06 Apr This too shall pass.
“This too shall pass”. I’ve heard this exact phrase spouted from politicians, business owners, mum’s in the school yard, even the young man in grade 11 who works the checkout at my local Woolworths told me this when I did my groceries this week.
Thing is, it WILL pass. One way or another we will all come out the other side of this very interesting, definitely challenging, time in history. Some will be in a better position, some much the same and some, unfortunately, will be starting from scratch.
History, economics, nature, it’s all cyclical. What goes up must come down, and conversely, what falls will one day rise again.
Criticism of the Australian Government has been swift and cutting. Calls for lockdowns, confusion over whether 30 minutes is really long enough for a haircut or not (and whether it’s really something that we need to discuss…..), and press conferences that have been confusing minutes of bumbling, mumbling talks about the place of the humble jigsaw in current society.
We have to remind ourselves that the Government has a lot going on. I can only imagine the pressure to be receiving a constant stream of information from multiple sources, often conflicting, to process this information, decide upon a course of action and then disseminate this to your team and the citizens of the country you govern.
Are they doing a super-duper amazing job? No, it doesn’t seem like it right at this moment.
Can I appreciate the role they have in managing the delicate balance that is keeping the public safe AND the economy ticking along? Absolutely.
We are starting to see some positive plans coming from Government, specifically around Australian businesses. The government’s plan, in broad brush strokes, is to effectively press pause on life and business and go into hibernation. In a perfect world, and in theory, this would mean that people will self-isolate for a period and then, once the danger is over, return to their work/business/life and effectively pick up where they left off.
Over here in the real world, we realise that won’t quite be the case but Government *has* stepped up and provided some comfort to small business owners in Australia. Mostly this is based around boosting cashflow and providing access to working capital for business owners through a number of measures.
Loan deferrals of up to six months.
Now this doesn’t mean free money. Your loan will still accrue interest and fees. If approved, the bank will waive the requirement for you to make loan repayments. All this is is a deferment of payment. You will still owe the deferred amounts in the long run. Oh, the other thing, this isn’t automatically applied. You need to contact your bank to make this happen, there is no blanket approval available to all.
Six-month moratorium on evictions
The Government has advised a six-month moratorium on evictions for businesses providing much needed opportunity for landlords and tenants to come to a mutually beneficial arrangement to get them both through this. Make the call, sit down together and work through the details. It’s in both of your interests to support each other, come out the other side and continue the relationship.
Instant asset write-off increase
Currently the Instant Asset Write-Off initiative allows businesses to claim instant deductions on business purchases of up to $30k. This expanded programme will see small businesses with a turnover of less than $500m able to access an increased amount of $150k through their tax returns.
Assistance for those with apprentices
Small businesses with fewer than 20 employees will receive up to $7k per quarter for every currently employed apprentice. These payments are capped at $21k and should help alleviate the expense of employing an apprentice for up to 9 months. To find out more, get in touch with your local Australian Apprenticeship Support Network provider.
Cash flow booster
For businesses with an annual turnover of less than $50m, tax-free payments of up to $100k are available to assist with operational expenses like rent, electricity and staffing costs. These payments are based on the tax you have withheld from your employee’s salary and wages and are credited to your BAS by the ATO. They will arrive in two rounds, from April 28 and July 28 this year.
Business loan guarantee
Under the Coronavirus Small to Medium Enterprises Guarantee Scheme, businesses with less than $50m turnover will be able to secure a loan of up to $250k for terms of up to three years (subject to approval). The government will guarantee 50% of new business loans issued by participating lenders. Check with your bank to see if they are offering loans under the scheme and to determine whether you qualify for assistance under this scheme.
It’s important to remember that this is a bank bail-out guarantee. It isn’t specifically for businesses. Its sole purpose is to provide a level of comfort for banks. You will still need to be assessed for suitability and there are no guarantees that a loan facility will be extended to you.
Early access to superannuation
This one comes with a big ol’ CAUTION slapped across it. Before you consider accessing this, it is imperative that you speak with your professional financial advisers to understand the implications of making this withdrawal. The government is allowing access to up to $20k worth of your super. It’s important to remember that $20k today, is not worth the same amount in ten, twenty, fifty years when you retire. Superannuation is based on the compounding effects of long-term cash-as-an-asset holding. Withdrawing it now can have significant long-term effects.
That said, it might be what you and your family need *right now*. So, weigh it all up with your advisers and figure out what works for you. It may actually be more beneficial to take out a small loan at a higher rate of interest to see you through than to access your superannuation and potentially cost you a fortune in the long run.
Bushfire affected businesses
With the current state of the universe, it can be easy to forget that only two months ago much of Australia was under threat or directly affected by bushfires. Grants and assistance are also still available for businesses affected by these fires.
As always, the banks have hardship policies in place specifically for times like these. If you are concerned about meeting your obligations, you should speak to your professional financial advisers and make contact with your bank to put arrangements in place to help you weather the COVID-19 storm. Making a call to your electricity, phone, gas and water suppliers could also yield arrangements to help you ride out the current lows. The Australian Small Business and Family Enterprise Ombudsman can also assist with dispute mediation and support if you are having difficulty in coming to an arrangement with your creditors.
If you find that you aren’t eligible for specific assistance, drop us a line, we can work with you and your accountant to help you sort your cash-flow requirements, keep you operating and make it through this tumultuous time.