COVID-19 Update - Support for Businesses
The Federal Government are meeting today to fast track the recent announcements on their Economic response to the Coronavirus.
While the full economic effects from the virus remain uncertain, the outlook has deteriorated since the Government’s initial Economic
Response announced on 12 March 2020, which is having significant economic impacts.
Support for Businesses
The Australian Government is supporting Australian businesses to manage cash flow challenges and retain employees. Assistance includes cash flow support to businesses and temporary measures to provide relief for financially distressed businesses, as well as many more:
- Boosting cash flow for employers
- Temporary relief for financially distressed businesses
- Increasing the instant asset write-off
- Backing business investment
Boosting cash flow for employers
The Government is enhancing the Boosting Cash Flow for Employers measure it announced on 12 March 2020 and providing up to $100,000 to eligible small and medium-sized businesses, and not for-profits (NFPs) that employ people, with a minimum payment of $20,000.
Small and medium-sized business entities with aggregated annual turnover under $50 million and that employ workers are eligible. NFPs, including charities, with aggregated annual turnover under $50 million and that employ workers will now also be eligible. This will support employment at a time where NFPs are facing increasing demand for services.
Under the enhanced scheme, employers will receive a payment equal to 100 per cent of their salary and wages withheld (up from 50 per cent), with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $10,000.
An additional payment is also being introduced in the July – October 2020 period. Eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments they have received. This means that eligible entities will receive at least $20,000 up to a total of $100,000 under both payments.
Temporary relief for financially distressed businesses
The economic impacts of the Coronavirus and health measures to prevent its spread could see many otherwise profitable and viable businesses temporarily face financial distress. It is important that these businesses have a safety net to make sure that when the crisis has passed they can resume normal business operations. One element of that safety net is to lessen the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business.
The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive.
The ATO will tailor solutions for owners or directors of business that are currently struggling due to the Coronavirus, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.
Increasing the instant asset write-off
The Government is increasing the instant asset write-off threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.
Backing business investment
A time limited 15 month investment incentive has been introduced to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost. This measure will support business investment and is estimated to lower taxes paid by Australian businesses by $6.7 billion over the next two years.
Supporting apprentices and trainees
The Government is also supporting small business to retain their apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for 9 months from 1 January 2020 to 30 September 2020.
Support for Coronavirus-affected regions and communities
$1 billion has been set aside to support regions more significantly affected by the Coronavirus outbreak. These funds will be available to assist during the outbreak and the recovery.
Support for immediate cash flow needs for SMEs
Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50 per cent to SME lenders to support new short-term unsecured loans to SMEs. The Scheme will guarantee up to $40 billion of new lending. This will provide businesses with funding to meet cash flow needs, by further enhancing lenders’ willingness and ability to provide credit.
Quick and efficient access to credit for small business
The Government is cutting red tape by providing a temporary exemption from responsible lending obligations for lenders providing credit to existing small business customers.
Reserve Bank of Australia - Supporting the flow of credit
The Reserve Bank of Australia (RBA) announced a package on 19 March 2020 that will put downward pressure on borrowing costs for households and businesses. This will help mitigate the adverse consequences of the Coronavirus on businesses and support their day-to-day trading operations
The RBA announced a term funding facility for the banking system. Banks will have access to at least $90 billion in funding at a fixed interest rate of 0.25 per cent. This will reinforce the benefits of a low cash rate by reducing funding costs for banks, which in turn will help reduce interest rates for borrowers. To encourage lending to businesses, the facility offers additional low-cost funding to banks if they expand their business lending, with particular incentives applying to new loans to SMEs.
In addition, the RBA announced a further easing in monetary policy by reducing the cash rate to 0.25 per cent. It is also extending and complementing the interest rate cut by taking active steps to target a 0.25 per cent yield on 3-year Australian Government Securities.
Support for non-ADI and smaller ADI lenders in the securitisation market
The Government is providing the Australian Office of Financial Management (AOFM) with $15 billion to invest in structured finance markets used by smaller lenders, including non-Authorised Deposit-Taking Institutions (non-ADIs) and smaller Authorised Deposit-Taking Institutions (ADIs).
Australian Prudential Regulation Authority - Ensuring banks are well placed to lend
The Australian Prudential Regulation Authority (APRA) has announced temporary changes to its expectations regarding bank capital ratios. The changes will support banks’ lending to customers, particularly if they wish to take advantage of the new facility being offered by the RBA.
Queensland State Government Response:
Covid-19 Job support loans
Expressions of interest are being sought at this stage but the announcement was:
- Up to $250,000 of “carry on” finance over 10 years
- Loan to be used to retain staff
- 12 months interest free
- A pool of $500 million has been made available
- To be processed through QRIDA when the scheme is open to applications
Payroll Tax Deferral
- The southern states have been much more accommodating, so we would expect the Queensland government to follow suit with further announcements
State Tax paid by Employers on the value of their payroll – once it exceeds $1.3 million is to be deferred for lodgement and payment until
31 July 2020.
For more information on financial assistance, eligibility and timing for the new government support for Australian businesses, visit Business.gov.au. Alternatively, The Money Edge is here to help!
Leanne and The Money Edge Team