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As the whole world feels the pain of the coronavirus each country is responding in different ways.

For us in WA we’ve been corralled into our regions in an effort to stop the spread. Many businesses have been affected, with those that rely on people meeting in groups being shut down entirely.

In response our Federal and State Governments have released a range of stimulus measures to try and reduce the economic impact of this virus. This cash splash amounts to over $320bn of help and is targeted at assisting both employers and employees.

These assistance packages have been developed very quickly and as a result there is a lot of information floating around and it can be hard to work out where your business fits.

In this article Dry Kirkness Chartered Accountants focus on the measures that benefit the local agriculture sector.

Cash Flow Support

 Both of the following cash flow support measures target the cost of employment in an eligible business. They are designed to encourage employers to keep their staff.

 1. Cash Flow Incentive | Providing Cash Flow Relief for Small Businesses at BAS Time

The Cash Flow Incentive enables businesses to get tax-free cash flow support, via a reduction of PAYG withholding liabilities, over the months of April to October.

To be eligible your business needs to meet the following criteria:

  • Have an ABN on 12 March 2020 and continue to be active;
  • Have an aggregated annual turnover under $50 million; and
  • Paid employees (even if no tax was withheld).

The cash flow boost comes via a credit on your March BAS. The ATO will calculate the amount equal to 100% of the quarterly (or 300% if you lodge monthly) PAYG withholding. With 100% of PAYG withholding liabilities being credited against further BAS lodgements up to the June 2020 quarter. If the credit results in a refund, any excess credits will be refunded.

The maximum receivable over this time is $50,000 with a minimum of $10,000 receivable.

Additional support (equal to credits received from March to June) will be provided in the July – October 2020 period so that eligible entities will receive total minimum support of $20,000 and maximum of $100,000. 

All you need to do is get your March BAS done and lodged with the ATO.

Simple!

And it’s a free kick for agri business..

 2. JobKeeper Scheme | Wage Subsidies for Business Affected by COVID-19

 This wage subsidy measure  ensures business affected by the Coronavirus can access a subsidy of $1,500 per employee per fortnight to continue paying their employees for up to 6 months.

That’s the headline from the Government. But there are eligibility tests, for both employers and employees, in order to get these payments.

For business with turnover under $1bn to be eligible, you need to show a decline in turnover more than 30% between 2020 and the same period last year.

Eligible employees include all full-time and part-time staff as well as casual employees employed for over 12 months. So unfortunately, seasonal casual staff will not be eligible. Eligible recipients can also include the self-employed, trading trusts and private companies so like a lot of tax law, the devil’s in the detail.

We recommend checking in with your accountant to see if you are eligible as the rules are a little complicated.

The first payments will be made to eligible businesses in the first week of May, backdated to 30 March.

Eligible businesses can apply for the payment online and are able to register their interest via ato.gov.au.

Investment Incentives

When the Government announced these incentives we wondered if they would be of any use to Australian business. Many businesses are running with significant excess capacity so why would they invest in new equipment?

However this incentive gives a big boost to the farming sector if you are in the position of needing new equipment and could potentially provide significant savings come tax time.

  1. Instant Asset Write Off | immediate Tax Write Offs for Asset Purchases

 The government has increased the instant asset write-off threshold to $150,000 and expanded access to include all businesses with aggregated annual turnover of less than $500 million until 30 June 2020.

This means that you can write off (or deduct) against your taxable income in 2020 the full cost of an eligible asset. The rules are the same that have applied for this asset write-off in the past, but a quick refresher on the main points are:

  • The asset must be depreciable;
  • The write off is for the amount the asset is used in business;
  • Motor vehicles are subject to the depreciation cost limit;
  • The asset can be new or second hand;
  • It needs to be installed and ready for use no later than 30 June 2020.

So if your business needs a new ute, and it costs less than the depreciation cost limit ($57,581 ex GST) you will be able to claim the full cost as a tax deduction in your 2020 tax return (assuming a 30 June tax year).

If you are considering investing in equipment and believe that you may be eligible for this concession then you need to act fast as there is a very limited window available – to 30 June 2020. We recommend speaking to your accountant to make sure that the purchase qualifies.

  1. Backing Business Investment | Tax Incentives for Investment

This additional measure provides a 15 month investment incentive to 30 June 2021 allowing businesses with a turnover of less than $500 million to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset’s cost.

 This will be of assistance for assets purchased costing >$150k or purchased after 30 June 2020.

Federal Government/Australian Banking Association | Small Business Loan Relief

At the request of Government and with the financial backing from the Reserve Bank, banks have cut interest rates on small business loans. In addition borrowers can apply for a suspension of loan repayments on any loans for a six month period to September 2020.

We recommend that you talk with your bank regarding the financing options available to you.

We commend the Government on these packages to support Australian business. By nature the agri sector is resilient and these packages should greatly assist many farming businesses to continue to operate throughout and beyond this crisis.

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