Whether your business is operating in a state where the coronavirus is still active or you’re feeling the effects of Australia’s economy in general, you might be looking for ways government initiatives can help you. Fortunately, there’s a range of government initiatives helping businesses available depending on what type of business you run.
In particular, we’ll be go through the Coronavirus SME Guarantee Scheme. It was recently announced that the second phase will start on 1 October 2020. The article will touch on other initiatives including JobKeeper and the changes to the instant asset write-off threshold. At the end, we’ll share links to some more resources.
Coronavirus SME Guarantee Scheme
What is the SME Guarantee Scheme?
The SME (small to medium enterprises) Guarantee Scheme intends to support businesses by lending up to $40 billion. This scheme was originally part of the $66 billion survival package. The government has guaranteed 50% of new loans that will be issued by participating lenders.
Who is eligible?
The SME Guarantee Scheme is available to small to medium enterprises with a turnover of up to $50 million. This also includes sole traders and not-for-profit companies. Though these businesses can apply, the loans will be subject to the credit assessment processes from the lender. However, lenders are to consider the uncertainty of the current economy.
What is the difference between the first and second phase?
The second phase will start on 1 October 2020 and end on 30 June 2021.
- Available on new loans until 30 September 2020
- Maximum loan amount of $250,000
- Maximum loan term of three years
- Loans come with an initial six month repayment holiday
- Loans can be unsecured
- Available on new loans from 1 October 2020 to 31 June 2021
- Maximum loan amount of $1,000,000
- Maximum loan term of five years
- Six month repayment holiday will be at lender’s discretion
- Loans can be secured or unsecured
- Loans can be used for more business activities, such as investment
It has been said that the second phase of the SME Guarantee Scheme is better for lenders. This is because that repayment holiday period has changed from mandatory to discretionary. However, non-bank lenders are still struggling to provide loans at a lower rate. On the flip side, bank lenders who are able to provide lower rates have a lower risk tolerance and are only lending to long-term customers.
How do I apply?
Currently, there are 44 lenders who are approved for the Coronavirus SME Guarantee Scheme. You can look at the list of participating lenders for phase one of the scheme. The Government is finalising which lenders will be a part of phase two. After expressions of interests are sought from lenders, a list of lenders will be published.
You’ve probably seen it all over the news, the Government’s JobKeeper Payment is one of the government initiatives helping businesses and looking to keep the economy alive. Here are some of the key points you need to know:
- End date has extended from 27 September 2020 to 28 March 2021
- To be eligible for JobKeeper payments under the extension, businesses need to have had a decline in turnover of:
- 50% for those with an aggregated turnover of more than $1 billion
- 30% for those with an aggregated turnover of $1 billion or less
- And not-for-profits need to have had a decline in turnover of 15%
- Payment rate of $1,500 per fortnight for eligible employees working for 20 hours of more per week
- Rate will reduce to $1,200 on 28 September 2020 and again to $1,000 per fortnight on 4 January 2021
- Employees working less than 20 hours per week may be eligible for a lower rate of pay from 28 September 2020 to 28 March 2021
- Follow these steps from the ATO to apply for JobKeeper payments
Instant Asset Write-Off
Another initiative that might help your business during the pandemic include the changes to the instant asset write-off that are applicable from 12 March 2020 until 31 December 2020. The threshold has been increased, meaning there are now cash flow benefits for businesses. The main points include:
- Threshold has increased from $30,000 to $150,000
- Access increased from businesses with an aggregated annual turnover of less than $50 million to $500 million
- Available for new or second-hand assets first used or installed within the timeframe
From 1 January 2021, the instant asset write-off thresholds will change. It will only be available for businesses with an aggregated turnover under $10 million and the threshold will significantly reduce to $1,000.
More resources on government initiatives helping businesses during the pandemic
- The business.gov.au chatbot is will be available 24/7 to give information on information, services and frequently asked questions
- The Government has a number of measures to help commercial tenants and support SMEs
- More leniency with statutory demands on financially distressed businesses
- The Government has announced a range of initiatives for the cultural and creative sector