The plain english (we hope) guide on COVID-19 stimulus measures for businesses
If you’re our client, you’ll get a customised email regarding this. We’re also planning on holding a Facebook live tomorrow (Tuesday 24 March) to discuss.
VIC closures (stage 1)
The businesses that will close due to the Stage 1 shutdown include pubs, clubs, nightclubs, Crown Casino, and licensed venues in hotels and pubs.
It also includes gyms, indoor sporting venues, places of worship, cinemas and entertainment venues.
Restaurants and cafes will only be allowed to provide home delivery or takeaway services.
If you aren’t the above, party on. Just with 4sqm per person and less than 100 people. And don’t lick surfaces. EWWWWW.
Jobseeker allowance (Help! I’m a sole trader)
For our lovely sole traders, they have finally conceeded that this is a HUGE area that wasn’t adequately addressed. So, if you are
- a permanent employee who has been stood down or lost your job
- a sole trader, self-employed, a casual or contract worker whose income has reduced
- caring for someone who’s affected by coronavirus.
The scene right now
On 12 March 2020 they started a 3 month waiving the Ordinary Waiting Period. This will continue while these temporary arrangements are in place. So you can apply straight away.
If you’re eligible to get the Coronavirus Supplement they also waive the liquid asset test waiting period, newly arrived residents waiting period, and seasonal work preclusion period. Reduced means testing: Asset testing for JobSeeker Payment, Youth Allowance Jobseeker and
Parenting Payment will be waived for the period of the Coronavirus supplement. Income testing will still apply to the person’s other payments, consistent with current arrangements.
If you’re a jobseeker on Newstart by 13 April, you will also be eligible for the $750 cash payment. Find out more
The scene after 27 April 2020
Subject to legislation passing, they are planning to pay a temporary fortnightly $550 Coronavirus Supplement from 27 April 2020 if you’re getting an eligible payment (i.e. jobseeker allowance)
Centrelink will waive asset testing from 27 April for 6 months, except for Farm Household Allowance and Special Benefit. Sole traders that become eligible for the Jobseeker Payment will automatically meet their mutual obligation requirements (looking or a job) during this period by continuing to develop and sustain their business (so do some amazing biz dev now to get back on your feet quick snap). Asset testing is also quite complex, as it seems to be age, marital, child and who knows, dependent on the number of kidneys you have. For example, us youngsters have super excluded. But the boomers get to exclude their house. It’s best to go and read it if you’re applying before 27 April. Find out more
Income testing will still apply. So on the weeks you might have some more income, your payment will reduce. Centrelink have some maths in place for this, but let’s be honest, thats a great situation to be in rather than that being your ONLY income.
We’ll be honest, we aren’t experts in the maze of Centrelink, but we hope this helps clients who are deeply affected.
I employ people - how can they cope? I’m worried we can’t open at all soon, and I can’t pay them.
Should it be unviable for the business to continue and pay employees, you do not need to make your employees redundant.
If you cannot usefully redeploy your employees, we would recommend to review the fairwork site HERE to understand your responsibilities to staff. Should they meet the criteria to be eligible for Newstart, then you can put them on unpaid leave until the time when the business is able to re-open. Make sure you go and read the Centrelink guides, so you can help your employees apply.
Be aware, your employees are ineligible if they are accessing employee entitlements such and annual leave, sick leave or income protection.
Boosting Cash Flow for Employers
Ok, so you will get given some money, between 20k and 100k, and it won’t form part of your taxable income. SWEEET. But you know what they say. You have to spend money to make money.
Eligibility
Small and medium business entities (and NFP) with aggregated annual turnover under $50 million and that employ workers will be eligible. Eligibility will generally be based on prior year turnover.
Ok, aggregated annual turnover means that if you own an empire across multiple legal entities, then all your companies and trusts that you are an owner of, they get grouped together. Then, when you group them together, you work out the whole group’s income and if it’s less than 50m, you’re over the first hurdle.
The second hurdle is that you employ workers. This means contractors are out. They are employees who you would withhold tax for.
Interestingly, the “eligibility will generally be based on prior year turnover”. This provides ambiguity for any legal entity that was not in existence in the prior year. If they started trading 1 January 2020…..are they excluded? We are working on the assumption if you were trading on 12 March and had employees on 12 March, then you should be fine.
The payment will be delivered by the ATO as a credit in the activity statement system from 28 April 2020 when eligible businesses lodge (see below) upcoming activity statements.
Eligible businesses that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100% of the amount withheld, up to a maximum payment of $50,000.
Eligible businesses that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.
This one is easy. When you lodge your March BAS, the amount listed as PAYGW (which is how much you have to pay to the ATO) becomes A.
If A, is less than $10,000, then you get $10,000.
If A is more than $10,000, but less than $50,000 then you get the actual amount of PAYGW.
If A is more than $50,000, then you get $50,000.
The kicker is, for most businesses, this is just going to reduce the amount payable. Unless you just pay your whole BAS, then you will get it as a refund. If you are on a payment plan, at this stage we assume it will go onto your payment plan.
Timing
The Boosting Cash Flow will be applied for a limited number of activity statement lodgments. The ATO will deliver the payment as a credit to the business upon lodgment of their activity statements. Where this places the business in a refund position, the ATO will deliver the refund within 14 days.
Quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020.
So, it’s going to happen twice. Same deal, but for the March and June BAS. Bear in mind though, the 50k cap is a total, so if you get 30k from your March BAS, then you will be capped at 20k for the next one. Also, the 10k minimum payment won’t apply. So if you don’t pay any PAYGW on behalf of employees, then too bad so sad.
In summary, it’s going to reduce the pain for SME businesses in meeting their tax obligations.
BUT HEY, WHAT ABOUT THE ADDITIONAL STIMULUS MEASURES?
OH. Yeah. Thats nice. Whatever you got paid before, you’ll get that same amount AGAIN. This is where it does become useful. Our two payments in March and June, they make a new number B. B, you will get paid AGAIN, but in two portions. One after the June BAS period, and one after the September BAS period. This is how you can get the extra 50K above and beyond the one linked directly to your payments to staff.
Hey - I pay monthly instalments - how does that work?
Good question, I’m glad you asked. It’s very tedious, but essentially the same cash benefit is paid, over almost the same time period. The maths is slightly different, but you aren’t better off or worse from being monthly or quarterly. Lucky for you, our calculator will show you how it is going to work.
Refund of 2020 income tax instalments
Many small businesses (sole traders and company structures) pay quarterly instalments towards their final income tax return for the year. The ATO is allowing you to (without penalty or interest) to vary your March instalment to $0, and then also get a refund of any tax instalments paid during the year. These would be the September and December.
HOW DO I KNOW WHAT THAT IS?
We know many of you aren't usually interested in the detail of these quarterly BAS, but this time, you want to be. *deep breath* So. Your quarterly Business Activity Statement (BAS) can be made up of a number of tax things all muddled together. In the one payment, you will pay tax on behalf of any employees, tax on behalf of the company (or yourself), possibly Fringe Benefits Tax (FBT) and GST. Now, you won't get all of everything back. You still have to pay the GST and any FBT. If you normally lodge your own BAS, PLEASE CONTACT US so we can work it out for you.
It usually looks a little like this
GST you owe us x
PAYGW (employees) x
PAYGI (the business) x
FBT instalment (they tell you this) x
GST we owe you x
And some usually scary total then comes down the bottom. It’s the payment for the business that reduces to $0, and for some of you, will be a refund.
HOW DO I GET THIS?
Step one. RECONCILE YOUR XERO NOW. The sooner you have your stuff in order, the sooner we can help you. We will review and lodge your BAS on your behalf, to ensure it’s all done properly. Any cost of this will outweigh the potential mistakes, and us fixing it for you later.
Step two. Make a cup of tea, and email us.
WHAT’S THE CATCH?
Oh, yes. This one has a catch. You still owe the ATO money, just…..much later now. This is to keep it back in your pocket until the economy has time to recover. We’re kind of assuming that everyone will be earning less this year now….so we’ll also update tax estimates later (after all the BAS and closer to the end of the year).
Withdrawing your Superannuation
The government has announced that eligible individuals experiencing financial hardship will be able to withdraw Superannuation under the Financial Hardship provisions. You will be able to withdraw up to 10k this financial year (up to 30 June 2020), and another 10k (from 1 July 2020 to 30 June 2021). From what we understand “Treasurer Josh Frydenberg said workers and sole traders could withdraw the money if the number of hours worked or their income fell by 20 per cent or more due to the coronavirus.”
Be aware, this should be a measure of LAST RESORT.
Your super has likely taken a massive hit (via the stockmarket), and it WILL recover. On average, the best strategy for share market highs and lows is just to always ride it out, as in a diversified portfolio (i.e like all super funds have) it recovers. But if you take out 20k now, that could have been worth (and worth again in a few years) 60k. We aren't financial advisors, but we're also not idiots. So be very careful, and speak to your financial advisor or super fund about the impact.
We have very little information as at 23 March 2020 as to how to actually do this, but it is likely it will be through your super fund. Read up here for the normal process.
Payroll tax
Payroll tax is paid by businesses in Victoria who have salaries and wages of over $550k per annum. If you have been paying payroll tax, and your annual taxable wages are under $3million, the State Revenue Office will be contacting you. The payroll tax you have paid year to date will be refunded to you.
You will need to continue lodging monthly payroll tax returns, but no further amounts are payable for this financial year.
If you want more information, please go to SRO CORONAVIRUS