What the Government’s response to COVID-19 means for your business

Brent Wedesweiler

Friday, 03 April 2020

Since the outbreak of COVID-19, the Australian government has announced not one, but three updates to their economic stimulus package, designed to help businesses stay afloat during this economic crisis.

While it’s still early days, and COVID-19 can feel like a waiting game for our health and economy, the good news is: business owners can expect some relief from both Federal and State Governments.

Seven measures are now in place, including financial assistance, more lenient insolvency laws and wage subsidies to help business owners retain staff and pay bills.

It’s only a matter of time, and there’s help available to tide us over.

What’s the Government doing to help?

The Government’s third economic response package has emerged, meaning $189 billion has now been invested in helping SMEs keep their companies moving.

Here’s an overview of the current support available to Australian businesses, including eligibility criteria for the seven measures in place.

1. Boosting cash flow for employers

This new measure will help take some of the financial pressure off small businesses to retain staff and pay bills, in order to keep their business running.

This measure started as a minimum payment of $2,000 (now $10,000) and a maximum payment of $25,000 (now $100,000). Eligible employers that withhold tax on their employees’ salary will receive a payment equal to 100 percent of the amount withheld, up to a maximum payment of $50,000 (up from $25,000).

If your small business was registered before March 12, 2020, good news—you’re eligible to receive payment. If your business is a charity, registered with the Australian charities and Not-for-profits commission, you will be eligible for payment even if your business was registered after this date. The Government realises that new charities will emerge in response to the COVID-19 crisis, and they must be supported.

Provided you’re eligible to receive the payment, there’s no need to make any claims. From 28 April 2020 (after lodging your upcoming activity statements) the ATO will automatically credit your business.

Eligible businesses will receive a minimum payment of $10,000, regardless of whether they are required to withhold tax for their employees.

For more information on eligibility criteria, refer to the government’s fact sheet on boosting cash flow for employers during the COVID-19 pandemic.

2. Temporary relief for distressed businesses

Temporary changes to insolvency laws are being enforced to further cushion the impact of COVID-19 on businesses who are struggling to stay afloat.

Prior to COVID-19, creditors were able to issue a statutory demand once a company owed $2,000, but this figure has since increased to $20,000. A statutory demand is a formal document issued by creditors requiring a business to repay their debt within a strict window of 21 days.

This new threshold means creditors cannot demand money from a business until that business has racked up at least $20,000 owing, providing businesses with more room to breathe during this difficult time.

Companies also have more leniency on the amount of time they have to respond to statutory demands they receive (six months, up from 21 days).

In addition, the threshold for bankruptcy proceedings has increased from $5000 to $20,000, and company directors will be relieved of their duties in preventing insolvency for the next six months.

If you’re a small business in distress due to coronavirus, you can take advantage of these new thresholds, but keep in mind they apply to statutory demands served after March 25, 2020. All increases to thresholds mentioned above are temporary only, and at this stage, will be in place for six months.

3. Increasing the instant asset write off threshold

The government has expanded their instant asset write off program, allowing SMEs to instantly write off assets until the end of 2020.

Initially, the program allowed small businesses to claim tax deductions on assets that cost under $30,000. But, since the recent outbreak of COVID-19, that figure has risen to $150,000. This will help support both SMEs and larger corporations. You can choose to deduct a single asset, or multiple if you wish, as long as each asset costs less than $150,000.

Businesses with annual turnover of up to $500 million (up from $50 million) can now take advantage of the instant asset write off. The proposal applies from 12 March 2020 until the end of 2020, so any assets (whether new or used) purchased and installed within this timeframe can be deducted.

Some items businesses can typically write-off under the scheme include:

  • Work vehicles
  • Tools and machinery
  • Computer hardware e.g. desktop computers and printers
  • Office fit-outs and furniture
  • Storage solutions e.g. sheds and containers

For a full list of eligible assets, check out the ATOs general depreciation rules.

4. Support for business investment

The government is incentivising business owners to invest by accelerating depreciation deductions for a limited time period (15 months). You can now deduct 50 percent of an asset’s total cost upon installation, provided it’s an eligible asset as per the government’s definition. To be eligible, your business must also have up to $500 million turnover.

Businesses with turnover that exceeds $500 million will not be eligible for the investment incentive.

5. Supporting apprentices and trainees through wage subsidies

Currently training up an apprentice? You can apply for a subsidy that equals 50 percent of their wage for a total of nine months (from 1 January 2020 to 30 September 2020). This wage subsidy is available for both apprentices and trainees, provided they have been with your business since March 1 2020.

If you’re eligible, you’ll be reimbursed up to $21,000, or $7,000 per quarter (per trainee).

This wage subsidy will support up to 70,000 small businesses, employing around 117,000 apprentices.

To qualify, you must be a small business with less than 20 full-time employees, and you will have employed your apprentices/trainees on or after 1 March 2020. If you’re eligible, you can register for the subsidy anytime between early April 2020 to 31 December 2020.

6. Support for coronavirus-affected regions and communities

The Government has planned to set aside $1 billion to support communities and regions most severely affected by COVID-19 in Australia. The funds will be distributed as needed, during the current outbreak and recovery period, to assist in rebuilding businesses and economies.

As our airline industry continues to suffer immensely since the emergence of coronavirus, several taxes and Government charges have been waived from airline companies. This will save the industry up to $715 million in total.

7. Subsidies for employee wages through The JobKeeper program

As of March 31, 2020, an additional $130 billion has been invested in the stimulus package to subsidise employee wages. This should help small business owners who have been hit hardest by the COVID-19 pandemic retain their staff.

You’ll be able to claim a payment of $1,500 per employee each fortnight, starting from March 30 2020 for up to six months.

The JobKeeper program is very much aligned with the Government’s core strategy of supporting Australian businesses and their staff, not only during this economic crisis, but afterwards as well—such measures will allow us to bounce back quickly and with minimal disruption when Coronavirus soon becomes history.

Take care, stay safe and hang in there—we’ll get through COVID-19 together. In the meantime, chat with our lending experts on 1300 780 568 to find out whether a tailored finance solution could tide your business over. With the right plan in place, you might even end up dodging a bullet and coming out stronger than ever.

The information in this post is correct and current at the time of writing, 30th March 2020.

Brent is the Director of Operations at Valiant, bringing a wealth of knowledge from 18 years of experience in the finance industry. He’s worked with banks and fin-techs in the consumer & commercial space, where he discovered his passion for helping SMEs.

Related Posts

How to fix bad credit: 7 top tips

A successful finance application starts with a healthy credit score. Click for seven practical tips to improve yours today.

What will work-life balance look like after the pandemic?

Does working remotely work? The stats are in! Here’s how our idea of work-life balance has changed, and whether it will stick.

Should you freeze your repayments? Pros, cons and considerations

Finances hit hard by Covid? Click to learn more about hitting pause on your mortgage repayments, and other ways to relieve financial pressure.

5 Ways to keep your team motivated (and productive) while WFH

Who saw 2020 turning out like this? No one. But that can only damper our spirits for so long.

Coping with COVID-19 and changing business needs

COVID forcing you to rethink your business model? Here are five practical steps you can take to cope with new challenges and changing needs.

What the Government’s response to COVID-19 means for your business

While no one planned for COVID-19, there’s a plan in place to keep SMEs afloat. Here's what you need to know.

Don't Let Small Business Setbacks Get In The Way Of Success

A minor setback can be challenging, but there's no reason to let it derail your business goals. Here are a couple of coping strategies to keep you moving.

Applying for a business loan? Be ready to answer these 4 questions

Put your best foot forward by preparing strong answers to these 4 questions.

How To Find A Great Loan For Your Small Business

A little preparation goes a long way. Get ahead on the finance front with our quick tips to help you with the 3 key areas of your loan application.

What Does Your Credit Score Mean For Your Business?

Cut through the confusion. There's so much talk around credit scores and what they mean; it can be hard to seperate fact from fiction.

Getting Your Business Finance Ready by James Carey

The time arrives in most small businesses when you’re required to borrow money. So, how do you get 'business finance ready'?

What Accountants Need To Know About The Online SME Lending Market

We sat down with Neil Slonim, The Bank Doctor, to find out what he thinks about Australia's fast-growing online SME lending market.

Case Study: Mark’s Wholesale Steel Business

Finding the right business loan doesn’t have to be difficult. See how we helped Mark’s Wholesale Steel Business find the right business loan for them.

Take Your SMB Marketing Strategy To The Next Level in 2018

How do you attract new customers to your business? Where do loyal customers come from? It all starts with your SMB online strategy.

Making The Leap: Transitioning from PT to Gym Owner

The path from personal trainer to business owner can be both challenging and rewarding. Check out our top tips for making the transition.

How To Get Your Business Set-up on Social Media

Want to reach your customers online? Are you ready to digitise your small business? First up: get smart about social.

How To Handle Complaints With The Service Recovery Paradox

Don't let angry customers stay angry. Protect your business' reputation with these simple tips and tricks for delivering exemplary customer service.

How To Find The Right Loan For Your Small Business

Every business is unique. Every business loan is different. What features are most important to you? Consider these 4 things before applying for finance.

Ready To Take Your Business Global?

Have you explored your trade finance options? Premiering your business on the world stage may be within reach.

Don't Get Caught Out: Top Tips For Smart Inventory Management

Your guide to smart inventory management for every season.

3 Great Ways To Drive Sales Through Customer Loyalty

Get more customers and keep them. Here's the low-down on setting up your very own customer loyalty program.

How To Compare Business Loans Across The Market

You've explored your business finance options. What do you do next? How can you be sure you're comparing loans effectively and getting the best deal?

How To Make Great Hiring Decisions For Your Small Business

Want to expand your team but don't know where to start? Here's our guide to hiring great employees, featuring tips from industry leaders.

How To Develop Your Unique Selling Proposition

A Unique Selling Proposition (USP) is fundamental for any business looking to grow. Learn how to develop your USP and stand out from the crowd.

Could Debtor Finance Solve Your Cash Flow Concerns?

Are you invoicing your B2B customers with longer payment terms? Is it hurting your cash flow? Debtor finance could be a lifesaver between payments.

Here's What Working Capital Can Do For Your Business

With so many business finance options to choose from, how do you know whether working capital is right for your business? Start by reading this.

Time To Refinance? Here's What You Need To Know

Are you ready to refinance? Reviewing your business loan every 2 - 3 years can save your SME a lot of money. Here's what you need to know.

7 Tips For Managing Business Debt

2018 is your year. Here are 7 quick tips and tricks to get back in the driver's seat when it comes to battling business debt.

19 Business Funding Mistakes To Avoid

Improve your chances of locking down the perfect business loan. Here are 19 business funding mistakes to avoid when you're applying for commercial finance.

12 Business Set-Up Costs You Need To Know About

Setting up a business is hard enough, without getting stung with unexpected costs. Here are the things you should be thinking about before you dive in.

5 must-ask questions when applying for a small business loan

Getting the best rate is all about asking the right questions. Have you done your research? Here's where to start and why.

Part 2: Claiming The R&D Tax Offset

"Ok, I'm eligible for the R&D tax incentive. But how do I actually claim it?" Here's what you need to know.

Part 1: Are You Eligible For The R&D Tax Incentive?

You could be missing out on a tax offset of 45 cents in every dollar. Check your eligibility for the R&D tax incentive today.

Debt Or Equity: What's Best For Your Business?

Need to raise cash for your business? We explore the use of debt versus equity, and how to decide which one is best for your business.

Are The Rewards On Your Business Credit Card Worth The Higher Fees?

Reward points can add value to your business, but it's not one-size-fits all. Here's what you need to know.

Company vs sole trader: What's the verdict?

Here's the million dollar question: will you start up a company or will you establish yourself as a sole trader? Get the full story.

10 lessons we learned from starting our small business

Valiant Finance is a small business dedicated to supercharging the growth of other small businesses through access to funding. Here's what we've learned.