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The following is a broad summary of the Federal Government’s stimulus package announcements and support available to small businesses during these uncertain times.
We remain extremely grateful for your business and are committed to working with you through this unsettled time. If you’re unsure or have any questions at all, shoot us an email and we can give you a call to discuss how we can help.
Payment will be made through the BAS/IAS process to employers with a turnover of less than $50m that employ staff as at 12 March 2020. The concession has now also been extended to not-for-profits.
Initially, the Government provided up to $25,000 with a minimum of $2,000 for eligible businesses. This has now been increased to a maximum of $100,000 and a minimum of $20,000.
The payments will be made as a credit of up to 100% of the amount withheld from salary and wages [up from 50%] and will be automatically applied to activity statements starting with your March BAS.
The payment will be split though between the following periods:
The second additional payment will require the entity to continue to be active and will be delivered as a portion of the amount previously paid under these incentives in the earlier period. It will be paid as follows:
When you work through the examples provided from Treasury it shows that the initial payment will be effective based on the wages for January, February and March 2020.
Example 1: Monthly PAYG Withholdings of more than $16,667 [and monthly lodger]
If your March BAS’s shows PAYG Withholdings of $16,667, you will receive payments as follows:
Example 2: Monthly PAYG Withholdings of $10,000 [and monthly lodger]
If your March BAS’s shows PAYG Withholdings of $10,000, you will receive payments as follows:
There are more examples in the Treasury documents at https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Cash_flow_assistance_for_businesses_0.pdf
And the good news is that this payment is ‘tax-free’!
One thing that has been made clearer now by the government is that eligibility requires you to be ‘active eligible employers established prior to 12 March 2020’.
Things to think about:
These changes will be significant for those distressed businesses that are worried about insolvency and bankruptcy implications.
Under the temporary rules, the Government is increasing the threshold of when a creditor can issue a statutory demand on a company from $2,000 to $20,000 [and this will be for 6 months].
The threshold for the minimum amount of debt for a creditor to start bankruptcy proceedings is also being increased from $5,000 to $20,000.
When a demand is issued against a company or a bankruptcy notice issued, if they fail to respond they are presumed insolvent or it is considered an act of bankruptcy. The time limit for both of these notice periods is being increased from 21 days to 6 months.
Insolvent trading rules have also been relaxed to ensure directors can make the right decisions rather than be worried about personal liability. Directors will be relieved of the personal liability that would be otherwise associated with insolvent trading for a period of six months.
Further information is available on the Treasury website https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_temporary_relief_for_financially_distressed_businesses.pdf
The Government proposes the setup of the Coronavirus SME Guarantee Scheme. The scheme will provide a guarantee equal to 50% to those that lend to SME’s to support short-term unsecured loans to SME’s with the intention of increasing the willingness of banks to lend SME’s money during these times.
Other eligibility criteria can be summarised as follows:
One thing to note here is that even though you may not need to provide further security, (assuming you go to your existing lender for the additional debt) you will probably already have given them everything by way of security.
Responsible lending can also be ignored for lenders providing credit to small business customers. This exemption will also be for 6 months and will apply to any credit increase or new credit for business purposes only.
RBA also announced earlier in the week a further cut in the official cash rate to 0.25% and the establishment of a term funding facility for the bank system so that banks can have access to at least $90billion in funding at a fixed interest rate of 0.25% per annum (further reducing funding costs to banks).
Further information available on the Treasury website https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Supporting_the_flow_of_credit_1.pdf
Have further questions? We’re here to help.