Working from home is the new normal, for the BHR team and anyone else not on the front line of keeping vital services up and running.
Here's a few tips for working from home success:
Fair Work has this page dedicated to providing information on your obligations as an employer, and what some support packages for employees may be. It is recommended that before making any decisions you get in touch with an HR Specialist to discuss your options.
Call your bank’s hardship line. They can put a halt on your mortgage, credit card and all loan repayments. Be proactive, call them now and stop the cash going out of your account as you may need that to run your business and support your family. Each bank has its own unique support package, but the key is to touch base with them now. All banks are offering interest rate cuts and higher interest term deposits – now is the time to see what benefits you can access. Whilst some have yet to publish their position, it is anticipated that all banks are offering small businesses six months relief on making their loan repayments. Also refer to the “Support for business investment” stimulus package to see what lending options could also be available to your business to get you through this tough time.
Supporting Small Business:
As we’re all in this together, the more we can do to help each other out the better, so here are some more ideas and suggestions:
Australian Tax Office:
The ATO have a dedicated line for COVID-19 affected businesses, at 1800 806 218. Call this number to discuss your options and/or liaise with your accountant to make a plan with the ATO. It is very important to ensure the lines of communication with the ATO are sustained. The ATO are very understanding that businesses are going to be impacted and that this will affect businesses ability to meet their tax obligations and the ATO will work with you to ensure these can be managed appropriately. They are there to help and you can find a full list of the tax based initiatives here.
A brief summary of these are as follows:
WA Government’s Coronavirus relief package for small business:
Information regarding the WA Government’s relief package can be found here.
Basically there is a freeze on some household utility expenses plus payroll tax rebates and extensions, as well as increasing the payroll tax threshold.
Other Small Business Tips & Support Options:
Some of these are our own ideas, while others have been borrowed - but we felt they were too awesome not to share! We all just want to do our bit to make people’s lives better.
1. Most importantly look after yourself, staff, family, friends etc. Seek support & advice from those you trust. Put plans in place to reduce the threat of Covid – 19.
2. Call the National Debt Hotline, 1800 007 007. They have advisors that can give you some tips and get information on the government's incentives a few days before the public.
3. Renegotiate your rent with your landlord, keeping the lines of communication open is key. It is better for everyone that you remain trading by paying a reduced rent for a few months, than for you to close the doors and the property end up vacant with zero rental return. Show the landlords actual data and figures, highlight the decrease in turnover day upon day or month to month, compare the figures to previous years as a point of reference, attach a cash flow to show you are running at a cash outflow.
4. Renegotiate your supply terms. Everyone is in the same boat and your suppliers want you to stay in business. They might extend the payment term out for several more months, or you can suggest a payment plan. Once again be proactive & work with each other. Touch base with key suppliers to make sure the products and services you require will still be available.
5. Stop every non-essential payments from going out. Apply for hardship on your credit card, your car repayments, phone bills, everything.
6. Shift your business model. We have to find a way to adapt our products and services to our new paradigm – research & development. Can you bring your business, product, services to the customer if they can no longer come to you? Can we extent into new service offerings? Think proactively!
7. Consider all options. Talk to your accountant, talk to a liquidation specialist, talk to a business broker. Work out your options whilst you have some still. Just choose your advisers wisely.
8. Forecast what the next few months could potentially look like, prepare for the worst case scenario and what cash-flow you would need to survive this. Planning your cash flow allows you to determine what you need to negotiate with your banks, ATO, landlords, suppliers etc. This also allows you to determine what expenses you can afford and it is also important to factor in what incentives and tax savings you can access from the ATO. This is our specialty and we are here to help!
9. Embrace technology; technology to work from home, zoom meetings, POS systems that allow you to sell online, offer contactless payments.
10. Don't panic. Phone a friend. Look after your mental health. Try to get some sleep. Go for a swim or a run. Don't let fear take over your decision making. Now more than ever we need to have emotional and mental clarity.
11. Reach out to your customers, ask them how they are, what they are seeing and how this may impact small businesses out there. What does the customer need right now that you can provide? This is a great time to focus on your existing customers & provide them with an excellent service. Make sure everyone knows that you are open for business and your customers know how to interact with your business.
12. Whatever may happen, be honest, transparent and upfront with your employees. Let them know what you know and ask them for suggestions, your best ideas may come from this. Take time to understand the individual circumstances of your employees.
13. Review your general insurance policies for any Business Interruption Insurance inclusions. Now is the time to contact your insurance agent to review your policy to understand precisely what you are and are not covered for in the event of an extended incident.
There are two methods of claiming your consumption costs:
Actual expenses by square metre
If you have a designated office space, you can claim a percentage of your consumption costs using the percentage of square metres compared to the entire square metres of your house. You can then apply this percentage to your actual expenses incurred for the period you worked from home.
Claiming by this method may result in a potential capital gains issue when/if you choose to sell your home. Substantiation requirements for this method are rather onerous: you must keep all your invoice/receipts, and you may face higher accounting fees for capital gains calculations.
Cents per hour
This method allows you to log the time you work from home in a diary or some form of logbook fashion. You can then add up the time that you have spent working from home and claim $0.45 cents for every hour worked. This method requires you to keep your records of hours worked.
Costs such as purchases of a new computer, home office desk or chair purchases can be claimed by percentage of use. If you purchase a computer desk and chair purely for the purpose of working from home, you may depreciate (or claim outright depending on the cost) the expense. The same would go for a computer or laptop, however you would need to adjust this laptop for personal use, only claiming the percentage of the cost that pertains to your income derivation.
Home expenses claimed that are over $50.00, such as internet and phone, are required to be substantiated. The ATO recommends diary entries and copies of the invoice that you are claiming, as well as evidence that your employer requires you to work from home. The ATO suggests a log book method of diarised entries for a minimum of four weeks.
In today’s day and age with plan-based billing, it can be hard to figure out what costs have incurred for work purposes.
How to work out your phone usage:
if your claim is less then $50, the ATO allow reasonable rates of:
0.25 land line outgoing calls
0.75 mobile outgoing calls
0.10 text messages sent
If you are claiming over $50, and you have access to an itemised bill (you may need to request it from your provider) you can apportion your costs by:
If you cannot get an itemised bill, you should diarise (for a minimum of four weeks) all phone activity, and apportion it on a reasonable basis using this ‘log book’.
Phone and internet bundles must be separated and their useage claimed accordingly.
Internet can be claimed by calculating data used for work purposes as a percentage of total data. Further, you are able to claim any additional costs you have incurred as a result of using your data - eg going over your data cap.
Finally, actual costs such as stationery bought purely for work purposes (and your diary to log the information in) can be claimed out right. Make sure your keep your receipts (take a copy of shop receipts so when they fade you still have the record).
Common home expense related myths and facts:
MYTH: I didn’t think I could claim it because my employer gives me an allowance.
Your allowance for those expenses is your employer compensating you for having to incur them. You should keep your records and claim your actual expenses against your allowance. You may find you are out of pocket from spending this money (or you could make a profit).
FACT: I can’t claim those times because my employer reimbursed me.
Reimbursement of expenses means you are not out of pocket, and ultimately your employer is paying for the expense.
FACT: If I claim a percentage of rates/interest on my home i will be required to pay capital gains tax on my home if I sell it.
Your home is exempt from capital gains tax because it is not an income producing asset. If you claim holding costs you will be required to pay capital gains on a percentage of your gain relating to those holding costs.
If you are unsure, write it down and record it. We can figure out whether it’s claimable at the end of the year.
If you don’t record it, we can’t claim it.
The Government has announced a $17.6 billion investment package to support the economy as we brace for the impact of the coronavirus.
The yet to be legislated four part package focuses on business investment, sustaining employers and driving cash into the economy.
1. Business investment
4. Household stimulus payments to drive cash into the economy
Parliament sits on 23 March. The Prime Minister has stated, "we have no plans to change the parliamentary sitting schedule."
Here’s what we know so far:
Increase and extension of the instant asset write-off
From 12 March 2020, the instant asset write-off threshold will increase from $30,000 to $150,000, and access to the write-off will be expanded to include businesses with aggregated annual turnover of less than $500 million until 30 June 2020.
The instant asset write-off is a tax deduction that reduces the tax liability of your business. It enables your business to claim an upfront deduction for depreciating assets in the year the asset was purchased and used (or installed ready to use). For example, if your business is a base rate entity (turnover under $25m) in a company structure you will get back 27.5% in your 2019-20 company return if the company acquires an asset that is used by 30 June 2020. If your business is likely to make a tax loss for the year, then the instant asset write-off is unlikely to provide a short-term benefit to you.
This is the fourth increase or extension to the instant asset write-off and businesses will need to be wary of what they are claiming and when:
* aggregated turnover under $10 million
** aggregated turnover under $50 million
***aggregated turnover under $500 million
Assets will need to be used or installed ready for use from when the changes were announced on 12 March 2020 until by 30 June 2020 to qualify for the higher threshold. Anything previously purchased does not qualify for the higher rate but may qualify for one of the other thresholds. Similarly, anything purchased but not installed ready for use by 30 June 2020 will not qualify.
The instant asset write-off only applies to certain depreciable assets such as a concrete tank for a builder, a tractor for a farming business, and a truck for a delivery business. You will also need ensure that there is a relationship between the asset purchased by the business and how the business generates income. You can’t for example just go and purchase multiple television sets if they have no relevance to your business.
There are some assets that don’t qualify such as horticultural plants, capital works (building construction costs etc.), assets leased to another party on a depreciating asset lease, etc.
What businesses can access the instant asset write-off
To access the instant asset write-off, your business needs to be a trading business (the entity buying the assets needs to carry on a business in its own right). It also needs to have an aggregated turnover under $500 million. Aggregated turnover is the annual turnover of the business plus the annual turnover of any “affiliates” or “connected entities”. The aggregation rules are there to prevent businesses splitting their activities to access the concessions. Another entity is connected with you if:
Accelerated depreciation deductions
In addition to the increased instant asset write-off rules, accelerated depreciation deductions will apply from 12 March 2020 until 30 June 2021. This will bring forward deductions that would otherwise be claimed in later years.
Businesses with a turnover of less than $500 million will be able to deduct 50% of the cost of the asset in the year of purchase. They can also claim a further deduction in that year by applying the normal depreciation rules to the balance of the asset’s cost. This will presumably only be relevant if the business cannot already claim an immediate deduction for the full cost of the asset.
For example, let’s assume that a business purchases a new truck for $250,000 (exclusive of GST) in July 2020. In the 2021 tax return the business would claim an upfront deduction of $125,000. The business would also claim a further deduction for the depreciation that would have arisen on the balance of the cost. If the business is a small business entity and using the simplified depreciation rules, this would mean an additional deduction of $18,750 (i.e., 15% x $125,000). The total deduction in the 2021 tax return would be $143,750. Without the introduction of this investment incentive the business would have claimed a deduction of $37,500 (i.e., 15% x $250,000).
This incentive will only be available in relation to new assets that are acquired after 12 March 2020 and are first used or installed ready for use by 30 June 2021. It will not apply to second-hand assets or buildings and other capital works expenditure.
Cash flow assistance for small and medium sized business
Tax-free payments up to $25,000 for employers
Tax-free cash flow support between $2,000 and $25,000 will be available to eligible businesses with a turnover of less than $50 million that employ staff between 1 January 2020 and 30 June 2020.
This is not a direct cash payment but a credit equal to 50% of the PAYG amounts withheld from salary and wages paid to employees. The employer will need to lodge an activity statement to trigger the entitlement. If the credit puts the business in a refund position the excess amount will be refunded by the ATO within 14 days.
If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $2,000 will still be made.
Businesses that lodge activity statements on a quarterly basis will be eligible to receive the credit for the quarters ending March 2020 and June 2020. Business that lodge on a monthly basis will be eligible for the credit for the March 2020, April 2020, May 2020 and June 2020 lodgements. The minimum $2,000 payment will be applied to the first lodgement.
Eligibility for the measure will be based on prior year turnover. We will have to wait for the legislation for the finer details.
Wage subsidy of up to 50% of an apprentice or trainee wage
Eligible employers can apply for a wage subsidy of 50% of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020. The payments are accessible to businesses with less than 20 employees. Employers will receive up to $21,000 per apprentice ($7,000 per quarter).
Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.
In order to qualify for this payment the apprentice or trainee must have been in training with the business as at 1 March 2020. Employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will also be eligible for the subsidy.
It is expected that employers will be able to register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020.
Targeted support for severely affected sectors, regions and communities
$1 billion has been committed to support sectors, regions and communities disproportionately affected by the economic impact of the coronavirus. Tourism, agriculture and education are specifically mentioned.
Initial measures include:
Further plans and measures will be developed with the affected industries and communities.
Administrative relief for certain tax obligations will also be provided, including deferred tax payments up to four months. The ATO will establish a temporary shop front in Cairns within the next few weeks to support the region’s small businesses. Other initiatives to bring support to the communities are being considered.
Household stimulus payments to drive cash into the economy
Tax-free $750 payment to social welfare recipients
A one-off, $750 cash payment will be made to pensioners, social security, veteran and other income support recipients and eligible concession card holders. Payments will be from 31 March 2020 on a progressive basis, 90% are expected to be made by mid-April.
The payment will be tax-free and will not count as income for Social Security, Farm Household Allowance and Veteran payments.
There will be one payment per eligible recipient even if they qualify in multiple ways.
Casual employees able to access the Newstart ‘sickness payment’
While not part of the stimulus package, the Prime Minister has stated that casual employees required to self-isolate or who contract the coronavirus will be eligible for a sickness payment (jobseeker payment) through Newstart. The normal waiting period for this payment will be waived.
We’ll bring you more details as soon as they become available.
“Justin Golds helped to guide us through the decision to sell that business. It was nice to have somebody looking at it from not a sentimental point of view. We ended up selling that Pharmacy, and we haven’t looked back since.”
The decision to sell the Centrepoint Pharmacy allowed Karyn and Dominic to focus on growing the Eaton Community Pharmacy.
“BHR have helped guide me through where money is being spent, and the financial viability of the business,” Karyn said. “Since freeing up the financial burden of the other business, we’ve been able to expand into different directions here at Eaton Community Pharmacy. On top of traditional Pharmaceutical goods and services, we’ve been able to branch out into mobility, aged care and NDIS services.
“We’re not a big store, but we’re certainly unique in our offering to the public.”
Eaton Community Pharmacy’s new services include everything from aids to daily living to mobility scooters.
“Both Dom and I now work in the business,” Karyn said. “There’s always one of us doing school hours. He’s quite sought after now for sales and service of mobility equipment.
“For a small business, the cost of some of the mobility equipment is quite high, and we need to have it available and on display. I’ve found that the programs we use through BHR such as Xero make it much easier to keep track of those expenses.
“At our previous accounting service, everything was reactive. We would reach the end of a quarter and wait for a report and try to make changes – whereas Xero gives me here and now access to all of the information I need. Communicating with BHR is easy – I often speak with our Bookkeeper Lara Procter, and all my questions are answered promptly. She’s a superstar.”
So after ten years, Eaton Community Pharmacy is going from strength to strength.
“It feels like a country pharmacy. We like to get to know people, and share their highs and lows,” Karyn said.
To be eligible you must have a total superannuation balance of less than $500,000 at the 30th of June in the year prior to making a contribution utilising your unused cap.
The effects are best explained in a table:
How can you use these rules to benefit you?
If this is something you would like to explore, please contact your accountant to arrange an appointment.
We've put together some handy dates from January to June 2020, to help keep your business on track. Follow the link below for a printable PDF.