Relief for SMEs impacted by COVID-19 is being offered by both the Federal and State Governments. In this article, we review the measures recently announced by the NSW Government.

These include a $10,000 grant to eligible "highly impacted" SMEs, to be used for unavoidable business costs and a 25% reduction in annual tax liability when annual reconciliations are lodged (due 28 July) for businesses with payrolls of up to $10 million.

Small Business Support Grant

Are you eligible?

To be eligible for the $10,000 grant, businesses will need to have between 1-19 employees, have a turnover of more than $75.000, hold an ABN as of 1 March 2020 and be based in NSW.

Additionally, the business must have a total annual wages bill of below the 2019-20 payroll tax threshold of $900,000. That is, to be eligible, an SME would currently not be paying payroll tax since it is only required to do so if its total Australian wages exceed the tax-free threshold of $900,000.

Another eligibility requirement is that the business must be classified as "highly impacted" by the Public Health (COVID-19 Restrictions on Gathering and Movement) Order 2020. Industries in which SMEs are considered to be "highly impacted" include retail trade; accommodation and food service; real estate services; administrative and support services; and art and recreation services.

It is not currently clear whether SMEs that fall outside of these industries will meet the "highly impacted" criteria or how they might do so – we expect the NSW Government to provide further details clarifying this issue in the coming days.  It is likely that the measure of being "highly impacted" will require an affected business to show a loss of turnover over a set threshold during a specified period. While the threshold has not yet been set, we expect it to be high enough to capture those businesses whose operations are significantly affected by COVID-19.

What can be done with the grant?

The grant is contingent on the SME agreeing to use the funding for unavoidable business costs such as utilities, overheads, legal costs and financial advice. At this stage, there is no information confirming how that will be enforced and whether there are any reporting obligations that will be required as part of accepting the grant. However, for a highly impacted business, the application of the grant to these costs is unlikely to be controversial.

How to apply?

The NSW Government expects to make its COVID-19 Small Business Support Grant application form available on the Service NSW website by 17 April. As part of the application process SMEs will be required to provided appropriate documentation to confirm their eligibility but at this time the specific documentation requirements have not been announced.

Deferment of Payroll tax

Payroll tax is a state tax which is assessed on the wages paid or payable to employees by an employer whose total Australian taxable wages exceed $900,000 for the given tax year (i.e. 01/07/2019 to 30/06/2020). The current payroll tax rate is 5.45 per cent.

For business paying wages under $10 million

Businesses with total wages of no more than $10 million, will have their annual payroll tax liability reduced by 25% when they lodge their annual reconciliation, which is due 28 July. Also, businesses within this category will be given the option to defer payments for up to three months but more information is expected to clarify how this will work in practice.

For businesses paying wages over $10 million

Businesses with wages over $10 million will not receive the 25% reduction but will be entitled to defer paying payroll tax for up to six months.

What do I need to do?

Businesses are not required to register or apply for the discount. If wages are no more than $10 million for the 2019/20 financial year, the discount will be automatically applied to the business tax liability after lodgement of the annual reconciliation.

Details of how businesses may take advantage of the option to defer payroll tax liabilities are expected to be released shortly. Like many measures being rolled out by the Government, the detail tends to follow the announcement a week or so after it.

It is important that, if you are an SME affected by COVID-19, you stay abreast of developments. Check our dedicated COVID-19 web-page (here) for regular updates or get in contact with us to advise you on the options available. We at McCabe Curwood are following the updates closely and can provide you with the timely and accurate advice to ensure you get the full benefit of all measures to support your business.