As contracts are cancelled and clients scale back operations, many of the tech industry's self employed and independent contractors are finding their incomes being crunched.
While not as affected as industries such as hospitality and travel, Australia’s IT industry is feeling the effects of the COVID-19 shut down as clients suspend projects and slim down teams.
The announcement by state and Federal governments that a range of industries would be shut down over the past 48 hours added to the economic uncertainty with businesses including cinemas, hotels, gyms, restaurants and cafes being closed.
Recognising the disaster facing many of the nation's 2.1 million small to medium businesses, governments at all levels have been offering support programs to affected SMBs.
There are traps in some of the programs though, with income support packages for contractors and small business owners not coming into effect until next month and changes to ATO and ASIC rules possibly having some traps for unwary business owners.
Nationally, the biggest move to support business has been by the Federal government with a range of measures to keep businesses going and access to payments for self employed or proprietors who find themselves unemployed.
Contractor and small business owner income support
From 27 April, the Federal government will make the jobseeker Payment and Youth Allowance Jobseeker allowances available for permanent employees who are stood down or retrenched without the usual waiting periods or application hurdles such as meeting with a Job Network provider or proving job separation details.
Sole traders, self-employed, casual workers and contract workers whose hours have been affected can also claim the payments which will include the $570 Coronavirus supplement being paid to most benefit reciepients.
In the case of sole traders and the self-employed, applicants will make a declaration that their business has been suspended or had turnover reduced significantly.
Treasury have made available a factsheet available explaining the benefits changes with examples for applicants.
The Federal government has added to the boosting cash flow for employers package announced last week and will now cover up to $100,000 across two financial years for eligible small and medium businesses on turnovers of below $50 million. Payments will be based on PAYG payments with a floor of $20,000.
Small to medium businesses can also access a loan guarantee scheme covering 50% of new lending to small and medium enterprises of up to $250,000.
The government is temporarily increasing the current minimum threshold for creditors issuing a statutory demand on a company under the Corporations Act 2001 from $2,000 to $20,000 for six months.
While this may be good for some businesses who owe money to suppliers and landlords, others should be cautious about this change as it might make it harder for contractors affected by slow payments to take action against tardy clients.
Australian Tax Office
The ATO is encouraging businesses suffering cash flow problems to get in touch to discuss relief options through its Emergency Support Infoline on 1800 806 218.
Some of the options available by the ATO include deferring PAYG, excise, Fringe Benefit and income tax payments by up to four months; changing GST reporting cycles and varying reporting cycles.
Employers will still need to meet their ongoing super guarantee obligations for their employees.
Given the complexities and ramifications of adjusting payments, it would be a good idea to discuss your financial affairs with your accountant before approaching the Tax Office.
Other Federal Government measures
Accelerated depreciation allowances for businesses with aggregated turnover below $500m including lifting the instant asset write-off threshold to $150,000 until 30 June 2020 and providing a 15-month accelerated depreciation deduction.
Workforce support including wages’ subsidies of up to 50% for some small businesses employing apprentices.
The Victorian Government has been the most generous of the states, having announced a $1.7 billion economic survival and jobs package on Monday which included a commitment to pay all outstanding supplier invoices within five business days.
The state government will also provide full payroll tax refunds for the 2019-20 financial year to small and medium-sized businesses with payrolls of less than $3 million and defer the first three months of the 2020/21 financial year until 1 January 2021.
Commercial tenants in government buildings can apply for rent relief – a move private landlords are also being encouraged to undertake – and 2020 land tax payments will be deferred for eligible small businesses.
New South Wales
The NSW Government has focused on payroll tax cuts with waivers and fast-tracking cuts to provide relief to NSW to small businesses with pay runs of over $900,000 per annum.
• $450m for the waiver of payroll tax for businesses with payrolls of up to $10m, for three months (the rest of 2019-20). This means these businesses will save a quarter of their annual payroll tax bill in 2019-20.
• $56m to bring forward the next round of payroll tax cuts by raising the threshold limit to $1m in 2020-21.
• $80m to waive a range of fees and charges for small businesses including bars, cafes, restaurants and tradies.
The Queensland Government was the first to respond with measures to support businesses affected by COVID-19 with a similar focus on payroll taxes. Measures include:
• Extending payroll tax relief, as of 17 March 2020, to all businesses affected by COVID-19. Lodgement and payment of payroll tax returns can be deferred until 3 August 2020.
• New $500m loan facility, interest-free for the first 12 months, to support businesses keep their workforce.
Western Australia has also focused on payroll tax relief with a range of grants and support programs for payroll tax paying businesses. Approximately $114m has been allocated to support Western Australian SME’s, including a one-off grant for businesses with a payroll between $1m and $4m to help manage the impacts of COVID-19.
The Tasmanian Government has announced a range of stimulus measures targeted at the hospitality tourism, seafood and exports sectors. Measures include:
• Payroll tax waived for the last four months of this financial year for hospitality, tourism, seafood and exports sectors.
• $20m in interest-free loans to the hospitality, tourism, seafood and exports sectors.
• $50m in interest-free loans for local governments
• $50m in maintenance on public buildings brought forward.
The state government in SA is focusing its efforts on a $350m construction-focused package to stimulate the economy, with initiatives in eco-tourism, regional health and aged care facilities.
The NT government has announced a Business Improvement Scheme. Under the scheme, all eligible businesses will receive $10,000 and can receive a further $10,000 if they spend $10,000 of their own cash on business upgrades.
Australian Capital Territory
The ACT government is waiving a range of payroll taxes and fees to industries most affected by the coronavirus shutdown. The Territory government is also providing support for the Vocational Education and Training (VET) sector by increasing subsidies for apprenticeships and traineeships, and for other VET students to access nationally recognised training in areas linked to skills needs across a range of industries.