Keeping Australia’s Small Businesses ‘Open for Business’
As you are no doubt aware, the Prime Minister, Scott Morrison, has today, March 22nd, announced an update and revision to the Federal Governments Economic Stimulus in response to the Coronavirus.
We are immediately working through the details and assessing how best to maximise the entitlements for all of our small business Clients.
But for now, we can summarise the key elements as they primarily relate to the small business owners in the CapitalQ Community, but also for those Community Members who have lost, or experienced substantially reduced, employment, as follows –
For Business Owners (and also Employees) Suffering Financial Difficulties As a Result of the Coronavirus
Improved Access to Social Security
The Government is temporarily expanding eligibility to income support payments. They are also creating a new, temporary, Coronavirus supplement which will be available for the next 6 months.
This will be important for any of our Clients who have lost employment (or had it substantially curtailed) and for those who own businesses that have or will be substantially impacted by the current circumstances.
For the next six months there will be expanded access to numerous income support payments.
Jobseeker Payment and Youth Allowance Jobseeker criteria will provide payment access for –
- Permanent employees who are stood down or lose their employment,
- Sole traders,
- The self-employed (which we expect will include those trading through companies, trusts and partnerships),
- Casual workers, and
- Contract workers, all who
- meet the income tests as a result of the economic downturn due to the Coronavirus.
Means testing will be reduced for JobSeeker Payment, Youth Allowance Jobseeker and Parenting Payment with Assets Tests being waived for the next six months. However as indicated above, Income testing will still apply consistent with current arrangements.
Further, waiting times have already been reduced with the usual Ordinary Waiting Period having been waived.
And further again, the Liquid Asset Test Waiting Period (LAWP) and the Seasonal Work Preclusion Period (SWPP) will also be waived for recipients eligible for the Coronavirus supplement (see below).
A number of income support payment categories will be eligible for the additional Coronavirus Supplement including Jobseeker, Parenting payment and Farm Household Allowance.
Anyone who is receiving one of the eligible payments will receive the full additional $550 per fortnight for the next six months. Importantly this will include new applicants, so in that regard…
Accessing Social Security
If you are a business owner, generally Centrelink requires to see all tax affairs up to date (no outstanding income tax returns). This usually applies not only to your personal return, but those for any related entities (Companies, trusts and partnerships).
We have already started fast tracking the preparation of returns for a number of Clients over the past week who need their affairs up to date in order to meet Centrelink requirements.
If you are facing financial difficulties and need to seek assistance through social security, please get in touch as quickly as possible and we will do all we can to get your affairs to the stage required.
Having said that, please note, we are not Centrelink or Social Security experts. These matters are all dealt with outside of the tax system these days (that was not always the case but it is now) and therefore we are not experts on the intricacies of Centrelink entitlements. We encourage you to seek out the Centrelink website, or head into a branch, to get the full story regarding what you can and can’t receive and how to qualify.
More information regarding these measures is available on the Treasury website. The key Fact Sheet can be reached here –> Income Support for Individuals
Early Access to Superannuation
The Government is allowing individuals affected by the Coronavirus to access up to $10,000 of their superannuation before 1 July and a further $10,000 in the approximate three months from 1 July to 30 September.
The withdrawals will be tax free and will not affect Centrelink entitlements.
To be eligible you must satisfy any one or more of the following requirements –
- You are unemployed, or
- You are eligible to receive a Job Seeker Payment, Youth Allowance for Jobseekers, Parenting Payment (which includes the single and partnered payments), Special Benefit or Farm Household Allowance, or
- On or after 1 January 2020 –
- You were made redundant, or
- Your working hours were reduced by 20 per cent or more, or
- If you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more.
IMPORTANT – That criteria doesn’t at first glance appear to include business owners trading through companies, trusts or partnerships. However they may be included in the requirements that “Your working hours were reduced by 20 per cent or more”. We will of course be investigating this further and provide an update when we can.
To make the draw down you will be required to apply via the Australian Tax Office, not via your Super Fund!
More information is available on the Treasury website. The key Fact Sheet can be reached here –> Early Access to Superannuation
For Business Owners Still Trading but Seeing Reduced Turnover and Facing Difficulties Paying Staff
Boosting Cash Flow for Employers
The Government has enhanced the measures it announced on 12 March.
Eligible small and medium size businesses that have employees will be entitled to receive up to $100,000, with a minimum payment of $20,000. These payments (though they are not actually payments, they are actually credits to your tax account) are known as “Boosting Cashflow for Employers payments”.
To be eligible, you must turnover less than $50 million, and you must employ staff.
If you are eligible, instead of receiving a credit to your tax account equal to 50% of the tax withheld from employee wages (as was originally the plan), you will now receive a credit for the full amount of tax withheld.
The maximum credit (over the four months March to June) has increased from $25,000 to $50,000!
And the minimum payment has increased from $2,000 to $10,000!
A further payment will also be made during the July to October 2020 period whereby a further payment will be made equal to the amount previously received (so effectively doubling the credit).
This means in total employers could receive up to $100,000! And the best part is, the payment/credit is completely tax free!
The example provided by Treasury is as follows –
Sarah’s Construction Business
Sarah owns and runs a building business and employs a number of workers. Sarah reports withholding of $15,008 for her employees on each of her monthly Business Activity Statements (BAS).
Sarah will be eligible to receive the payment (on lodgment) of her Activity Statements as follows –
- A credit of $45,024 for the March period, equal to 300 per cent of her total withholding ($15,008 x 3).
- A credit of $4,976 for the April period (She has now maxed out her initial $50,000).
- No payment for the May period, as she reached the $50,000 cap in April.
- An additional payment of $12,500 for the June period (credit in July), equal to 25 per cent of her total Boosting Cash Flow for Employers payments ($50,000 x 25%).
- An additional payment of $12,500 for the July period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.
- An additional payment of $12,500 for the August period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.
- An additional payment of $12,500 for the September period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.
Check out our blog post from 12 March —> The Coronavirus Stimulus Package – What it means for the Business Owners of the CapitalQ Community <– It explains how the payments (credits) will work and discusses eligibility. None of that has changed to our understanding. Only the numbers you will receive have increased which is a great thing!
More information is available on the Treasury website. The key Fact Sheet can be reached here –> Cash flow Assistance for Businesses
Supporting (Enhancing) the Flow of Credit
The Government has introduced a number of broad measures to make it significantly easier for business to access credit from banks and other lenders.
The primary measure is that they will now guarantee 50% of new short term unsecured loans.
Further, the red tape regarding lending practices is being cut, of particular note is the temporary exemption from responsible lending obligations for banks and other lenders providing credit to existing small business customers.
In short, this should all mean it is much easier for CapitalQ Community Members to access addition financing should they require it. Our regular contributors to The Q Review, TAG Finance, are the very best placed to help you secure additional funding so get in contact for a referral.
More information is available on the Treasury website. The key Fact Sheet can be reached here –> Supporting the Flow of Credit