Autumn -  24 March 2020

Business Newsletter

He will win who knows when to fight and when not to fight.

Sun Tzu

 Australians started 2020 with a fight against bushfires. The current pandemic will bring us to a situation where to win the fight, we must not participate. This year will be remembered for our resilience, patience, and mateship; a trait that all Australians have shown throughout history. As assistance measures are introduced by governments across Australia, we will let you know what affect they will have on you. We wish you strength during this time and encourage you to stay connected to your communities in any way you can.

Synstrat’s plan

For the moment, there has been no change to our services. As of Tuesday 24th March our reception hours will be 9am to 5pm. Any essential meetings with clients or suppliers scheduled before 30th April will be held via online conference or telephone only. All non-essential meetings will be postponed.

A number of our team members will be away from the office to look after their children while schools are closed. Those that are able to continue working will do so either from the office or from home, depending on their job description.

We will do our utmost to keep resources available to you during this phase and will respond as promptly as possible. If Victoria is placed into lockdown, as many of our services will be maintained as possible and our direct contact details will be published to our website: www.synstrat.com.au.

How to Survive the Pandemic Crisis

The unfortunate reality is that, no matter what profession or industry you are in, the next 3 – 6 months will not be business as usual and you should plan for a severe downturn in your top line income level, potentially to zero in some cases.  To come out of the other side with your business intact, cash preservation is critical.

We have set out below some advice on how to manage cash through the downturn and navigate any difficult decisions that will have to be made.

Generally, the largest expenses we face in small business are:

1.     Our people;

2.     Premises;

3.     Tax; and

4.     Interest.

The earlier critical decisions are made, the better your chances of survival. 

People

Without straying into the area of legal advice, the options for dealing with staff as an employer that you have are:

1.     Working from home;

2.     Using entitlements (sick leave, annual leave, leave without pay);

3.     Switching from full time to part time;

4.     Temporary stand downs; or

5.     In the most extreme cases, redundancy and termination.

If you want to discuss these options further, we are able to provide factual information on each option however HR specific legal advice should be sought before implementing any strategy.  As painful as these decisions will be, getting this area right is critical to surviving any lockdown period.

Premises

Landlords are being encouraged to negotiate reductions or deferrals of rent. With many businesses closed there will simply not be sufficient cash flow to meet fixed overheads such as rent, and many will fear eviction. The National Cabinet has discussed this issue recently and will be looking to ensure that both commercial and residential tenants are not adversely affected by rent reductions.  We suggest you approach your landlord seeking a rent standstill if your business faces a severe downturn.

Clients owning their own premises, particularly within superannuation may be able to seek rental relief and still comply with relevant legislation. Please contact your adviser before making any changes to your rental agreements.

Tax

Where your business is suffering a severe trading downturn, we may be able to vary your PAYG tax instalments to provide you some cash flow relief. Please contact your accountant to discuss this option further.

Interest

Banks are offering repayment deferrals for up to six months on loans of under $250,000. Many clients have been contacted by their bank managers already. You may need to contact your account manager to see if you meet the eligibility criteria.  BOQ Specialist recently wrote to its clients setting out its package which included:

• the ability to defer mortgage and/or loan repayments;
• the option to make Interest Only repayments;
• special arrangements in relation to arrears;
• early access to Term Deposit funds with waiver of redemption fee; or
• waiver of other fees and charges related to non-payment.

Federal government assistance

PAYG withholding assistance

For the four months ending March to June 2020, 100% of your PAYG withholding obligations will be repaid by the ATO – up to an aggregated maximum of $50,000. The credits will appear on your account with the ATO and will reduce the amount you owe, with any excess being refunded to you within 14 days. These are known as Boosting Cash Flow for Employers payments.

There will also be an additional payment in the June to September 2020 period whereby eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments they have received.  This means that eligible entities will receive at least $20,000 up to a total of $100,000 under both payments. This additional payment continues cash flow support over a longer period, increasing confidence, helping employers to retain staff and helping entities to keep operating.  

Personal income support

Payments can also be made direct to your staff to help them pay their bills if they are stood down. The federal government has established a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight from 27th April 2020. This should alleviate some of the pressure felt by employers to look after vulnerable staff. The supplement will be paid to both existing and new recipients of the eligible payment categories for the next six months.  This includes sole traders and self-employed. Check the DSS website for more details.

SME Loan Guarantee Scheme

This will provide businesses with funding to meet immediate cash flow needs, by further enhancing lenders’ willingness and ability to provide credit. Businesses with a turnover of up to $50 million will be eligible to receive these loans. Under the Scheme, the Government will provide a guarantee of 50 per cent to small and medium enterprise (SME) lenders for new unsecured loans to be used for working capital. This will enhance these lenders’ willingness and ability to provide credit, which will result in SMEs being able to access additional funding to help support them through the upcoming months.

The Government will provide eligible 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.

The Scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.

Investment incentives

New business assets costing less than $150,000 can be written off between March and 30 June 2020. Furthermore, new assets purchased before 30 June 2021 will be eligible for a 50% tax deduction in addition to the relevant depreciation claim.

State government assistance

A number of states have confirmed that they will reduce or remove payroll tax liabilities until 30 June 2020. The Victorian State Revenue Office will refund all payroll tax payments received for the 2019/20 year and waive payments up to 30 September 2020. New South Wales has stopped payroll tax until at least July 2020 and raised the threshold so that fewer businesses will be impacted in the short term. Queensland has similar policies related to payroll tax and small business loans.

 We are here to help.  If you would like cash flow projections and advice on whether your plans will enable you to survive the pandemic lockdown, please contact us for an initial consultation.

 Stay safe, stay calm,

The Synstrat Team

The above information is general advice only. To discuss how this may affect your personal situation, please contact your Synstrat Adviser before taking any specific action on (03) 9843 7777 or office@synstrat.com.au