I had been hesitant about posting about the stimulus package announced last week as it wasn’t the final package, and it hasn’t been passed by Parliament yet. But I have been receiving a lot of questions regarding what’s on offer and what should we all be doing to protect our businesses in the current environment.
- From 12 March 2020, the instant asset write off threshold has been increased to $150,000. In simple terms, this means an asset purchased by your business under this threshold, will be treated as an expense, i.e. 100% deductible in the year of purchase. Rather than being depreciated over several years.
There is a threshold test for this, businesses with an aggregated turnover of below $500 million.
- A time-limited 15-month investment incentive (through to 30 June 2021) which will operate to accelerate certain depreciation deductions. This measure will also be available to businesses with a turnover of less than $500 million, which will be able to immediately deduct 50% of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost. As announced, this measure is proposed to only apply to new depreciating assets first used, or installed ready for use, by 30 June 2021.
- The big card item that has a lot of people talking is the Cashflow Assistance Package. Unfortunately, this only applies to small businesses employing people. So sole traders, etc., will not qualify for this unless they employ people.
The minimum amount available is $2000, with a maximum payment of $25,000. This is not a cash payment; credit will be applied via the ATO once your March, April, May & June BAS have been lodged.
It is calculated at 50% of the PAYG withheld from employees wages, that are lodged in the applicable BAS.
If you are not required to withhold PAYG from wages, but still report wages on your BAS, you will receive the minimum $2000.
- Wage subsidies to support the retention of apprentices and trainees – Employers with less than 20 full-time employees may be entitled to apply for Government-funded wage subsidies amounting to 50% of an apprentice’s or trainee’s wage for up to nine months from 1 January 2020 to 30 September 2020. The maximum subsidy for each apprentice/trainee is $21,000.
These relief strategies might need your Accountant involved and must be applied for, the ATO will not automatically do this. The ATO’s Emergency support Infoline is 1800 806 218.
- Individuals and businesses can request a deferral of some types of payments for four months. They will still need to be paid, but this will give greater flexibility with cashflow.
- For those of us that pay quarterly income tax instalments, we can now vary the March quarter down to nil.
In addition, we can also claim back credit of what was paid in the September and December quarters.
This will often result in a refund for the BAS, but please be warned that once your tax return is completed, you will be liable for 100% of the tax calculated. So, you are just postponing the inevitable, but if you need the cash flow boost, this can be a great option.
- If you currently have a debt with the ATO, we can now ask for a remittance of any interest charges and late lodgement penalties, from the 23 January 2020.
Below are listed some general ideas that just make good business sense given how crazy things are right now:
- Cashflow is king. Do you have enough of a buffer put aside in the event that your business needs to close its doors or turnover is dramatically reduced? Obviously, the stimulus package is the Government trying to encourage spending but please only do so if you can afford it.
- Make sure your payment terms are clear and are being enforced. It might be a good time to look at charging upfront (if possible).
- Have a chat with your bank. See what kind of options they are offering to assist with cashflow. Would a line of credit or something to that effect get you through this?
- This is a great time to be looking very closely at your numbers (which you should be doing anyway). What kind of impact is it going to have if your income drops by 30%, 40% or 50%? Where can you save money?
- If you don’t already, I suggest a tax planning session with your Accountant to review year to date for 2020. And to ensure you are taking maximum advantage of the stimulus package being offered.