Government Stimulus/COVID-19
I hope you are coping OK with all the COVID-19 uncertainty and the impact that this may have on your business.
There is some help for small business in the Government Stimulus, but it will only really help employers and to be eligible you will need to be lodging a BAS and have PAYG withholdings on wages (including your own) paid (label W2). So if you are a Sole Trader, with no staff this isn’t going to help you.
The stimulus credit will be applied automatically after BAS lodgement if you are eligible, so no additional action is required.
I recommend that you stay on top of your lodgements through this time and this way the ATO will be more likely to assist if you are struggling. If you are a Director of a company it also keeps you compliant with your obligations.
Tip: If you have a company with no payroll I suggest you (i) make sure you are registered for PAYG and (ii) start paying yourself $350/week. There won’t be any PAYG (tax) as this is below the tax free threshold, but it should unlock the $2k minimum refund/credit.
The other advice I would give you to manage your cash flow:
Chase up all outstanding invoices/debtors now
Ask for upfront payments/deposits where possible for new sales/jobs
Consider a discounting strategy to shift inventory… it may reduce profitability, but it’s worth considering if it gets cash in the door quicker
Review costs and if you need wage reductions spread across all employees e.g. move to a 4 day work week.
Here is some more detail on the govt stimulus and at the bottom there is some information on tax payment deferments and other measures to assist small business.
BOOSTING CASH FLOW FOR EMPLOYERS
The Boosting Cash Flow for Employers measure will provide up to $25,000 back to business, with a minimum payment of $2,000 for eligible businesses. The payment will provide temporary cash flow support to small and medium businesses that employ staff. The payment will be tax free.
Eligibility
Small and medium business entities with aggregated annual turnover under $50 million and that employ workers will be eligible. Eligibility will generally be based on prior year turnover.
The payment will be delivered by the Australian Taxation Office (ATO) as a credit in the activity statement system from 28 April 2020 upon businesses lodging eligible upcoming activity statements.
Eligible businesses that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 50 per cent of the amount withheld, up to a maximum payment of $25,000.
Eligible businesses that pay salary and wages will receive a minimum payment of $2,000, even if they are not required to withhold tax.
Timing
The Boosting Cash Flow for Employers measure 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. Monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgments. To provide a similar treatment to quarterly lodgers, the payment for monthly lodgers will be calculated at three times the rate (150 per cent) in the March 2020 activity statement. The minimum payment will be applied to the business’ first lodgment.
Examples
Sarah’s Construction Business - Sarah owns and runs a building business in South Australia and employs 8 construction workers on average full-time weekly earnings who each earn $89,730 per year. In the months of March, April and June for the 2019-20 income year, Sarah reports withholding of $15,008 for her employees on each Business Activity Statement (BAS). Under the Government’s changes, Sarah will be eligible to receive the payment on lodgment of each of her BAS.
Sarah’s business receives:
A payment of $22,512 for the March period, equal to 150 per cent of her total withholding.
A payment of $2,488 for the April period, before she reaches the $25,000 cap.
No payment for the May period, as she has now reached the $25,000 cap.
No payment for the June period, as she has now reached the $25,000 cap.
Sean’s Hairdresser Salon - Sean owns a hairdresser’s salon on the Gold Coast. He employs one apprentice who earns $37,970 per year and two stylists who both earn $44,260 per year. In the March and June 2020 quarterly BAS, Sean reports withholding of $4,570 for his employees. Under the Government’s changes, Sean will be eligible to receive the payment on lodgment of his BAS.
Sean’s business will receive:
A payment of $2,285 for the March quarter, equal to 50 per cent of his total withholding.
A payment of $2,285 for the June quarter, equal to 50 per cent of his total withholding.
Sean’s business will receive a total payment of $4,570. Sean may also benefit from the assistance for existing apprentices and trainees measure.
Tim’s Courier Run - Tim owns and runs a small paper delivery business in Melbourne, and employs two casual employees who each earn $10,000 per year. In the March and June 2020 quarterly BAS, Tim reports withholding of $0 for his employees as they are under the tax-free threshold. Under the Government’s changes, Tim will be eligible to receive the payment on lodgment of his BAS.
Tim’s business will receive:
A payment of $2,000 for the March quarter, as he pays salary and wages but is not required to withhold tax.
No payment for the June quarter, as he has already received the minimum payment and he has no withholding obligation.
If Tim begins withholding tax for the June quarter, he would need to withhold more than $4,000 before he receives any additional payment.
Other measures to assist businesses impacted by COVID-19 include:
deferring by up to four months the payment of tax amounts due through the BAS (including PAYG instalments), income tax assessments, FBT assessments and excise;
allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting to get quicker access to any GST refunds;
allowing businesses to vary PAYG instalment amounts to zero for the April 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters;
remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities; and
allowing affected businesses to enter into low-interest payment plans for their existing and ongoing tax liabilities.