Small Business Blog by Simplly Fin Wiz
Thank you to Harnath Sithamraju from Simplly Fin Wiz for providing our member update on the Stimulus package for small business announced by the Government to soften Coronavirus pandemic effect.
We hope you and your loved ones are safe and healthy.
Over the past week, the Coronavirus crisis went from bad to worse and the worst may be round the corner. Without sounding doom and gloom, we are all aware of the situation facing our country due to this pandemic disease where within a few months , the entire world is staring at a great challenge which requires all of us to unite and respond with great courage to fight against this attack from an unseen challenger.
These are so very challenging times that may bury our entire civilization as we know it. This will most likely dwarf the Great Depression of 1920s, World War I, World War II and GFC. In the present situation the entire world is affected where being an alarmist is the new norm. This pandemic does not recognize borders nor personages.
Australia has sealed its borders, individual states are beginning to close theirs and all non-essential services have been shut and majority of the left over employed population working from home.
Make no mistake, this is an extinction-level event for hundreds of thousands of businesses and many people will lose everything.
The Government is doing its best to create a stimulus for the economy on a grander scale than the one during GFC to ward of an economic devastation. Apart from the first stimulus package announced a week ago which targeted people on Centrelink payments and pensioners this second one was specifically aimed at small businesses.
But what is in it for the small businesses and sole traders specifically.
Boosting Cash Flow For Employers
Boosting Cash Flow for Employers payments Small and medium sized business entities and NFPs with aggregated annual turnover under $50 million and that employ workers, will be eligible.
Eligibility will generally be based on prior year turnover.
· The payment will be delivered by the ATO as an automatic credit in the activity statement system from 28 April 2020 upon employers lodging eligible upcoming activity statements.
· Eligible employers that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100 per cent of the amount withheld, up to a maximum payment of $50,000.
· Eligible employers that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.
· The payments will only be available to active eligible employers established prior to 12 March 2020.
However, charities which are registered with the Australian Charities and Not-for-profits Commission will be eligible regardless of when they were registered, subject to meeting other eligibility requirements. This recognizes that new charities may be established in response to the Coronavirus pandemic.
Temporary Relief For Financially Distressed Businesses
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.
The elements of the package are:
· A temporary increase in 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;
· A temporary increase in the threshold for a creditor to initiate bankruptcy proceedings, an increase in the time period for debtors to respond to a bankruptcy notice, and extending the period of protection a debtor receives after making a declaration of intention to present a debtor’s petition;
· Temporary relief for directors from any personal liability for trading while insolvent; and
· Providing temporary flexibility in the Corporations Act 2001 to provide targeted relief for companies from provisions of the Act to deal with unforeseen events that arise as a result of the Coronavirus health crisis.
For owners or directors of a business that are currently struggling due to the Coronavirus, the ATO will tailor solutions for their circumstances, including temporary reduction of payments or deferrals, or withholding enforcement actions including Director Penalty Notices and wind-ups.
Sole traders will be able to access a “coronavirus supplement” of $550 per fortnight for the next six months and if they are currently making less than $1,075 per fortnight will be eligible for the full supplement.
Sole traders who have had their income reduced by 20 per cent or more as a result of coronavirus will also be able to access up to $10,000 of their superannuation tax free.
Employers are encouraged to keep their staff. Not for profit and small businesses with turnover under $50 million will receive a tax free cash payment of up to $100,000 to help them retain staff and continue operations. The Government expects 690,000 businesses employing 7.8 million people and 30,000 not for profits will be eligible for the stimulus package.
It doesn’t mean extra money in the pockets for the employee, but by linking the payments to staff wage tax withholdings, businesses will be given an incentive to hold on to more of their workers.
The reasoning behind this according to the Prime Minister Scott Morrison is that “whether you are a coffee shop, mechanic or a hairdresser by providing at a minimum of $20,000 and up to $100,000 for small businesses who employ people it gives them a chance to get to the other side.”
In order to safeguard your wealth and business you should take immediate steps not limited to the following:
1. How to stop creditors or the banks from seizing your family home - as the wheels come off the economy.
2. How to get the money that’s owed to you fast - so you can buffer your business cash flow and stay afloat during the shutdown.
3. How to get breathing space from banks and creditors, so you can support your family in the coming months.
Over several years I have been working as a Finance Broker. I have had experience of working in 2 of the Big4 Banks viz Westpac Bank and Commonwealth Bank in the Equipment Finance and Mortgages Unit respectively.
Simplly Fin Wiz