Business & Financial Support

Federal Financial Support Information

The Federal Government released a second stimulus support package to help with the effects of coronavirus on the economy. Some of the updates are:

For businesses

  • PAYG Withholding credits for businesses with employees has increased to $20,000 minimum – $100,000 maximum. The rebate is based upon 100% of PAYG Withholding for the period 1 January – 30 June 2020 to a maximum of $50,000. If you are entitled to the maximum $50,000 in PAYGW credits for the period 1 Jan 2020- 30 June 2020, you will receive an additional $50,000 in credits over the period 1 July 2020-31 October 2020. This is for businesses with an annual turnover of less than $50m.
  • The threshold at which creditors can issue a statutory demand for payment of amounts outstanding will increase from $2000 – $20,000. This measure will be in place for 6 months. The period of time that the debtor has to respond will increase from 21 days to 6 months for a period of 6 months.
  • Instant asset write off – increased from $30,000 to $150,000 from 12 March 2020 – 30 June 2020.
  • Assets over $150,000 eligible for 50% instant write off and the balance deductible at normal rates in the same year – this second measure is from 12 March 2020 – 30 June 2021.
  • 50% subsidy for apprentice or trainees wage (up to $21,000) for the period 1 January 2020 – 30 September 2020 for businesses with up to 20 full-time employees

Supporting the flow of credit

The Government will provide a guarantee of 50% to SME lenders for new unsecured loans to be used for working capital. SME’s with a turnover of up to $50 million will be eligible to receive these loans. 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 Australian Government has established a website where businesses can find critical information regarding financial assistance, eligibility and timing for the new government support for Australian businesses. This includes information around increasing the instant asset write-off, boosting cash flow for employers and measures to support apprentices and trainees. For more information, click here.

Landlord/Tenant Commercial Leasing Code of Conduct

The National Cabinet have formally agreed that states and territories will implement the attached mandatory Code of Conduct in respect to certain commercial leasing arrangements. This will occur in NSW by way of the introduction of legislation or regulation (to be confirmed).

The purpose of the Code is to impose a set of good faith leasing principles for application to commercial tenancies (including hotels) between owners/operators/other landlords and tenants, subject to the tenant meeting the criteria of a “small/medium sized business” (being a business with an annual turnover of up to $50 million and also that is an eligible business for the purpose of the Federal Government’s JobKeeper programme).

Central to the Code is the principle of proportionality to rent reductions based on the tenant’s decline in turnover to ensure that the burden is shared between landlords and tenants. Appendix I of the attached Code provides practical examples of the application of the principle of proportionality.

As part of this announcement National Cabinet again noted that it expects Australian and foreign banks along with other financial institutions, to support landlords and tenants with appropriate flexibility as they work to implement the mandatory Code.

The Code provides that, where landlords and tenants cannot reach agreement on leasing arrangements (as a direct result of the COVID-19 pandemic), a state-based binding mediation process will be made available to the parties to the dispute (further NSW specific details to follow with the applicable legislation/regulation).

We will provide members with a further update once the code is formally enacted in NSW.

Duty of directors to prevent insolvent trading

Last week we updated members on pre-existing “safe harbour” laws which could have assisted members with setting up a defence to a possible future insolvent trading claim. Government has now introduced new “safe harbour” provisions, which will apply for 6 months from the commencement date (TBA) in respect of debts incurred in the “ordinary course of the company’s business”.

A company will be taken to incur a debt in the ordinary course of business if it is necessary to facilitate the continuation of the business during the relevant period. The Explanatory Memorandum suggests this could include:

  • taking out loans; or
  • continuing to pay employees.

For example, it would also likely cover debts incurred in respect of:

  • a new cleaning regime;
  • delivery of food or products; and
  • engaging consultants.

The new “safe harbour” is an automatic process providing personal protection for directors from the commencement date.

Despite these new provisions, Henry William Lawyers (insolvency specialists and AHA members) recommends all businesses act early with necessary or desirable restructuring action. Whilst a new defence to insolvent trading may partially address directors’ personal statutory liability concerns, new debt accruing through a period of no trade still may have crippling long term effects if not addressed as soon as possible. Further, this new law will not reduce potential liabilities for directors under personal guarantees. Commercial leverage to negotiate with key third parties will also be at its strongest in the earlier days.

Helpline for Small Businesses Impacted by COVID-19

Morrison Government’s Business Hotline – 13 28 46 – www.business.gov.au 

Operations at the www.business.gov.au 13 28 46 Contact Centre will increase from five days per week to seven days per week, and provide an additional two hours a day of support outside standard operating hours for the first month, answering calls from 7.00 am to 11.00pm AEST.

5 steps businesses can take

In the midst of managing the business impacts of the crisis, here are 5 things you might want to think about.

  1. Make sure you are following health and safety guidance from the Department of Health.
  2. Communicate what health and safety measures you are taking in your business to your customers and partners.
  3. The Department of Health has launched a national campaign to inform all Australians about the Coronavirus. They have developed a range of resources for businesses to use, find out more here.
  4. The Australian, State and Territory Governments have announced a series of measures to support businesses and individuals during this difficult time. Find out more here.
  5. Look after your mental health and reach out if you need help.

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