With this ever-changing and evolving environment, we are ensuring we stay across the various measures put in place. If you require any further information or assistance on the below, please get in touch with your Ledge Finance Executive directly, or contact our offices here, and we will do all we can to support you through this.
On this page
- What is a “Small Business”?
- RBA $90-billion Term Funding Facility
- Financial Institutions Support Measures for SME’s
- SME $250k Unsecured Loan
- Billion Dollar Stimulus Package to Boost the Economy
- Support for Business Investment
- Cash Flow Assistance for Businesses
- Assistance for Severely Affected Regions
Please note the information provided here is general in nature and does not constitute financial, tax or other professional advice. The current environment is changing rapidly and rules and regulations for the measures explored below are constantly evolving. You should consider whether the information is appropriate for your needs and seek professional advice prior to making any decision.
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.
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, on 21 March 2020 the ABA announced that Australian banks will defer loan repayments for small businesses affected by Covid-19 for six months.
As of 30 March 2020, the ABA supports more than 30,000 Australian businesses for deferred loan repayments. That’s 98 per cent of all businesses with a loan from an Australian Bank and will apply to an additional $100 billion of business business loans. Bringing the combined total of loan repayments deferred by Australian Banks to $250 billion.
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.
SME $250k Unsecured Loan
SMEs with a turnover of up to $50 million will be eligible to receive these loans.
The Government will provide eligible and participating banks/lenders with a guarantee for loans with the following terms:
- Maximum total size of loans of $250,000 per borrower
- The loans will be up to three years, with an initial six month repayment holiday
- The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan
These loans will still be subject to banks/lenders credit assessment processes of which they will take the current economic conditions into account
This will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020
For more information head to: Australian Government – Coronavirus SME Guarantee Scheme or click here to read our blog on what you need to know about the $250k assistance loan.
Billion Dollar Stimulus Package to Boost the Economy
On 12 March 2020, the Federal Government 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.
On Sunday the 22nd March, the Federal Government announced an additional $66 billion in COVID-19 economic support measures. This brings the total economic assistance package to nearly 10% of Australia’s GDP.
On 20 March 2020, the Federal Government introduced a further $130 billion wage subsidy package for businesses to pay workers.
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 and as of 9th June has been extended for a further 6 months to 31st December 2020. This allows businesses who may not be able to take delivery of a new work vehicle before the original 30 June 2020 deadline can now take advantage of the tax benefit in the 2020 – 2021 financial year.
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
- For more information here is the Australian Government – Cash flow assistance for businesses PDF
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
$130 Billion Wage Subsidy – JobKeeper Payment
- Businesses impacted by the Coronavirus will be able to access a wage subsidy to enable them to continue to pay employees
- Employers who are directly affected by Coronavirus will be able to claim $1500 a fortnight, per employee, from 30 March 2020 and for a maximum of 6 months. This has since been extended until 28 March 2021, with new and tougher eligibility criteria. To find out more head to The Treasury website here.
- For employees and business participants who, in the four weeks before 1 March 2020 were working an average of 20 hours or more per week, the current payment rate of $1,500 per fortnight will be reduced to:
- $1,200 per fortnight from 28 September 2020, and then
- $1,000 per fortnight from 4 January 2021
Payroll Tax Waiver
- Payroll tax waived for a 4 month period between 1 March 2020 to 30 June 2020 for SME’s with Australia-wide annual wages of less than $7.5 million in 2019-20.
- This will deliver around $165 million in relief to around 10,700 businesses that will not be required to pay payroll tax for this period.
- This tax waiver replaces the payroll tax deferral already announced for particular SME’s.
- For more information head to WA Government: COVID-19 payroll tax relief article here.
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 more information on the measures put in place to support small businesses impacted by COVID-19 head to:
Federal Government Support for Business
Australian Government: Coronavirus (COVID-19) news, updates and advice
