Tony Skinner:
Hi and welcome to the Podcast My Business, podcast. And today, we’re joined by Simon from Business Australia. Hi Simon.
Simon:
Hi Tony. How are you?
Tony Skinner:
I’m fantastic. And I guess you’re as busy as a bee with a bum full of honey.
Simon:
That’s one way of putting it. Yes, there’s certainly a lot going on and there’s a lot of small businesses which are needing a lot of assistance at the moment.
Tony Skinner:
Absolutely. And that’s where business Australia comes in. For over 190 years, they’ve been helping business owners in Australia and New South Wales. Used to be called the New South Wales Business Chamber and now, it’s all joined in right across the country. It is Australia’s largest business advocacy group. And yeah, they’re celebrating 195 years this year or coming up next year. Yeah, been around for a long time and their objective is to help businesses. Today, we’re going to be talking about the support packages for COVID-19 or as I call it, the event. I’m going to stick calling it the event because it’s just too damn big and it’s led to so many issues. Now, if you’d like to start off reading out the wonderful statement that you’re required to read out.
Simon:
Yes. As always, the lawyers have got to us. Anyway, as usual with these things Tony, the advice which I’m providing today is general business advice and doesn’t constitute financial, legal, taxation, accounting or insolvency advice. And it’s obviously given without knowing the personal objectives and financial situations of the various businesses out there. And of course, all businesses should consider the appropriateness of the advice and the things which we’re discussing today, as well as considering them carefully and seeking their own advice from their own accountants and lawyers as appropriate.
Tony Skinner:
Great. Thanks very much, Simon. Okay, we’re out of time. Thank you very much.
Simon:
It’s always like that, isn’t it?
Tony Skinner:
Oh, my God, the intro. Okay. We are focusing on small and medium sized businesses and also sole traders as well. And really, let’s just jump straight into it. What government assistance is available?
Simon:
Well, it’s been a very interesting period because all governments at all levels, so whether it’s federal, state and local, have really recognized the significant implications of the event, as you call it. I’ll just run through the main ones because it is very complicated. I’ll just start off with the federal support. There’s job keeper, which has been right in the headlines at the moment. That’s the $130 billion package, which the federal government announced. And in essence, provides a $1,500 fortnight to eligible employees of eligible employers. And I can touch on that in a bit more detail a bit later on.
Simon:
There’s also the cashflow for small business program, which again, is for businesses with less than $50 million in turnover and essentially provides between 20,000 and a hundred thousand dollars tax free and is a credit against the PAYG, which has been withheld. To access that, the business will need to be an employer.
Simon:
There’s also instant asset write off. The federal government is allowing up to $150,000 per asset to be immediately written off, provided that it’s purchased and ready for use before 30 June, 2020.
Simon:
There’s the business investment scheme, which is accelerated depreciation and they’re allowing an upfront 50% deduction of capital equipment installed, ready for use up to June, 2021. It’s about 15 months or so to go on that.
Simon:
And then the other cash support is in the way of a subsidy of up to 50% for apprentices and trainees and supporting them. And that will last till September, 2020. They’re the direct financial support measures which the federal government has provided.
Tony Skinner:
Okay, Simon. And what about the SME loan guarantees?
Simon:
Okay, that’s a good point, Tony because in addition to the direct financial support, which the federal government’s given, there are a number of other support measures which they put in place. One of which, as you say, is the SME loan guarantee. Recognizing that there is a cashflow requirement under job keeper because the employer has to have paid the eligible employees within the relevant periods under job keeper and the ATO isn’t going to refund or remit the money back to them for anywhere up to six weeks after they’ve commenced. The government have supported those businesses by providing a loan guarantee to major financial institutions and a number of other FinTech finances, if you like, of 50% up to $250,000. That’s to enable small business to access credit, to be able to pay and meet those employee entitlements and payments.
Tony Skinner:
That’s funny. Sorry, I spoke to my bank about that and the interest rate they were going to charge for that … I’m just going to say it. It makes the banks look like casinos because the interest rate they get at that 0.25%, the government guaranteed 50% and they’re still charging over 4%.
Simon:
Yeah. I think there’s still a number of issues with the process, which need to be worked through. I’ve heard that anecdotally, as well as hearing that a lot of people have a lot of difficulty getting through to the banks in the first place and then those loan approvals taking quite some time to come through as well. Business Australia and through its advocacy Business New South Wales, are certainly taking that back to government to try and streamline the process and you keep seeing the federal treasurer coming out saying how he’s expecting the banks to support small business in this but we need to keep an eye on that and make sure that those benefits really are getting to the people who need it.
Tony Skinner:
And sorry, I cut you off. You were on your way to …
Simon:
That’s all right. There’s a couple of other things which the federal government have put in place. One is the commercial tenancies code, where they’re encouraging tenants to negotiate in good faith with their landlords and the landlords to recognize the issues which their tenants are facing, to be able to work through this. And that’s been set out in commercial tenancies code, which is also being enacted into legislation in the various states.
Simon:
The federal government have also made some temporary changes to insolvency provisions, to relax the requirements around insolvent trading, to give businesses an opportunity to trade through this. And I can touch on that in a little bit more detail shortly.
Simon:
And then finally, there’s also some support from the ATO around what they call administrative relief, which is deferring tax liability payments and remitting penalties and interest, et cetera. That’s the federal government support. All of the state governments have also contributed significantly to supporting business, in particularly small business. And in New South Wales, the main few are around payroll tax relief.
Again, as an employer, you’ll get a 25% reduction of your 2020 payroll tax bill. And also, there’s a three month deferral on payment of your final quarter, as well as they’re looking to increase the threshold from $900,000 to a million dollars. And that’ll take effect [crosstalk 00:09:15] July.
Tony Skinner:
That 25% discount, is that permanent or you’ve got to pay that back down the track?
Simon:
No, that’s a permanent reduction but that will just be on your annual … Or on employer’s annual payroll tax charge for 2020. you’ll do an adjustment of that in July when you do your annual payroll tax reconciliation.
Tony Skinner:
Great.
Simon:
And all of the governments have … All the state governments have also put in place small business support grants. In New South Wales, the amount is $10,000 and it’s very similar to the bushfire and other disaster relief grants, which they put in place earlier this financial year but again, the criteria is fairly narrow. You’ve got to have a turnover of greater than $75,000 per annum. You’ve got to be impacted by the event, as you call it, by more than 75%. You must employ at least one person and up to 19 and also be below the payroll tax threshold of $900,000, so that’s creating-
Tony Skinner:
Sorry. You have to have lost revenue over 75%.
Simon:
That’s right.
Tony Skinner:
Wow, okay. You’d be out of business.
Simon:
Well, that’s why they’re putting in place these grants. And it’s same with job keeper. A lot of these programs … And the federal government have come out and said they’re looking for businesses perhaps to hibernate for up to six months, so that they can survive this period and then come out at the other end. How realistic that is, I’m not sure. I don’t know how many businesses can actually survive if they don’t do anything for six months. And it’s all very well to keep giving them some support but I think that there certainly needs to be a level of activity which they’re undertaking.
Tony Skinner:
Well, that’s interesting because even … And let’s jump to the job keeper payment. You’ve got to be impacted by a minimum of 30% and I’m lucky I haven’t been hit by that level, only a small amount but yeah. A lot of those support packages, there’s lots of rules and regulations around them.
Simon:
Well, that’s right. And I suppose the government’s giving, under job keeper anyway, they’re providing a $130 billion worth of support and they’re trying to make it as accessible to as many businesses as possible but still recognizing that it’s taxpayers’ money and they still need to be accountable for it. There’s got to be some rules and regulations and some guidelines around that. And I think under the circumstances, they’ve done a remarkable job of being able to get such a large program out there so quickly, while still working through a lot of detail as we go.
Simon:
And that’s always one of the complications with this, which is why people need to get specific advice on their specific circumstances because no two businesses are the same.
Tony Skinner:
Absolutely right.
Simon:
But I’ve just touched briefly on job keeper because the government have said that it’s a subsidy to enable employers to keep in paying their employees and they’re looking to provide the $1,500 per eligible employee for periods from the 30th of March. It goes from 30th of March to the 27th of September and it’s done on a fortnightly basis with businesses having to qualify or state that they’re eligible. And as you touched on, there’s a number of criteria but the main one for small business and federal government’s been very generous in their assessment of what are small businesses, or small to medium business. It’s if you’ve got an aggregated turnover of less than a billion dollars.
Simon:
And I imagine there’ll be lots of businesses out there who’d be pleased to fall just below that threshold but you’ve got to show that you’ve had a 30% fall in your turnover as a result of the Coronavirus outbreak. There’s a number of tests around that and whilst they recognize that all businesses are different, the alternative tests they’ve come up with, they’ve put into seven broad categories and they’re actually quite complicated to work through and then calculate. Again, it’s important that businesses get those right and get the required advice to make sure that they are indeed eligible. As always, under our tax system, we work on a self assessment basis and this is no different. And recognizing, that the government and the ATO have put in place some quite stringent integrity measures, which basically means there’s some very heavy penalties if you get it wrong. Again, getting proper advice on the eligibility is critical.
Tony Skinner:
Well, talking about proper advice, I called the ATO a few weeks ago and they had no idea.
Simon:
Well, that’s all right. The ATO have been working through it. I won’t say it got dropped on them by the politicians and treasury but I think … As I said before, I think they’ve done a remarkable job of trying to work through the complexities of it all. There’s still some confusion. Well, there’s quite a bit out there, which is why it’s important that people keep up to date with the regular updates which come through and get the right advice.
Tony Skinner:
Excellent.
Simon:
Let’s touch on those. Probably the main area where people need support … Because if you’re a larger business, you’ve usually got a fairly strong team internally or you’ve got good external advisors. The sector of the economy which is actually one of the major employers in Australia, is the smaller end of the scale. And the state government recognize that with their criteria of 1 to 19 employees but there’s also quite a lot of businesses which are sole traders who don’t have employees as well. It might be worthwhile just touching on them.
Tony Skinner:
Yes please.
Simon:
The government recognizes the need to support sole traders.
And in one of their fact sheets, they state that a sole trader is a business structure where the individual owner is legally responsible for all aspects of the business, including any debts and losses and day to day business decisions. A sole trader may or may not employ other people in their business. The support which they provided is the job keeper. They recognized and said that the sole trader also runs a business and as a business owner or an operator or business participant as they describe it, sole traders can also access the $1,500 fortnight payment.
Simon:
We can only do that under a company structure as a director or shareholder, within a partnership or through trust arrangements. They do recognize that there’s a number of different ways that people operate their businesses. Second way that they say they’re helping sole traders, is providing easy access to superannuation, there’s the access of up to $20,000 to individuals.
Simon:
We touched earlier on the SME loan guarantees. Again, they can access that program, which provides loans for up to three years with a six month repayment holiday, which is to be used for working capital. Of course, the six months repayment holiday, particularly if it’s at the 4% which you got quoted Tony, just means that the interest gets capitalized, so you still have to pay it and you got the compounding effect of capitalizing your interest.
Simon:
There’s the insolvency relief. The government increased the level of debt that statutory demands can be raised on, from $2,000 for companies and $5,000 for individuals, to 20,000 and a temporary relief from a duty to prevent insolvent trading that’s incurred in the ordinary course of business for six months. That’ll expire in September. Again, people or business owners have to be careful, there’s still the requirement to act honestly, in good faith and to avoid insolvent training but this is just trying to help people through that process. If people are concerned about that, they do need to seek special advice on it because their liabilities will still continue after this period.
Tony Skinner:
Thank you. Because of course you can’t trade insolvent. And they’re saying, “Well, you can at the moment.”
Tony Skinner:
Yeah, you’re right. Be very, very careful with it.
Simon:
Well, that’s right. You’ve got to have a very good reason to think that you’re going to be able to trade out of the situation, even if you can’t temporarily pay your debts as when they’re fall due.
Tony Skinner:
Now, there was one point in relation to the cash payout for businesses. Some confusion for sole traders. In order to qualify for that, you need to have an employee, not just be paying PAYG.
Simon:
Correct. Well, if you’re a sole trader and you don’t employ people, you won’t be able to access the boosting cashflow, which is essentially a credit against your PAYG, which they’ll top up to be a minimum refund or credit of $10,000 for the first quarter and 10,000 for the second quarter but …
Tony Skinner:
I’m just saying that specifically because while businesses that have employees are not required to pay the PAYG that’s below 10,000 shall we say, if you don’t have any employees this quarter, you still need to pay your PAYG.
Simon:
No. If you don’t have any employees, you wouldn’t be paying any PAYG. If you’re paying yourself PAYG, you’re paying yourself as an employee and therefore, you’d get the credit for that.
Tony Skinner:
Okay. This is where a particular point gets confusing. Okay, we’ll go offline with this particular question and we can discuss it separately, so please continue on. Yep.
Simon:
Yeah. Thank you. It is a very complicated area and there is a lot of confusion around that, Tony. I think that would be good. And then of course, there’s the other measures which we talked about before, which is instant asset write off, accelerated depreciation and as we were just starting to discuss, the boosting cashflow measure, which is the credit for your PAYG but again, you need employees to do that.
Tony Skinner:
Well, that’s good. Okay. Well look, there seems to be … Okay. I remember when this event first started and they started doing all the instant asset write off and whatever and the first package of $7 billion too and I thought, “That’s great. Businesses are going to start spending. Fantastic.”
Tony Skinner:
That’s always good to … Excuse me. I’m about to sneeze. Okay.
Simon:
Hope you sneezed into your elbow.
Tony Skinner:
I did. I’m just adding it into my notes so I can edit it. Okay, thank you. Yeah. Yeah, a lot of these things are great after the event. I would say to businesses, “Don’t panic, keep marketing”
Let people know that you’re out there. Stay in front of people because there’s going to be lots of money coming from the government after the event and the money at the moment is just to keep you going during the event so you can come back after so-called hibernation and continue on.”
Simon:
Look, I couldn’t agree more, Tony because I think that … It’s interesting that Business Australia have set up the stimulus advice line, which you mentioned at the start, which is essentially what I’m leading at the moment but I think it’s a bit of a misnomer. And I really think that it really should be a survive and thrive advice line and strategy. Survive through this period but while you’re surviving, making sure you’re going to thrive coming out the other side because there’s going to be … I think some big implications as we come out, particularly as people have to start realizing how they’re going to meet their liabilities and other things, which they’ve deferred for a while, whether that be rent or whether it’s the interest holidays on loans and other measures, as well as obviously dealing with employees who have been used to getting the $1,500 a fortnight when they probably wouldn’t ordinarily.
Tony Skinner:
Yep. Been lots of pay rises by the government support and yeah … And remember, there are other things out there, like you can certainly get holidays on your home loan repayments, car repayments and so on. And pretty much every organization’s doing it automatically. Once you finally get looked at a month or two later, you get a little email or text going, “Yes, that’s been approved.”
Tony Skinner:
And moving on to the next person. Cool. All right, thanks so much for that Simon. Okay, so anything else you’d like to add?
Simon:
No, except that Business Australia has free membership.
There’s lots of support available on both the website and on various advice lines, a lot of which is free to members and non-members. And also, there’s a number of guides which are available on the website as well, including a guide to the government assistance and the job keeper payment employer’s guide.
Tony Skinner:
Fantastic. And that’s businessaustralia.com and Business Australia is pretty good. I’m a member via my local chamber of commerce. You can join your local chamber of commerce, which everyone should be a member of or join Business Australia itself directly, whichever particular avenue you want to pursue. Okay, thanks very much for your time, Simon.
Simon:
Thank you, Tony. And good luck to everybody out there in surviving and thriving.
Tony Skinner:
Thank you.