This year, the federal government passed a range of new legislation to help small businesses withstand the effects of the COVID-19 pandemic.
While some of these initiatives are familiar, such as JobKeeper and changes to insolvency, from January 1, 2021, important changes will occur.
Here are four changes SMEs need to know.
1. JobKeeper extension
The extension of JobKeeper 2.0 starts on January 4, and will run until March 28, with lower rates for employees working full-time and part-time.
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To claim JobKeeper payments for this period, businesses need to show that their actual GST turnover has declined in the December 2020 quarter relative to the same period in 2019. More information about the eligibility test is available here.
The tier one rate for employees who satisfy the 80-hour threshold will be $1,000 per fortnight, and the tier two rate will be $650.
Businesses already receiving JobKeeper payments do not need to re-enrol. However, they will need to declare their revenue, pay their employees the new JobKeeper amounts, and continue to complete monthly business declarations.
2. New insolvency process
From January 1, small businesses facing bankruptcy can use the new insolvency process, which allows business owners to stay in control of their companies while restructuring debts.
Legislated in November, the reforms will transition the insolvency framework from a ‘creditor in possession’ model to a ‘debtor in possession model’.
In practice, this allows businesses with liabilities of under $1 million to stay in control of their business and continue to trade while they restructure debts. It also imposes a shorter timeframe for a restructuring plan to be made and agreed on.
When businesses become insolvent, a ‘restructuring practitioner’ will help them create a plan. The business and practitioner have 20 days to develop the plan and give it to creditors. Creditors must then vote on the plan within 15 days, and if at least 50% are in favour, the plan is implemented.
If the plan is not approved, the company may be placed into liquidation or voluntary administration.
3. Supplier payment times
From January 1, large businesses must publicly report on how and when they pay their small business suppliers, as part of a new scheme designed to improve payment times and cashflow for SMEs.
The Payment Times Reporting Scheme (PTRS) requires businesses with a total yearly income of over $100 million to report their payment times and detail their supply chain financing arrangements including reverse factoring in an online register.
A regulator will begin the scheme from January 1, and publish the first public report in the online register in July.
There will also be a small business identification tool that SMEs can opt in or out of, which helps larger businesses find out who their suppliers are.
After 12-months of the scheme, civil penalties will kick in for large businesses that fail to report or give false information to the regulator.
4. HomeBuilder extension
Cash grants for housing construction programs have been extended under the HomeBuilder program, albeit at a lower rate.
The extension is for new contracts signed between January 1 to March 31, and offers $15,000 to eligible owner-occupier purchasers instead of the previous $25,000.
The property price caps for new homes in New South Wales and Victoria will be also be boosted to $950,000 and $850,000 respectively.
The three-month extension of the program is expected to help the construction or rebuild of about 15,000 homes on top of the 27,000 homes the scheme was intended to support in 2020.