1. What will happen when Job Keeper stops?
Job Keeper has allowed many business owners, who suffered a loss of revenue by at least 30% to retain staff. Many business owners were entitled to claim back or be reimbursed for up to $750 per week initially and then to a much lesser extent from January 2021.
Interesting 10% of the local population are employed by the tourism sector, having been on a reduced Job Keeper rate since January 2021, it is likely that the economy will not notice a great deal of impact from the stopping of Job Keeper to the businesses that receive Job Keeper for their work force, what is more likely is the negative flow on affect that the continued lack of international and domestic travelers will have on the economic conditions.
If a business’s revenue did not reduce or did not continue to be less than 30% as the previous year, a business was not eligible for claiming, and it was our experience that only less than 5% of our small business clients had an ongoing downturn to their business revenue. Many businesses did not experience a downturn in revenue, many in fact benefiting from the vast amount of government funds ‘swishing’ around in the domestic economy.
Stories of how employees hours were reduced and were being paid just the job keeper amount will be an area that can not continue once Job Keeper stops. In essence, normal working conditions will return, and may be an area for employers to get in order to avoid any interaction with Fair Work.
Job Keeper changed the data the ATO was receiving, and this will shape future employment related compliance, as the ATO has never had such timely information about business, their employees and how the effect of their policy making decisions impacted the economy.
Cashflow management will be critical to those receiving Job Keeper, if revenue has not returned to ‘normal’ when Job Keeper stops this will put considerable strain on business continuity. Reviewing budgets and projections will be critical for a business to continue to be dynamic and thrive.
2. Business continuity, what types of funding is available due to Covid-19?
Depending on your industry, there are several options still available to you and your business, subject to how viable your business continues to be. Banking institutions continue to be ‘allowed’ to offer recovery loans, which may include repayment or interest holidays as well as a business owner benefiting from the Government guarantee.
The business adaption grant was highly subscribed, and continues to be available to businesses who whish to adapt and sustain business operations, sustain employment and build resilience.
State governments implemented land tax rebates, payroll tax deferral and rebates as well as several other Covid-19 related funding.
Qld Rural and Industry Development Authority have sustainability loans, which can also be used for return to business operations.
3. Can I get a full tax deduction for equipment purchased from 1st January 2021?
Eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used or installed ready for use, subject to the immediate write off threshold applicable to each year.
The threshold for assets purchased between 12th March 2020 to 31 December 2020 was $150,000. From 1st January 2021, the normal depreciation write-off methods return, in that dependent on your choice of depreciation your deduction is based on effective life rates or pool asset rates.
4. I have a lot of cash at the moment, what should I do with it so that my business receives a tax deduction?
Receiving a tax deduction requires you to spend money on a cost that has a direct relationship with the generating your revenue. The cost, if claimed as a tax deduction, reduces your income that is subject to tax. This is also commonly referred to as a ‘tax saving’. In essence a tax saving is received if you spend money on a tax deductible item. If the item is capital in nature, you do not receive a full tax deduction, instead the deduction may be based on an effective life write off, or a certain legislated deduction based on percentage or straight line write off, or no deduction at all.
Due to careful business practices and budgeting many businesses have more cash now then ever before. It isn’t a matter of buying a commercial building or a new motor vehicle to received a full tax deduction/tax saving, but might involve a combination of these and other dull deductions like superannuation contributions in to a complying super fund to achieve a tax deduction.
The recommendation is generally, don’t spend cash if what you are spending it on isn’t used or necessary in your business, as a tax deduction applied at your tax rate may result in less cash just to save on tax!
5. Is the time right to start a business?
Any time can be the right time to start a business, provided you have a sound business concept, supported by a well thought out business plan, that is fulling costed with estimated revenue and expenses and a reasonable skepticism on how much capital is required to operate a successful business.
We see it way too often that a good idea starts before a good plan is considered.
Once you had your idea, how much money will you need to begin your business, what items are essential to ‘buy’ to start the business, when will you get paid, how will you know that your business is successful, what is your exit strategy. So many questions should be considered before taking the leap of faith, often just that you need a little nudge to get you off the ledge, but with support and advise starting a business (now or anytime) could be the best thing you do for yourself and your family.