11 Key steps you need to take now for your business
Maximise Cash Receipts from the Updated Government Stimulus Package
Review the Australian Government stimulus package for business cash flow. Work with us to identify which key parts your business is eligible for and get the process started to obtain these cash flow bonuses.
- Boosting Cash Flow – Up to $100,000 credit or cash payment against activity statements equal to 100% of PAYG withheld from employees from March 2020 to September 2020
- Boosting Cash Flow – Minimum payment of up to $20,000 even if employers aren’t required to withhold tax from employees
- JobKeeper Payment – Subsidy paid to you by the Government of $1,500 per fortnight per eligible employee from 30 March 2020 for a maximum of 6 months. This will help you to keep staff and will help you restart when the crisis is over.
- Supporting Apprentices + Trainees – Wage subsidy of 50% of wages paid up to a maximum of $21,000 per apprentice for the 9 months from 1 January 2020 to 30 September 2020
- Instant Asset Write-off – Up to $150,000 per asset can be instantly written off for assets purchased by 30 June 2020. Applies to businesses with turnover up to $500 million.
- Accelerated Depreciation Deductions – Deduction of up to 50% of the cost of an asset in addition to existing depreciation rules.
Prepare a Cash Flow Forecast for 12 Months
Meet with your Accountant ASAP to create or update your business cash flow plan over the coming months. You need to forecast your daily and weekly planned cash position to make informed decisions, like when you may need additional bank funding.
Prepare the Cash Flow Forecast with these scenarios:
- Subsidy received from Government – JobKeeper – $1,500 per fortnight per employee
- Income reduced by 50%
- Income reduced by 75%
- Expenses cut to minimum, including
- Reduced Wages
- Rent reduced by 50%?
- No payments to ATO
- Include Superannuation payments when due
How long can your business survive with the above assumptions?
Consider Delaying Tax Payments to the ATO
Keeping your business alive means paying your employees, your key suppliers, your rent and your Accountant (so we can keep helping you during this crisis) each week! Nothing else matters over the short term.
You may need to delay making payments of GST, PAYG Withholding Tax and Employee PAYG Tax to the ATO. You should set up a second bank account (separate from your main trading account) and each week transfer cash for these payments across into it. If needed, you can then dip into this cash reserve to keep your business alive.
See the section below about ATO Tax Relief Options.
Important: It’s vital that you keep lodging your Business Activity Statements (BAS’s) and Instalment Activity Statements (IAS’s) by their due dates and negotiate a delayed payment with the ATO, otherwise the ATO may view the PAYG withholding portion as non-compliant and you will then lose you tax deduction for these amounts.
Request an immediate Rent reduction
Contact your Landlord ASAP and request an immediate reduction in your rent. Ask for 3 months’ rent free or 6 months at half rent. You never know what they will say unless you ask!
Arrange Additional Government and Bank Funding
Contact your Bank Manager ASAP and arrange for additional bank funding / lines of credit that can be approved NOW for use in an emergency. Making these arrangements early before things have gone bad is the key. Bank approvals may take up to one month or longer, so start the process today.
The Government has just released support for banks to support the following loans:
- Maximum size of loan of $250,000 per borrower
- The loans will be up to 3 years, with an initial 6 month repayment holiday.
- The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security
Consider Alternative Funding Arrangements
Consider using alternative funders such as Moula or Prospa to set up a short term line of credit now to pay for inventory and operating costs. These funders lend based on the cash flow of your business and don’t need property security.
You should consider doing this as a backup now to any other bank lending arrangements you may have.
Protect Your Personal Assets
Now is the time to upgrade / update your asset protection. Consider if you need to protect the equity in your Family Home or other assets in personal names with a “Gift and Loan Back arrangement” – with no stamp duty or Capital Gains Tax consequences.
Enduring Power of Attorney (EPOA) + Will – Create or Update these NOW
If you have to self-quarantine or if you incapacitated in any way, you need to have an EPOA in place so your business can continue to operate.
Ensure your EPOA and Will are up to date now and ensure your family and your Accountant know where the original signed documents are.
If needed, we can assist you to quickly and professionally have these documents prepared and signed.
While all your employees want to keep receiving their full salaries and wages, if your business runs out of cash then they no longer have their jobs. Everyone is suffering and tightening up in the short term, so we all have to work together.
- Do you have to reduce working hours of some employees?
- Decide if you should offer unpaid leave to your employees. Some businesses are suggesting that employees take unpaid leave on a roster basis.
- Decide on how to inform employees of you need to stand them down for the short term.
- Help your employees to understand the new Jobseeker payments plus COVID-19 Supplement they can receive. Provide them with the Individual fact Sheets at https://treasury.gov.au/coronavirus/households
Review your general insurance policies for any Business Interruption Insurance inclusions. Now is the time to contact your insurance agent to review your policy to understand precisely what you are and are not covered for in the event of an extended incident.
Review ATO Tax Relief Options
The Australia Taxation Office (ATO) is implementing a series of relief options to assist those impacted by the coronavirus. The relief will not be automatically applied.
You or your Accountant need to contact the ATO on to make any of the following requests for assistance:
- Businesses can call the ATO’s Emergency Support Infoline (1800 806 218) to discuss relief options based on their needs and circumstances.
- Individuals and businesses can request deferral of some payments (by up to 4 months) and vary instalments.
- Businesses (under $20 million turnover) can elect to report and pay their GST monthly instead of quarterly to accelerate access to GST refunds, but only from 1 April 2020, and must remain monthly for 12 months.
- Quarterly payers can vary their PAYG instalments for the March 2020 quarter, and claim a refund of instalments paid for the Sep and Dec 2019 quarters.
- Businesses can request remittance of interest and penalties applied to tax liabilities incurred after 23 January 2020.
- Businesses can request a low interest payment plan.
- Employers still need to meet their SG obligations. The ATO has no discretion under the SGC rules to vary the due date or waive the SGC where contributions are late/unpaid.
Do you have a question?
Related Blog Articles
The rules for the Pandemic Leave Disaster Payment, the payment accessible to those who have lost work because they have had to self-isolate with COVID-19, or are caring for someone who contracted it, changed on 18 January 2022. Pandemic Leave Disaster Payments rules change
There has been confusion over the tax treatment of RAT tests with the Prime Minister stating for some time that they are tax deductible, but in reality, the tests were probably only deductible in limited circumstances. PCR and RAT tests to be tax deductible, FBT free
Insight’s support for Amaroo stretches from tax advice, to business strategies, and managing the company’s payroll.
The updated rules and explanatory statement clarify a number of common issues that have been raised by accountants since the JobKeeper extension was announced, including:
Carrying on an entity from 1 March 2020
Eligibility for December if failed previous decline in turnover test periods
Applying the two tier payment rates
The power of the Tax Commissioner
GST reporting method
Current GST turnover
Jobkeeper payment rates – alternative tests for the 80 hour requirement
Employees not tied to hours worked
Wage condition extended to 31 October 2020
We’ve summarised the key details for employers on JobKeeper 2.0 in this update, but just remember that the proposed changes are not yet law and the details could still change.
The second tranche of the JobKeeper scheme changes the eligibility test for employers and the method and amount paid to employees.
Will the Prime Minister’s targeted $250 million package of funding to support cultural and creative projects and initiatives save the industry? The arts funding is aimed at kick starting the sector with funding preferencing commercial initiatives that generate jobs...
We always knew that a Government scheme swiftly distributing cash during a crisis was going to come with equally swift compliance and review measures, particularly when eligibility was self-assessed. Two major Australian Taxation Office (ATO) initiatives are searching out fraud and schemes designed to take advantage of the Government’s Coronavirus Economic Response Package.
The Government has announced grants of $25,000 to encourage people to build a new home or substantially renovate their existing home.
Since precautionary measures were heightened to slow the spread of COVID-19, almost 1 million Australians have lost their jobs. According to the Australian Bureau of Statistics, Australia lost 7.5 per cent of its jobs between 14 March and 18 April. If you're one of...
- Download: COVID-19 Stimulus Packages and Support Measures
- COVID-19 – tax implications
- ATO COVID-19 information and resources
- ATO COVID-19 frequently asked questions
- Australian Government Support for individuals and employees
- ATO information on early access to your super
- Download: COVID-19 Business Continuity Plan Template
- The 3rd Stimulus Package: What you need to know
- The 2nd Stimulus Package: What you need to know
- The 1st Stimulus Package: What you need to know
- Information on COVID-19 and work health and safety
The material and contents provided in this publication are informative in nature only.
It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
Liability limited by a scheme approved under Professional Standards Legislation