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In 1959 Dinah Washington had a hit song with these words

What a difference a day makes,
Twenty-four little hours …

and in the second and third verses

What a difference a day makes,
There’s a rainbow before me…

You might remember the disco version by Esther Phillips or Rod Stewart’s more recent cover version better!

This song came to my mind after the announcement last Sunday of the relaxation on our community. What a difference a day makes! It feels like a cloud was lifted and we are through the rainbow, returning back to a normal life. What will normal look like for you and your business?

Here’s another story to set the scene for this week’s email.

I hope you have had the experience of a road trip at least once in your life. For me the trip that springs to mind is the road between Albany and Walpole in our Great Southern region. You begin driving from Albany and the road is smooth and fairly straight with no real hills. 110 all the way! About halfway along you pass through the town of Denmark and the rest of the journey to Walpole is on winding, hilly roads with views around each corner. The speed limit falls away to 60 as trees hug the sides of the road, the bitumen is narrower, and you’re never too sure as you round the next bend if you will be hard up against the rear of a slow moving truck, tractor or caravan. You need to slow down and take it easy. Are we there yet is the cry from the back seats!

We all want to get there and out of this time of COVID-19, we want it over.
Where is there and how do we get there?

Our leaders are making it clear that this is a long journey and while business can begin to resume there will be ongoing restrictions until we reach stage 5 of the recovery plan. Which is going to require resilience.

Resilience is how well you adapt to changes in life. A stronger resilience enables a faster bounce back from whatever adversity you have faced. Scientists identify between 5 and 7 steps in building resilience which generally fall into the headings of:

1. Awareness of the situation
2. Developing flexibility and a stable focus on the issue
3. Let go -physically
4. Let go -mentally
5. Building a positive forward motion

These steps can be applied to individuals and also to business. And I want to write about your business and how as your accountants we can help with your recovery plan.

The first thing we can do for you is to draw on our experience working with clients in different industries and in different sized businesses to provide situational awareness in this pandemic. Understanding your position helps identify actions required to be taken in responding to the crisis. As I write we are talking with a business that provides contracted services and employs more than 100 people. The effect of COVID-19 will be felt in the cost of funds from their bank. We are working as part of team with our client and their other advisors to prepare financial reports that are complete and accurate so all parties are informed quickly of their positive trading position. Part of this function involves reporting on the government stimulus packages and how to record this income in the financial reports at balance date.

The second service we can provide is to stress test your ideas on how to work in this time. Just the same as my road trip, it’s impossible to see the road ahead around the next corner in your COVID journey. Without being alarmist we are aware of increasing reports of business slowing in forward orders and work as they enter the new financial year in July. With the stimulus packages ceasing in September there is a prospect of a period of time when levels of business activity may slow considerably which may negatively affect your business. In this situation cash flow forecasting and a consistent focus on cost control is required.

All of our team are willing to both listen and talk with you if things are getting too much. We aren’t counsellors but we can help by identifying the key issues for you to focus on in the business that may relieve some of the anxiety associated with the future for your business.

Thirdly we can help draw a financial road map for the future of your business. Right now this means we continue to work with clients to ensure they receive their entitlements under the Job keeper package. A cause of concern is that many clients are confused on either the process or the definitional requirements to be entitled.

The process began with registering an interest for Job Keeper with the ATO. All this did was to flag your business for future contact by the ATO on the program. To be a part of the program the business needed to “Enrol” with the ATO (which can be done by you or us as your tax agents) and the ongoing obligation is to report monthly on the employees entitled to be funded and to provide projected turnover information(to be used for statistical information).

Right now the definitional requirements are principally affecting large employers in the charity space. When Job Keeper was introduced I wrote in my email entitled the “Stimulus Sack”(3 April): The way we see things: there are three levels of engagement happening in an effort to get the announcements legislated.

1. The Government has the announcement and gets the media grab.
2. Then Treasury draft the legislation to go to Parliament.
3. Then its left to the ATO to pick up the pieces and implement…. And that’s when the fun starts. We all know the ATO is a regulator not a service delivery provider, so there are genuine concerns around how the ATO will apply the law.

We certainly didn’t expect that one of the really tricky pieces would be around defining and applying the decline in turnover test. Sure enough, a little over one month in and that prediction has come true. We now have an Act, a set of Rules, some revised Rules, Legislative Instruments, a Practical Compliance Guideline (PCG 2020/4), a Practice Statement Law Administration (PSLA 2020/1), a Law Companion Ruling (LCR 2020/1 – the LCR) and this week a Practical Compliance Guide (PCG 2020/4.)

With no criticism of the ATO in working with a difficult situation each additional publication is overlaying the last resulting in significant confusion for employers as to whether they meet the test to participate. In an effort to clarify the law, the result has been increased confusion!

We are talking with many clients on the issue of decline in turnover, what is turnover for the purpose of the test, and the different test periods available to a business. If this is a concern for you please do contact us so we can leverage the experience we have developed for your advantage.

Just as in my road trip there is always an end to the journey. This COVID journey will take time and it’s possibly a case of slow and steady winning the race. We’re in it together and here at DK we are only an email or call away if you need to bounce an idea off us.

In the meantime to all our readers stay safe!