Mar 2020 MANAGING YOUR BUSINESS DURING THE COVID-19 PANDEMIC
To assist business owners in preparing their businesses for the economic downturn that we are experiencing, here is some information collated from Government websites to help clarify the key pieces of information that company Directors need to know.
Employees
Speak to your employees regarding a possible shutdown of your business in the coming weeks. Explain the seriousness of the virus and that we all must do what we can to stop the spread. Mention that Centrelink payments can be received and superannuation can be accessed to help support them and their families during this difficult time (those details are below). It is advisable to prepare a Cash flow Forecast (see Cash flow forecast section) and reviewing paid leave accrued by each employee (see the Paid leave section) before speaking to your employees.
Speak to your employees regarding the very likely shutdown of your business in the coming days or weeks. Explain the seriousness of the virus and that we all must do what we can to stop the spread. Mention to them that Centrelink payments can be received and superannuation can be accessed to help support them and their families during this difficult time (those details are below). It is advisable to plan this talk by preparing a cash flow (see the Cash flow forecast section) and reviewing paid leave accrued by each employee (see the Paid leave section).
Make sure your team knows that we are all in this together and that they are a part of your long-term vision for the company. It is critical that everyone works together to prepare for and overcome this challenge. Remind them that there is a future for the company by showing them some of the projects that are booked to help them stay uplifted. As employers, it is essential that we stay positive so that our team can too.
During the lockdown period (when it comes), employers will not have to pay employees
The Fair Work Website states that when a business is instructed by the Government to stop operating during a period of enforced lockdown, you will not have to pay your employees for the entire lockdown period.
The information on the Fair Work Website https://www.fairwork.gov.au/ states:
Employees who are stood down without pay remain employed for the period of the stand down. Under the Fair Work Act, an employee can only be stood down without pay if they cannot be usefully employed because of a stoppage of work for any cause for which the employer cannot reasonably be held responsible.
Centrelink payments are available for employees
Chat with your employees regarding the Centrelink JobSeeker fortnightly payment they may be eligible to receive. The Government is supporting employees with approximately $1100 a fortnight.
The website to start the process is below:
https://www.servicesaustralia.gov.au/individuals/services/centrelink/jobseeker-payment/how-claim
Paid leave
According to fairwork.gov.au; employers are not required to make payments to employees for the period of a stand down but may choose to pay their employees via paid leave.
This is something you can discuss with your employees if they have accrued leave. But be aware that paying out a large amount in paid leave (when many weeks are owed to some employees or many employees are eligible for some paid leave) may put your business under financial strain. The best approach is to plan any payments carefully and only do what you can (see the Cash flow forecast section below).
Early access to superannuation
The Government is also allowing sole traders, directors and employees who have seen their hours of work or income fall by 20 per cent or more as a result of the pandemic to access their superannuation. Withdrawals are capped at $10,000 this financial year and a further $10,000 next financial year. The withdrawals will be tax free.
Remember that it would be best to not dip into your superannuation and instead to save these funds for your retirement, but the option is there for those that need it.
Freezing company vehicle payments
Consider freezing fuel cards and vehicle loan repayments during the lockdown period. Employees with company vehicles won’t be able to travel far after all and may have a personal vehicle they can use for collecting groceries. Again, something to negotiate with your employees as soon as possible.
Freezing a mortgage
By freezing a mortgage (typically for six months), you aren’t required to make any repayments to the bank. That means as a homeowner or commercial property owner you can defer the normal repayments until the COVID-19 pandemic is over or until such time as can be negotiated with your financial institution.
However, please note that interest will still accrue throughout this period and be added to your mortgage total.
Tenants cannot be evicted
Tenants cannot be evicted if they are experiencing financial hardship because of the economic fallout from the coronavirus crisis under new measures enacted by the National Cabinet on Wednesday 25th March. This decision comes after the NSW Parliament passed an amendment to allow the Housing Minister to ban evictions, a measure to bolster renters’ rights in the current economic climate. The National Cabinet did not make any decisions on rent freezes because tenancy law is a state issue, with further decisions to be made on Friday 27th March.
Depending on an employee’s financial situation, they can also consider approaching their landlord and suggesting their rent payments be deducted from their rental bond, asking for a reduction in rent for this period, asking for a rent free period or at least a deferred payment.
Employers
Are small business owners eligible to receive Centrelink payments?
Yes, sole traders and company directors are eligible, providing they suddenly find themselves earning less than $1,075 a fortnight. If this happens to you, you are eligible to apply for Centrelink support.
Temporary cash flow support (PAYG refund)
Employers will receive a payment equal to 100 percent of their Pay as You Go Withholding (PAYG) for the March Quarter and June Quarter in 2020. The Australian Tax Office (ATO) will also allow businesses to vary PAYG instalment amounts to zero for the March 2020 Quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters. It is worth contacting your bookkeeper or accountant early on to help work through these options in case you need it.
Assistance to help pay the wages of apprentices
Eligible employers can apply for a wage subsidy of 50 percent of an apprentice’s or trainee’s wage paid during the nine months from 1 January 2020 to 30 September 2020. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter). The subsidy is subject to an eligibility assessment to be undertaken by an Australian Apprenticeship Support Network (AASN) provider.
Deferring PAYG and BAS Payments
It will be possible to defer the payment date of amounts due through the Business Activity Statement (BAS – including PAYG instalments), income tax assessments and fringe benefits tax assessments by up to six months.
Freezing a mortgage
By freezing a mortgage (typically for six months), you aren’t required to make any repayments to the bank. That means as a homeowner or commercial property owner you can defer the normal repayments until the COVID-19 pandemic is over or until such time as can be negotiated with your financial institution.
However, please note that interest will still accrue throughout this period and be added to your mortgage total.
Deferring office rent
Depending on your financial situation, you can consider approaching your landlord and negotiating a deferred payment or a reduced monthly payment during a period of enforced lockdown.
When lockdown occurs
Keep in regular contact with your employees via phone, WhatsApp, Skype or Zoom or social media.
Remember that during the lockdown period, you will have time to improve some business systems and prepare so you can hit the ground running when work resumes.
Communicate with your clients now
You have probably spoken to all current and future clients assuring them you will be able to responsibly attend to their project or maintain their garden now and in the future. Many clients will gratefully accept this information as they will want your services to continue for as long as possible.
If some clients do decide to cancel bookings, speak to them to offer them some options. If they feel the current situation causes financial strain, suggest to them some alternative designs and materials that will help them achieve an enhanced outside space while meeting their new more economical budget.
Securing a schedule on your return
We don’t know how long lockdown will apply. As such, clear communication with your clients will help you create a schedule of future work now for when you and your team return to work.
Cashflow forecast
Plan your finances over this uncertain period by creating a cashflow forecast for the next six months. On a page or spreadsheet, place each month (April through to September) in a column across the top. A column to the left-hand side of the page should have two major headings (Money In and Money Out).
Under Money In, place your opening bank balance at April 1 (or the bank balance in your account on the first day of a month, when you start your cashflow).
Also under the Money In heading, write down all income such as projected payments from clients.
Under the Money Out heading, write down all projected expenses.
Money In minus Money Out will show you the projected bank balance at the end of each month.
The cashflow forecast is an essential financial tool to use to plan for this period of uncertainty.
Here is an example (you can create your spreadsheet with as many rows as needed):
Coronavirus SME Guarantee Scheme
After considering all of the above and working out your cashflow, if you need additional funds to support your business through this time, the Government will provide eligible lenders with a guarantee for loans. If you’re interested in the Coronavirus SME Guarantee Scheme you should approach your financial institution for more information.
Feel free to give me a call prior to taking the above step and we can explore other possibilities.
Most importantly, remember that we are all in this together. Let’s stay safe, hang out with immediate family or household members only and use the down time to work on some areas of our business that need improving. With smart planning and foresight, we will come through this period relatively unscathed in a few months’ time.
If you need any assistance, please email me: john@landscaperscoach.com.au or phone 0433 271 980.
Disclaimer: most of the information contained in the article was collated from three government websites for your benefit. Any reliance on acting on the information contained within this article is at your own risk. Seek the advice for your solicitor and or accountant for advice regarding standing down employees without pay.