We are getting inundated with clients looking for help as the COVID-19 pandemic tracks towards being the greatest social upheaval the world has seen since World War II. The updates and announcements are coming at a breakneck speed.
It’s not easy to stay calm at this time but we are here to help you and we will continue to post regular updates.
It’s become clear that some industries will be more severely impacted than others and the most common question we are getting from clients is, “What do we do next?” In response, we have put together an action plan checklist.
It is vital that you act quickly and decisively and work your way through this action plan. There are cash incentives, loans and tax payment
deferral strategies to consider. Of course, feel free to contact us by phone or email as face to face meetings are no longer available.
Here are practical steps to consider right now:
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This is priority one. Up to date, accurate financial records allow us to work together to make informed business decisions. By preparing
interim financial statements to March 31, 2020 we can:
Build a Cash Flow Forecast for the next 12 months and keep updating it at least every month as you get more information about revenue and costs.
Cash flow is the lifeblood of any business and it just became critical. The main reason most business owners prepare a cash flow forecast is
to raise finance but right now it needs to identify how much money you will need and when. The forecast will project your bank balance at
the end of every month.
To produce your cash flow statement, the starting point is to extract last year’s cash flow report from your accounting software. Project your likely receipts including any government stimulus payments. This won’t be easy but depending on your industry, you might need to work on a decrease of between 25% and 60% or possibly more, of sales.
Work through your fixed costs (rent, insurances, subscriptions, loan and lease repayments etc.) and then consider your staff requirements and calculate your anticipated wages. Next, plug in your variable costs like direct materials, stock, commissions, freight etc.
A cash flow budget template is available to download from the resources tab of our website.
The Government is providing up to $100,000 to eligible small and medium-sized businesses and not-for-profits (including charities) that employ people, with a minimum payment of $20,000. Employers with aggregated annual turnover of less than $50m will receive a payment equal to 100 per cent of the PAYG tax withheld on salary and wages in the March and June quarters with the maximum payment being $50,000. The minimum payment is $10,000.
An additional payment will also be paid in respect of the July to September 2020 quarter. This means that eligible entities will receive between $20,000 and $100,000 when you combine both payments. The cash boost is a tax free payment to employers and is automatically calculated by the Australian Taxation Office (ATO) based on Business Activity Statements lodged. There are no new forms required. Eligibility will generally be based on prior year turnover.
To qualify for the additional payment, the entity must continue to be active.
Government Stimulus Entitlements – Loans
The government has offered the banks $20 billion to help them lend $40 billion to struggling businesses. The maximum loan amount is $250k and these funds could provide a lifeline to eligible businesses (SME’s with a turnover of up to $50 million). Under the Scheme, the Government will provide a 50% guarantee to SME lenders for new unsecured loans to be used for working capital. Some conditions apply:
The Government’s ‘Job Keeper’ Program provides wage subsidy payments to Australian businesses (with a turnover of less than $1 billion) whose turnover will reduce by more than 30 per cent due to COVID 19. The decline is relative to a comparable period a year ago (of at least a month). Businesses will be able to claim a fortnightly flat payment of $1,500 per eligible employee from 30 March 2020, for a maximum period of 6 months. Payments will begin being paid in the first week of May.
Eligible employees are employees who are currently employed by the eligible employer (including those stood down or re-hired) and were employed by the employer at 1 March 2020. They include 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). They must be at least 16 years of age.
The subsidy is specifically intended to keep employees in work, not to boost the bank balances of businesses themselves, and the ATO will enforce this. Self-employed individuals (businesses without employees) that meet the turnover decline test are also eligible to apply for Job Keeper Payments.Employers can register their interest in the Job Keeper Payment via ato.gov.au and in turn you will need to provide information to the ATO on eligible employees including the number of eligible employees engaged as at 1 March 2020 and those currently employed by the business (including those stood down or re-hired). For most businesses, the ATO will use Single Touch Payroll data to pre-populate the employee details for the business.
Consider ATO Payment Deferral Concessions
The ATO assistance in this area is not automatic, so you will need to approach them for assistance. If eligible, the ATO will ‘tailor’ the assistance package for you. Please contact us if you need guidance in this area.
The ATO payment deferral concessions include:
State Government Grants
State Governments are also providing various incentives.
The NSW State Government is offering relief on Payroll Tax.
Employers whose total grouped Australian wages for the 2019-20 financial year are no more than $10 million.
PAYROLL TAX REDUCTION
Eligible employers will have their 2019/20 financial year payroll tax liability reduced by 25%. The reduction in the liability will be received when the annual reconciliation for the year is lodged, which is due on 28 July 2020.
PAYROLL TAX PAYMENT WAIVER
Eligible employers will not be required to make payroll tax payments in NSW for the months of March, April and May 2020. It is currently unclear whether the monthly returns will still need to be lodged.
In this manner, the measures provide almost immediate effect by relieving eligible employers from the March 2020 payroll tax payment which would have been due on 7 April 2020.
Eligible employers will still be required to report wages paid during those months in their annual reconciliation.
PAYROLL TAX THRESHOLD INCREASED FROM 1 JULY 2020
The NSW Government has also announced the payroll tax free threshold will increase from $900,000 to $1,000,000 with effect from 1 July 2020. This increase is a general increase and will apply to all employers. This replaces the previously scheduled increase in the threshold to $950,000.
The Victorian Government is offering a $10,000 grant to qualifying businesses who must meet the following criteria:
Applicants must submit an application online via the 'Apply now' button on this page: https://www.business.vic.gov.au/disputes-disasters-and-succession-planning/illness-and-business-management-plan/coronavirus-business-support
Applicants are required to provide a copy of their most recent Business Activity Statement (BAS). Other supporting materials can also be provided.Other state governments are offering various grants, payroll tax reductions, waiver of a range of fees and charges for small businesses including bars, cafes, restaurants and tradies. We recommend you visit the state government sites for more information.
At the moment it’s probably not high on your agenda, however, marketing remains important. Your competitors are probably rattled so this is an opportunity. The most important thing right now is communicate with your customers and clients. Remember, they are in the same boat as you and sailing in turbulent unchartered waters.
Anything you do to help them might be rewarded with some loyalty down the track. Digital marketing is cheap so send an email, produce a short video, write some blogs or produce an e-Book or newsletter. The shut down and lock down period can be used to develop your marketing plan for the next few months. It could be as simple as forwarding them this checklist or our Recession Proofing e-Book.
We are understandably being inundated by concerned clients and this checklist is designed to help you develop a plan. Working through this checklist will give you structure and a sense of direction that will help you remain as calm as possible in the circumstances.
Take care, stay safe and contact us for assistance.