Unprecedented Government Stimulus for Australian Businesses Affected by COVID-19

You would be hard-pressed to find a business in Australia that hasn’t been affected by the COVID-19 pandemic. Business shut-downs, reduced spending and isolation restrictions have all led to a severe economic downturn and the largest government stimulus package in Australia's history (an estimated 3.3% of Australia's gross domestic product this budget year and 6.1% next year – much larger than the government response to the GFC). 

But what now?

For many business owners, it’s overwhelming to make so many decisions so quickly and to ensure you’re tapping into all the support available in the most effective way. 

So, our friends at Melbourne-based entrepreneurial advisory firm BlueRock have pulled together this guide to the COVID-19 stimulus package. It takes you through the main areas of government support and what you can do to get some much-needed relief for your business.

Financial Support for Businesses

JobKeeper Payment Scheme

The JobKeeper Payment Scheme is a wage subsidy to be paid to businesses, sole traders, businesses without employees, not for profits and charities who have experienced a loss of at least 30% of their turnover relative to a comparable period a year ago (of at least a month). 

It’s certainly a topic that has generated a huge number of questions amongst the BlueRock client community, and has already had a significant, positive impact on many of their businesses.

To be really clear, the JobKeeper payments will be made to employers at a flat rate of $1,500 per fortnight from 30 March 2020 for all employees that were employed as of March 1 2020.

Payments will be made from the first week of May, backdated to 30 March, and will continue for a maximum of 6 months. These payments are designed to keep employees on the payroll and connected to their business. Businesses will be required to prove that they are using the funds to subsidise wage payments to their employees and have a legal obligation to retain the employee.

The first stage, the Enrolment Stage, of the JobKeeper Payment Subsidy program opened on 20 April 2020. The second stage of the JobKeeper Payment Scheme is the Application Stage, which opens on 4 May 2020.

Apprentice Wage Subsidy

The government has introduced an Apprentice Wage Subsidy to support small businesses to retain their apprentices and trainees. Businesses may be eligible to receive 50% of their apprentice’s wages, capped at $21,000 per apprentice, for 9 months from 1 January 2020 to 30 September 2020.

Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network provider. Like other assessments, this is expected to be completed via a SmartForm on the Australian Apprenticeship website.

Employers can register for the subsidy from 31 March 2020, and final claims of payment must be lodged by 31 December 2020.

Instant Asset Write-off

The Instant Asset Write-off incentive allows small businesses to claim immediate deductions for new or second-hand asset purchases such as equipment, vehicles and tools.

To support businesses to continue to invest and grow during the current economic slump, on 12 March 2020 the Federal Government announced a $700 million injection into this program, which sees the purchase threshold increase from $30,000 to $150,000.

This means that many Australian businesses will be able to invest in assets that will help them to pivot, meet new customer needs and, ultimately, succeed into the future.

Eligibility for the Instant Asset Write-off Scheme depends on a number of factors including:

• your aggregated turnover (the total ordinary income of your business and that of any associated businesses)

• the date you purchased the asset and when it was first used or installed ready for use

• the cost of each asset being less than the threshold.

In order to be eligible for the Instant Asset Write-off incentive, the entire cost of the asset must be less than $150,000 (from 12 March 2020) or $30,000 (before 12 March 2020), not just the business-use portion, and inclusive of GST.

The asset purchased must also be first used or installed and ready to use in the income year you're claiming it in.

This incentive is only available between 12 March 2020 and 30 June 2020 as part of the stimulus package, so it’s best to start the application process sooner rather than later. If you need support, you can contact BlueRock’s Director of Asset Finance with any questions.

Insolvency Relief

For businesses that are severely impacted by the COVID-19 market downturn, the government has announced temporary changes to insolvency laws under the Corporations Act 2001. The changes are designed to give businesses time to assess their solvency, implement restructuring plans where needed, and take advantage of the safe harbour provisions under the Corporations Act 2001.

The main changes to be aware of are:

• a temporary increase in the statutory demand threshold to $20,000

• an increase in the time to comply with a statutory demand from 21 days to 6 months

• a temporary increase in the size of the of the debt required to issue a creditor's petition to $20,000

• an increase in the time to comply with a bankruptcy notice from 21 days to 6 months

• a 6-month moratorium on directors' insolvent trading liability, for debts incurred in the ordinary course of business.

Insolvency is a highly specialised area of the law, so if you have any concerns about your exposure, please don’t hesitate to contact BlueRock’s insolvency expert.

Tax Relief

Payroll

There have been a number of updates to the payroll tax concessions available across Australia. As the concessions are different for every state, we recommend you read more about it on the BlueRock COVID-19 web page.

PAYG

The government’s PAYG tax-free payments are aimed at businesses that employ staff and have a turnover of less than $50 million. It aims to help businesses cover employee wages and between 1 January 2020 and 31 October 2020.

100% of PAYG withheld between January 2020 and June 2020 will be credited to a maximum of $50,000 for the 6-month period. The minimum amount an employer will be able to receive is $10,000, up to the maximum of $50,000 for this period.

An additional payment is also being introduced in the July to October 2020 period, equal to the total of the PAYG withheld refunded in the previous 6 months to provide a total refund of up to $50,000 per entity.

Tax Deferment

The stimulus package includes the option for businesses to defer payment for BAS (including PAYG instalments), income tax assessments, FBT assessments and excise by up to 4 months.

Businesses can vary PAYG instalment amounts to zero for the March 2020 quarter, and claim a refund for any instalments made for the September 2019 and December 2019 quarters.

The tax deferment package also allows businesses to receive remittance for any interest and penalties incurred on or after 23 January 2020, that have been applied to outstanding tax liabilities.

Finally, affected businesses can enter into low-interest payment plans to help pay existing and ongoing tax liabilities and opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.

Managing Your Property and Leases

Commercial Leases

The COVID-19 pandemic has created significant issues between tenants and landlords when it comes to the terms of their existing commercial leases. Almost universally, leases weren't drafted to take into account a global pandemic on the scale of what we are currently experiencing. 

As a result, the National Cabinet agreed that a mandatory Code of Conduct should be developed to standardise commercial tenancy arrangements affected by COVID-19. The Code has been legislated by each state and territory and, as such, landlords and tenants should make sure they are aware of the laws that apply within their own state.

The Code applies to landlords or tenants with a turnover of less than $50 million and which meet the criteria for the government’s JobKeeper assistance guidelines (with a 30% loss of revenue).

To find out more, please get in touch with BlueRock Law’s leasing expert.

Land Tax Deferral

Landowners due to pay 2020 land tax that have at least one non-residential property and total taxable landholdings below $1 million have the option to defer their 2020 land tax payment until after 30 June 2020. The State Revenue Office will contact all taxpayers who are eligible for this deferral.

Grants and Funding

In the last couple of weeks, governments and global media giants have all come to the table with some pretty impressive COVID-19 grants to help businesses battle through the downturn.

Victoria Government

Eligible businesses can now apply for up to $10,000 through the $500 million Business Support Fund. Grants can be used to cover financial services, operational costs or marketing and communications activities during the coronavirus crisis. Applications opened on Monday 30 March 2020 and will close on Monday 1 June 2020.

City of Melbourne

As a result of COVID-19, the City of Melbourne is offering $5 million in grants for local businesses to invest in online and e-commerce capabilities. If you’ve lost revenue due to retail closure, this grant can provide up to $5,000 for hardware, software and services to develop the following digital capabilities.

Google

Media giant Google has announced an $800M commitment to support SMEs during the COVID-19 crisis. This includes Google Ads credits and a $200 million investment fund that will help NGOs and financial institutions to provide small businesses with access to capital.

Facebook

Facebook has also announced grant funding, to the tune of $100M, for small businesses affected by COVID-19. These grants are available for up to 30,000 businesses across 30 countries, including Australia.

For more detailed information on any of the above topics, please visit the BlueRock COVID-19 guide. With expertise across accounting, law, finance, private wealth, insurance, digital and more, BlueRock has you covered when it comes to running and growing a successful business when times are tough.