COVID-19 – Financial Crisis Assistance: Small and Medium Businesses

Following on from the Financial Crisis Assistance  article, we now concentrate on Small and Medium Businesses.

The other 5 articles in this series are:

Low-Income Earners
Superannuation Pension and Centrelink Recipients
Home Owners and Investors
Larger Businesses
Landlords & Tenants

You can also refer to our other articles by clicking on the links above for your personal situation.

Part One:

A number of the measures that are available to help your business to work through a potential cash flow crisis relate to:

• Government payments being made via the ATO Tax Portal
• Banks and bank loans
• Your investment spending to 30 June 2020.

1: Australian Federal Government Grants:

There is a minimum of $20,000 and a maximum of $100,000 being made available for small businesses – this involves PAYG withholding for small business owners, paid to businesses in their upcoming BAS/PAYG lodgement.

The announcement made today has set a minimum of $10,000 for the March 2020 quarter, and a top-up of $10,000 being paid in the June 2020 quarter.

That is a minimum of $20,000 for boosting cash flow.

The detail of an eligible business is not yet known. For those clients who don’t have staff, or we have been paying directors through trust distributions or dividends, we need to review your BAS to see how we can access these grants.

We are therefore requesting clients that we review their BAS where it is appropriate. We are also encouraging our clients to get their BAS for the March 2020 quarter in early, as the ATO is paying the grants automatically.

2: Government-Backed Business Loans:

These loans will be made available through traditional lending channels and are designed to support business working capital during the downturn. Importantly, normal credit application/assessment processes will apply and interest will be charged on the amount drawn.

So it is very important you get the right advice from us before applying for any loans.

They will be up to a maximum of $250,0000, Unsecured and an initial 6 month repayment holiday will apply.  The maximum loan term is 3 years. We provide further clarity here.

3: State Government Grants & Payroll Tax Relief:

A number of State Governments have announced their relief packages. We advise that these are detailed and are specific to each state. As a result, we have set-out each state for you in a separate article which will be Part 2 of this series.

4: Small Business Loans – Relief Package (6 months):

Australian banks will provide support to eligible small businesses by deferring loan payments for up to six months, where assistance is required as a result of COVID-19. The intention is for banks to implement this as soon as possible.

We have yet to receive the detail on what constitutes an eligible small business, so please contact us to see how we can assist.

5: Business Loans – Repayment Holidays (3 months):

A number of banks have already announced that for business loans, equipment finance and vehicle loans for business, that they will grant a three month repayment holiday. This is on a case by case basis, so please contact us for assistance in dealing with your financial institution on your behalf.

6: Help for Sole Traders and Contractors:

Access to superannuation savings will be broadened where you’re in financial distress because of the Coronavirus and you meet certain eligibility conditions.

If you’re eligible you’ll be able to access up to $10,000 before 30 June 2020 and an additional $10,000 from 1 July for approximately three months (depending on the timing of legislation).

To be eligible, you must meet one of the conditions, which includes that on or after 1 January 2020, you were made redundant, your hours of work reduced by at least 20%, or if you’re a sole trader, your business was suspended or your turnover reduced by at least 20%.

7: Employers with Apprentices and Trainees:

Eligible employers who employ apprentices or trainees can apply for a subsidy of 50% of the employee’s wage. This applies for the period 1 January – 30 September 2020. The maximum payment is $21,000 per apprentice or trainee.

If an employer is unable to retain an apprentice, the subsidy will be available to the new employer.

An eligible employer must have less than 20 full-time employees, and the apprentice or trainee must be in employment with the business as of 1 March 2020.

Other employers, regardless of size, and Group Training Organisations that re-engage eligible out-of-trade apprentices or trainees, are also eligible for the subsidy.

Eligible employers can register for the subsidy from early April 2020 and final claims for payments must be lodged by 31 December 2020.

8: Instant Asset Write Off:

From 12 March 2020, the instant write-off threshold will increase from $30,000 to $150,000. It has also been broadened and will be available to businesses with an annual turnover of up to $500 million for the current financial year (an increase from $50 million). This applies to new or second-hand assets used or installed ready for use by 30 June 2020.

The increased write-off threshold will apply on a ‘per asset basis’ until 30 June 2020.

9: Accelerated Depreciation:

Accelerated depreciation of 50% will apply to eligible assets until 30 June 2021.

Eligible assets are those acquired after 12 March 2020 and are used or installed ready for use by 30 June 2020. However, it does not apply to second-hand assets, building or other capital works deductible under separate tax provisions. This concession will be available to businesses with an aggregated turnover of less than $500 million.

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Part Two:

The following is a summary of the Payroll Tax and State Government’s Announcements relating to businesses in various states throughout Australia.

NSW, WA, Queensland, Victoria, ACT, and Tasmania have all announced Payroll Tax and other concessions for businesses, South Australia did not opt for that and is instead spending funds on infrastructure to boost its economy.

We summarise the announcements (excluding SA) and their potential impact for your business as follows:

1: NSW – Business & Payroll Tax:

The NSW Government has announced a $2.3b health and economic stimulus package in light of the COVID-19 outbreak. The package has two key components: $1.6b in tax cuts to support jobs, and $700m in health funding.

Payroll Tax is the largest component of the NSW Government package. We are asking clients to review the value of their payroll projection for normal Payroll Tax amounts to 30 June 2020, as you may be able to potentially receive some of the grants as set out below. Effectively, by giving businesses a waived monthly payment, plus an annual reconciliation deduction of 25%, the amount waived is “smoothed out”. Seasonal wages or significant drops in payroll will entitle businesses to receive additional annual reconciliation “refunds”.

1.1   Payroll Tax:

In terms of tax cuts, the State Government has set aside $450m for the waiver of Payroll Tax for businesses with payrolls of up to $10m for the months of April, May and June 2020. The Payroll Tax threshold limit will be raised to $1m in 2020/21, thereby bringing forward another round of payroll cuts for eligible businesses.

Future Payroll Tax lodgements

1.1.1   Annual reconciliation (2019/20):
Employers whose total grouped Australian wages are $10m or less will have their annual tax liability reduced by 25%. The annual reconciliation is due on 28 July 2020.

1.1.2 Monthly statements (April, May and June 2020):
Where total Australian wages are $10m or less for the current financial year, no payment is required. When lodging your annual reconciliation, you will still need to provide wage details paid in these months and will receive the benefit of a 25% reduction in the amount of tax you would have had to pay for 2019/20.

The splitting of the annual reconciliation and monthly statement provides a balance of payroll tax waivers where:

• an employer’s payroll is seasonal, and/or
• payroll over the next three months will be reduced dramatically.

1.2      Additional NSW Government Spending:

In addition, the State Government will introduce the following:

• $80m set aside to waive a range of fees and charges for small businesses
• $250m earmarked to employ additional cleaners of public infrastructure
• more than $250m to bring forward maintenance on public assets, and
• $500m to bring forward capital works and maintenance.

To claim your Payroll Tax waiver in NSW, it is likely to be done via the annual reconciliation process. The annual reconciliation is due by 28 July 2020.

2: WA Payroll Tax & Business:

On 16 March 2020, the Western Australian government announced measures to attempt to alleviate cash flow concerns of businesses from the economic downturn resulting from the Coronavirus pandemic.

Unlike other state and federal governments, this announcement included both cash flow relief in terms of deferred payments, but also grants direct to businesses. This all revolves around the businesses being subject to Payroll Tax. We summarise as follows:

2.1      One-off grants to small businesses:

Western Australian businesses that have Australian taxable wages between $1m and $4m will be eligible for a one-off grant of $17,500. Group employers are only eligible for one payment.

At this stage, it appears the grant will be received by way of a cheque, paid in July. Revenue Online WA is requesting that all eligible taxpayers review their contact details through their website to ensure their postal address is up to date.

2.2      Deferral of Payroll Tax payments:

The deferral of Payroll Tax payments by small and medium businesses is intended to run from the month of March through to June 2020.

The 4-month deferral will be only be granted by the Commissioner of State Revenue, with applications to be made via an online application form.

An application to defer monthly and quarterly payments will be considered if the business:

• has Australian taxable wages of $7.5m or less (including groups), and
• can demonstrate that COVID-19 has directly or indirectly affected turnover, profit, customers, booking or supply contracts.

If the application is approved, payments will be deferred for the 4 months. However, all returns are still required to be lodged by the due date, and all catch-up payments are required to be made by 21 July 2020.

2.3      Bringing forward Payroll Tax threshold:

The currently legislated change to the Payroll Tax threshold, from $950,000 to $1m, due to apply from 1 January 2021, will now apply from 1 July 2020.

As a result, some businesses may intend to (or will) go under the threshold from 1 July 2020. This means an employer may look to cancel their registration going forward and can do so 6 months earlier.

3: Queensland Payroll Tax & Business Relief:

The QLD Government will offer $500m in loans, and extend its Payroll Tax deferral to all affected businesses.

The $500m concessional loan facility will comprise loans up to $250,000 with an initial 12-month interest-free period.

Payroll Tax deferral is available to small and medium businesses to 31 July 2020. The Queensland Government is to extend the offer of a six-month Payroll Tax deferral to all affected Queensland businesses.

More detail is being made available, and we will provide it to clients when it is available.

4: Tasmania Payroll Tax & Business Relief:

The Tasmanian Government has announced a $420m support package to support the public sector, businesses, and the workforce. This package includes a Payroll Tax relief component, being as follows:

• Payroll Tax for the last four months of income year 2019/20 will be waived for businesses in the hospitality, tourism, seafood and export sectors. Affected businesses in other sectors with an annual payroll not exceeding $5m in Australian wages, can apply for a waiver of Payroll Tax for the three months of April, May and June 2020.
• A youth employment Payroll Tax rebate scheme will also be introduced from 1 April 2020 to encourage youth employment. One-off grants of $5,000 for businesses that hire an apprentice or trainee will likewise be introduced.

The State Government will also introduce the following measures to support businesses:

• Interest-free loans to targeted business for equipment purchase, business restructuring or asset maintenance
• Reduction of terms of trade for government agencies from 30days to 14days
• Provide a 50% discount in liquor licensing fees and waiver of application fees for the entire 2020 calendar year
• Assistance to the Tasmanian Chamber of Commerce to provide advice to businesses
• Waiver of tourism operator fees for the fourth quarter of 2019/20, and
• 12-month waiver of annual fees and levies for selected fisheries and divers.

5: ACT Payroll Tax Relief:

The ACT Government has announced an economic survival package, including a plan for Payroll Tax relief for small and medium businesses. It will also announce further packages as The ACT progresses to different phases of the crisis.

There will be a 6-month waiver on Payroll Tax for the hospitality, creative arts, and entertainment industries. There will also be access to interest-free deferrals of Payroll Tax commencing on 1 July 2020 for all businesses up to a payroll threshold of $10m in Australian taxable wages. The current threshold for the exemption from Payroll Tax will remain at $2m. In order to facilitate the program, a business liaison team will assist local businesses with these measures.

To further assist businesses, the Territory will expedite the payment of bills to further provide cashflow support for small and medium businesses.

There will also be a rebate on the fixed charge for 2019/20 on commercial rates for properties with an AUV below $2m, targeting businesses that own their own premises.

The government will also waive fees for food business registrations, certain liquor licensing fees and outdoor dining fees. Also, there will be a $750 rebate for small business owners to help with power bills.

6: Victorian Payroll Tax Relief and Land Tax Relief:

The Victorian Government announced on 21 March 2020 (Saturday) a range of tax measures to support businesses through Victoria’s State of Emergency, as part of a broader economic survival package to support business and jobs in response to COVID-19.

6.1      Payroll Tax waived:

Businesses with annual taxable wages up to $3 million will have their Payroll Tax for the 2019-20 financial year waived.

Eligible businesses must continue to lodge returns but do not need to make further payments for this financial year.

The State Revenue Office will directly contact eligible businesses in relation to reimbursement for Payroll Tax already paid in the financial year.

These businesses can also defer paying Payroll Tax for the first quarter of the 2020-21 financial year.

More information about the administration of these relief measures will be sent directly to eligible businesses.

6.2      Liquor licence fees waived:

Businesses that have paid for a renewable liquor licence for 2020 will be reimbursed for their licence fee and those yet to pay will have the fee waived.

The State Revenue Office will administer the reimbursement, regardless of whether the licence fee was paid to it or the Victorian Commission for Gaming and Liquor Regulation.

6.3      Land Tax deferral:

Landowners due to pay 2020 land tax that has at least one non-residential property and total taxable landholdings below $1 million, will have the option of deferring their 2020 land tax payment until after 31 December 2020.

The State Revenue Office will contact all taxpayers who are eligible for this deferral.