24 March 2020
COVID-19 AND SMALL BUSINESS ASSISTANCE
Following on from our newsletter last Tuesday, things continue to change at a rapid rate.
We have been in contact with many of our business clients and associates over the past week and have summarised the FAQs and our answers below:
What is the likely financial impact on my business?
It depends. Some clients we are seeing major disruption, and others there is minor impact. There is no generic answer to this question, and the impact of COVID-19 needs to be assessed on a case by case basis.
The PM announced on Sunday major shutdowns to a number of our business clients. In these instances, the impact on revenue and profitability is immediate.
From a financial perspective, what should we be focusing on right now?
Last week, this week, and the coming few weeks are an important time to collect information about your business, reforecast, make decisions and develop an action plan.
- Step 1: Collect data and measure the impact on your Profit & Loss such as cancelled contracts, new opportunities and demand changes to your service offerings.
- Step 2: Consider if the options presented in the Federal stimulus package, the WA stimulus package and other opportunities presented by the ATO and the banking sector are relevant to assist your business. Opportunities from the Federal Stimulus Package # 2 now also need to be considered.
- Step 3: Prepare a Reforecast. Consider your YTD results to March, and reforecast for Q4 (April - June) and Q1 (Jul-Sept). Consider the cashflow impact including tax planning options and capital commitments. Reforecasting revenue over that period will be difficult in some instances, but necessary to enable decision making.
- Step 4: Make decisions - based off the results from your reforecast, you will need to make decisions regarding the direction of your business for Q4, and the longer term. Ensure you don't just think about the short term.
- Step 5: Action plan - prepare a bullet point plan of things you are going to action for Q4. You should focus discussions with you customers on what want from you right now. These are the things that add value to them.
What COVID-19 relief is available?
The relief is changing daily, and we will keep you informed regarding any new measures yet to be announced.
With respect to the Federal Stimulus package # 1, refer to our newsletter sent out on Tuesday 17/3/20. The Federal Stimulus package # 2 was announced on Sunday 22/3/20.
Read more and click on the links below.
Supporting Individuals and Households
The factsheets cover Income support for individuals, payments to support households, temporary early release of superannuation, temporarily reducing superannuation minimum drawdown rates and reducing social security deeming rates.
Click here to read more: https://treasury.gov.au/coronavirus/households
Supporting Business
The factsheets cover boosting cash flow for employers, temporary relief for financially distressed businesses, increasing the instant asset write-off, backing business investment and supporting apprentices and trainees
The immediate impact relief is in the cashflow incentives for employers, which are summarised below. Refer to the link for the details.
- Scaling up their "boosting cashflow for employers' payment" relief by increasing the payment to 100% (up from 50%) of the PAYG Withheld, which effectively covers the January-June period. The minimum payment has increased to $10,000 (up from $2,000) and the maximum payment has increased to $50,000 (up from $25,000). This will be delivered as an automatic credit on lodgement of your Quarter 3 (Jan-Mar) and Quarter 4 (Apr-Jun) BAS. (NOTE: monthly lodgers get the credit in Mar/Apr/May/Jun BAS's)
- Adding an "Additional payment" equal to the total of the "boosting cashflow for employers’ payment" above. This effectively doubles the entitlement, however, to receive this relief, the entity must continue to be active. Again, this will be delivered as an automatic credit via the BAS system in Quarter 4 (Apr-Jun) and Quarter 1 (Jul-Sep) BAS. (NOTE: monthly lodgers get the credit in Jun/Jul/Aug/Sep BAS's)
Click here to read more: https://treasury.gov.au/coronavirus/businesses
Supporting the flow of Credit
The factsheets cover Coronavirus SME Guarantee Scheme, quick and efficient access to credit for small business and other measures to support the flow of credit.
Click here to read more: https://treasury.gov.au/coronavirus/business-investment
The WA State Government have now released a WA stimulus package. The main relief at this stage is payroll tax relief in terms of increasing the threshold to $1m and deferring the payment until 21 July 2020. In addition, employers or groups of employers, with annual Australian taxable wages between $1 million and $4 million will receive a one-off grant of $17,500. You do not need to apply for this grant, it will automatically be paid from July 2020.
The ATO announced some administrative concessions the main ones being:
- Deferral of tax payments by the BAS system by up to 4 months.
- Allowing businesses to vary PAYG instalments to Nil for the March quarter.
- Remitting of interest and penalties for affected businesses (after 23/1/20)
- Extending low interest payment plans to affected businesses.
ATO relief is not automatic they will assess on a case by case basis.
The Australian Banking Association have made statements last week regarding the banking sectors relief. You will need to get in touch with you bank to find out more about their relief packages for your business.
We look forward to assisting you to interpret and apply the information and also assist you in managing your business strategy and decisions during this difficult time.
Please contact the office to discuss your business with one of our advisors.
AR Advisors