COVID-19 Small Business Questions Answered
We are another week into the Covid-19 “situation” and this week we thought we’d take the opportunity to pass on some direct information around specific questions our clients have been fielding. We’ve gone straight to our Director Cos Schuh to answer these common questions coming in from some of our small business clients:
Having regard for the stimulus available to employees, we have been asked many times already whether in a situation where clients are trading through a trust or company but not paying themselves a wage, can then "employ themselves" as wage earners and so receive the much-needed stimulus of $1,500 per fortnight?
Unfortunately, we see some difficulty around this "change of remuneration" and already the Tax Office is flagging that any new applications for employee registrations, etc. will be looked at with "suspicion.” If you find yourself in this position, it might be to your advantage to give us a call, so we can explore some other options that may be available.
We have also been asked by some clients who have unfortunately needed to close their business, as to whether they still have an obligation to pay their creditors. The answer is most definitely yes, however, the government has introduced legislation to extend the time for a formal debt collection process in the hope that the Covid-19 pandemic will have abated. This will perhaps allow people to open their business to trade again and perhaps come to some arrangement with creditors.
We would also remind clients of their ability to withdraw $10,000 from their superannuation prior to June 30, 2020, and a further $10,000 thereafter. While we would certainly consider this a “last resort” option, it may stave off a more serious situation with creditors.
On a brighter note, some clients have ordered machinery, etc. which would fall under the "$150,000 asset write-off threshold" and by chance, the order was placed before the introduction of the legislation. However, in some instances, the delivery of the asset being acquired will fall after the date of the legislation being introduced. In any such cases, the accelerated claim will still be permitted, as the legislation provides for the opportunity to make an accelerated claim "from the date the asset becomes income-producing" - NOT the date it was ordered.
If you are contemplating the purchase of a passenger vehicle as part of the $150,000 incentive prior to June 2020, please be mindful of the luxury car limit of $57,581.
At this stage, we see that clients purchasing a luxury car that is partially utilised for business purposes will be limited to the business percentage of $57,581 as a full deduction.
We are obtaining some clarity around this situation, but an example might look like this:
Purchase a new vehicle for $80,000 which is utilised 75% for business purposes. We believe the claim will be 75% of $57,581 being $43,186 as a full claim. We are obtaining confirmation on this situation, so if you find yourself in this position, please give us a call before you finalise the deal.
As always, please don’t hesitate to contact us with any queries at this time. We’re only a phone call or an email away.
*Image courtesy of ausbanking.org.au