Australia’s Economic Response to COVID-19: In conversation with Trevor Dymond, Director of Syracuse – Podcast Episode 4

The economic fall-out from this pandemic has been far reaching. Australia has already seen widespread job loss and whole sectors effectively “brought to their knees”. In response to the crisis, the Federal and Victorian Governments have announced various stimulus packages and initiatives to hopefully mitigate the impending recession, with a particular focus on small to medium sized businesses and Australian households.

In the fourth Nicholes Family Lawyers’ podcast, Sally Nicholes, Managing Partner of Nicholes Family Lawyers joins Trevor Dymond, Chartered Accountant, Tax Advisor and Director of Syracuse in conversation, to discuss the various government initiatives announced in the wake of the COVID-19 pandemic, and to help us “unpack” these initiatives in further detail.

 

Sally Nicholes:

Welcome to the Nicholes Family Lawyers Podcast. This is the fourth podcast in our series. My name is Sally Nichols and I’m the managing partner at Nicholes Family Lawyers. I’m joined today by Trevor Diamond, director at Syracuse. Trevor’s a chartered accountant and tax advisor at Syracuse, a laying team of expert accountants and business advisors in Melbourne. I’ve invited Trevor today to talk about the government’s various economic initiatives announced in the wake of the coronavirus pandemic and to help us really unpack these initiatives in further detail. Welcome, Trevor.

Trevor Dymond:

Thank you, Sally. And I’m very glad to join you today and it’s certainly a tumultuous time for businesses and obviously individuals in the economy. You know, client base in our friends, our friendship circles and certainly, we’re all keen to make sure that people access the help and information they need to deal with whatever issues they’re facing at the moment.

Sally:

Absolutely. And look needless to say, this economic fallout from this pandemic has been so far-reaching. Australia has already seen [inaudible] the widespread job loss and whole sectors effectively brought to their knees including tourism hospitality and retail. In response to federal and Victorian government has announced various stimulus packages and initiative. So hopefully, mitigate the impending recession with a particular focus on small to medium-sized businesses and Australian households. So, Trevor, if you could start by taking us through some of the government-proposed initiatives, I think that would really help people. Focusing first on businesses.

Trevor:

Thanks, Sally. One of the first announcement that was made on the 12th of March was around businesses that employ and providing what they call a boosting cash flow for employers program, whereby they effectively provide a rebate linked to the amount of pays go withholding reported on BAS for the month for March, quarter as appropriate. Now, the real reason for this is to… in our view, is to encourage employers to keep staff employed and not make any rash decisions. They want the economy to continue and they want money in employees’ hands to keep spending to the extent that they can. This was then doubled on the 22nd of March such that eligible employers can receive up to $50,000 with reference to the March month or quarter as a rebate against their Pay-as-you-go withholding amounts and then another 25,000 against the June quarter bass and a further 25 thousand against the September quarter bass and those amounts that have quoted are the caps that the maximums of businesses can come back. Businesses need to speak to their tax advisors and actually understand what it means for them. But effectively, it is a significant cash flow boost for those businesses employing staff and we’ve had, probably, three or four dozen examples in the last week or two in our client base of where we’ve provided some really good advice to clients about the cash that is coming their way when they lodge their March BAS’s and most tax agents would be comfortable that the governor’s come out so strongly in this way to really support businesses. Most, as I said, most businesses have some sort of support around them, IE bookkeeping or their external accountant and what we’ve seen is they have mobilized really quickly to ask the question: What does this mean for me? And I’d encourage anyone out there who hasn’t, you need to get in front of your advisor. Whether it’s your bookkeeper, your accountant, your tax agent and really understand what it means and make the best decisions you can. Now, that the March quarter BAS has due.

Sally:

We’ve mentioned, too, with family law matters that when people are actually looking the valuation of businesses, at this time, advice would be invaluable and also it’d be very, very difficult to even think about valuing your business, at this period of time, without actually taking all this stimulus package into account, too. And there’s a couple of things that come to mind when I look at it. Firstly, what would… we sometimes have cases and they’re rare where one party actually won’t pay tax. They’re putting their head in the sand a little bit in the process. If someone wasn’t actually taking advantage of the stimulus in an obstructive way, what would you recommend that we actually do if we came to you and actually got the advice? There is a possibility of going to court if necessary to seek that a party follows and fills out that necessary forms, but it would be a very obvious disadvantage and thing to do when you’ve got these government stimulus is not to get ahead of the queue, don’t you think?

Trevor:

So the interesting part about a lot of these measures is that they are relatively automatic. So the one I’ve just talked about is the business lodges its BAS in March and keep lodging BAS’s in April, May, June and so on and the ATO will calculate and automatically credit the business with what they are entitled to. So for most businesses, they don’t need to do anything. The decisions they’re making around who they’re employing. So do they cut staff or not cut staff may impact upon that or if they haven’t logged their documents, they’ve got a whole lodgement history. Then that may well be an issue where one party would say, “Look. You need to comply with your lodgements.” The ATO, I think have said that there’s about two years for a taxpayer to apply for this stimulus. So they’ve gotten I think it’s I’ll need to check but it’s a couple of years until they lodge this BAS and I’ll still get the stimulus so that don’t have to lodge by April 28th to get the money. So it is there. There’s other things that do require the business to do things. So in Victoria Dan Andrews was very quick off the mark to effectively refund payroll tax for Victorian employers for the current financial year. Initially, they said it was to be automatic. Now, in the last week, I’ve said you must apply. So where you have a business that doesn’t apply for the refund, they won’t get it. For our business, that was a significant number because we’ve got 25 staff and so we’ve applied for and received it. So if you did have a business owner who has been constructive and not applying for that l, then you would have genuine cause to approach them and say that this isn’t right and if they’re acting in the best interest of the business, they get that cash back. And there are some other measures that do require the business to make a decision. You will most likely get onto the new JobKeeper subsidy that’s been put forward as an announcement without legislation yet and that does require each business to really think about their decision around employing people and who they keep on and who they might re-employ as they go. This is in pretty, very pertinent commercial decisions that have to be made now for the business to maximize the subsidy they might receive from the federal or state government.

Sally:

Absolutely. And would you think of this period of time, I’ve got a lot of clients saying what should I do about my family law or property settlement negotiations? How could we possibly value a business in this particular climate? What would you say to them at the moment?

Trevor:

We’ve had these issues with, I guess, property valuations there’s been some that have come up the last couple of weeks given the tenancies for some of our clients are affected, the commercial tenancies, especially. I think it is uncharted territory. And you do have a situation where if you’re advising a client, you need to think about what’s in their best interest and depending on the nature of the business, if it was a cafe or another business that has been significantly affected by what’s happening, you really have to question whether sitting or entering into a sale in this environment is the best for anyone. The viability of some of those businesses even with some of the support that’s out there has to be questioned and you may well need to advise a client. We just need to get through the next four-six months whatever it is and come out the other end and see where this things sit.

Sally:

Made sense to me that more than ever, we need clients to really consider alternative dispute resolution where people collaborate. They may be separated but maximize the advantage of keeping businesses going and people have come to me and said, “Look. Can we still separate?” And I said, “Yes, you can still separate.” Sadly, if that’s where the relationship has come to. But in terms of looking at their domestic, their assets, whether they’re in a domestic relationship or they’re married, you want to make sure that you act and conduct yourself in such a way. In these really unprecedented times as you should always conduct yourself to ensure that those businesses for example, keep operating and to support each other in that way because it’s only going to benefit the family.

Trevor:

One of the issues around all of the property of a marriage is you’ve got real estate. You’ve got business. You’ve got investments with share markets. All of those and if you ever see superannuation, all of those investments are going to be impacted differently and there are going to be opportunities to people out there looking to buy assets cheaply and we have also have that within our client base people looking for the opportunities to buy assets, too. But so you would need to exercise extreme caution in this market if you’re entering into any transaction to dispose of any assets.

Sally:

Well, absolutely and I think in terms of discovery, I think both parties would need to be completely transparent about what they are taking advantage of and that they are actually making prudent decisions with somebody like yourself advising them is they both have accountants, getting the accountants to put both their heads together to make sure that they’re maximizing that stimuluses and all those packages to the best advantage of their family asset. Now, have you look at the support provider for individuals and households? You mentioned the supplement that’s coming in for job seekers and that will be supportive businesses that have a 30% downturn, I understand the legislation coming in. Have you got any tips for businesses about that at the moment?
Trevor: So we have a fact seet about this that has just been released in the last couple of days about this and I think businesses need to look at 1 March, which is the relevant date and understand how this proposed subsidy applies to all the employees they have that 1 March. They, then, need to consider whether they keep staff on and receive the subsidy. Because what you have is if you’ve employed someone and kept them employed right now, you’re still subject to the employment contract you have with that staff member. And yes, you might receive a $1,500 a fortnight subsidy from the government, but you still need to pay that person. So you still need to be commercial about “Can I afford to pay the excess?” We’re seeing some interesting outcomes when we’ve modeled this for clients. Some clients, the combination of the cash flow boost on wages that we talked about before and the JobKeeper payment means that they are being subsidized quite heavily to keep their staff members in employment, which is what the government wants to do. In terms of staff member businesses… in terms of what we’re saying in our client businesses, they are still needing to make commercial decisions about what the next one to six months looks like for their businesses, what staffing they need and then they can consider the JobKeeper coming in as a subsidy at 1500 or 1400 for the staff they gave. So I think the more methodical they are in planning their business then the better off they will be when we finally get out of lockdown and the economy returns to some level of normality.

Sally:

Like you mentioned, the staff morale is going to be very important as well. Because if you have got a business that was booming, for example, doing well before the coronavirus and you have good staff, it’s going to be such a juggling act to make sure you keep that workforce going and their morale boosted and and also but to be economic about it as well. So it’s really really important.

Trevor:

And I think we’re saying that within our client base that most of our clients are looking at this as how do I keep my staff employed with me. I might reduce their hours. But with the government incentives and the JobKeeper being the most recent one, they’re looking at ways to keep people employed and that’s a fantastic outcome. But ultimately, the businesses have to have to trade profitably or at least break even or supported somehow and there’s never about the measures. Obviously, the banks are slowly coming to the party in supporting SME business with deferred loan repayments, etc. There’s a number of other Victorian and federal government incentives.  And if you add those up, we’re saying that most of our clients’ businesses will be able reliable, be able to continue and come out the other end somehow and that’s good. So it shows the government incentive packages are working.

Sally:

I think absolutely vital that they actually confer with someone like yourself, Trevor. I can’t imagine anybody being able to navigate it. I think all the… without your help and your expertise because there’s a lot of information out there, but people probably mistake what they might read in the newspapers as fact or the actual package, for example, legislation isn’t currently out to support a lot of these government policies or proposals and I think people don’t really realize that. That they hear that these schemes are up and running but not quite until the legislation is passed. There’s not even the infrastructure, for example, yet within the tax department to process some of these things. So it’s all… it’s very, very important to actually deal with someone like yourself to actually navigate and charter these really unprecedented waters, I think.

Trevor:

And I couldn’t agree more. The announcements come out and everyone digests the announcements. But until we have legislation, we don’t know how it’s going to be implemented and where the issues might be in that legislation. We had that last week, made legislation earlier in the week. We managed to then put a circular attract clients saying this is what it actually means and it gives us comfort the weak and tell our client, “Yes, you can do this in this way.” The JobKeeper is another example where we have a fact sheet from the ATO which often the government which is very useful. It’s four pages long. However, until we see the legislation and until legislation is passed, we cannot tell clients with certainty. This is what you need to do because they’re going to make significant commercial decisions based on this information and we hope it is as close to the factory as possible. Certainly, now is the time to lean on your circle of advisers, your bookkeeper, accountant, lawyer, financial planner, whoever that is and go to the get the facts and, I guess, not rely on the media relations and the general media because the devil is always in the detail as you would well understand.

Sally:

So anyone listening to this podcast can actually go onto your website and actually download those fact sheets. Will They be there available.

Trevor:

Yes, we will make sure that they are available on our website, which is syracuse.com.au.

Sally:

And we’ll make sure we will have links available with the podcast to make sure that people can actually access it access that information that’s really important. So I’m looking at perhaps now looking at the support provider for individuals and households, because you talk a bit about the supplement for example, and the youth allowance and the JobSeeker payment.

Trevor:

So one of the earliest announcements that the government made was to really make significant increases to the income support payments that Centrelink administer and one of that was to make a coronavirus supplement of 550 per fortnight, which is paid to existing and new recipients of JobSeeker youth allowance, JobSeeker parenting payment, farm household allowance and special benefit and that is really to do what, I guess, what the Rude government did in the GFC is get money into households hands quickly and as much as possible to stay at lodge to the economy and that will continue while this, I guess, this emergency is in effect. They also announced two payments of $750 to income support recipients one on 31 March which obviously went through last week and a second payment on 13 July 2020 and with exactly the same intent to get money into the economy and really help people who were looking for jobs or they’ve lost their job to really make sure that they could continue to survive during this crisis.

Sally:

What about the early releases superannuation? Is that something that people might want to also talk about with their financial advisers? Because I understand that there is that $10,000 release for people who are eligible. Is that something, too, that people might want to think about their age and stage before they actually release of that money?

Trevor:

Yes, we’re accounts but not financial planners, so we can’t give advice in that area. More I would say to people is you need to get financial advice before you do this. It does sound like a little bit of money and the implications are low, but if it was my client. I’d want them to exhaust every other avenue before they access their super by way of income support, etc., because the superannuation environment is such an attractive tax environment and it is, therefore, people’s retirement. I understand why this measure has been introduced for some people who literally it’s a last resort. They need to access $10,000, but I would encourage people to look at every other opportunity before they access their super.

Sally:

Yes, particularly the self managed funds with the value of shares going down so dramatically.

Trevor:

Exactly.

Sally:

Yeah. It’s very critical that she said neither of us have financial advisors, but it’s something that we want to send people off to financial advisors have a chat about, perhaps want to do a podcast for the financial advisor to answer some of these questions. So part of this negotiated family law settlement, I really need to be mindful of their ability to an early release of superannuation, too, when negotiating super split but also in relation to all the existing allowances for income as well. And including also actually the childcare rebate that’s just come out which again, too, I think that is still just policy. I think the devil will be in that detail, too. So we might actually defer that for another podcast. That’s very interesting development in terms of holding places and another incentive to try and keep the workflow, workforce going and also childcare centers open. I don’t know if you’ve got any clients who might have childcare centers, but that’s going to probably give them a bit of relief, too.

Trevor:

Look. We do but as it relativity a new measure and not saying legislation. It’s  one of those things until you see how the workforce is going to react to that use. It’s hard to to have an opinion on at this stage.

Sally:

Absolutely. So lastly, let’s talk a bit about how the governor has sought to support the flow of credit. What would you like to comment about that Trev?

Trevor:

So I’ve said is seeing a lot of excitement in our client base in relation to these SME loans being guaranteed, partially guaranteed by the federal government. I think the caution I would put out there is it is still subject to lending criteria and the banks are still going to look at a proposal as they normally would. We have a number of clients who have approached their banks to get relief whether it’s they need working capital because their revenue has dropped but their fixed cost is still there or whether they want to defer some repayments to give themselves some breathing space. We need to see any conclusions from the banks. Certainly, there’s a lot of applications and discussions, but it’s early days is to how the banks actually assess those applications and whether they approve them or not. Very, very interesting, I guess, in the next few weeks to see what they do. And certainly from a commercial perspective, the discussions around the impact  from commercial landlords and tenants with tenants asking for relief, what the commercial landlords can do in that case and whether they can approach their lenders to get some relief if their rent receipts are going to be significantly affected each month. Once again, it’s early days as to the requests that are coming in from some of our clients’ tenants and their landlords and whether banks will come to the party and provide relief whether it’s by lower interest rates or deferral of repayments.

Sally:

It really needs to to be both sides doesn’t it? It’s really important and you can see that the government’s attempting to do that. But you need cooperation from both banks and landlords in that that situation, don’t you?

Trevor:

Exactly, right? And that’s what Scott Morrison was saying is we’re in this together.

Sally:

Yes.

Trevor:

Landlords, look after your tenants. Banks, look after your clients. And we’ll get through this together. But as we well know, the mechanics of this is difficult, and the legality is difficult. So you hope that people go in with the best of intentions. But so with the banks, we’re not saying any concrete answers as yet. It’s all in the discussion and application phase.

Sally:

Yeah. And really tough when you’ve got the directive from the government to have the workforce mainly working from home. Often leases are practically frustrated. You can’t actually have clients in an office space or actually use the office space. Must be very frustrating for commercial tenants on the other hand as well. It’s a really difficult situation. Lastly. What has the Victorian government offered individuals and businesses? What sort of tax concessions are available at the moment?

Trevor:

So certainly, the major one and the largest one for employers that we have been dealing with is the payroll tax refund for the current financial year that are significant benefits for Victorian employers and they did that really quickly which is good. They initially said that it needed… it was automatic. But then they came out about a week or two ago and said you need to apply. That process is very simple. So we’ve been telling clients that are affected who pay their own tax to Get on the line. Ask for your refund and it would be likely to be back in a few days. The second measure that was introduced was for return of land tax was there were land tax deferrals available for some small businesses who had land holdings less than a million dollars, including one normal commercial property where they would defer that to 31 December 2020. So not a subsidy, just a deferral. There was waving of liquor licensing fees for venues that were affected obviously with the shutdown. There’s a business support fund of 500 million dollars at obviously affecting areas such as hospitality, tourism, accommodation, etc., where you can apply for certain grants for that and we’ve had some clients apply for those grants already. So the Victorian government are doing, I guess, their fair share to make sure that they can support the joint economy, as much as possible get through the next period of time whatever that is within the control of the taxes that, I guess, that they administer.

Sally:

Okay, Trevor. Thank you so much. That’s so much food for thought and I really appreciate that and we’re really hoping in terms of the family law context generally, too, that this will provide some navigation and we would really urge people to again try and work collaboratively together. This is the last moment where people want to be litigious or adversarial but take advantage of working together as a team, whether they’re together or separated. It’s really important to make sure, more than ever, that they’re working to maximize their asset pool. Take advantage of the concessions that are being offered and it’s a slight new reality here at the moment, and hopefully, everyone practices social isolation. It will be over sooner than later. But thank you very much for your time.

Trevor:

Thank you, Sally. I’m delighted to be with you today.

 

Useful Links:

Kids Helpline: A free, private and confidential telephone counselling service – 1800 55 1800 or kidshelpline.com.au/

Parent line: A state-wide counselling and support service for all Victorian parents – 13 22 89 or 1300 272 736

Safe Steps: A domestic violence hotline service for women and children – 1800 015 188

WIRE Helpline: A free support, referral, and information for all Victorian women (non-binary and gender diverse inclusive) – 1300 134 130

Relationship Space: An online program to help parents manage divorce – www.relationshipspace.com.au

Online Family Violence Intervention Order Application – fvio.mcv.vic.gov.au/

Relationships Australia: www.relationships.org.au/

 

Disclaimer: Nicholes Family Lawyers intends the information provided in this podcast as general information only, please contact Nicholes Family lawyers if you require specific information and advise in relation to any family law matter.

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