Contact Our Experts Today on 1300 855 456

Tax Free COVID-19 Payments

A new law has been passed to ensure that COVID-19 Disaster Payments will be considered non-assessable, non-exempt income. Workers will receive payments to compensate for the effects of lockdowns in Australia. Business support payments will also be considered non-assessable, non-exempt income if they meet certain requirements such as an aggregated turnover of less than $50 million. Payments to businesses affected by lockdowns are expected to continue into the next year.

Source:  Accountants Daily


Australia, with large parts of the country in lockdown, has fallen behind in vaccinations. However, economically Australia has been remarkably resilient and has not been as impacted as many countries have been in terms of economic damage done. The long-term effects remain to be seen, as economies around the world will recover at different rates.

Source: In the Black

Here we bring you the definition of an insolvent trading claim and how such claims can come about in relation to SMEs which fall within the scope of our work.

What is Insolvent Trading?

An insolvent trading claim is applicable to companies as opposed to directors as individuals, given they are treated under law as separate personalities. Directors have a duty under this to prevent insolvency and can be liable if the following grounds are met: a reasonable suspicion of insolvency or if debt is incurred while insolvent. Insolvency arises if there is a shortage of working capital, and if the company is unable to meet its debt obligations.

1 January 2021 saw the New Restructuring and Insolvency Process for Small Business come into effect.

A fact sheet in relation to this new process can be found on the Treasury website.

The ATO has commenced reviewing all of the assistance claimed by businesses throughout the 2020 period to ensure that reporting was accurate, criteria was met and that guidelines were followed.

Some of the flags they will be looking at are:

Small businesses heavily affected by COVID-19 may now be able to make insurance claims on their business interruption policies.

Insurance Council of Australia recently lost a case in the New South Wales Supreme Court of Appeal opening up the door of hundreds of millions of dollars in payouts.

Insurance companies had originally rejected COVID-19 related claims arguing that their policies did not cover ‘quarantinable diseases’. The court found that COVID-19 was not considered a ‘quarantinable disease’ opening the insurers up to thousands of claims from businesses that have suffered losses during the lock down period.

The Insurance Council is considering an appeal in the High Court of Australia however Suncorp recently announced that it would allocate an extra $125 million to potential business interruption claims due to Victoria’s extended lockdown.

As we start a hopefully better New Year a lot of SME's will be looking for ways to ensure that they continue to survive.  Now is the time to revisit business plans and look at strategies to help thrive in 2021.

Cash Flow

A lot of businesses struggled with cashflow in 2020 during the various lockdown periods.  Now is the time to be looking at how you can improve your cashflow moving forward.

Just as 2020 is coming to an end, so is the insolvent trading moratorium.  It is vital that businesses do a health check and take corrective action if needed.

The temporary COVID-19 Safe Harbour changes to Corporations Act came into effect on 25 March this year and directors could retrospectively be personally liable for insolvent trading from that point.

Virtually every major world economy has been adversely affected by COVID-19 in 2020. The USA and Europe, as well as Japan and India, have all borne the brunt. Australia has seen unemployment rise and businesses feel the strain, in common with these economies. Yet a similar pattern to COVID-19 can also be seen in our economy: the picture may not seem good, yet somehow not as bleak as any number of countries in terms of absolute numbers.

By now, we have all felt some type of hopelessness during these strangely unprecedented times. Whether that has been in your personal life - due to missing social interaction or pushing weights in the gym, or in your business life – seeing a major drop in profits or not even being able to operate at all/ losing a job – we have all felt it.

Thanks to the three stage plan that Scott Morrison has implemented, we can now see that there is a light at the end of the tunnel.

In the meantime, the Australian government has created various schemes to keep us afloat financially (we really do live in the best country in the world).

The Australian Government has enacted a number of stimulus measures to help business and the economy through a global pandemic. This includes JobKeeper, early release of superannuation and boosts to cash flow. Most people and businesses have been honest with their usage of benefits made available to them. However, a number of cases of fraud have also emerged.

The ATO has announced that it will be vigilant regarding the matter. In fact, the ATO has uncovered a number of schemes designed to cheat the system. Such tactics include the withdrawal of money from superannuation and re-contributing in order to get a tax deduction. Single Touch Payment, tax returns and superannuation fund information are used to track and catch those that do cheat the system.