As we enter another uncertain week ahead, we are pleased to provide you with further detail in relation to the State Government Stimulus package and the 2nd round of stimulus from the Federal Government announced over the weekend.
While we have been impressed with the Federal and State Government actions, we are disappointed at their disjointed and out of sync press conferences and advice in relation to the operation of our small and medium businesses. This newsletter is focused on the impacts the packages will have on small to medium businesses.
Before we start with the stimulus packages, we would like to assure you that Suntax will be fully operational at all times during these periods of self-isolation and shutdown. Every member of our team has been set up to work from home, with full 2 Step Authentication for added security. Our mobile phones will work exactly the same as our office desk phones (using some internet magic) and we are using google meetings to share our screens with you as we work in virtual meetings. As we are 100% cloud based, we can access everything you may need from us while being able to perform everything you need as your accountants and financial advisors.
State (Victoria) Government Stimulus Package
Premier Daniel Andrews announced a $1.7 billion economic and jobs package over the weekend that included:
A full REFUND of payroll tax that has been paid to the Victorian State Revenue Office for the 2019-2020 financial year for those employers with a payroll of less than $3 million dollars, with payments to start flowing next week. This will happen automatically.
A DEFERRAL of Payroll Tax for the payment of any payroll tax for the first three months of the 2020-2021, until January 2021. This will happen automatically.
Rent Relief for tenants in government buildings – A move private landlords are being encouraged to undertake.
A DEFERRAL of land tax for eligible small business for 2020.
Improved speed of payment of Invoices from the Victoria Government. They will now be paid within 5 business days.
Liquor License fees for 2020 will be waived in an effort to support the hospitality industry.
A $500 million Business Support Fund will be established to support those industries most affected, including hospitality, tourism, arts and entertainment and the retail sector. More details to follow.
A $500 million Working for Victoria Fund which will provide support to those unfortunate enough to have lost their jobs, helping them to find new opportunities. More details to follow.
Second Round of Federal Government Stimulus
In the second round of Federal Government stimulus announcements, the Morrison Government announced an additional $66 billion in COVID-19 economic support. The Small Business stimulus announcements include:
Tax Credits For Small Business Employers (Also known as “Boosting Cash Flow for Employers”)
The Federal Government has increased the small and medium business credit for employers to up to $100,000. The first payment (capped at $50,000) will be made after 28th April and the second payment (also capped at $50,000) after 28 July 2020. Small and Medium Businesses with aggregated annual turnovers of under $50 million will now receive two paymentsequal to 100 per cent of their PAYG withheld on their employees salary and wages for the periods from 1st of January 2020 to 30th June 2020.This is a great initiative to encourage businesses to retain staff.
Additionally, businesses that employ and pay salary and wages but are not required to withhold tax will receive a minimum credit against their BAS of $20,000 (was previously $2,000)
Businesses will not physically receive the cash as it will be offset against the ATO BAS account, reducing the amount you would have otherwise had to have paid, unless, the stimulus payment creates a refund, then the refund will be paid in cash to the business. The payments are tax free, there will be no new forms to complete as the stimulus will automatically be calculated by the ATO.
There are special rules for monthly BAS reporters, please refer to the examples at the end of this newsletter to see how this stimulus may work for you.
IMPORTANT NOTE: This stimulus is only available to employers that were registered before 12thof March 2020.
Government Guaranteed Loan Scheme
In a move that may see an improvement in bank lending practices to small to medium businesses, the Federal Government will guarantee 50% of loans to businesses from bank and non-bank lenders and will include an upfront six month freeze on repayments.
The loans will be unsecured and can only be used only for working capital purposes for loans granted between 1st of April 2020 and 30th of September 2020. New and existing small and medium business customers will be able to apply for loans up to $250,000 over a three year term.
Financially Distressed Businesses Will Receive Extra Protection Under The Corporations Act
In a move that reduces the rights of suppliers, the Government has temporary increased the threshold at which a creditor can take action to initiate insolvency or bankruptcy from $2,000 to $20,000 while also giving companies and individuals six months instead of 21 days to respond to a demand for payment.
There will also be relief for directors for personal liability when the company is trading while insolvent.
We are not great fans of this change as it reduces the rights of those businesses that have sold goods or provided services in good faith of being paid. Businesses withholding payments are likely to have negative flow on effects throughout the business community.
Early release of superannuation for Individuals Impacted By The Coronavirus
From April 2020, eligible individuals will be able to access part of their superannuation, capped at $10,000 this financial year and a further $10,000 next financial year. The withdrawals will be tax-free. The eligibility requirements for individuals are:-
You’re unemployed
You’re 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
On or after 1 January 2020
You were made redundant
Your working hours were reduced by 20 per cent or more
If you’re a sole trader, your business was suspended or there was a reduction in your turnover of 20 per cent or more.
People accessing their superannuation will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
We applaud this change, as it will have a direct cashflow injection to those that have been impacted by the Coronavirus. It is the first real benefit for sole-traders who do not employ staff. As withdrawing money from your superannuation will reduce your retirement nest egg, if this option is used, a plan to rebuild your superannuation balance should be put into place once we are past this pandemic.
With the myriad of information being announced, we hope that we have been able to provide concise and meaningful information that is likely to inform you and hopefully provide a positive impact to your business and life during this horrible time.
If you need a chat or would like to discuss any of the above measures, please do not hesitate to reach out and call us. We are here to support you during this once in a lifetime event.
Your Suntax Team
Examples of How The $100,000 Government Stimulus Package May Impact you (Also know as “Boosting Cash Flow for Employers”)
Example 1:
Sean’s Sunbury Hairdressing Salon
Sean owns a hairdresser’s salon in Sunbury. He employs 12 hairdressers, with average salary of $50,000 per year. Sean reports withholding of $8,788 for his employees in each of his monthly BAS’s.
Under the Government’s changes, Sean will be eligible to receive the payments on lodgment of his relevant BAS. Sean’s business will receive:
A credit of $26,364 for the March period, equal to 300% of his total withholding (because he is a monthly BAS lodger).
A credit of $8,788 for the April period.
A credit of $8,788 for the May period.
A credit of $6,060 for the June period, before he reaches the $50,000 cap.
These credits will be applied to Sean’s BAS account
Sean will also receive:
An additional payment of $12,500 for the June period, equal to 25% of his total Boosting Cash Flow for Employers payments.
An additional payment of $12,500 for the July period equal to 25% of his total Boosting Cash Flow for Employers payments.
An additional payment of $12,500 for the August period, equal to 25% of his total Boosting Cash Flow for Employers payments.
An additional payment of $12,500 for the September period, equal to 25% of his total Boosting Cash Flow for Employers payments.
Under the Government’s enhanced Boosting Cash Flow for Employers measure, Sean’s business will receive $100,000 (note: the first announced stimulus only provided for a $25,000 benefit)
Example 2:
Tara’s “Essendon Courier Business”
Tara owns and runs a small delivery business in Essendon, and employs two casual employees who each earn $10,000 per year. In her quarterly BAS, Tara reports withholding of $0 for her employees as they are under the tax-free threshold.
Under the Government’s changes, Tara will be eligible to receive the following credits on lodgment of her BAS.
Tara’s business will receive:
A credit of $10,000 for the March quarter, as she pays salary and wages but is not required to withhold tax.
An additional payment of $5,000 for the June quarter, equal to 50 per cent of her total Boosting Cash Flow for Employers payments.
An additional payment of $5,000 for the September quarter, equal to 50 per cent of her total Boosting Cash Flow for Employers payments.
Tara’s business will receive $20,000 under this new stimulus package to keep her business moving.
