Does the stimulus package cover startups? {with VIDEOS}

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// The passing of the $130B ‘JobKeeper’ stimulus package through Parliament yesterday was momentous … but how much applies to a typical startup?

On the day the largest economic stimulus package ever was to pass the Australia parliament, Perth Morning Startup held its regular (now weekly) virtual meetup, with 50 startups tuning in to hear which bits were relevant.

Shane Crommelin (from Elevate) did an amazing job whistling through the main chunks of the legislation. As in all these things, please do your own research and get your own independent advice.

Here’s a recording of the session:

Some of the key elements are below, and they may be a bit more positive for startups than previously thought…

1. JobKeeper

JobKeeper is a subsidy to pay employees $1.5K per fortnight, the incentive being that organisations keep their employees in jobs, irrespective if there is an actual job to do, no matter what their actual salary is (or was). Its objectives are to save 6M jobs in Australia.

Note – everyone gets same amount, no matter what they were paid. One number for all.

Effectively, the government are using the ATO as the ‘hander out of money’ instead of Centrelink. The ‘JobSeeker’ equivalent is $1,100/fortnight from Centrelink, so JobKeeper has a built in incentive to keep people employed.

So, even if you’re not paying your staff $1.5K a fortnight, you can now!

The payment will be paid in arrears though, so you have to pay your staff this money first, through payroll, from 30 March.  This subsidy program will operate for six months.

What’s the catch? The staff member must have been full or part time employed by your company on 1st March 2020. Casual staff members must been working for you for 12 months. Staff can’t claim this from more than one company.

You also need to show that your turnover (total revenue) has fallen by 30% or more over past 12 months – comparing your March 2019 BAS to Mar 20 BAS.

Do you have to pass the test only once to get it? Not sure.

So, it’s likely that many startups will find it hard to pass this 30% revenue decline test. However, the ATO has discretion to use alternate tests.

A 6 or 9-month-old business is not necessarily eliminated from JobKeeper. A “scaling business” may have another test, but details on how this will be accessed have not yet been released.

What about startups that have highly variable, or project based revenue? Again, these may be covered. More guidance should be forthcoming in the coming days. Startups that have never had revenue may have a challenge to test. But don’t assume it’s a no.

Jump on ATO website and register – where there’s an ‘Expression of Interest’ registration process.

How about Contractors? Businesses that employ contractors can’t pay it, but the contractor themselves may be able to apply.

Self-employed? You need to be Australian (citizen, PR or specific visa holder), 16+ year old, and if your personal income has fallen by 30%, you can apply. Your business ABN would have to have been set up by 12th March 2020.  If you are a consultant, then you would need to have done some billable work during FY19 or FY20 and lodged the FY19 tax return or BAS before 12th March 2020 that reported income.

If you’re not paying wages to owners (like many startups to), one director or owner MAY nominate to receive JobKeeper if they are actively involved in the business. Register the business, so you may be in line for something, even if the owners are not drawing a wage.

>> REGISTER FOR JOBKEEPER HERE <<

2. Cash Boost

Cash Boost‘ involves temporary cash flow support for small and medium businesses and charities, in the form of credits when you lodge your PAYG Witholding.

These credits should appear from 28th April, so the advice would be to lodge your March 2020 BAS quarter or month if you want to, but don’t pay it yet until the credit appears after April 28th.

A minimum of $10K can appear, up to $100K.

Your company is eligible if you have processed payrolls for employees, have revenue below $50M, and held an ABN before 12th March 2020.

This is automatic; no registration is needed.

  • As long as you pay your payroll something, you’ll be eligible for $20K, if PAYG <$10K in Mar-June 2020;
  • Above $10K PAYG, you’ll get $20K up to $100K credit. You receive $2 for every $1 PAYG you pay;
  • If PAYG > $50K, you get the $100K cap.

You get this credit when you lodge your BAS, whether monthly or quarterly. Until you hit the limit.

Then it happens again in June-Sept BAS, paid monthly (an even 25% per month) or in two instalments if quarterly lodging (even 50% per quarter). This second payment is identical dollar value to the first.

Small businesses will get the $20K benefit no matter how small they are, so long as they have employees.

This does not have to be repaid; this is free money. It’s not taxable income. If you’re in losses, it does not eat them up. It’s a gift to let you keep your staff.

>> For more, visit the ATO website <<

3. Rent Relief

The government announced this week a ‘Code of Conduct’ around the payment of rent. Landlords are to ‘share the pain‘ with tenants.

If you’re eligible for JobKeeper, then you are eligible for this.

The landlord must drop rent by same amount as your revenue has fallen, half of which you never have to pay back to them, half is deferred.

They can’t kick you out, and there is no interest accruing on unpaid rent. Basically, you have to sit down and work this out with your landlord.

4. SME Bank Loan guarantee scheme

The bank loan guarantee scheme is for loans for working capital (i.e. to keep your business going), not to make an acquisition, and can be up to $250K, repayable over 3 years.

There is no repayment for 6 months, then you have two and a half years to repay the principal and interest. The government will back half of the loan, so you don’t need to provide collateral.

Any catch? Banks will be applying rules differently. Basically, you need to prove that pre-COVID-19 you could have been able to service this loan (… which is unlikely for many pre/low revenue startups.)

5. Others

  • If you feel like now’s the time to invest in capital, the instant asset write off has been raised from $30K to $150K;
  • There is also an insolvency trading waiver, meaning you can (temporarily) trade insolvent (usually this is illegal);
  • In your personal tax returns for this year, you’ll be able to claim 80c/hour for time spent in your home office (rather than having to fill out timesheets etc).

Final words of advice

Be careful. We are living in uncertain times, and much of these measures apply for a short time period only. What happens when they are released after 6 months?

There could be a world of pain coming with business failures, so be careful who you do business with.

The world will recover though, and there will be new opportunities right now, and in the future.

And as always, get the best advice you can from your advisers, investors, board members, team, accountants, lawyers and others.

Innovation Bay Session

Coincidentially, Innovation Bay held a session on the same topic on the same day. You can view that here…

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Disclaimer: This article is for general advice only; Startup News cannot take any responsibility for any actions taken based on the content written above. Please do your own research.

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