Bluebird News

As mentioned in our previous email this is part 2 of today’s news from Bluebird Accounting. Here we’ll give you the lowdown on the CASH stimulus and assistance available for businesses.

We’ve had many clients ask how they apply for the cash stimulus. Well thankfully there are NO application forms. All you need to do is keep up-to-date with your Business Activity Statement (BAS) lodgements.

Boosting cash flow for employers

 The government understands that employing people in these uncertain times can be a burden on cash flow, but at the same time they recognise that people need jobs to keep feeding their families and the economy functioning. So, what’s been implemented is a cash break for businesses that employ individuals. There’s a lot of fine detail to absorb but put simply, here it is:

There is a minimum payment of $20,000 and maximum payment of $100,000 split into 2 stages, these payments/credits are TAX FREE.

There are 2 stages of the cash stimulus:

Stage one: This is a credit on your current running account balance with the ATO on submission of your PAYG withholding obligation for March 2020. This payment is a minimum of $10,000 and a maximum of $50,000.

Let’s use some examples:

Example 1 – Quarterly lodger: $1,000 in PAYG withholding on wages 

 You’re a small business and you employ one individual between January and March 2020, you’re required to withhold $1,000.00 in PAYG. 

 When you lodge your March Quarterly BAS you’ll receive a credit of $10,000 (which is the minimum payment) on your ATO running account balance. If you have a GST liability of $2,000.00 you’ll be eligible to request a refund of $7,000 ($10,000 less $1,000 in PAYG withheld less $2,000 of GST). 

 Therefore, you will reduce the debt you owe from you BAS and be eligible for the remainder in a refund.

Example 2 – Monthly lodger: $15,000 in PAYG withholding on wages 

You’re a small business and employ multiple individuals in the month of March 2020, you’re required to withhold $15,000 in PAYG. 

 When you lodge your March Quarter BAS, you’ll be eligible for a credit of $45,000 ($15,000 x 3) on your running account balance. Therefore, If you have a GST liability of $20,000 you would be eligible to request a refund of $10,000 ($45,000 less $15,000 PAYG withheld less $20,000 of GST). 

 When you then lodge your next month withholding for April of $15,000 you’ll be eligible for a credit on your running account balance of $5000. This is the remainder of the $50,000 available to you ($50,000 less $45,000 credit from March). Therefore you will only need to pay the ATO $10,000 ($15,000 less $5,000). 

What we see here with the Stage 1 payment, is that it’s based on the PAYG withholding that you’re required to withhold on wages. In most circumstances, this will result in a credit/reduction in the amount that you owe on your BAS. Therefore, you’re able to keep the cash that you would otherwise be transferring to the ATO which will allow you to continue to employ and manage your cash flow.

TIP: The credit is applied at the time of lodgement 

Stage two: This payment is available for those who continue to employ and is the 2nd half of the $20,000 and $50,000 cash stimulus. You must be eligible for Stage 1 to get Stage 2. Again these are tax-free payments and are available during the June to October period. Quarterly lodgers will receive 2 equal instalments of 50% of their entitlement and monthly lodgers will receive 4 equal instalments of 25% of their entitlement.

Applying examples 1 and 2 above.

Example 1 – Quarterly lodger: $1,000 in PAYG withholding on wages

As you were entitled to Stage 1 you’d be eligible for a total payment of $10,000 which matches your first payment of $10,000, therefore a total of $20,000. It’ll be credited as follows: 

• June BAS lodgement                  $5,000 credit
• September BAS lodgement                $5,000 credit 

This payment is made regardless of your PAYG instalment. Again, it’ll be applied as a credit to the account and you will be eligible for it to be refunded to your account. 

 Example 2 – Monthly lodger: $15,000 in PAYG withholding on wages 

 As you were entitled to Stage 1 you’re eligible for a total payment of $50,000 which matches your first payment of $50,000, therefore a total of $100,000. It will be credited as follows: 

•  June BAS lodgement                          $12,500 credit 
•  July IAS lodgement                            $12,500 credit 
•  August IAS lodgement                        $12,500 credit 
• September BAS lodgement                $12,500 credit 

This payment is made regardless of your PAYG instalment. Again, it’ll be applied as a credit to the account and you’ll be eligible for it to be refunded to your account. This is to help you continue to employ individuals over this time. 

Don’t worry though, we’ll work through your eligibility and what it means for you on a case-by-case basis.

FACT:  It should be noted that the ATO will be applying a specific integrity rules to stamp out artificial and contrived arrangements designed to obtain these cash boosting credits and payments.

Other measures: 

Access to credit: The government has announced that the will guarantee 50% of new short term loans in partnership with banks. These loans will be unsecured and available to small and medium businesses. These loans will require no repayment for 6 months, however, they will accrue compounded interest over this time.

Bankruptcy protection: The threshold for creditors to issue a statutory demand on a company has increased from $2000 to $20,000 for the next 6 months. Also, the threshold for declaring bankruptcy for individuals has increased from $5,000 to $20,000 in additional. This allows an extended required response time from 21 days to 6 months.  

Wages subsidies for apprentices and trainees:  Not only can you get a credit for the PAYG withheld on the wages paid as discussed above, but you may be entitled to claim 50% of apprentice or trainees wages if:

• You employ less than 20 full-time employees and retain apprentices
• They were in training as at 1st March 2020

This claim can be made from 1st January 2020 to 30 September 2020, and the total claim is $21,000.

NOTE: You can register from early April 2020.

Increase in the install write-off threshold: This is an interesting one because at this time cash flow is tight. Therefore buying assets may not be a priority. As well, dealers may be on limited trading hours. Nonetheless, if you need to purchase some assets for your business the tax breaks are good news for you. There is:

• Immediate write off of $150,000 for assets installed and ready for use between 12 March 2020 and 30 June 2020.
• Accelerated depreciation of 50% from 1 July 2020 to 30 June 2021, for all eligible assets (this is a new asset).

This measure includes an increase in eligible businesses from $50 million in turnover to $500 million in turnover. By increasing this, it can enhance a larger business to purchase more to keep more people in jobs. There is lots of detail on the fine print, so contact us if you have any questions. We can go into more detail later on. 

At the moment we are experiencing high call volumes, if we’re unable to take your call, we will get back to you as soon as we can. We’re committed to assisting you with your financial happiness and helping you through this tough time.

During this time your business may not be able to operate or you may choose to/ or be forced to lay employees off. It is an overwhelming time, but you’re not alone. These relief measures have been put in place to get you through to the other side, and there will be more to come. And we’ll be here to help you.

If you can, this is an opportunity to work ON your business, not in it. It’s an opportunity to review what’s working and what’s not and also to plan for how you want your business to grow. If you can’t face that right now, that’s ok too. We’ll help you make sure you’re getting all the financial benefits you’re entitled to.

Stay safe, stay positive and know you’re not alone.

Liz, Julian & the Bluebird team