3 questions SME owners should ask themselves before JobKeeper 2.0

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JobKeeper is due for a big shake-up next month, which means if you’ve been relying on it to get your business through these rocky times, you need to start planning ahead now.

With the small business ombudsman and many economists concerned about an “insolvency tsunami” hitting small businesses, it’s critical that you start thinking about your ongoing funding plans now to avoid being swept up in the tide.

JobKeeper support is set to end for many businesses on September 27, while it will continue for other eligible businesses under a reduced amount until March 28.

So with that in mind, you may want to start assessing your business’s ability to make loan repayments, pay staff without JobKeeper support, take care of ATO debts, as well as any other financial obligations.

So, what are the big 3 questions?

Businesses that have been drawing on JobKeeper should start asking the below three questions, says Wayne Smith, Group Executive of SME lender Scottish Pacific.

1. What support will I lose, and has my business got the cash available to replace it?

2. What payments will I have to make from October or March that I’m not making now?

3. Do I have any pressing creditors ready and able to take action against me once they are able to?

Why these questions are so important

The unfortunate fact is that over the coming months many businesses will have a funding gap and have to face some very tough decisions.

“Your answers to (the above) questions will guide whether you seek extra funding or make a tough call on your business,” Mr Smith says.

“You don’t want the business to accumulate debt if it’s not going to be viable.”

Mr Smith says businesses can consider seeking rent reductions, JobKeeper, government grants, and ATO deferments.

“These initiatives have helped many businesses hibernate or trade through the tough times. However it’s important to consider how this will pan out when commercial evictions for non-payment of rent return, and creditors are able to present winding up petitions,” Mr Smith adds.

Financing options you may consider

It’s important to note that the federal government’s Coronavirus SME Guarantee Scheme is being extended, with the initiative allowing lenders to provide eligible SMEs unsecured loans “more cheaply and more freely”.

Mr Smith says another option business owners could consider is Invoice Finance, which makes use of assets already in the business rather than using the family home for security.

“Put simply, using Invoice Finance brings forward payment of your invoices so you have cash in hand. You get 80% paid earlier, and the remainder later,” Mr Smith says.

Now may also be a good time to consider whether your business could benefit from a self-liquidating revolving line of credit facility, says Mr Smith, rather than further exposing yourself by taking on more loan repayments.

Get in touch

As mentioned earlier, if you think you might have a funding gap in your business, it’s good to act in advance – not when you’re scrambling to make ends meet.

So if you’d like to explore some funding options for your business please get in touch today – we’re here to help your business however we can.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Coronavirus SME Guarantee Scheme is being expanded

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If you’re a small or medium-sized business owner in need of an affordable loan then we’ve got good news: the federal government is expanding the Coronavirus SME Guarantee Scheme to allow businesses to borrow more and for a wider range of purposes.

The scheme, which is in phase one until September 30, allows lenders to provide eligible SMEs unsecured loans of up to $250,000 for up to three-year terms.

It’s got pretty good traction too, with more than 15,600 businesses accepting loans worth $1.5 billion to date.

As such, phase two has just been announced to further assist Australia’s economic recovery from coronavirus.

Hold up. What’s this scheme all about?

The Coronavirus SME Guarantee Scheme basically involves the government guaranteeing 50% of each new loan issued to SMEs by eligible lenders.

This allows lenders to offer the loans “more cheaply and more freely” compared to ordinary business loans, says the Australian Banking Association (ABA).

What’s changing?

In a nutshell: SME Guarantee loans will soon be larger, longer-term and for a wider range of purposes.

The second phase of the scheme will kick off on 1 October 2020 and will be available until 30 June 2021. Here are the key changes taking place:

– Loans can be for a wider range of investment, beyond working capital
– Secured lending now permitted (excludes commercial or residential property)
– Maximum loan size increased to $1 million (up from $250,000 per borrower)
– Maximum loan term now five years (up from three years)
– Lenders can now offer a repayment deferral period.

How do I apply?

This is where it can get a little confusing: the federal government has approved 44 lenders to participate in the scheme, which is a lot to choose from.

Fortunately, we can sit down with you and look at your business’s financing needs to help make your decision easier.

So if you’d like to discuss your eligibility and any other details of the scheme, get in touch today – we’re here to help you work through it.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Last chance for $150,000 instant asset write-off this financial year

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Keen to buy a vehicle or another asset for your business and immediately write off the cost? You’ve got just a few days left to take advantage of the $150,000 instant asset write-off for this financial year.

While the federal government recently extended the scheme to 31 December 2020, those keen to claim the deductions sooner rather than later will want to beat the June 30 EOFY deadline.

What’s this $150,000 instant asset write-off scheme you speak of?

A few months back the federal government increased the instant asset write-off threshold from $30,000 to a whopping $150,000 as part of its coronavirus economic stimulus package.

Under the scheme, businesses with an annual turnover of up to $500 million can immediately write off the cost of assets such as vehicles, tools, equipment and – thanks to the recent $150,000 threshold increase – heavy vehicles, tractors and machinery.

Basically the scheme allows you to immediately claim all the tax deductions you would have claimed over the life of the asset.

This can help with your cash flow, as getting the cash back sooner means you can re-inject it straight back into other parts of your business.

Why the hurry?

As mentioned above, the end-of-financial-year is fast approaching.

The good news is that even if you get the ball rolling on it now, and still miss the deadline by a day or two, you’ll have peace of mind knowing that you’ll qualify next financial year under the 31 December deadline.

So if you’d like help obtaining finance for an asset then please get in touch – we can run you through more details of the scheme and present you with financing options that are well suited to your business’s needs now, and into the future.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

SMEs get instant asset write-off extension, but EOFY deadline looms

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Great news for small business owners: the federal government has extended the $150,000 instant asset write-off to 31 December 2020, but you’ll need to act asap if you want to make use of the scheme this financial year.

A few months back, just as coronavirus was ramping up in Australia, the federal government increased the instant asset write-off threshold from $30,000 to a staggering $150,000 as part of its economic stimulus package.

Under the expanded scheme, businesses with an annual turnover of less than $500 million can immediately write off the cost of new or second-hand assets such as food vans, tools, equipment and – thanks to the recent threshold increase – heavier vehicles such as trucks, tractors, and machinery.

Better yet, the threshold applies on a per asset basis, so eligible businesses can immediately write off multiple assets.

Why the extension?

Under the scheme, an asset must be installed and ready to use by the deadline (previously June 30) in order to be eligible.

So, by giving a six-month extension (to December 31) the government is giving under-the-pump businesses around the country “additional time to acquire and install assets” – which essentially means a little more breathing room.

There’s still time this financial year

All that said, there’s still time to make the most of the scheme this financial year.

By doing so, you can immediately claim all the tax deductions you would have claimed over the life of the asset.

This can help with your business’s cash flow, as getting the cash back sooner means you can re-inject it straight back into other parts of your business.

So if you’d like help obtaining finance before the June 30 EOFY deadline, please get in touch.

We can present you with financing options for the instant asset write-off scheme that are well suited to your business’s needs now, and into the future.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

How the instant asset write-off applies to vehicles

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Got your eye on a shiny new vehicle for your business thanks to the $150,000 instant asset write-off? We’ve got the answers to the FAQs many business owners are asking ahead of the looming EOFY deadline.

Need a new van for that delivery service your business has started? Or perhaps your trusty old ute is now more ‘old’ than ‘trusty’.

To help businesses with cash flow amidst the coronavirus pandemic, the federal government has increased the instant asset write-off threshold from $30,000 to a whopping $150,000 until June 30.

Under the scheme, you can immediately write off the cost of assets – such as new and second-hand vehicles – allowing you to claim the deduction in one hit, rather than over the lifetime of the assets.

But (and there’s always a but!), there are several important exclusions and limits when it comes to vehicles under the scheme, which the ATO has recently clarified. Here’s a summary of their new guidance.

Does the instant asset write-off apply equally to all vehicles?

Unfortunately not. Vehicles with a total cost of less than $150,000 are eligible.

However, if you purchase a car – one that’s designed to carry a load less than one tonne and fewer than nine passengers – then you can only claim a limit of $57,581 (unless it’s been fitted out for use by people with disability).

That said, the threshold applies on a per asset basis, so eligible businesses can immediately write off multiple assets (see case studies below).

What about bigger vehicles?

Good news!

The $150,000 threshold applies to heavy-duty vehicles such as trucks, tractors, machinery and one-tonne utes.

But remember: the total cost of the vehicle must be less than $150,000 (including all relevant taxes) in order to be eligible.

Can you claim the full cost of the car if you use it for both business and private use?

No.

If you use a car for both business and private use, you can only claim the business portion.

The deduction is also limited to the business portion of the car limit.

For example, if you use your car for 75% business use, the total you can claim is 75% of $57,581.

What happens if you’ve ordered and paid for your car by EOFY, but not received it?

Bad news, sorry.

You must have first used your car, or have it delivered and ready for use, between 12 March 2020 and 30 June 2020.

You cannot claim the instant asset write-off for this period if you have not received your vehicle by 30 June 2020.

Different eligibility criteria and thresholds apply to assets first used, or installed ready for use, prior to 12 March 2020.

Still scratching your head? The below ATO examples* below should help clarify further (*names have been tweaked for fun).

Example one: Darryl and Debbie buy a luxury car

Darryl and Debbie run Downit Wines, a small winery and vineyard business on Tassie’s beautiful east coast.

On 27 March 2020, their business purchases an $80,000 luxury car that’s designed to carry passengers to and from the Hobart and Launceston airports.

Now, because it’s a car, the maximum amount they can write off is the car limit of $57,581, not $80,000.

But pump those brakes for a second.

It turns out they’ll only use the car for work purposes 60% of the time (and 40% personal), so they’ll only be able to claim $34,549 (60% of $57,581).

The business can’t claim the excess cost of the car under any other depreciation rules.

Example two: Darryl and Debbie buy a ute

It’s not all sommeliers and sipping at Downit Wines.

Darryl and Debbie also need some horsepower to supplement the hard yakka they do around the vineyard, so they bought a ute for $65,000 on 27 April 2020.

Now, the ute isn’t designed to carry passengers, has been set up with all the tools in the tray, and has more than a one-tonne load capacity, so the car cost limit of $57,581 doesn’t apply.

This means the business can claim a full deduction of $65,000 as an instant asset write-off (assuming the ute is 100% for work purposes).

Is your business eligible?

The expanded instant asset write-off scheme can now be accessed by businesses with an annual turnover of up to $500 million (up from the previous $50 million cut-off).

But remember: the vehicle must be used or ready for use by June 30, which is less than a month away.

So if you’d like help obtaining finance to purchase the vehicle before the EOFY deadline then get in touch with us today – we’re ready to put the pedal to the metal for your business.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.