COVID-19 - The Latest Stimulus Explained

There certainly is a lot of information out in the market regarding assistance and relief available for businesses and individuals who have been impacted by Coronavirus.

While we have been distributing updates on the assistance options available, this page has been created as a comprehensive summary of these as of 30 March 2020 so that you have them all in a single location.

As further announcements are made, we will continue to update the relevant information for you around all relevant available support on the various COVID 19 initiatives being provided by State and Federal Governments as well as important business information and advice tips.

Key Practical Business Considerations

We expect that all businesses will be impacted in some manner. We strongly suggest that you spend some time considering the potential impacts on your business and personal life, should things escalate. We have listed some practical considerations:

Forecasting
Prepare a short term cashflow forecast (3months) broken down into weekly cash flows, assuming a 20% drop in revenue and identify the impact on your cashflow and work through what potential strategies you could adopt around costs savings and protecting revenue

People

Speak to staff about short term job sharing or moving to part-time employment rather than redundancies
Consider short term salary cuts for higher salaried employees
Communicating with staff about your policy, expectations, and interactions with clients and customers
Consider workflow planning should there be personnel disruptions, managing casual staff/paying full-time wages while on leave.
Consider working from home requirements as outlined in the section of this email, “Workcover and working from home.”
Consider Fair Work requirements for employees that may have been exposed to the virus.

Cashflow
Know your cash flow position

Consider how your product mix and sales strategy may need to change to reduce the impact of, or take advantage of, current conditions
Revisit your marketing plan and strategy to investigate low to promote your business in a low-cost way
Eliminate all non-essential or discretionary expenditure
Reduce your labour costs – refer to People the section above
Consider your operating hours to reduce the running costs of your business
Discuss reducing or deferring rent with your landlord
Discuss converting your debt to interest-only with your bank or seeking a repayment holiday as outlined above
Review cash flow relief and support options provided by the ATO as outlined above
Identify other options for short term sources of finance
Reduce stock levels
Sell surplus assets that do not have debt attached to them
Consider payment plans or deferral for personal expenses such as school fees

Debtors

Offer discounts for prompt payment
Agree on payment plans where required
Seek upfront payments for services where appropriate
Make sure your terms and conditions are structured adequately and protect your right to recover debts

Suppliers

Proactively communicate with key suppliers and delay payments or negotiate extended payment terms
Reduce the number of suppliers who are owed funds by clearing smaller debt as this will reduce the number of suppliers you may be required to negotiate with
Negotiate payment discounts
Suppliers
- Proactively communicate with key suppliers and delay payments or negotiate extended payment terms
- Reduce the number of suppliers who are owed funds by clearing smaller debt as this will reduce the number of suppliers you may be required to negotiate with
- Negotiate payment discounts
Employee Issues
2.1 Staff Considerations
Employee Leave Queries
- The World Health Organisation (WHO) declared Coronavirus (COVID-19) a pandemic on 11 March 2020. With the impact of COVID-19 changing the business landscape daily, it is unsurprising that employers have been left asking “but what does this mean for my business and workforce?”
Please note you may be best to speak to an employment law specialists to gain more information on this issue.

Workcover & working from home

An important point to note is where your team is working from home, their home becomes a place of work and is therefore covered by Workcover.
Australian Government Checklist to help you identify any risks associated with working from home.

Fair Work Requirements

The Fair Work Ombudsman has released information that addresses Coronavirus and Australian Workplace Laws.
Fair Work Corona Virus media release

2.2 Apprentice Relief

The government has introduced a wage subsidy to support small businesses to retain their apprentices and trainees. Businesses may be eligible to receive 50 per cent of their apprentice’s wages, capping at $21,000, per apprentice, for the nine 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.

Insolvency – Temporary relief for financially distressed businesses

The Government has announced temporary changes on insolvency laws (Corporations Act 2001). These proposed 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 Most Notable Changes 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 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;
The moratorium on action against a debtor following the presentation of a declaration of intent to present a debtor's petition is increased to 6 months; and
A six-month moratorium on directors' insolvent trading liability, for debts incurred in the ordinary course of business.

Individual Information

4.1 Superannuation & Social Security for Individuals and Sole Traders
Early release of superannuation

The Government will allow individuals in financial stress to access up to $10,000 of their superannuation in the 2020 financial year and a further $10,000 in the 2021 financial year.
To be eligible for early release of superannuation you must be either have:

Been unemployed, or
Been eligible to receive Jobseeker payment, Youth Allowance for job seekers, Parenting Payment, Special Benefit or Farm Household Allowance, or
Been made redundant on or after 1 January 2020, or
Had your working hours reduced by 20 percent or more, or if you were a sole trader had your business suspended or experienced a reduction in your turnover of 20 percent or more

Those who are eligible are able to apply through the myGov website from mid-April 2020 to access the funds before 1 July 2020 for the first $10,000 and have three months after this date to access more. These funds will not be taxed and will not affect Centrelink or Veterans' Affairs payments.

Superannuation pensions minimum draw down rates

The Government is temporarily reducing the superannuation minimum draw down requirements for account-based pensions and similar products by 50% for the 2019/20 and 2020/21 financial years. This will provide more flexibility as to how superannuants manage their superannuation assets.

No Relief for Employer Super Obligations

Employers will still need to meet their ongoing super guarantee obligations for their employees.

Social security deeming rates

The Government is reducing the deeming rate adopted for Age Pension income testing by a further 0.25 percentage points to reflect the latest rate reductions by the RBA. As of 1 May 2020, the upper deeming rate will be 2.25 per cent and the lower deeming rate will be 0.25 per cent.

4.2 Income Support for Individuals & Sole Traders

Two $750 stimulus payments to pensioners, social security, veteran and other income support recipients and eligible concession card holders. The first of these payments was announced on 12 March 2020 and the second will be automatically made on 13 July 2020. The payment will be tax-free and will not count as income for social security, farm household allowance, and veteran payments.
From 27 April 2020, the Government is also temporarily expanding eligibility to income support payments to include sole traders and establishing a new time-limited Coronavirus Supplement to be paid at a rate of $550 per fortnight for the next 6 months on top of existing entitlements.
The Coronavirus Supplement will be paid to both existing and new recipients of the JobSeeker Payment, Youth Allowance, Parenting Payment, Farm Household Allowance and Special Benefit and be in addition to the payments made on under these allowances.
The Jobseeker payment is currently $550 per fortnight and the addition of the Coronavirus Supplement increases this payment to $1,100 per fortnight.
Sole traders and casual workers who are currently making less than $1,075 a fortnight will be eligible to receive the full supplement.

Bank Support
5.1 Bank Care Package

The Australian Banking Association (ABA) has announced a relief package that includes a deferral of principal and interest repayments for all term loans and retail loans for six months for small business customers with less than $3 million in total debt owed to credit providers.
At the end of the deferral period, businesses will not be required to pay the deferred interest in a lump sum. Either the term of the loan will be extended, or the level of loan repayments will be increased. The package applies to all ABA member banks who agree to participate. Contact your local lender for more information on how they may support you.

5.2 Coronavirus SME Guarantee Scheme

This Scheme is designed to provide working capital support to SME’s (businesses with a turnover of less than $50 million) to get through the impact of the coronavirus.
Under the Scheme, the Federal government will guarantee 50 per cent of new SME unsecured loans issued by eligible lenders up to the value of $250,000. This effectively represents a guarantee of $125,000.
The government will encourage lenders to provide facilities to SMEs that only have to be drawn if needed by the SME, and will remain available into the future, with interest only on the funds that are drawn down.
The Scheme will commence in April 2020 and loans will be made available by participating lenders until 30 September 2020. The loans will be made under a term of 3 years with an initial 6 month repayment holiday. No assets will be required as security for these loans.
These conditions apply only to new loans, not refinanced loans.
No fees will be payable on the establishment of the loans.

Tax
Payroll TaxQueensland

The QLD Government have announced refunds of two months’ payroll tax payment

Payroll tax ‘holiday’ for three months – i.e. employers won’t have to pay payroll tax for three months
Deferral of payroll tax for the 2020 calendar year, until 14 January 2021.

6.2 ATO Relief – PAYGW Refunds

These tax-free payments are to help businesses cover employee wages and applies to businesses and Not For Profit entities with a turnover of less than $50 million that employ staff, 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 six 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 July — October 2020 period equal to the total of the PAYG withheld refunded in the previous six months to provide a total refund of up to $50,000 per entity.
PAYGW credits will apply on a per entity, ABN basis. Therefore, if you have two entities conducting business in your group structure each entity is eligible for PAYGW BAS credits of up to $50,000 provided each entity has paid $50,000 in PAYGW during the period 1 January 2020 to 30 June 2020.
Maximum total refund per entity is $100,000
Upon lodgement of the March 2020 quarter Business Activity Statements, the ATO will automatically apply a credit to the entities Running Balance Account in the amount of the PAYG tax withheld reduction from 28 April 2020.
The ATO has advised that where these credits result in an entity having a net refundable amount, refunds will be paid within 14 days to the entity’s nominated bank account.
For employers with monthly Activity Statement lodgements, the March 2020 credit will be calculated at three times the rate, to cover for the January and February months.

6.3 ATO Relief – Tax Payment Deferral Options

Deferring by up to four months the payment date for BAS amounts due (including PAYG installments), income tax assessments, FBT assessments, and excise.
Allowing businesses to vary PAYG installment amounts to zero for the March 2020 quarter; businesses that vary their PAYG installment to zero can also claim a refund for any installments made for the September 2019 and December 2019 quarters.
Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to outstanding tax liabilities.
Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low-interest payment plans, and
Allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.

Property & Leases
Retail And Commercial Leases
We’ve put together a couple of tips / potential traps to help you to identify issues and opportunities around your business's lease. Unfortunately, there are also no definitive answers and how these issues are best dealt with will come down to individual circumstances, the terms of the lease and the legal position.

Ask For A Rent Concession / Discount / Abatement (Different Terms – Same Meaning!)‍

Have a conversation with your landlord now. Asking for a 50% rent reduction for a 2 to 3 month period is not unreasonable. Landlords will want their tenants to have viable businesses on the other side of this pandemic or they face the possibility of empty shops, months with no rental income, paying costs that they would usually pass on to tenants. It’s also worth reviewing the terms of the lease to check for any terms that the tenant could use as leverage to swing a rent reduction in their favour.

How Could Coronavirus Cause A Tenant To Breach Their Lease?

Infection disease obligations
Tenants may have reporting obligations if the premises (or its occupants) come in contact with an infectious disease and leases often includes clauses that require tenants to advise landlords in these circumstances. Tenants can also be required to comply with directions given by government authorities; i.e. clean-up measures, at the tenant’s expense. If tenants fail to comply with the directions of their landlord or authorities, they may be in breach of their lease and also liable for costs including the landlord’s losses or damages.

Stopping trading
Most leases require tenants to operate their businesses from the premises during normal business trading hours, with limited exceptions. If a tenant closes a shop without the landlord’s consent during times when it is required to trade, it may be in breach of the lease. Tenants could face losing security deposits, bank guarantees and in some situations, individuals could be personally liable for the tenant’s breach.

A nationwide or state-sanctioned lockdown would probably override a trading obligation but it would have to be considered on a case-by-case basis.

When Would A Tenant Be Entitled To Compensation As A Result Of The Coronavirus?‍

Tenants have legal rights to compensation in circumstances where landlords interfere with a tenant’s use of the premises and the tenant suffers a loss. A tenant may have a claim against their landlord if the landlord forced the tenant to shut their store. There are exceptions; i.e. if a landlord causes the interference in response to an emergency or at the direction of a government authority.

Is There An Opportunity To Change The Terms Of A Lease?

There’s always an opportunity if discuss it the right way but a crisis can provide opportunities to negotiate terms that can benefit both parties. Whatever the parties decide, the agreement should be documented in writing so there is clarity on what has been agreed and it’s binding. The economic climate is too uncertain to do deals on a handshake, despite how good the relationship might be. The following are examples of renegotiation options:

If the lease is due to expire and the tenant does not have an option to renew the lease, it could agree to renew the lease for a further term (giving the landlord comfort that it will have continuous rent income), subject to the landlord agreeing to a short-term rent abatement.
If a tenant runs a strong-performing business from the premises, it could negotiate a reduced base rent and agree to top it up with turnover rent (a percentage of the tenant’s turnover which exceeds a threshold amount).
If there are still a number of years left in the term, a tenant could agree to carry out refurb works at the premises (preferably at a deferred date), subject to the landlord agreeing to a rent abatement.

Applicable to assets purchased after the 12th March 2020
An increase in the instant asset write off threshold from $30,000 to $150,000 and expanding access to these write-offs to include businesses with aggregated annual turnover of less than $500 million until 30 June 2020.
For assets with a purchase price of more than $150,000 or purchased after 30 June 2020, businesses with an aggregated annual turnover of less than $500 million, in addition to the standard depreciation a claim for assets, will be able to deduct 50% of the asset cost in the year of purchase via a time-limited 15-month investment incentive through to 30 June 2021.

For Example

Assuming that a business purchases a new truck for $250,000 (exclusive of GST) in May 2020.
In the 2020 tax return the business would claim an upfront deduction of $125,000. The business would also claim a further deduction for the depreciation that would have arisen on the balance of the cost.
Assuming a depreciation rate of 15%, this would mean an additional deduction of $18,750 (i.e. 15% x $125,000). The total deduction in the 2020 tax return would be $143,750.
Without the introduction of this investment incentive, the business would have claimed a deduction of $37,500 (i.e., 15% x $250,000).

JobKeeper Payment

To receive the JobKeeper Payment, employers must:

Register an intention to apply on the ATO website and assess that they have or will experience the required turnover decline.
Provide information to the ATO on eligible employees. This includes information on the number of eligible employees engaged as at 1 March 2020 and those currently employed by the business (including those stood down or rehired). For most businesses, the ATO will use Single Touch Payroll data to pre-populate the employee details for the business.
Ensure that each eligible employee receives at least $1,500 per fortnight (before tax). For employees that were already receiving this amount from the employer then their income will not change. For employees that have been receiving less than this amount, the employer will need to top up the payment to the employee up to $1,500, before tax. And for those employees earning more than this amount, the employer is able to provide them with a top-up.
Notify all eligible employees that they are receiving the JobKeeper Payment.
Continue to provide information to the ATO on a monthly basis, including the number of eligible employees employed by the business.

Background on Jobkeeper Payment
Under the JobKeeper Payment, businesses impacted by the Coronavirus will be able to access a subsidy from the Government to continue paying their employees. Affected employers will be able to claim a fortnightly payment of $1,500 per eligible employee from 30 March 2020, for a maximum period of 6 months.

9.2 Eligible employers

Employers will be eligible for the subsidy if:

their business has a turnover of less than $1 billion and their turnover will be reduced by more than 30 per cent relative to a comparable period a year ago (of at least a month); or
their business has a turnover of $1 billion or more and their turnover will be reduced by more than 50 per cent relative to a comparable period a year ago (of at least a month); and
the business is not subject to the Major Bank Levy.

The employer must have been in an employment relationship with eligible employees as at 1 March 2020, and confirm that each eligible employee is currently engaged in order to receive JobKeeper Payments.
Not-for-profit entities (including charities) and self-employed individuals (businesses without employees) that meet the turnover tests that apply for businesses are eligible to apply for JobKeeper Payments.

Eligible employees

Eligible employees are employees who:
• are currently employed by the eligible employer (including those stood down or re-hired);
• were employed by the employer at 1 March 2020;
• are full-time, part-time, or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020);
• are at least 16 years of age;
• are an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder; and
• are not in receipt of a JobKeeper Payment from another employer.

If your employees receive the JobKeeper Payment, this may affect their eligibility for payments from Services Australia as they must report their JobKeeper Payment as income.

That’s a Wrap…. For Now
If you have queries about any of the above content and how it may impact you or your business, please don’t hesitate to contact us. We understand that this has been a lot of information to take in and try to figure out. We’re here to help as much as we can during these challenging times.

*Image courtesy of www.rdariverina.org.au

CustomerGetters31 March 2020