This is a draft being edited in March 2020.
Maximise Government Assistance & Business Cash-flow Plan 2020
The dramatic and sudden change to our lives due to COVID-19 will affect every business in Australia.
This Axia Accounting “Business Survival Guide 2020” outlines a number of strategies you can employ along with additional help from the Australian government to help your business survive 2020.
How government payments will reach business are not yet confirmed by the Australian Taxation Office (ATO). We will continue to keep you updated through the coming weeks and months as more information is clarified.
- BUSINESS LOANS: Guarantee 50% of unsecured loans up to $250,000 for businesses
- SOLE TRADERS: Early access to $10,000 superannuation for sole traders
- ASSET PURCHASES: Increase in immediate asset write off to $150,000
- EMPLOYERS: Payments up to $100,000 to businesses with employees
- EMPLOYERS: Payroll Tax (see below – each Australian states has different benefits
- BUSINESS CASHFLOW: A range of strategies to help you shore up cash and ensure cash-flow in your business
The government has announced they will offer 50% guarantees to banks on unsecured loans up to $250,000 for small businesses.
Due to the nature of unsecured loans, they are not easily approved by banks. With the government offering to guarantee 50% of these loans, the approval rate should be much higher.
These loans will likely carry a low interest rate, for example CBA has announced their interest rate will be 5% less than normal. Not all banks will be participating, so far CBA, NAB and Westpac have confirmed they will participate. ANZ is yet to confirm. Please contact the eligible banks for details.
All the major banks have announced they will allow affected businesses to defer payments on their current business loans for a period of 6 months. Please contact your bank for details.
Sole traders – Superannuation Early Access
The government has announced the ability for sole traders to make an early access withdrawal from their superannuation fund up to $10,000 each year for the current financial year, and next financial year.
The requirement for this withdrawal is where your income has reduced by 20% since 1 January 2020. The withdrawal will be tax free in your hands. You apply for this by making a declaration via MyGov. After the ATO processes your application they will provide the determination directly to your superannuation fund who will release your payment. Please contact your superannuation fund to ensure they have your current bank account details.
This early access to superannuation is also available if you are unemployed, made redundant or if your working hours have been reduced at least 20%.
All businesses – Immediate Asset write off
This measure has already been introduced into legislation. Previously businesses could get an immediate deduction for assets purchased up to $30,000 (net of GST). This immediate deduction has now been increased to an amount up to $150,000 (net of GST).
Though – it would be better from a cash-flow perspective to lease, or continue to use older machinery, and other business assets. Check with your Axia accountant to see if buying or renting would be better for you.
*** If you purchase an asset close to $150,000 ensure that all the costs are included by the supplier. Ask them to send you a pro-forma invoice so your accountant can check it first.
Employers – Payments
The government has announced payments for small businesses with employees of at least $20,000 and up to $100,000. There are no further details at this point regarding how the scale applies. It is understood the payments will be a rebate on PAYG Withholding tax. Therefore, it may be credited against your Integrated Client Account at the ATO. Initial reports say this credit will be applied late April.
At this time we believe it will be based on records reported in Single Touch Payroll (STP). If you have not yet registered for Single Touch Payroll you need to attend to this immediately to ensure there is no risk to missing out on these payments. Please contact us if you require assistance with this registration.
Should these payments be paid to you in cash you will need to ensure your bank details are current with the ATO. Please message our Axia admin office if you need to clarify bank details held with the ATO, or update details.
The government has announced that approximately 30,000 charities and not for profit organisations will be eligible for this payment.
Employers – Payroll Tax
The QLD State Government has announced that those businesses paying payroll tax have the option to defer payments for 6 months. This deferral can be applied for via www.osr.qld.gov.au.
The NSW State Government has confirmed that businesses will have their payroll tax liabilities waived for the next 3 months to 30 June 2020.
Business Cash-flow Strategies
Here is a number of cash-flow strategies that will help your business.
1. Increase online sales and do more business over the phone
Your customers and clients still require your products and services – albeit a change to what they are looking for.
Try to see where the demand is in your business. For example, IKEA and OfficeWorks have seen a huge increase in home office furniture sales for people to work from home.
2. DO increase your customer / client marketing and promotions
Do continue to promote your business via email, SMS, social media and phone to your customers and clients.
Offer specials and promotions around what products are services that are in demand now.
3. Strictly manage customer and client payments (terms)
Reduce credit terms. Consider putting all late and bad payers on upfront payments.
4. Reduce discretionary expenses
There will be a list of discretionary expenses that all people and business owners spend on that now can be reduced or eliminated. Some include:
- Online subscriptions to magazines and newspapers.
- Paid training. Postpone or cancel training (both in groups and online).
- Staff events and functions
- The daily $4.50 cafe coffee. Look at going to cheaper options like using the coffee machine at work, or drinking instant coffee.
- Any many more… you will know what they are.
5. Pay your suppliers on-time
Do pay your suppliers on-time. What goes around comes around.
6. Increase your lines-of-credit
No need to draw on it, but you should expand your lines-of-credit NOW. Reach out to your current loan provider (bank, etc).
- Maybe increase your credit card limit
- Increase your overdraft limit
- Increase any other business loan limits (as required)
New loans – Contact your current loan provider or contact us at Axia Accounting and we can refer you to a business loan finance company.
7. Use invoice factoring (if applicable)
Maybe look at using a factoring company to get 80% – 97% plus of your invoices paid immediately. With the balance coming through when your client pays the invoice.
8. You may have to stand down some employees
Unfortunately if it means that this is the only way for your business to survive, you may have to stand down some employees. Either the employees will accept unpaid leave or they will quit and choose to go on unemployment benefits. It’s a very tough and distressing call to make. Keeping your business going and keeping some staff employed is the Australian government’s preference.
9. Enduring Power Of Attorney (EPOA)
Ensure your business can operate without you (if you become ill). An enduring power of attorney is a legal agreement that enables a person to appoint a trusted person – or people – to make financial and/or property decisions on their behalf. An enduring power of attorney is an agreement made by choice that can be executed by anyone over the age of 18, who has full legal capacity.
Free download here from the Australian government:
Sit down with your partner(s) and see which of the above strategies you can implement immediately. Doing nothing unfortunately will put your business at high risk. By implementing now your business can survive. You should see a return-to-business-as-usual and an increase in demand once the COVID-19 crisis has dissipated later in 2020, or by early 2021.
If you need additional assistance please contact us at Axia Accounting.
Keep yourself and your family safe.
Thank you for being a valued Axia accounting client.
– the team at Axia Accounting