Coronavirus (COVID-19) business resource for Australian startups and SMEs

This resource was originally published on the Standard Ledger blog and was reproduced for LinkedIn on Thursday 19 March (last updated 26 March). For the most up-to-date resource, please visit the Standard Ledger blog.

This coronavirus business resource provides an up-to-date view on what you might need to think about financially during the pandemic, and how you can access support. We’ll keep updating it as more support is announced.

Our thoughts go out to everyone affected by the coronavirus. Above all, please look after yourself and those around you as we pull together to get through this as best we can.

While we can’t help on the health side, we want to on the financial side by helping you understand your position, plan and get support. That’s why we’ve set up this coronavirus business resource to help you during this unprecedented period.

In addition, please reach out if you need help with financial planning or accessing support. Simply book a no-cost phone consultation with our team. 

We hope you find this resource useful. Take care,

Remco, Mike and the Standard Ledger team

Free PAYG Stimulus Calculator 

The Federal Government has announced cashflow support to small and medium businesses through the PAYG process. You’re eligible if your revenue is under $50 million and you employ staff between 1 January and 30 June 2020.

It’s not the same for everyone and will range from $20,000 to $100,000 for eligible businesses.

To help you understand what it means for your business, we’ve made a free PAYG calculator that you can download and use. If you need any help, book a spot with Remco. Don’t worry about the W in the calculator’s name – it stands for ‘withholding’, which is the full tax name for this type of PAYG. 

Understanding your financial position

First up, you need to take stock of your financial position. This can be difficult as the situation keeps changing but start by thinking through:

• How much cash you have to ride out a drop in income (and for how long)
• Whether you’re struggling to get supplies of goods/services
• Whether there are any impacts to your business from travel restrictions (either in your own business or through your customers, suppliers or partners)
• Whether you need to look at how to support staff working from home
• If you need to look at staffing levels – compassionately, always remembering our people are our best way of looking after our customers (ours definitely are) so you’ll want your team when this turns around
• Whether you have any business continuity insurance and what it covers

You also need to consider your agreements (and commitments) to banks and landlords. For example, do you need to renegotiate the terms of a bank loan so you can afford to keep paying it? Or do your bank loan, lease or other contracts have force majeure clauses that a lawyer can use to help you suspend payment?

This coronavirus resource from our friends at LegalVision has more on force majeure and how to deal with banks and landlords at this difficult time. 

Financial planning during the coronavirus

We’re facing very uncertain times at the moment so whatever views you form, plans, forecasts and contingencies you make will need to remain fluid. 

That said, it is important to build financial plans because at least then you have a roadmap of sorts that you can adjust as needed. Also, banks and other funders require it. They don’t need to be complex but you’ll need to build financial plans for:

• Short term cash-flow impacts
• What happens if “everything stops” for three or six months
• Three-way financial forecasts for longer term robust plans, especially if you’re talking to financiers about lending

This coronavirus Business Continuity Planning resource from Boston Consulting Group is really useful. Please consider running through it for your business. 

Federal Government support

There are a couple of ways the Federal Government is looking to support business through its coronavirus stimulus package, announced on 12 March 2020. Here are the details available to most small and medium-sized businesses.  

CASHFLOW SUPPORT (between $2000 and $25,000)

You should receive some financial support if you meet all the criteria:

• Annual turnover under $50 million
• Employ staff between 1 January and 30 June 2020

If you meet the criteria, you don’t need to do anything. The benefit will be provided progressively, as a credit of up to 50% of your employee PAYG against the next few monthly Instalment Activity Statements (IAS) or quarterly business activity statements (BAS). It will be a minimum of $2000 in support, capped at $25,000.

This will start from the end-of-March lodgements. Despite the way some news reports have made it sound, it won’t be a payout coming into your bank account but it will reduce the PAYG you’d otherwise have to pay, freeing up your cash to support your business in other ways at this time. The ATO has provided some good examples in its fact sheet.

ASSET WRITE-OFF INCREASE

If you buy an eligible new or used asset, like a work vehicle or computer equipment, worth up to $150,000 before 30 June, it can be an instant tax write off (increased from the previous $30,000 per asset limit). Note that for cars, the limit is still $57,000 while other work vehicles can be worth up to $150,000.

Beyond 30 June this year, and until 30 June 2021, you can deduct an extra 50% of an asset cost in the year it was bought. See the ATO’s fact sheet for more.

As always, we don’t recommend buying assets for the sake of it. It’s only tax and cost-efficient in the long run if it’s something you actually need. You might also need to back up any short-term cash requirements with extra vehicle or asset financing through your bank. And don’t forget to check the list of assets that do not qualify for the instant write off.

ATO HARDSHIP ASSISTANCE 

The ATO has also taken the unusual step of asking businesses affected by the coronavirus to get in touch to discuss tax relief options.

We’ve spoken to the ATO and can confirm they are being very supportive at this time. Options that could be available to you include:

• Deferring Activity Statement payments by up to four months
• If you’re paying PAYG instalments (this is where you’re pre-paying towards your expected end-of-year company income tax) the ATO could allow you to vary PAYG instalments to nil for the March 2020 quarter and claim a refund for PAYG instalments paid in the previous September 2019 and December 2019 quarters
• If your business is expecting more regular refunds, you could shift your quarterly GST reporting cycle to monthly, to get quicker access to GST refunds

There are also these options, which could be particularly useful in managing the upcoming quarterly and annual tax obligations:

• The ATO will remit any interest and penalties incurred on or after 23 January 2020, that have been applied to existing tax liabilities
• The ATO has made it clear they are very open to discussions about existing and upcoming company tax debts, including working with companies to enter extended repayment terms with low or even no interest payment plans

Remember that these options and support are not automatic. The ATO recommends calling its Emergency Support Infoline on 1800 806 218 to discuss your situation and how they can help.

R&D TAX INCENTIVE AND OTHER GRANTS

Remember that the R&D Tax Incentive and grants such as the Export Market Development Grant are available as normal.

If you want to chat about these, get in touch with Jeremy Worthington to discuss if you’re eligible and what it could mean for you. He’ll do an initial consult at no charge.

State Government support

In addition to the Federal Government support detailed above, state governments are starting to announce their own support packages too. Here are the ones we know of so far.

NEW SOUTH WALES

The NSW Government has announced it will waive payroll tax for small businesses (with payrolls of up to $10 million) for three months.

QUEENSLAND

The Queensland Government has announced its economic stimulus package comprising a bunch of options:

• Loans to help small businesses keep going and keep their staff. Basically, these are low interest loans of up to $250,000 for carry-on finance with an initial 12-month interest free period for businesses to retain staff. If interested, you need to register interest here or call 1800 623 946
• The ability to defer lodging and paying payroll tax until 31 July 2020 if your business has been affected by the coronavirus. More details here
• Free mentoring (including financial mentoring and business planning) one-to-one or register interest for a workshop in your area (which they’ll consider holding according to demand). Call 1300 654 687 or email to find out more
• Grants for Queensland agriculture, food and fishing exporters and their critical supply chain partners. Find out more here

TASMANIA

The Tasmanian Government has announced economic stimulus measures as part of its overall COVID-19 response. For Tasmanian SMEs, it includes:

• The possibility of interest-free loans, for up to three years, for businesses in the hospitality, tourism, seafood and exports sectors (available to businesses with turnover under $5 million for the purpose of purchasing equipment or restructuring business operations)
• Waiving payroll tax for the last four months of this financial year for hospitality, tourism and seafood industry businesses. Other SMEs with an annual payroll of up to $5 million can apply to have their payroll tax from March-June 2020 waived, based on the immediate impact of the coronavirus on their business
• Faster payment from state government agencies to businesses to help with cashflow (from 30 days down to 14 wherever possible) 

WESTERN AUSTRALIA

The WA Government has announced an economic stimulus package too, largely centred on payroll tax breaks.

It means any small business with a payroll between $1 million and $4 million, that pays payroll tax, will receive a one-off grant of $17,500. If this is you, you should receive a cheque in the mail as early as July 2020 (as long as your registered address with the Department of Finance is correct). But if your tax status changed during the 2018-19 or 2019-20 financial years, it could be delayed and at this stage, it’s unclear whether you’ll need to apply for it. Call the department on 1300 368 364 if you need to check.

If you’re a WA business with a payroll of less than $1 million, you’ll be exempt from payroll tax from 1 July 2020 – six months ahead of the previously planned exemption.

And you might also be able to defer your payroll tax payments until 21 July 2020 too, if your business pays up to $7.5 million in taxable wages and has been affected directly or indirectly by the coronavirus. If this is you, use the WA Government’s payroll tax deferral form.

More help 

We hope you’ve found this coronavirus business resource useful but if you need more help understanding the financial implications of coronavirus and the support available for your startup or SME, please reach out to us.

We’ll keep updating this resource with any relevant financial announcements. In the meantime, take care and look after yourselves,

Remco, Mike and the Standard Ledger team.

Photo oat top of this page by Neil Thomas on Unsplash.