Written by Nicola Brazier of YBM
September is upon us, welcomed by many as the official start of Spring, but this year marking an important, and somewhat daunting month in our Covid-19 journey. A number of changes to stimulus measures will occur this month making it a critical time for business owners to keep their fingers on the pulse.
For many businesses, the changes will increase the already considerable strain on cash flow. Repayments on deferred loans are due to re-commence, JobKeeper payments will reduce and ongoing uncertainty in the business environment continues. Data-driven decision making is going to be more important than ever before.
One silver lining during the last six months, from an accountant’s point of view at least, is that accounting files are significantly more up-to-date. Assuming the data is also correct, this will enable much better decisions to be made moving forwards. Eligibility for ongoing support will need to be assessed and a number of decisions will need to be made as to how the business can best move forwards. Without doubt, navigating the coming months will be easier for those who have cash flow forecasts that are being reviewed on a regular basis.
At it’s most basic, a cash flow forecast considers likely income, the direct costs involved with generating that income and the overhead expenses that the business needs to cover regardless of what else happens. Much of this information can be gleaned from historical accounting data, with educated adjustments made to allow for current circumstances.
There are a number of tools to assist with budgets, from excel spreadsheets to sophisticated forecasting software, and plenty of people within YBM to help you with this. However, having correct, up-to-date data is an important starting point.
The six-month loan repayment deferral provided welcome relief for many businesses at the start of the pandemic, however the end of the deferral period is rapidly approaching. Thankfully, it appears that banks, in consultation with APRA and ASIC, have recognized that recommencement of payments may not be possible for all businesses. The Australian Banking Association has outlined three stages.
- Those who are able to recommence loan repayments will do so at the end of the deferral period. For most, this will see repayments recommence in October.
- Restructures and variations may allow partial repayment for those in ongoing financial difficulty. An extra deferral period of four months may be considered for some customers; however they will be required to work with their bank during this time to find the best solution to return to repayments.
- Those unable to pay will be assisted through the banks’ financial hardship processes to determine the best long-term solutions.
Communication with banks will be important, regardless of your position within these stages. Interest charged during the deferral period will result in changes to loan terms even for those planning to recommence payments in full. Our advice to all clients, therefore, is to start these conversations with your bank as soon as practical.
The JobKeeper program has been extended, with payment amounts stepping down and moving to a two-tiered payment system from 28 September. Firstly, however, business owners must determine if they remain eligible.
- In order to receive JobKeeper 2.0 until the end of December, business turnover from 1 July to 30 September 2020 (actual figures not forecasts) will be compared to the same quarter last year (July to September 2019).
- A decline of 30% remains the key parameter for most businesses, with a 50% decline required for businesses with aggregated turnover of more than $1 billion and 15% decline for Australian Charities and Not for profits Commission-registered charities (excluding schools and universities). Alternative tests will also be available for some businesses.
- As mentioned, payment rates will also change after the 28 September.
- The payment rate for employees who work 20 or more hours per week will be $1,200 per fortnight.
- The payment rate for those who work less than 20 hours per week will be $750 per fortnight.
- For employees whose hours vary around 20 hours per week you will need to average the hours of the four weeks of pay leading up to 1 March 2020 (for employees who were eligible from JobKeeper start) or the four weeks of pay leading up to 1 July 2020 (for employees who became eligible with changes introduced in August).
- In order to receive JobKeeper from January to March 2021, eligibility will be again assessed comparing October – December actual figures to the same period the previous year. Payment rates will again step down for the January-March quarter.
- Finally, temporary Fair Work Act provisions will be available for employers who qualified for JobKeeper but not for JobKeeper 2.0. This will enable directions of requests for employees to change their days or times of work if turnover has declined by 10% or more. A certificate from your accountant will be required to access this provision so please reach out if you think this could apply to you.
Get in touch!
Whether to tidy up your software, assess JobKeeper eligibility or liaise with the bank, we are here to help. Please get in touch with us sooner rather than later. From the start of the pandemic, September was marked as a pivotal month, and we understand that it may be causing some angst, so please contact us if you need some help.