assist small businesses weather economic uncertainty.
1) Federal Government (available to all SMEs)
On 12 March, the Government has announced a $17.6 billion economic plan to deal with the significant challenges posed by the spread of the coronavirus.
This initial package has been expanded with a further announcement on 22 March that brings the consolidated assistance provided by the Federal Government to $189 Billion.
The stimulus packages are focused on keeping Australians in jobs and helping small and medium sized businesses to stay in business and has four parts:
- Supporting business investment
- Providing cash flow assistance to help small and medium sized business to stay in business and keep their employees in jobs
- Targeted support for the most severely affected sectors, regions and communities;
- Household stimulus payments that will benefit the wider economy
The Government plans to introduce the package of Bills for the relief measures into Parliament on 23 March. What has been announced is set out below.
Real, Cash Money for Small Business Owners
i) 100% Cashback on PAYG Withholding, up to $100,000
Business entities with annual aggregated turnover of less than $50 million that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100% of the amount withheld, up to a maximum payment of $100,000.
Eligible businesses that pay salary and wages will receive a minimum payment of $20,000, even if they are not required to withhold tax.
The ATO will deliver the payment as a credit to the business upon lodgment of their activity statements. Where this places the business in a refund position, the ATO will deliver the refund within 14 days. The payment will be a tax-free refund or credit.
The payment will be tax free and delivered by the ATO as a credit in your Business Activity Statement (BAS) from 28 April 2020. Quarterly BAS lodgers will get the credit in the June-20 quarter BAS. Monthly IAS lodgers will get a credit of 100% from the March-20 IAS up to the June-20 IAS. Any existing debt with the ATO this will be offset against your existing liability.
The Government has also announced that there will be an additional payment in the July – October 2020 period equal to the total of all the payments made in the period prior to June – limited to the maximum threshold of $100,000.
The benefit is for limited time only and applies to the PAYG Withholding on wages between 1 January 2020 and 30 June 2020.
If for example you have spent more than $100,000 in PAYGW for the 6 month period between 1 January and 30 June 2020, you should receive $100,000 from the Government. If you have spent $30,000 in PAYGW for the same period, you will get $30,000. These credit will be applied by the ATO as from 28 April.
Any employer that has received the maximum $100k payment will not be entitled to a further payment in the July – October quarter. The employer that, for example, received a $30,000 refund will receive a further $30,000 refund in the July – October quarter.
💡 How to apply?
- This credit will automatically be processed upon lodgement for your BAS and IAS by RCR Partners.
ii) 50% subsidy on apprentice wages, up to $21,000
Eligible employers can apply for a wage subsidy of 50% of apprentice or trainee wages for up to 9 months from 1 January 2020 to 30 September 2020 (up to a maximum of $21,000 per eligible apprentice or trainee).
If a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.
💡 How to apply?
Employers can register for the subsidy from early April 2020 with final claims for payment due by 31 December 2020.
Instant asset write-off increase
For new or second-hand assets first used or installed ready for use from 12 March until 30 June 2020, the instant asset write-off threshold will be increased from $30,000 to $150,000 for businesses with aggregated annual turnover of less than $500 million (up from the current $50 million threshold). The threshold applies on a per asset basis, so eligible businesses can immediately write-off multiple assets.
The threshold will revert to $1,000 for small businesses (for businesses with a turnover less than $10 million) from 1 July 2020.
50% investment incentive
The Government is introducing a time limited 15 month investment incentive (to 30 June 2021). Businesses with aggregated annual turnover of less than $500 million per annum will be entitled to accelerated depreciation deductions. Eligible businesses will be able to deduct 50% of the cost of an eligible asset upon installation. Assets must be acquired after 12 March 2020 and first used or installed by 30 June 2021.
There is no asset value threshold for this 50% investment incentive and the existing depreciation rules will continue to apply to the remaining balance of the asset’s cost over its effective life. Therefore, an eligible asset will generate the immediate deduction of 50%, plus in the same year will generate a Division 40 depreciation deduction calculated in accordance with the normal depreciation rules.
💡 How to apply?
- This credit will be processed on the preparation and lodgement of your 2020 income tax return.
Tax Payment Deferrals
The ATO has announced a series of payment deferral concessions for businesses directly impacted by COVD-19. These concessions are:
- Deferring by up to 4 months the payment date of amounts due through the business activity statement (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise duty.
- Allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get faster access to GST refunds they may be entitled to.
- Allowing businesses to vary Pay As You Go (PAYG) instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
- Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities; and
- Allowing affected businesses to enter into low-interest payment plans for their existing and ongoing tax liabilities
💡 How to apply?
- The ATO assistance is not automatic, contact our office, we will approach the ATO to request assistance, and if eligible, the ATO will ‘tailor’ the assistance package for you.
Temporary relief for financially distressed businesses
The Government has also announced a series of measures that are aimed at lessening the threat of legal action against businesses that could cause them to become insolvent and force them into liquidation.
These measures include:
- An increase to the threshold at which creditors can issue a statutory demand on a company and initiate bankrupt proceedings against an individual. The new threshold limit has not been released yet.
- The time companies and individuals have to respond to statutory demands they receive will be increased. The new limits have not been released yet.
- Directors are temporarily relieved from any personal liability for trading while insolvent.
- New measures that introduce some flexibility to the Corporations Act 2001 targeted at providing relief from the provisions of the Act to deal with the unforeseen events that arise as a result of the Coronavirus health crisis have been announced. No further detail is available as to what these amendments are.
The Government also announced that the ATO will tailor solutions for owners and directors that are currently struggling due to the Coronavirus. The assistance offered by the ATO to business will include a temporary reduction of payments or deferrals of tax liabilities, or withholding enforcement of liabilities by not proceeding with actions such as Director Penalty Notices and the wind-up of a business.
💡 How to apply?
- The ATO assistance is not automatic, contact our office, we will approach the ATO to request assistance, and if eligible, the ATO will ‘tailor’ the assistance package for you.
Supporting the flow of credit
The Government, the Reserve Bank of Australia and the Australian Prudential Regulatory Authority have taken coordinated action to ensure the flow of credit in the Australian economy. These measures include:
Support for immediate cash flow needs for SMEs
Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50% to SME lenders to support new short-term unsecured loans to SMEs. The Scheme will guarantee up to $40 billion of new lending.
Quick and efficient access to credit for small business
The Government is cutting red tape by providing a temporary exemption from responsible lending obligations for lenders providing credit to existing small business customers.
Reserve Bank of Australia — Supporting the flow and reducing the cost of credit
The Reserve Bank of Australia (RBA) announced a package on 19 March 2020 that will put downward pressure on borrowing costs for households and businesses.
The RBA announced a term funding facility for the banking system. Banks will have access to at least $90 billion in funding at a fixed interest rate of 0.25 per cent. This will reinforce the benefits of a lower cash rate by reducing funding costs for banks, which in turn will help reduce interest rates for borrowers. To encourage lending to businesses, the facility offers additional low-cost funding to banks if they expand their business lending, with particular incentives applying to new loans to SMEs.
In addition, the RBA announced a further easing in monetary policy by reducing the cash rate to 0.25 per cent. It is also extending and complementing the interest rate cut by taking active steps to target a 0.25 per cent yield on 3-year Australian Government Securities.
Support for Non-ADI and smaller ADI lenders in the securitisation market
The Government is providing the Australian Office of Financial Management (AOFM) with $15 billion to invest in structured finance markets used by smaller lenders, including non-Authorised Deposit-Taking Institutions (non-ADI) and smaller Authorised Deposit-Taking Institutions (ADI). This support will be provided by making direct investments in primary market securitisations by these lenders and in warehouse facilities.
Australian Prudential Regulatory Authority — Ensuring banks are well placed to lend
The Australian Prudential Regulatory Authority has announced temporary changes to its expectations regarding bank capital ratios. The changes will support banks’ lending to customers, particularly if they wish to take advantage of the new facility being offered by the RBA.
2) State Government
On 11 March 2020, the South Australia Government announced a $350 million stimulus package that will include current infrastructure projects being brought forward, as well as new projects around road maintenance, housing, tourism and health. The details of the package are not yet available.
3) Banks and Lending Institutions
Specific COVID-19 concessions have been announced by the following banks:
i) CBA
- Deferring repayments on a variety of business loan and overdraft products, for 6-months.
- Reducing commercial interest rates by 0.25
- Waiving merchant terminal fees for impacted customers with CBA payment terminals, for 90 days.
- Waiving early redraw fees on business term deposit accounts (including Farm Management Deposit accounts).
- Waiving establishment fees and excess interest on Temporary Excess products.
- Deferring repayments on vehicle and equipment finance loans, and providing tailored restructuring options that meet individual customer needs.
💡 How to apply?
ii) ANZ
- Suspending interest repayments
- Deferral of business loan repayments for up to 6 months, assessed on a case-by-case basis
- Providing early access to term deposits without incurring break fees
- Providing access to additional credit subject to approval
💡 How to apply?
- Contact ANZ or your relationship manager.
iii) NAB
- Deferral of business loan repayments for up to 6 months, assessed on a case-by-case basis
- Extension of a business loan term by a period of up to three months, where individual circumstances warrant
- Support to restructure existing business loans, including equipment finance
- Business credit card deferred repayments.
💡 How to apply?
- Contact NAB or your relationship manager
- 1300 769 650 (Monday to Friday 8am-6pm AEST/AEDT)
iv) Westpac
- Continuing it's hardship assistance program
- Deferral of business loan repayments for up to 6 months, assessed on a case-by-case basis
💡 How to apply?
- Contact Westpac or your relationship manager
v) Bendigo
- Home Loan and Business Loan customers can apply for relief on loans for up to three months
- Waiver of fees for the restructuring or consolidation of loans
- Credit card customers can apply for an emergency credit card limit increase
- Discounted interest rates on new personal loans taken out by existing Bendigo Bank customers
- Waiver of interest rate reduction for early withdrawals on term deposits prior to maturity
- Deferral of payments and extensions for Equipment Finance on a case by case basis
💡 How to apply?
- Contact Westpac or your relationship manager
