COVID: so... you're a sole trader?
***as at 1 April 2020***
It is a big, scary, confusing world out there normally, let alone today, and when we work for ourselves it can feel all that more alone. But, rest assured, we're all this shit boat together sailing the choppy seas... and I am right here with you and I have been trained to read the map. We will get to the other side!
If you are feeling confident about your ability to understand Scomo and his team, then head here for the official Treasury info.
If not, then let me help translate the government info for you so you know what support might be available to you. This blog is for sole traders. Some of you might also have other/casual employment, and we will cover off the important info related to that too.
SOLE TRADERS & INDIVIDUALS
As a sole trader, you are your business, meaning you are the one legal entity. Whereas if you were operating through a Company or a Trust, that would be a separate 'being' to you, the individual. Confused already? No worries, check out this blog on the different structures.
There a few things the Government have released that might be applicable to you, and that we will go through here:
- Job Keeper - the government giving employers (including the self-employed) money to help them keep people employed.
- Job Seeker - Centrelink support, with an added 'covid bonus', and with reduced eligibility criteria.
- Tax Obligations - lodgement extensions, payment plans, reduce your instalment amounts.
Other stuff they have on offer, but that doesn't apply to a lot of my clients so not covered in this blog (email me if you want to chat through these further!):
- Household Support payment - like a little boost to the economy, paid automatically to some people.
- Early release of superannuation - access your super early and with reduced draw down rates. This is not my favourite option, but it is there for those experiencing hardship*.
- Increased 'small business write off' threshold - if you happen to be looking to invest significantly in assets, then this might be useful to you.
- Government going guarantor on loans - the Government have lifted the 'responsible lending guidelines' for lenders, and have offered to go guarantor on some business loans. Be cautious of repayment plans and interest rates still.
*I am not allowed to give financial advice, and superannuation is a tricky area in normal conditions, so I encourage you to speak to your super fund and to a registered financial adviser if you are considering this.
Job Seeker
This is one of the 'Centrelink' support systems that has been in place for a while, but that the Government has now tweaked a bit to make it more accessible, and to give eligible people a kind of 'covid bonus'.
Basically, be eligible for a single $1 of the support, and then each fortnight, receive that amount for which you are eligible ($1+) and the covid bonus payment of $550.
This supplement payment (the $550) will be paid to those on other support systems beyond just Job Seeker, it's just that it is the Job Seeker one which has been tweaked to open it up to sole traders now. It used to be hard to apply for this because we weren't really seeking jobs...
Tweaks include:
- expanded access - if you are a casual worker, a sole trader etc. and you meet the income test, then you should be eligible.
- reduced 'means testing' - while they still ask about your assets and liabilities and things, the asset test won't apply.
- reduced waiting times - I am laughing... if you have tried to apply for this you know the wait on the phone is lengthy. What they mean is that you used to have to serve a wait period of a few weeks, which you no longer have to do.
- they've gone online - to fast-track all of this, you can now complete your application online. It's still a bit of a nightmare, don't get me wrong, but we're all just doing our best as fast as we can... including Centrelink and their teams. Be kind.
If you think you might be eligible:
- prioritise logging into MyGov and ticking your intent to claim
- get your CRN sorted asap (you might need to jump on the phone to verify yourself... avoid going to centrelink because you know there is a deadly virus out there and we're trying to do the right thing!)
- get your business and personal finances in order - you will need to show that your sole trader business has been impacted by covid (suspended or turnover significantly reduced)
- continue investing in your business activities where you can - as sole traders, if you do this, then you automatically meet the 'mutual obligations' requirements (like, usually you need to be seeking a job, hence the name)
Some key info to consider:
- payments should start from 27th April 2020 we believe
- you can't be simultaneously accessing employment benefits like sick leave and annual leave
- income received when on this support needs to be reported
- you don't need to be looking for another job
- might mean you get the once-off $750 payment too! (back dated to 13 April)
- you will be asked to declare how much rent you pay, so they can assess if you also qualify for rent assistance
- they have lifted the partner income threshold to ~$78k
Also, DON'T COMMIT FRAUD. Seems obvious, but just be honest about your past, present and forecast future reality. I also recommend having good records about how you arrived at the numbers and info you put into the application so if you get asked about it later you can easily see and remember.
For more info, check out this awesome video that my new friend (a financial coach), Kevin Smith, made for everyone. Relevant as at 23rd March 2020.
Job Keeper
Ah yes, what we all wish we were, right?
This is a new shiny thing released by the government on the 30th of March 2020. ***legislation now released***
Here is the actual legislation.
Job Keeper is designed to help employers keep their staff employed, but the government has kindly said this will apply to the "self-employed" too.
NEW INFO - The legislation now says ALL ENTITIES (with a few exceptions that don't really apply to my main client base).
It is basically a payment of $1,500 per employee per fortnight (pre-tax), from the government to the 'employer', for them to pay to their employee.
Who is eligible?
- employers and the 'self employed'
- NEW INFO - now includes one eligible business participant too
- includes not for profits
- business turnover of less than $1 billion*
- turnover has fallen by more than 30%
- business is not subject to any Major Bank Levy
*if you have turnover of more than a billion dollars, thanks for signing up to my newsletter firstly, but also, please kindly check out the government info that is relevant to you (because this blog is not), and also donate to all of my creative friends and clients because we need you right now.
Tell me about this 30% drop...
We don't know the details yet, but what we believe you will need to show is that in this last quarter (or month, depending on your usual reporting cycle), you have 30% or more of a drop in total sales (income) of the business when compared the same month/quarter in 2019. If your business is new, then a drop compared to it's average/usual conditions.
NEW INFO - You (sole trader) will need to report monthly to the ATO re your earnings to ensure you are still eligible.
NEW INFO - You (sole trader) will need to show that April 2020 (eligible month) has seen a drop of 30% or more as compared to a comparable period in 2019 i.e. April 2019. The fact sheet suggests you can use alternative estimates, averages, periods etc. if you have lumpy income.
Which employees count?
Self-employed individuals will be eligible to receive the Job Keeper Payment, and we're pretty sure it will just be paid directly into your nominated account. Keep in mind this is taxable income so don't spend it all at once!
NEW INFO - You need to have registered your interest and then make monthly reports in order to get the payment in arrears from the ATO.
For those of you who employ other people, this is pretty important to understand. You will receive the $1,500 per fortnight for each of the eligible employees on your books at 1 March 2020. No sneaky back dating off stuff!
Eligible employees include:
- full time
- part time
- long-term casuals (i.e. have been with the employer for the 12 months to 1 March 2020)
- stood down employees (if stood down after 1 March 2020)
So, if you have been stood down, chat to your ex-employer!! - who are Australian citizens, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder.
How does it work?
- Employers elect to get this - "opt in" kind of thing
- NEW INFO - Employees need to do a nomination. We need more info on the form/format/content.
- Application/election will be done via to ATO
- Employees cannot double dip - you as an individual can only receive the payment once, so you need to tell your various employers which of them is the primary one, and it is that one which will elect with the ATO and then pay you
If you are the employer, maybe give your employees a quick call to check on their situations! - If you are the employee/self-employed and receive the Job Keeper payments, be sure to report this to Services Australia. Heads up: It might impact your Job Seeker payments.
How much do I receive? How much do I pay my employees?
The employer/self-employed receives $1,500 per eligible employee per fortnight, for up to 6 months, in arrears.
NEW INFO - Timing: the first 'job keeper fortnight' begins 30 March 2020, and the payments will be received by the employer in arrears (not a sexual reference). This means 'after the fact' i.e. the employer pays the employee through April, then receives a kind of 'reimbursement' from the ATO from 1 May 2020 (and so on). This arrangement is planned to end 27 September 2020.
***get in touch with us today if you need help setting this all up in your accounting software!***
If the employer chooses to/has to keep them on at their usual (higher) rate, then this acts like a subsidy - think like when the parents of the birthday girl subsidise the drinks at the 18th birthday. The government are pitching in so the employer just pays the top-up amount.
Example A:
- usual wage is $1,800 per fortnight
- the employer now receives $1,500 from the government
- employer pays that $1,500 plus the $300 they have to cover themselves as employers
- employee has no change in their income
Example B:
- usual wage is $1,000 per fortnight
- employer receives $1,500 from the government
- employer pays that full $1,500 to the employee
- employee feels amazing
Example C:
- employee was employed at 1 March 2020, but then stood down
- employer receives $1,500 from the government
- employer pays that full $1,500 to the stood down employee
- they feel better, and more secure, but probably bored without work
The same applies if the employee ceased work and then was re-engaged.
Also, it is up to the employer whether they will pay the extra superannuation on any amounts paid above the usual wage.
NEW INFO - What if I work in my business but I am not 'employed'?
Firstly, you should book a meeting with us to discuss pros and cons of the approach you have taken.
Secondly, it is going to be ok - the government updated the offer to cover what they refer to as business participants.
Your entity is entitled if:
- The fortnight is a 'job keeper fortnight'
- The entity is not a not-for-profit
- The entity meets the other eligibility criteria (like the 30% drop etc. - see above)
- The individual (you) are the eligible business participant for the entity for the fortnight
- The entity has lodged their form with the ATO
- The entity must have had an ABN at 12 March 2020 (or you need to get Commissioner approval)
Please note your entity can only have one business participant receiving the Job Keeper payment. Your entity cannot be entitled if another entity is entitled re that same individual.
Your entity needs to notify you (the individual) of the nomination to be the eligible entity.
You are an eligible business participant if:
- You are not employed by the entity for that fortnight
- You meet the other general requirements (see above)
- The individual is actively engaged in the carrying on of the business
- If the business is a sole trader, then the individual is the entity
- (see other blog re if you operate a different structure)
NEW INFO - Reporting Requirements
You have 7 days from the end of the calendar month to make your reports to the 'commissioner' (AKA the ATO).
Too good to be true?
Kind of. One thing to keep in mind is that the payment from the government will be in arrears. That is not a sexy reference. In arrears kind of means after the fact. So, if cash-flow is an issue, this might help but not perfectly. As the employer, you probably need to cover the actual wages paid to employees through April, and then the subsidy will be paid by the government to the employer from the first week of May 2020.
Check out more examples at the end of this fact sheet.
Tax Obligations
I might be biased but now seems like the perfect time to put some energy into organising your finances and getting on top of your tax. This also helps me, your friendly neighbourhood accountant, to negotiate special things for you with the ATO.
Following covid, the ATO and government decided on giving us a bit of help when it comes to our reporting and tax payment obligations:
- Deferring by up to 4 months the payment of tax amounts due through the BAS (including PAYG instalments and PAYG withholding), income tax assessments, FBT assessments and excise by affected businesses
If you are not sure what these acronyms mean, please check out my other blogs by clicking on the links! - Allowing affected 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.
This might ease cash in the short term, but keep in mind it does not make the tax payable go away... - Remitting any interest and penalties, incurred by affected businesses on or after 23 January 2020, that have been applied to tax liabilities; and
- Allowing affected businesses to enter into low-interest payment plans for their existing and ongoing tax liabilities.
These are not automatically applied, and you need to call the ATO. If you need a hand, you know where to find me!
Phew! Big blog!
I hope that this has been useful to you and your friends. Please share this amongst your community too. We will endeavour to keep it up to date for you.
Feel free to email or DM me any questions you have, and please share handy links and resources you find. We're happy to collaborate and share the love and knowledge around!
Stay safe
xxx Lauren
