COVID-19 stimulus package was rolled out by the Australian federal government, in recognition of the impact of the pandemic to the economy. The stimulus packages aim to help small- and medium-sized businesses (SMEs) and workers hurdle the unprecedented changes brought about by this global pandemic.
Covid-19 stimulus package for SMEs includes:
- Affected employers will be able to claim a fortnightly payment of $1,500 per eligible employee from 30 March 2020 until 27 September 2020. You can read more information on how the JobKeeper Payment can help employers and sole traders.
- Eviction notices to SMEs will be held off under the government’s mandatory code of conduct for commercial tenants. It is also wise to make urgent forthright negotiations with your landlords for rent concessions.
- The Higher Education Relief Package will support workers displaced by the COVID-19 crisis to upskill or retrain, and support universities and other higher education providers to continue teaching.
- Changes to bankruptcy law were also made to cushion the impact of the crisis on financially distressed businesses. The temporary changes, which include a temporary increase in the statutory demand threshold to $20,000 and a temporary increase in the size of the debt required to issue a creditor’s petition to $20,000, will be in place for six months from 25 March 2020. Note that if, pre-Covid-19 your business is already financially distressed, it might be a good idea to not rely solely on the government-imposed moratoriums to evade liabilities.
- For public companies, the Australian Securities & Investment Commission issued guidelines for meeting upcoming annual general meetings (AGM) and financial reporting requirements, among these is the adoption of a “no action” approach, as long as an AGM is held by 31 July 2020.
RSM warns that integrity measures will be applied on the eligibility of SMEs to the $100,000 cash boost. Using this integrity measure, the government can deny the employer access to the cash boost under the Covid-19 stimulus package if the employer or their agent, enters into or carries out a scheme with the sole or dominant purpose of accessing, or increasing entitlement to, the cash boost.
State governments also stepped up in helping SMEs by giving their own Covid-19 stimulus package through tax measures. The measures include a six-month waiver of payroll tax for the Australian Capital Territory, reduction by 25% of annual tax liability in New South Wales, and refund of payroll tax in Queensland. RSM made a summary of State tax measures here.
While it is comforting to be able to lean on government support at this time, RSM suggests taking decisive and proactive action to mitigate operational and financial risks. RSM proposes that scenario modelling can help businesses make decisions this time. Scenario modelling includes looking into possible scenarios such as continuing business as usual, partial closedown, closing uneconomic operations, reduced segmented activity levels, cost reduction strategies, or “mothballing” operations.
Additionally, RSM suggests doing the following:
- Cash flow forecasting
- Working capital assessment
- Tax planning
- Financier communications
- Debtor management
- Costs review
- Solvency considerations
- Supply chain management
- Rent renegotiation
- Product availability
- Group structure
- Staff retention
- Employee obligation
- Bounce back
- Working from home
The government may have laid out many aid options for SMEs but to some these may not be enough to weather the storm. We should take this crisis we are facing as a time to assess our business’s financial status and come up with plans that could help us survive.
Here at The Insolvency Service, our services include assessment of your financial status and investigation into future cash flow. Most especially we guide directors as to the right path to take should the government’s Covid-19 stimulus packages prove to be inadequate to keep the business afloat. The pandemic forced businesses to come up with creative and untraditional solutions. We never know, the solutions we come up today maybe the innovations of tomorrow.