A series of unexpected and unfortunate events have recently taken place within just a short period of time in Australia – fires, floods, hail, cyclones, and coronavirus. These have made a huge impact on communities, including businesses and investors.
The most recent spread of Coronavirus has caused dismay and panic to almost all of the members of the community. There have been reports on panic-buying and sudden gradual increase in the prices of protective masks, hand sanitizer, tinned goods, cereals, and even alcohol. The biggest and most embarrassing tussles in our supermarkets have been over toilet paper, and the latest larger item apparently in demand is for freezers.
There has been an increase in the number of people who were diagnosed with coronavirus, including Tom Hanks and his wife, who happened to be in Australia upon diagnosis. Just recently, Home Affairs Minister Peter Dutton also tested positive. The coronavirus pandemic is hard to keep up with, in terms of statistics, and the international and Australian advice changes almost hourly, affecting economies, health and tourism of each country affected. Some businesses, like Flight Centre in Australia and the airlines, have reduced their operations, affecting the livelihood of thousands of staff, and in some countries, whole cities are in lockdown. It’s been a huge international disruption, and it’s certainly not over yet.
Notwithstanding all the adverse effects of the Coronavirus Outbreak, the Australian government in its AUD17.6 billion economic stimulus package released this week encourages businesses to keep spending by offering certain incentives.
Have a look and see which of these directly affects your family and/or business.
- Instant asset write-off for businesses from $30,000, to $150,000. This will be expanded to include businesses with aggregated annual turnover of less than $500 million, up from $50 million, but will run only until 30 June 2020. As it is now mid-March, there is not a lot of time to organise this before the end of the tax year, for large purchases, particularly if the asset needs to come from overseas, with manufacturing processing being affected particularly in China. Under the current write-off rules, the asset has to be first used or installed ready for use by 30 June 2020.
- Don’t buy assets prior to 1 April 2020, and don’t buy large assets for the sake of a tax deduction, if you don’t actually need the tax deduction.
- Immediate Asset Write Off – Clever Tips and Trick by Julia Hartman of Ban Tacs (Note: IN8 Business Advisory is a member of the Ban Tacs National Accountants Group)
- Four-month deferral of the payment date of amounts due through the business activity statement, including PAYG instalments, income tax assessments, fringe benefits tax assessments, and excise. Remember that this is just a deferral; you will still have to pay the tax in four months, plus there will be a catch-up because another BAS, for example, would be due around the same time.
- A time-limited 15-month investment incentive (through to 30 June 2021) to support businesses with a turnover of less than $500 million, by accelerating depreciation deductions up to 50% of the cost of an eligible asset on installation.
- The ATO will also look to remit any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities, and allow affected businesses to pay their existing and ongoing tax liabilities by allowing them to enter into low-interest payment plans.
- Cash payments of up to $25,000 with a minimum payment of $2,000 (tax-free) to employers of businesses with turnover of less than $50 million that employs staff between 1 January 2020 and 30 June 2020 to assist with cost of salary and wages. Eligible businesses will receive payments of 50% of their BAS or IAS from 28 April with refunds to be paid within 14 days.
- Businesses, on a quarterly reporting cycle, be allowed to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.
- Wage subsidy of up to 50% of an apprentice’s or trainee’s wages for the 9-month period from 1 January 2020 to 30 September 2020 for small business. New employers who retain apprentices of another small business shall also be eligible for this subsidy.
- One-off $750 (tax-free) household stimulus payment for lower-income Australians in order to boost domestic demand in the economy. Recipients include social security, veteran and other income support recipients and eligible concession card holders, like those on Newstart, those who have commonwealth seniors health cards, and families receiving family tax benefits.
- Assistance for severely-affected regions including waiver of fees and charges for tourism businesses, measures to support recovery and further promote domestic tourism.
Note that there is no fine print of the legislation yet. These information are based on reputable fact sheets and government website announcements.
Contingency Planning:
(And we don’t mean just stocking up on toilet paper!)
It is highly probable that this issue will last for more months, that is why it is important to set up contingency plans for the continuity of your business.
In the wake of the coronavirus, what can you do with your business (and family) finances?
- Focus on cash flow: Have enough cash reserves to cover any periods of lower than normal revenue where costs may not be covered.
- Look at your Balance Sheet. What are your current assets, less stock? What are your current liabilities, including the current portions of large loans? Current Assets less Stock / Current Liabilities = Your Quick Ratio – shows how ‘liquid’ your business is. If you don’t have enough immediate cash resources to pay your immediate debts, your cash situation needs to be addressed. If you can’t work this out, please give me a call.
- Monitor your Accounts Receivable (Debtors) closely: who isn’t paying you in accordance with your payment terms? Do you have clients particularly hard hit by recent Australian events, such as in the MICE industries (Meetings, Incentives, Conventions & Exhibitions)? Reconcile your debtor payments at least on a twice-weekly basis, and run your Accounts Receivable report, to make sure you’re on top of this. Send out statements regularly. Ensure that services and goods are invoiced promptly.
- Your own Payables: Is your Accounts Payable (Creditors) report accurate? Does it need attention? Do you need to contact creditors to pay any larger bills in instalments?
- Contingency Planning: What will you do if your staff and/or customers are affected by coronavirus? Do you have a plan? Have you discussed this with your staff? I don’t think taking your staff a curry will really be enough, whatever Scott Morrison thinks.
- Your ATO Debts: If you can’t pay your BAS or Income Tax bill in full, contact either us or the ATO and make a payment arrangement. Directors are now personally responsible for GST, Superannuation Guarantee payments and PAYGW (Group Tax), so keep on top of your debts. Sign your business up to MyGov and make sure that you know what your ATO debt situation is.
Sources:
- Economic Stimulus Package by Prime Minister of Australia
- Beefed-up instant asset write-off, SME cash payment among $17.6bn stimulus package
- ‘Shoulder to shoulder’: ATO details COVID-19 assistance
- BAS agents given free pass on SG amnesty services
- What the Australian government’s $17bn coronavirus stimulus package means for you
- Government coronavirus stimulus package to assist businesses with cashflow