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Support for Small Businesses Impacted by COVID-19

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What is a “Small Business”?

According to the Australian Banking Association (ABA) Banking Code of Practice, released 1 March 2020, a business is a “small business” if at the time it obtains the banking service all of the following apply:

a) it had an annual turnover of less than $10 million in the previous financial year; and

b) it has fewer than 100 full-time equivalent employees; and

c) it has less than $3 million total debt to all credit providers including:

i. any undrawn amounts under existing loans;

ii. any loan being applied for; and

iii. the debt of all its related entities that are businesses.

Friday, 20 March 2020

RBA $90-billion Term Funding Facility

The Reserve Bank of Australia announced a further 25 basis point rate cut on 19 March 2020 bringing the interest rate to 0.25%. During the meeting the RBA decided on a comprehensive package to help support jobs, incomes and businesses as the Australian economy deals with the coronavirus. Part of this package included a Term Funding Facility (TFF) for the banking system with support for business credit, especially to SME’s.

“Under this new facility, authorised deposit-taking institutions (ADIs) in total will have access to at least $90 billion in funding. ADIs will be able to borrow from the Reserve Bank an amount equivalent to 3 per cent of their existing outstanding credit to Australian businesses and households. ADIs will be able to draw on these funds up until the end of September this year”. RBA Governor Philip Lowe.

Read the full RBA Media Release here.

Financial Institutions Support Measures for SME’s

Financial Institutions (banks/lenders) have introduced support measures for SME’s to invest and to help the economy withstand and recover from the economic impact of Coronavirus (Covid-19).

These incentives include:

        • Business loan deferred repayments
        • Business loan term extension options
        • Restructuring and consolidating loans
        • Access to term deposit funds without reduction in interest rate
        • Deferred payments for Business Credit Cards
        • Business financial counselling

These support measures are available to eligible customers and will be assessed on a case-by-case basis. In a fast moving environment, the ABA has this morning announced that Australian banks will defer loan repayments for small businesses affected by Covid-19 for six months. Given that the circumstances and responses are changing rapidly, we will endeavour to update you with any changes as they come through or alternatively please seek further clarity from your Ledge Finance Executive, or contact our offices here.

Monday, 16 March 2020

$17.6 Billion Stimulus Package to Boost the Economy

The federal government has outlined new measures in a stimulus package worth $17.6 billion. This package has been put in place to boost the economy in response to the Coronavirus crisis. There are many companies that will benefit from this package, particularly those in the SME space.

Support for Business Investment

The following incentives have been put in place to support businesses in the short term:

Increasing the instant asset write-off

        • Threshold increased from $30,000 to $150,000 for businesses with turnovers of less than $500 million
        • This $150,000 threshold applies per asset, meaning eligible businesses can instantly write off multiple assets
        • This applies for eligible new or second-hand assets purchased before 30 June 2020

Investment Incentive – Tax Deduction

        • This concession will provide a tax deduction of 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost
        • For example, a $1 million depreciable asset acquisition will get $500,000 deduction plus the normal tax depreciation (based on $500,000) in the year of acquisition
        • This measure will apply for approximately 15 months and will apply to eligible new depreciating assets acquired from 12 March 2020 and first used or installed by 30 June 2021
        • There is no limit to the cost of a depreciating asset that can qualify for this concession, and it will be relevant for assets acquired between 12 March 2020 and 30 June 2020 with a cost of AUD150,000 or more which are not eligible for the instant asset write-off

Note: Some announcements have stated that eligible new assets up to $150,000 acquired between 12th March 2020 and 30th June 2020 qualify for the 100% Instant Asset Write-Off and the 50% Investment Incentive. It is our understanding that this is not the case.

Upgrading your equipment comes with many benefits, including:

        • Reduced repair and maintenance costs
        • Quality/efficiency of the asset
        • Attraction in the market
        • Tax incentives (as listed above)
        • New equipment warranty

To find out more on how your business can benefit from these incentives put in place to support business investment, contact your Ledge Finance Executive directly or contact us here.

Cash Flow Assistance for Businesses

The following measures have been put in place to improve SMEs business confidence:

Cash Payments of up to $25,000

        • Businesses with turnover of less than $50 million – generally taken from the prior year
        • Receive tax-free cash payments of 50% of their Business Activity Statement or Instalment Activity Statement
        • Eligible for those who employ staff between 1 January 2020 and 30 June 2020

Apprentices and Trainees Wage Subsidies 

        • Eligible employers can apply for 50% wage subsidy of the apprentice’s or trainee’s wage paid during the 9 months from 1 January to 30 September 2020
        • A maximum of $21,000 per eligible apprentice/trainee per year (i.e $7,000 per quarter)
        • Eligible SMEs are those employing fewer than 20 full-time employees who retain an apprentice/trainee
        • Apprentice/trainee must be in training as at 1 March 2020

Assistance for Severely Affected Regions

The following funds will be in place to support businesses in severely affected sectors, regions and communities:

$1 Billion Allocated

        • An initial $1 billion has been allocated to support these sectors, such as tourism, agriculture and education
        • These funds will be provided through existing or newly established Government programs

ATO Administrative Relief

        • Administrative relief for certain tax obligations for taxpayers affected by the Coronavirus outbreak, on a case-by-case basis

If you have any queries on the above, please contact your Ledge Finance Executive directly or seek further advice from your accountant.

For the full Federal Government Media Release from 12 March 2020, click here.

Please note the information provided here is general in nature and does not constitute financial, tax or other professional advice. You should consider whether the information is appropriate for your needs and seek professional advice prior to making any decision.

For more regular updates:

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