Notes taken by Karen as part of the Estuary Learning Business Survival

& Resilience 4-part Workshop Session One.

6 April 2020

Notes by Karen Burgess

 

Covid-19 has thrown us a massive curve ball, and not just in trying to lessen the curve, either.  It’s turned the world upside down; people are fearful and Government actions have made it impossible for many businesses to earn a living. I have been reaching out to clients and friends regarding some of the Government assistance programs that are available.

 

It’s incredibly confusing, but the most important thing is to know everyone is in the same boat and that there are a variety of programs which can be of assistance. The Estuary Learning group has asked if I can help explain some of this.

 

There are both Federal and State Government assistance packages. At this stage the Government is thinking on its feet, as are tax professionals like me, so I apologies if I may not be having all the answers to your questions. The goalposts are changing daily. You are most welcome to call or email me if you have further questions. There are some fact sheets available too.

 

Here’s the Overview.

There are a bunch of initiatives, about 7 at the moment that have different eligibility criteria. Some are tax free payments, some are grants and some are subsidies, so I’ll go through them one at a time.

 

Each one is designed for a different kind of business, so some may be right for you, where others won’t be.

The first initiative was the ‘The Cash flow Assistance for Business’ – This is when the Federal Government tried to fix the problem by giving free money to businesses, which seemed like a good Idea at the time, except it only helps employers, not businesses that have none, such as many sole traders, like yourselves. This one has been passed by the Government, whereas others haven’t been as yet. I’ll discuss this one in detail later.

 

The second Federal Government initiative is called The Jobkeeper Programme. This one has not passed into legislation yet... (There may be political some hoops to jump.) And is probably the one most of you could benefit from. So, I’ll go into the details now.

 

It will give you $1500 per fortnight for 6 months and now addresses the businesses that do and don’t employ. It’s a wage subsidy paid to employers to then pay their employees, but more importantly, it now covers sole traders who don’t employ – the catch being that you must have had a 30% fall in sales to get this. So, if you are a company or sole trader with employees, you may get 2 x Federal Government payments and if you don’t employ, you may be able to get this one.

 

Here is the breakdown.

You have to have suffered a 30% reduction in income from the same time as last year, of at least a month. So, how do you work this out without asking your accountant? The easy answer is have you had to shut your doors due to Government regulations and cannot work via web or streaming services? Then yes, that’s you. Still not sure? Then the easy way would be to look at your bank statements from 1 Jan – 31 March last year and quickly tally the income payments – back of an envelope is fine, then do the same for 1 Jan to 31 March this year. Notice a big difference? 30% or more? Then yes, the rules apply – get a bit of Dec Q income in March? Maybe you need to wait a few weeks and do the same thing again with the dates covering April. Or, you could tally your invoices for those dates to get the figures.

 

You need to register for this one. The ATO is calling this a subsidy. Payments will be $1500 per fortnight, before tax, paid monthly into your bank account for up to 6 months. There has been no announcement yet as to whether this is tax free or becomes part of your taxable income.

You will need to provide monthly updates to the ATO.

 

To be eligible, you must be a sole trader with no employees or have had employees for at least a year from 1 March that are over 16 years of age and must have the right Visa or be Australian Citizens and aren’t getting this payment from anyone else.

This means that employers will get a minimum of $1500 per fortnight given to them, to give to each of their employees.

 

Either way, you need to register your interest with the ATO, which doesn’t sound very encouraging, but you should do it anyway. At this stage you only need to give your Business Name, ABN, contact name, email and mobile number. The ATO will then get back to you.

 

https://www.ato.gov.au/Job-keeper-payment

 

There is also another Federal payment – This one is pretty simple, and you don’t need to do anything to get it. If you or family members receive government payments like a pension, have a concession card or get family tax benefit payments, then the Federal Government will give you each a $750 once off payment from 12 March to 13 April, and another $750 payment on 10 July. So, a pensioner couple will get $1500, singles will get the $750, provided you had been receiving payments prior to the magical 12 March date.

 

Now to go back to The Cash Flow for small business – this is the one that’s actually passed through legislation and only helps those with employees. It’s the one where you get money from the government via the BAS. So, it may sound a bit complicated for those of you that don’t have a payroll account with the ATO, well, actually it will probably sound complicated for everyone, but here goes.

 

This initiative uses the Activity statement role for getting a credit against any withholding you may have. Withholding is the tax that’s taken out of an employee’s gross wage and paid to the taxman by way of a BAS or Activity instalment. So, this one only works if you’ve had employees, as at the 12 March when the announcement was made. So, that could be a company, or a sole trader who has an employee.

 

This is tax free money.

 

If you lodge a Quarterly activity statement with wages tax (Withholding tax) the ATO will credit you i.e. pay the amount for you.

 

The ATO will match the same amount of PAYGW on the March BAS and give it to you for free, up to $50,000. If you pay wages in March, but don’t need take any tax out, the ATO will still give you $10,000. This will go into your Integrated Client Account (the BAS account). If you end up in a credit on the account, after other liabilities have been cleared, the ATO will refund any extra money to your bank account. This payment will come in after 28 April, when the BAS is due.

 

You will get the same amount you received on this March BAS, when you lodge your June one – with payments up to $100,000 in total if you have PAYGW and $20,000 even if you don’t.

 

There are different treatments for those on monthly activity statements, anyone here have those? Yes?? - OK it means that whatever you put on the March instalment, the ATO will give you 3 x that amount as a credit on your ICA, to go against your PAYGW liabilities for future months up to the $100,000.

 

The nutshell is that if you have had employees as at 12 March, you will get your PAYGW covered for the March and July quarters by the ATO. If you have employees and don’t pay any PAYGW because they are below the tax threshold, you will still get $20,000.

You are still obliged to meet the super laws re 9.5% x gross wages paid to superfund. So that’s the 2 big ATO developments.

For those that are really struggling, you have another option, and that’s The Early access to super of up to $10,000. This one should be carefully thought out before you do anything. I am not allowed to give financial advice. However, you can apply to access your super if you satisfy certain requirements.

 

This is a bit of a minefield. Your super may have lost a lot of its value since the share market fell as a result of the pandemic. Please approach this as a last resort and seek financial advice if you can.

 

However, you may be able to access your super if you  are:

Unemployed

Satisfy eligibility

Were made redundant

or your working hours were reduced by 20% or more since 1 January 2020

Or are a sole trader and your business was suspended or your turnover has reduced by 20% or more since 1 January 2020.

 

If you meet these requirements, you won't pay tax on super you withdraw, and it won't affect Centrelink or Veterans’ Affairs payments.

 

$10,000 Grant - will be available to eligible NSW small business owners. You need to apply for this one. It’s called the

 

NSW Gov - Small Business Support Grant

The NSW COVID-19 Small Business Support Grant of $10,000 will be available to eligible NSW small business owners. I’m not sure what you need to show in order to get this, or what you need to do, however, there will be an application form available on the Service NSW website by 17 April.

 

To be eligible, businesses will need to:

Have between 1-19 employees and a turnover of more than $75,000

Have a payroll below the NSW Government 2019-20 payroll tax threshold of $900,000

Have an Australian Business Number as at 1 March 2020, be based in NSW and employ staff as at 1 March 2020

Be highly impacted by the Public Health (COVID-19 Restrictions on Gathering and Movement) Order 2020 issued on 30 March 2020

Use the funding for unavoidable business costs such as utilities, overheads, legal costs and financial advice

Provide appropriate documentation upon application.

 

Now, if you have any money left after all of this, there is also the

 

Increase in the instant asset write off – if you have the money you can now buy an asset for the business for up to $150K, instead of the $30K announced earlier. Let me know if you’d like me to chat about this one.

 

And finally, there is

 

Power Relief. This is another rebate for small business, it’s based on your energy consumption and is too complicated to discuss here. If you Google Covid-19 Electricity and Gas Package, there is a fact sheet, or I can email it to you.

 

And in addition to these, you can contact your bank if you have a mortgage where you can put the payments on hold, and you can also see if you can negotiate with your landlords re their rent. These ones are pretty much up to you.

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To download all the Australian Government fact sheets go to FAQs.