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Managing business cash flow during the COVID-19 crisis

COVID-19 has significantly impacted many Australian businesses. Find out what financial relief and support options are available to keep cash flowing through your business.

4 minute read

What’s in this article:

  • Nearly half of Australian businesses say they’ve already been financially impacted by COVID-19; 86% believe they will be in future months
  • Managing business cash flow effectively is critical to staying afloat in a challenging landscape
  • The government has implemented schemes and initiatives to provide cash flow to SMEs during the coronavirus crisis

The coronavirus pandemic has left many businesses in a slump. According to the ABS, nearly half of Australian businesses have been adversely impacted as a result of COVID-19, while 86% expect to be impacted in the coming months.

For small business owners especially, the focus is now on managing business cash flow to stay afloat. So, what can you do to reduce the risk of negative cash flow as a result of lost sales? We’ve put together some resources to help you navigate this challenging landscape.

1. Boosting Cash Flow for Employers scheme

The government is offering temporary cash flow support to small and medium businesses, and not-for-profits that employ people.

Under this scheme, eligible businesses will receive tax-free payments of between $20,000 and $100,000 from the Australian Tax Office (ATO), delivered as credits in the Business Activity Statement (BAS) system. These payments are designed to help businesses cover operational costs like rent, utilities and wages.

Payments will be made to small and medium businesses that:

  • Held an ABN on 12 March 2020 and are currently active.
  • Have an annual turnover of less than $50 million.
  • Have lodged their relevant BAS statements.

The payments will be equal to the amount of tax the business withholds from employees’ salaries and wages, to a maximum of $100,000. If your business is eligible but you aren’t required to withhold tax, you’ll receive the minimum payment of $20,000. Payments will be made in two rounds: the first from 28 April 2020 and the second from 28 July 2020.

2. JobKeeper payment

The Government is offering emergency relief and financial assistance to help employers during this difficult time, including the JobKeeper Payment scheme.

The Government’s website contains information, including whether you are eligible to claim these payments.

You can register your interest in the JobKeeper payment with the ATO. 

3. Increased instant asset tax write-off threshold

Thanks to the Instant Asset Write-Off threshold (IAWO), businesses with an annual turnover of less than $500 million can now claim an instant deduction on assets worth less than $150,000 in the year they are purchased. This means, if you buy business equipment in the 2019-20 year through financing1 or otherwise, you can claim a deduction for that year for the full purchase price of the assets (up to $150,000 per asset).

4. Business lending relief

Your bank may also offer specialised lending relief options to help your business weather the storm. These can include:

  • Repayment relief

A repayment relief package can mean that business loan principal and interest repayments may be deferred for six months for all eligible business loans.

  • Expanded unsecured lending options

As part of the government’s Coronavirus SME Guarantee Scheme, many banks offer unsecured three-year term loans of up to $250,000 to eligible businesses with a turnover of less than $50 million. A six-month payment-free option is also available on new loans.

  • Repayment relief on equipment finance

Loan principal and interest repayments may be deferred for up to six months for all eligible Business Auto and Equipment Finance Loans. Some business banking providers, including Bank of Melbourne have also decided to waive establishment fees for equipment finance loans until the end of June 2020.

  • Payment deferral for business credit cards

Eligible small and medium business customers can choose to defer payments and annual fees, if required, for up to six months.

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The Detail

1. Financing does not include asset leasing

The JobKeeper program is a Federal Government initiative and we provide a link to the external site for your convenience. This information is provided for general information only. Please read the Government’s fact sheet to see if you are eligible and for terms and conditions that apply. You should consider seeking independent legal, financial, taxation or other advice on how the Federal Government initiatives relate to your circumstances.

This information does not take into account your personal circumstances and is general. It is an overview only and should not be considered a comprehensive statement on any matter or relied upon. Consider obtaining personalised advice from a professional financial adviser and your accountant before making any financial decisions in relation to the matters discussed in this article, including when considering tax and finance options for your business.

© Bank of Melbourne - A Division of Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.