It’s been an eventful couple of weeks across the world, with the outbreak of Coronavirus (COVID-19) and as it now stands, the World Health Organization (WHO) has announced that COVID-19 is a global pandemic.
The Australian Government has released and passed through parliament on the 23rd March 2020 their economic response to the Coronavirus’s effects on our country.
The full details of the complete assistance packages for both businesses and individuals can be found here but in summary, here is what businesses may be able to access:
SME Cashflow Loans Guarantee Scheme
The major banks are offering unsecured loans to business of up to $250,000 with the government guaranteeing 50% of the loan. The funds must be used for cashflow purposes and applications must be directly to the bank itself – brokers are unable to help in this process.
The loans will be at current interest rates once the loan is drawn down, with a repayment holiday for the six months and repayable over 18 months to 3 years.
Quick and efficient access to Credit for Small Business
The Government is providing an exemption from responsible lending obligations for lenders providing credit to existing small business customers. This exemption is for six months, and applies to any credit for business purposes, including new credit, credit limit increases and credit variations and restructures.
Responsible lending obligations do not currently apply to lending which is predominantly for a business purpose, but it can take time and effort for lenders to be satisfied that the money borrowed meets this test. By providing a temporary exemption from responsible lending obligations, this reform will help small businesses get access to credit quickly and efficiently.
Increase in the Instant Asset Write Off**
The Government is increasing the instant asset write-off threshold from $30,000 to $150,000 and expanding access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.
The threshold applies on a per asset basis which means that businesses can write off multiple assets immediately if purchased and used or installed ready for use between 12 March 2020 and 30 June 2020.
Please consider the cashflow implications of any of these purchases very carefully. The increase to the instant asset write off does NOT mean that you will receive a tax refund. Please contact your accountant or ourselves to discuss the cashflow implications further.
Backing business investment**
The Government is introducing a time limited 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions.
Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of eligible assets on installation, with existing depreciation rules applying to the balance of the asset’s cost.
Eligible assets are new assets that can be depreciated under Division 40 of the Income Tax Assessment Act 1997. The assets are acquired after the announcement (12 March 2020) and first used or installed by 30 Jun 2020. Does not apply to second hand Division 40 assets, or buildings and other capital works depreciable under Division 43 such as leasehold improvements.
Temporary relief for financially distressed business
There is a temporary increase to the threshold at which creditors can issue a statutory demand on a company and initiate bankrupt proceedings. Also an increase to the time companies and individuals have to respond to statutory demands that have been received.
The Government is temporarily increasing the current minimum threshold for creditors issuing a statutory demand on a company under the Corporations Act 2001 from $2,000 to $20,000.
Not responding to a demand within the specified time creates a presumption that the company is insolvent. The statutory timeframe for a company to respond to a statutory demand will be extended temporarily from 21 days to six months.
To make sure that companies have confidence to continue to trade through the Coronavirus health crisis with the aim of returning to viability when the crisis has passed, directors will be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business.
ASIC has the power to offer temporary flexibility in the Corporations Act 2001 and to provide targeted relief from provisions of the act to deal with unforeseen events that arise because of the current crisis.
All of these measures will apply for six months.
Victorian Liquor licence fees waived
Businesses that have paid for a renewable liquor licence for 2020 will be reimbursed their licence fee and those yet to pay will have the fee waived.
The State Revenue Office will administer the reimbursement, regardless of whether the licence fee was paid to it or the Victorian Commission for Gambling and Liquor Regulation.
Victorian Land tax deferral
Land owners due to pay 2020 land tax that have at least one non-residential property and total taxable landholdings below $1 million have the option of deferring their 2020 land tax payment until after 31 December 2020.
The State Revenue Office will contact all taxpayers who are eligible for this deferral.
The lanscape of this crisis is constantly changing and the next few months are going to be challenging for everyone here in Australia and accross the rest of the world. If you need support please reach out, we want to provide as much help as we can to make sure you are ok and we can all come out the other side stronger.
**All information is of a general nature and should not be considered tax advice
Want more information?
Contact us directly to see how this may effect you, and what you can do to best manage your business.