This coronavirus business resource helps Australian startups and SMEs understand the financial implications of COVID-19 and the support available.
Coronavirus (COVID-19) business support and assistance tips in Australia
This coronavirus business support resource provides an up-to-date view on the financial support available during the COVID-19 pandemic.
You can also watch the below webinar, where our founder Remco covers the latest info and answers financial questions from startup founders and SME business owners.
This resource is not personal financial or tax advice but we have tried to make it as useful as we can for startups and SMEs. If you do want personal advice or help accessing support, please reach out to us. 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
Don’t forget to follow the Federal Government’s Whatsapp channel, built by the clever team at Atlassian for the latest numbers, restrictions and announcements.
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.
Federal Government coronavirus business support
The Federal Government has announced a raft of measures to support startups and SMEs through the coronavirus via two stimulus packages – the first on 12 March 2020 and the second 10 days later – plus the very significant JobKeeper Payment. Here’s a summary of what’s available and how to get it.
JOBKEEPER PAYMENT ($1500 per employee/fortnight)
This is a major stimulus measure worth $130 billion. It’s all about helping employers keep employees and it provides for the self-employed and non-profits too.
Basically, it’s a wage subsidy of $1500 per employee per fortnight to eligible businesses, for up to six months.
It’s available for full-time, part-time, long-term casual and even stood-down employees who were on your books on 1 March 2020. The eligibility criteria are:
- Business turnover under $1 billion
- Turnover will be reduced by more than 30 per cent relative to a comparable period a year ago (of at least a month)
You can read the details and see some examples here. As accountants, we can see some grey areas in the criteria and expect some difficulties in the ATO administering it but we’ll be doing our best to help businesses access it.
Payments are expected to start in the first week of May 2020, backdated to 30 March 2020. You need to register interest with the ATO to get the ball rolling.
CASHFLOW SUPPORT THROUGH PAYG PROCESS (between $20,000 and $100,000)
You should receive this if you meet all the criteria:
- Annual turnover under $50 million
- Employ staff between 1 January and 30 June 2020
If you’re eligible, you don’t need to do anything differently.
The government will calculate it against the PAYG withholding tax you pay for staff in the Jan-Mar, Apr-Jun and Jul-Sept 2020 periods and provide a refund into your account. In total, it will be a minimum of $20,000 and a maximum of $100,000.
To see how much this should be for your business, use our free PAYG Stimulus Calculator. 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.
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.
MORE LENIENCY FOR BUSINESSES CLOSE TO THE EDGE
In its latest announcement, the Federal Government has also responded to requests from the business community to take the pressure off financially stressed businesses with some temporary measures, mainly:
- Increasing the threshold when creditors can issue statutory demands on a company
- Increasing the time companies have to respond to statutory demands
- Relieving directors from being personally liable for trading while insolvent
If that sounds a bit technical, it probably is but basically it just takes the pressure off businesses really close to the edge, giving them more time to try to work their way out of it.
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 always.
The deadline for the R&D tax incentive for the 2018-19 financial year has been extended to 30 September 2020, and there’s also the possibility of R&D financing so you can get your tax refund in advance – again, not a new thing but it could be very useful at this time.
If you want to chat about any of this, book a free call to discuss if you’re eligible and what it could mean for you.
Loans and bank support
The Federal Government, RBA and banking sector are doing a bunch of things to help businesses through the crisis.
This includes government-guaranteed loans to help SMEs access working capital up to $250,000 with no interest for the first six months. This is rolling out via the banks – so far CommBank, NAB and Westpac (see ‘unsecured lending’) have announced their loans through this scheme.
Across the board, banks are offering various types of support to take the pressure off existing loans and make new ones more affordable. That’s the short story and it means if you need support, contact your bank (that includes for home loan help, but we’re not covering that here).
Here’s the longer story, with a breakdown of what each of the big-four banks is offering. Note that we haven’t heard from the main non-bank lenders Judo, Moula and Prospa yet, but we’ll keep you updated as we do.
- Reduction in variable business loan rates of 0.25%
- A reduction by 0.80% pa to a new two and three-year fixed rate of 2.59% pa for secured small business loans up to $1 million
- All customers impacted by the coronavirus can request a six-month payment deferral on loan repayments for term loans, with interest capitalised
- Temporary increases in overdraft facilities available for 12 months
- Early access to term deposits without incurring break fees
Full details on ANZ’s coronavirus support page.
- Reducing rates on Better Business Loans, business overdrafts and other products by 0.25%
- Deferring repayments on business loan and overdraft products, for 90 days
- Deferring repayments on vehicle and equipment finance loans, and providing tailored restructuring options
- Waiving early redraw fees on business term deposit accounts
- Waiving merchant terminal fees for coronavirus-impacted customers with CommBank merchant terminals, for 90 days
- Waiving establishment fees and excess interest on Temporary Excess products
- Providing additional resourcing and extended hours for commercial lending teams to ensure faster decision times
See the full details on CommBank’s page.
- A 0.20% rate cut on QuickBiz loans and overdrafts
- An additional 0.10% reduction on variable rates for small business loans
- Defer principal and interest for up to six months on a range of business loans, including floating and variable rates, and equipment finance loans
- Access up to $65 billion of additional secured limits to pre-assessed customers, with $7 billion currently available for fast assessment process
- Access up to $9 billion in additional limits for unsecured lending for existing customers via QuickBiz
- Defer business credit card repayments
Full details on NAB’s coronavirus support page.
- A 0.20% reduction on overdrafts for new and existing customers
- A 0.10% interest rate reduction for small business cash-based loans
- Defer principal and interest repayments of business term loans for up to six months
- Deferred payments for business credit cards for at least three months
- Termination of a term deposit without the interest rate adjustment
- Merchant terminal rental fee waivers for up to three months
- Helping small and medium businesses take advantage of the increased instant asset write-off and accelerated depreciation provisions in the Federal Government stimulus package with no establishment fees for equipment finance loans
See the full details on Westpac’s support page.
State Government coronavirus business support
In addition to the Federal Government support detailed above, state governments are announcing their own coronavirus business support packages too. Here are the ones we know of so far.
AUSTRALIAN CAPITAL TERRITORY
If your business is registered here and your total payroll is under $10 million, you can apply for a payroll tax deferral from 1 July 2020. There’s also a six-month waiver on payroll tax for businesses in the hospitality, creative arts and entertainment industries. Contact the ACT Revenue Office for more info.
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.
It will also increase the payroll tax threshold to $1 million from 1 July 2020.
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 – 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
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
- A payroll tax rebate scheme for young people to be implemented from 1 April 2020 to encourage youth employment
- Faster payment from state government agencies to businesses to help with cashflow (from 30 days down to 14 wherever possible)
The Victorian Government’s Economic Survival and Jobs Package provides full payroll tax refunds for the 2019-20 financial year to SMEs with payrolls under $3 million, as well as holding off on payroll tax for the first three months of the 2020-21 financial year.
To get your payroll tax refund for the 2019-20 financial year, log into your State Revenue Office account and request it. It’s a pretty simple process, as this screenshot example shows.
The Victorian Government has also established a $500 million Business Support Fund for hardship payments, small grants and tailored support to go towards sectors that “really are doing it tough” who may not pay payroll tax and require more tailored support to survive.
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 for the March-June 2020 period as well, 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. Note that you’ll still need to lodge the paperwork, even if the payment deferral is granted.
If you’re a startup, you might be considering whether it’s possible to raise capital at this time.
The answer is not an outright no. After all, investors are well-versed in taking risks. And that’s really what it comes down to as this article highlights – depending on their risk appetite, investors will still consider new investments.
The catch is, they’ll probably be expecting more favourable valuations. If you’ve previously secured investment, you’re likely in a stronger position as investors want their portfolio companies to survive so there’s a good chance they’ll be up for follow-on investment in their portfolio companies.
So if you’ve already got investors, you should be sending them a Covid-19 update ASAP (if you haven’t already), with any early indication of your funding needs plus how you’re looking after your team and customers.
Our friends at capital raising, share and employee management platform Cake Equity have a few suggestions on capital raising at the moment too:
- Raise small amounts – You might need a top-up to cover short term cash flow needs. Why don’t you extend a prior round at the same valuation and raise smaller amounts? Even raise a small amount each month for several months until things die down to protect your cash runway – get in now to save the headache later
- Consider convertible notes – Valuations are harder to agree during turbulent times. Companies struggle for the resources to prepare adequate supporting documentation for valuations, and even then market volatility makes for unreliable quantitative data. Convertible notes offer a simple solution to raise capital now and agree on the valuation in the future, normally at the next raise
- Raise more, sooner – This may be easier said than done, but how long is your cash runway? Based on prior downturns, it can be two or more years until the good times roll again. Raising more and sooner can be the difference that keeps you afloat
If you’re considering whether to raise capital, also check out Innovation Bay’s webinar with a panel of venture capital (VC) experts. Key takeouts from this March 2020 event aligned with Cake Equity’s advice above and also added the fact that VC funds have recently completed their own fundraising so for the time being, there is still capital available.
Looking after your employees is always a sensible strategy too. If cash flow is going to be tight, it might make sense to consider implementing an employee share scheme (ESS) now. It could be the difference in keeping your team together or having it fall apart.
We hope you’ve found this coronavirus business support resource useful but if you need more help understanding the financial implications of COVID-19 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 at top by Charles Deluvio on Unsplash.
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