In early 2020, the Federal Government released a range of COVID-19 stimulus measures to financially support Australian businesses through the Coronavirus pandemic.
These measures were expected to end in September, but with many businesses still significantly impacted by COVID-19 and major concerns around the stability of the economy, the Government has made changes to extend a number of measures to assist companies to rebuild their finances after COVID-19.
Measures extended include the JobKeeper payment and the temporary insolvency relief for company directors.
On Thursday 23 September 2020, Treasurer Josh Frydenburg unveiled a new suite of insolvency reforms based on the US-style Chapter II Bankruptcy laws that aims to protect Australian small businesses from the fallout of the COVID-19 pandemic. The new laws allow small businesses including sole traders owing less than $1 million to creditors the ability to restructure their debts while remaining in control of their business.
Unlike the existing insolvency laws where an independent Administrator steps in to take control of the company under Voluntary Administration or Company Liquidation, business owners and company directors would work in conjunction with a Small Business Restructuring Practitioner to assist the business restructure its debts.
The Treasurer said that “these are the most significant reforms to Australia’s insolvency framework in 30 years and it will help keep more businesses in business and Australians in jobs.”
The new laws are expected to replace the temporary changes to insolvency laws that are currently in place, but are expected to end on 31 December 2020.
Until further announcements are made when the 2020-2021 Federal Budget is released on October 6, here’s everything you need to know about the changes to current COVID-19 stimulus measures to understand how they may affect you and your business moving forward.
| Measure | Date of Effect | End/Reduction Date |
JobKeeper Payment |
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| The JobKeeper Payment was introduced to help Australian businesses affected by COVID-19 to help keep Australians in jobs. | 1 May 2020, backdated to 30 March 2020 |
Up until 27 September 2020, the JobKeeper payment rate is $1,500 per fortnight for eligible employees and businesses. From 27 September 2020 to 3 January 2021, the JobKeeper payment rate drops to a maximum of $1,200 per fortnight. From 4 January 2021 to 28 March 2021, the JobKeeper payment rate drops further to a maximum of $1,000 per fortnight. Employees who were stood down after 1 March 2020 are eligible for the JobKeeper payments. |
Cashflow Boost |
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| The Boosting Cashflow for Employers stimulus measure was deployed to support businesses to keep operating, pay rent, electricity and other bills and retain staff during these uncertain times. | Started from 28 April 2020 for quarterly lodgers, or 21 April 2020 for monthly lodgers |
When a company lodges their BAS statements, they will receive a tax-free boost of between $20,000 and $100,000 for their statements up to the month or quarter of September 2020. The Cashflow Boost will generally equal the amount of money your company withheld from employee wages for each monthly or quarterly period from March to June 2020. |
Supporting Apprentices and Trainees Wage Subsidy |
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| The Apprentices and Trainees Wage Subsidy allows eligible businesses to keep apprentices and trainees in work throughout the COVID-19 pandemic. | Backdated from 1 January 2020 |
Allows eligible employees to apply for a wage subsidy of 50% of an apprentice’s or trainee’s wage. A maximum of $7,000 is paid per apprentice/trainee through the scheme per quarter. The subsidy was expected to end on 30 September 2020, but has been extended until 31 March 2021. |
Instant Asset Write-Off Threshold Increase |
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| The instant asset write-off scheme was temporarily increased to assist businesses and economic growth in the short-term and encourage economic recovery. | 12 March 2020 |
These measures temporarily increase the instant asset write-off threshold from $30,000 to $150,000. All businesses with an aggregated annual turnover of less than $500 million are eligible. The temporary increase was expected to end on 30 June 2020, but has been extended until 31 December 2020. |
Accelerated Depreciation |
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| Allows businesses to deduct 50% of the cost of a new depreciating asset. | 12 March 2020 |
For each new asset, the accelerated depreciation deduction applies in the income year that the asset is first used or installed ready for use. Eligible businesses can claim the deduction when lodging their tax return for the appropriate income year. There is no limit on the number of assets you can apply the accelerated depreciation to. The accelerated depreciation deduction can be used on eligible assets until 30 June 2021. |
Coronavirus SME Guarantee Scheme |
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| Under this scheme, the Government is guaranteeing 50% of new loans issued by eligible lenders to Small and Medium-sized Enterprises (SMEs). | April 2020 |
Initially, the Coronavirus Guarantee Scheme was only available for new loans made by participating lenders until 30 September 2020. The scheme has been extended and will start on 1 October 2020 until 30 June 2021. |
ATO Relief |
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| The Australian Taxation Office (ATO) has been very considerate of businesses struggling during the COVID-19 outbreak by offering additional support. | After 23 January 2020 |
Additional support includes:
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Temporary Changes to the Insolvency Laws |
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| As part of the Government’s initial economic response to COVID-19, they made temporary changes to the insolvency laws to provide businesses with a safety net if they are in financial hardship. | 25 March 2020 |
A Statutory Demand can only be issued against a company for a debt over $20,000 and the company will have 6 months to respond. Company directors will not be made personally liable for insolvent trading during COVID-19. These temporary changes were expected to end on 25 September 2020, but have been extended to 31 December 2020. |
Mandatory Code of Conduct |
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| Provides tenants who are in financial distress due to COVID-19 with rent relief under the mandatory code of conduct. | 3 April 2020 |
The code of conduct is state based and will expire once the JobKeeper program ends. JobKeeper is expected to end on 28 March 2021. |
If COVID-19 has caused your company’s debts to become unmanageable, it is vital to seek professional insolvency advice as soon as possible. Our team members at Revive Financial are available to discuss options to reduce your debts and return your company to profitability. Get in touch with us today on 1800 531 510.