While Canberra this week pledged $8.7b in business assistance as part of its Coronavirus stimulus, SMEs need more ATO support to survive the escalating pandemic.
To reduce the blow for businesses, key measures of its $17.6b stimulus were:
- An instant asset write-off for assets costing $150,000 or less, enabling businesses to claim an immediate tax deduction for capital expenditure on new or second-hand equipment, and
- An investment incentive which will enable businesses to deduct 50% of the cost of a new asset in the year of purchase.
Both are available to businesses with a turnover of less than $500 million.
While these initiatives will encourage businesses to spend, they only provide immediate cash flow benefit to the “seller” of the asset and not the “buyer”. The buyer will benefit, but not until lodging their tax return and receiving their tax refund. This won’t be until after 30 June and is closer to March or May next year for many small businesses. This means the cash flow benefit isn’t realised immediately, when businesses need it most and are at risk of closure.
In response to the bushfire crisis, the ATO provide a range of concessions for affected taxpayers, including being able to vary their income tax instalments without penalties.
Implementing similar measures now for all SME businesses would bring forward the cashflow benefit for businesses spending money on capital assets and accessing the $150k instant asset write-off or the 50% upfront deduction.
Other effective ATO concessions announced amid the bushfire crisis which would also be effective for Covid-19 support include:
- An extension on the due date for Business Activity Statement lodgements and tax returns for businesses
- The fast tracking of tax refunds
- The remittance of any interest or penalties applied to tax debts since the beginning of the crisis, and
- A hold on debt recovery action for affected tax payers with a tax debt or outstanding obligation.
Introducing a similar suite of actions now and allowing businesses to vary their PAYG instalment payments with penalty exposure, will provide immediate stimulus to waning cash flows and assist businesses to stay afloat.
Sure, it would require increased administrative support from the ATO, but it will keep businesses spending and could just stave off an eminent recession.