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Sole traders and the COVID-19 pandemic: The support available

Last week we brought attention to the fact that sole traders had been missed out in the first stage of the stimulus package put forward by government during the COVID-19 pandemic. 

The Small Business and Family Ombudsman, Kate Carnell, called for more support for businesses that do not employ staff, saying they needed “income support right now” without asset testing.

Sixty per cent of Australian businesses are sole traders, and they seemed to be missed out completely in the assistance offered simply because they did not employ any staff.

In an effort to bring clarity to sole traders, we have listed the support available to them below, which comes from the second stimulus package, announced last Sunday.

Increased asset write-off for COVID-19 affected businesses

The asset write-off threshold is usually $30,000, however this has now been raised substantially to $150,000. These are for any assets installed or ready for first use by the 30th June 2020.

This is for any business with an annual turnover of less than $500 million (usually $50 million) for any new or second-hand items from 12th March 2020 until the end of June.

This may be beneficial for the cashflow of any sole traders that must buy equipment or tools, or did so before the severity of the outbreak and it’s damaging economic impact was realised.

Having said that, we are not sure how many sole traders will actually be looking to make purchases of that value during this uncertain time.

Still, it may be useful for some to know that the higher IAWO (Instant Asset Write-Off) gives an immediate deduction of eligible assets (costing less than $150,000) within this timeframe.

Backing Business Investment (BBI)

The government is supporting business investment and economic growth over the short term by accelerating depreciation deductions.

This applies to all businesses with a turnover of less than $500 million.

BBI essentially means that 50 per cent of the cost of an eligible asset (see above and here for more info) will be deducted.

Increased income support

As outlined in the stimulus package 2.0 summary, workers struggling financially due to the pandemic will be able to access an additional $550 per fortnight.

This is for both new and existing income support recipients, as of 27th April 2020 for a period of six months.

Sole traders and the COVID-19 pandemic: The support available


Relief for regional businesses and communities

The Deputy Prime Minister will be working with affected industries, regions and communities to develop recovery plans for COVID-19, with an initial $1 billion set aside for support. There is not yet a specified date for this, or details on accessibility.

It will be looking to support businesses and sole traders that are “disproportionately affected” by the economic impacts of the Coronavirus, including those heavily reliant on industries such as:

  • tourism
  • agriculture
  • education

For example, it will include wavering the Environmental Management Charge for tourism business (operating in the Great Barrier Reef Marine Park) and the entry fees for Commonwealth National Parks.

The support will be provided through existing or newly established Government programs.

SME Guarantee Scheme

This follows the recent announcement that no repayments of business loans will be required for six months, which may be one of the more useful measures introduced so far for sole traders.

Under the Coronavirus SME Guarantee Scheme, the Government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs.

This will provide sole traders and businesses with funding to meet immediate cash flow needs, by further enhancing lenders’ willingness and ability to provide credit. Businesses with a turnover of up to $50 million will be eligible to receive loans.

The guarantee for loans is conditional on the following terms:

  • Maximum total size of loans of $250,000 per borrower
  • The loans will be up to 3 years, with an initial 6 month repayment holiday
  • The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan

Early access to superannuation – $10,000

Those experiencing financial difficulty because of the COVID-19 pandemic can access up to $10,000 of their superannuation in each financial year (2019-2020, and 2020-2021).

These withdrawals will be tax-free and available to sole traders who have seen their hours work, or income fall (20 per cent or more), as a result of the coronavirus.

This means you can access $10,000 before July 1st 2020 and a further $10,000 maximum before July 1st 2021.

However, many superannuation companies are warning that this should be a last resort. This measure should be approached with “extreme caution,” according to a media release from Industry Super Australia (ISA).

Their analysis shows that a 20-year-old who accesses the full $20,000 available under the scheme, for example, could lose more than $120,000 from their retirement balance.

“Some members will have lost their jobs or had their hours dramatically reduced and Industry Super Funds will do all they can to help them,” said Industry Super Australia Chief Executive Bernie Dean.

“But members should tread carefully and only think about cracking open their super after they’ve taken up the extra cash support on offer from the government- super should be the last resort given the impact it can have on your retirement nest egg.”

Tax support

The Australian Tax Office (ATO) is providing relief for some tax obligations for businesses affected by the outbreak, on a case-by-case basis.

Dynamic Business could not find more information regarding this at the time of writing, however the government have suggested for sole traders to contact the ATO’s Emergency Support Info-line on 1800 806 218 for more information or to request this help.

This is currently the only support available for sole traders, who do not qualify for the grants that small businesses that employ staff do. We will be updating this as we receive more information from the government.

If you are a sole trader impacted by COVID-19, please let us know what support you need most at editorial@dynamicbusiness.com.au as we will look to cover a story on what sole traders need most right now. Let us know if you’d be happy to have your opinion and quote included in a feature.

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Loren Webb

Loren Webb

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