Passing The Business To Family? Here Are Three Things You Probably Hadn’t Considered

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Succession planning for the family businesses has a number of factors that could impact the decision to pass the business onto the next generation. Namely,  you’ll be looking for someone in the family who is willing to assume the responsibility.

But if you intend to pass your business down the family tree there are also a number of taxation, financial and managerial considerations that need to be taken into account for a successful succession.

Taxation Implications

When transferring your family business and placing it in the name of another family member you may trigger a myriad of taxable consequences, including Capital Gains Tax (CGT), wine equalisation tax, fuel tax credits and excise duty. You need to consider, when preparing the business for succession include:

  •     Consulting the ATO to check if you are eligible for tax concessions
  •     Document all business restructuring operations and the tax impact in the succession plan

Consider A Family Trust

It is often suggested before a younger family member gains ownership of the business they should first assume managing responsibilities to prove themselves. If you want to relinquish control gradually rather than permanently, re-structuring the business as a family trust is an option.

Although this may be complicated and incur costs, as a trustee you will be able to have control of the assets from a distance and be able to step in should the need arise in the early phases of new leadership. Family trusts also carry increased tax benefits and concessions that can be taken advantage of.

This is a great solution for those looking to go into semi-retirement or looking to step back from the business but still want some involvement with the process.

Create A Family Constitution

To make the hand-off occur as smoothly as possible a family constitution should be drawn up collaboratively by all, directly and indirectly, involved in the business. The following should be included:

  •     A detailed business plan, stipulating goals, outcomes
  •     Hierarchy of the business, both present and future
  •     Will of the business
  •     Code of conduct for interactions between family members in business

Develop A Succession Plan To Successfully Succeed

A succession plan is designed to assist you in transferring your business to a successor. To do so, it should include the following to further guide the process.

  • Choose A Successor

Identify who you would like to take over your business. If you wish to keep it in the family, you need to be certain that the person who will be taking over is skilled and prepared for the responsibilities to come. Make sure that you consider what is the best path for the business.

  • Value Your Business

Understand how much your business is currently worth by getting your business valued. By doing so consistently, you can mark out how much your business is worth during events, the general day-to-day and more. This valuation may change substantially before you plan to leave, but having a valuation may assist you with planning for your succession.   

  • Keep The Plan Current

Review your plan regularly, as your circumstances and the business’s circumstances may change over time. Having an up-to-date succession plan will ensure you’re always ready in the event that you need to pass the business on earlier than expected. 

  • Make The Final Handover

If the final preparations have been properly made, and you’re ready to go, you should simply be able to hand over the business and step aside. A clear and current succession plan should facilitate a smoother transition with far less chance of disruption to the business’s everyday operations.

Why Keeping Money In Your Superannuation Needs To Consider Death Benefit Taxes

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Most people will want to keep as much money in their superannuation account for as long as possible. One of the primary reasons behind this is that the longer the superannuation has a chance to stay within the account, the more returns may be seen (depending on how the investment assets are performing).

Often, people will ask if they actually have to take their money out. The simple answer is no.

You never have to take your own super out if you don’t want to. There are plenty of rules regarding keeping money in super (including the conditions and requirements to withdrawing, meeting preservation ages, etc). There are very few however that force you to take it out, and very rarely will you be forced to withdraw your superannuation if you do not want to.

The only time your super must be paid out is following your death (which, technically, means that you won’t receive that money anyway, it will be your beneficiary/ies who will).

The question though is whether or not you should leave your superannuation in there until you die. It comes down to who is receiving the money from your super.

If the money is being paid out to your spouse, it will be tax-free and there will be no issue with accessing it. You can also keep as much of your superannuation in there for as long as is necessary.

When you are a married couple, you can leave it to each other. However the remaining living spouse will often end up leaving their super to their adult children, and therein lies the catch.

When your super is paid to a child who is over 25 (without a disability), the adult child has to pay 17% tax on any taxable component of their parent’s super. In this situation, taking professional advice to compare the tax consequences of taking your super early (where you pay the tax on the earnings) versus the tax position of leaving it in super and your kids paying 17% on the taxable component instead, may be needed to work out what might be best for your situation.

One of the primary concerns is that those finding themselves in this position, where they have for example $600,000 in super and in their mid-eighties are not paying tax and not regularly seeking advice are the ones whose children end up paying the tax.

It may be that the next generation needs to be involved with their elderly parents’ financial positions to ensure that they are not going to be stung with Australia’s death taxes on superannuation payments.

Remember, this tax is only payable on the taxable component of the superannuation – there are strategies that can be put in place during your sixties that can reduce the taxable component of your super (without taking it out and remaining in your name).

Everyone in their sixties should be taking advice from professionals so that the impact of death benefit taxes are reduced for their adult children when it is mandatory for their parents’ superannuation to be paid out to them.

Common GST Mistakes That You Might Be Making In Your IAS

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GST is an area that commonly has mistakes made in it – mistakes that can be costly and require additional measures to correct it if they aren’t caught in time.

Many small business owners continue to make errors when claiming GST credits in their GST returns or Business Activity Statements.

A vast majority of these errors are easily avoidable and often relate to the over-claiming of GST credits. Here are the top ten common GST mistakes that can be made (and what you might be encountering yourself).

  • Residential rental property: Incorrectly claiming GST credits on expenses relating to residential rental properties where the entity is registered for GST.
  •  Bank fees: Generally, annual fees, monthly fees and loan establishment fees are input-taxed, and therefore, there is no GST to claim. However, GST is charged on credit card merchants’ fees and can be claimed.
  • Private expenses: GST is not claimable on private expenses such as personal loans, director fees and drawings etc.
  •  Interest: Interest paid on loan or chattel mortgage repayments or credit card payments does not incur GST, and cannot be claimed.
  • The total cost of a business insurance policy: Insurance policies usually include stamp duty (which is GST-free), however, the rest of the policy is subject to GST. A GST credit cannot be claimed on the stamp duty portion of the policy as no GST is paid.
  • Government fees: GST is not charged on government fees i.e. council rates, land tax, ASIC filing fees, motor vehicle registration and water rates, and therefore, GST credits cannot be claimed.
  • GST-free purchases: Incorrectly claiming GST credits on purchases without GST, such as basic food items, exports and certain health services is a common mistake. Remember not all suppliers are registered for GST, so check the tax invoice before claiming a credit.
  • Entertainment expenses: Claiming the entire GST credits on entertainment expenses where the business has elected to use the 50/50 split method for fringe benefits tax is incorrect. Only 50 per cent of the GST credits can be claimed.
  • Wages and superannuation payments: Both wages and super do not attract GST and cannot be claimed. Wages are not an expense to be included in G11; they are to be reported in W1 in your BAS. Superannuation is not included in BAS.
  • Sole traders and partnerships: When claiming expenses that are used for both private and business use, you must apportion the expenditure to exclude private usage.

If you find that a mistake was made on a previous activity statement, the ATO says you are able to:

  • correct the error on a later activity statement if the mistake fits the definition of a “GST error” and certain conditions are met;
  • lodge an amendment – the time limit for amending GST credits is 4 years starting from the day after the taxpayer was required to lodge the activity statement for the relevant period, or
  • contact the ATO for advice.

If you find this process is too time-consuming or too difficult to complete yourself, the best way to ensure that you remain compliant and avoid making these mistakes is to contact a registered BAS agent for assistance.

A Business Plan Requires Structure – Here Are 5 Things You Should Be Including In It

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When you are first setting up a business, understanding exactly what you are setting out to achieve can be a daunting task. But a business plan takes some of that stress away by helping to cement your business idea into achievable goals. It can be as simple as dot pointing your strategy on the back of an envelope, or a 30-page report of what your business is hoping to achieve.

However, a formal business plan should consist of specific information that you can present to investors (or a bank, or just your spouse) as an indication of how your business will succeed.

Your Concept

What is the point of the business? In this section, try to outline your plan succinctly.  You should discuss the industry that your business will be operating within, what structure your business will take, the particular product or service

Actioning The Strategy

What goals do you have for your business? When and how will you reach your goals? Do you have a clear set of steps that you need to take to implement your strategy into being?

Why Your Product?

What’s the competitive advantage of your product over the others in your field? Are you a solicitor who specialises in family law? Do you sell vintage merchandise for Aussie Rules football teams?

What niche does your business fulfil that your customers need? Provide solid information about your product to your readers, and explain the reasoning behind why your customers will want to purchase your product, and not those of your competitors.

The Market

Who are your target customers? What demographics do your customers primarily lie in? How will you attract and retain enough customers to make a profit? What methods will you use to capture your audience? What sets your business apart from the competition?

Answering these questions will assist you in planning out your marketing strategy, and demonstrate to your investors that you understand how you will be targeting your customers.

Financial Needs

These will be based on your projected financial statements. These statements provide a model of how your ideas about the company, its markets and its strategies will play out.

Obviously, a report that outlines your business plan is probably preferable to a scrap of an envelope, but the main point to this is working through the business idea in a written form that you can take to your business strategists to formulate a more comprehensive and viable business plan that aligns with your goals.

As you write your business plan, stick to facts instead of feelings, projections instead of hopes, and realistic expectations of profit instead of unrealistic dreams of wealth. Facts—checkable, demonstrable facts—will invest your plan with the most important component of all: credibility.

It’s time to start writing that business plan if:

  • You have a new idea for a business and want to explore its feasibility
  • Your industry is undergoing significant changes and dramatic developments, and you want to map them out for your current business
  • You’re looking to sell your business and want to establish a value for it that can be supported by facts and figures.
  • You require financing for your business idea and want to plan out how you’ll expend the resources you’re committing.

If you’re looking for assistance with planning for your business’s future, you can come speak with us.

Structured Settlement Contributions – What Are They And Why Should You Care?

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Disasters, be they natural or man-made, can happen to anyone. It could be a car accident, a tree crashing through the roof, or a bushfire hitting your residence. In any case, an event that causes significant harm or impact that affects someone’s everyday life in an adverse way is never pleasant.

Thankfully, as a society, there are laws that provide compensation to people who experience these accidents as a result of someone else’s actions and are significantly impacted. If someone were to be (potentially) disabled for life due to such an incident, there may be a substantial compensation payout.

The idea of this compensation is not only to compensate for economic loss but to also provide a capital amount for the person’s living costs for the rest of their lives. Often that compensation will run to millions of dollars. Sounds like a lot, right?

If you receive compensation for becoming totally and permanently disabled, investing this lump sum should make it last far longer. This action will require careful planning and professional advice. Consulting with a professional on this financial decision may be in your best interest.

One effective strategy that can be used here is to make what is known as a Structured Settlement Contribution to superannuation.  You can then use your superannuation to pay you a pension.  If done correctly, all the money that your investment earns in super should be tax-free and all of the money that you draw out of super should also be tax-free. Removing tax from the equation when it comes to the money that you can draw out of your super will have a massive impact on your ability to have that money last your lifetime.

However, you need to make sure you comply with all of the rules around making a structured settlement superannuation contribution. These rules include:

  1. You will usually have to be under 67 at the time of making the contribution
  2. The contribution needs to be made within 90 days of getting the money
  3. Two doctors need to certify that you are totally and permanently disabled
  4. The payment must be compensation for personal injury where someone else was at fault or for workers compensation
  5. You must notify your super fund that it is a structured settlement contribution

The contribution will also have no impact on your pension transfer balance limit.  This means that if you make a structured settlement contribution of $2 million then you will now be able to transfer $3.7 million into a pension instead of the usual $1.7 million.

The payments are usually received after a lengthy legal process and it is probably not something that will be top of mind for the 90 days following receipt of the funds but the decision to contribute the amount to superannuation can have a lasting positive impact on your after tax income.

Consulting with a registered professional about your options regarding contributions, withdrawals and general options can give a better understanding of what you might be in a position to do.

End Of FBT Year Is Approaching – Do You Know What Benefits You’re Giving Your Employees?

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As a part of your employees’ employment contracts, do they receive benefits such as a car space, gym membership or even a car to drive?

These are what’s known as fringe benefits, which is a ‘payment’ to an employee that takes a different form to salary or wages. This incurs a specific kind of tax separate from income tax known as fringe benefits tax, which is based on the taxable value of the fringe benefits provided. FBT applies even if the benefit is provided by a third party under an arrangement with the employer.

Knowing what is and what isn’t deemed as a fringe benefit will assist you in working out what you might provide to your employees as a benefit for working with you.

Examples Of Items That Are Fringe Benefits

  • Allowing an employee to use a work car for private purposes
  • Giving an employee a discounted loan
  • Paying an employee’s gym membership
  • Providing entertainment by way of free tickets to concerts
  • Reimbursing an expense incurred by an employee, such as school fees
  • Giving benefits under a salary sacrifice arrangement with an employee.

Examples Of Items That Are Not Fringe Benefits

The following are not fringe benefits:

  • Salary and wages
  • Shares purchased under approved employee share acquisition schemes
  • Employer contributions to complying super funds
  • Employment termination payments (including, for example, the gift or sale at a discount of a company car to an employee on termination)
  • Payment of amounts deemed to be dividends under Division 7A
  • Benefits provided to volunteers and contractors
  • Exempt benefits such as certain benefits provided by religious institutions to their religious practitioners.

Employees don’t have to worry about paying the tax on these items, but it is an area of concern that employers need to be careful of. Employers must self-assess their FBT liability for the FBT year (which ends 31 March) and lodge an FBT return.

Employers can generally claim an income tax deduction for the cost of providing fringe benefits and for the FBT they pay. However, there are ways in which you may be able to reduce your liability when it comes to FBT.

These methods include:

  • providing benefits that are income tax-deductible
    • If your employee is given a benefit that they could otherwise have claimed themselves.
  • using employee contributions
    • If your employees contribute to the cost of the FBT themselves through cash payment to the provider of the benefit, the taxable value of the fringe benefit can be reduced by that amount
  • by providing a cash bonus
    • If you provide your employee with a cash bonus instead of a benefit you won’t have to pay FBT, and the employee will pay income tax on the amount.
  • providing benefits that are exempt from FBT.

FBT exemptions can sometimes be changed by the Australian Taxation Office (ATO), which can affect your FBT liability.

One such change was the FBT Retraining & Reskilling Exemption. Under this change, if you are an employer who is providing to their employees who are redundant (or soon to be made redundant) a benefit that encompasses training or education.

The exemption can be applied to retraining and reskilling benefits provided on or after 2 October 2020. This exemption is not to be included in your 2022 FBT return or in your employee’s reportable fringe benefits amount. If you have already lodged your 2021 FBT return though and paid any FBT owing, you can amend your 2021 FTB return to reduce the FBT paid for retraining and reskilling that is exempt.

It’s advisable to consult with a tax agent (such as us) if you need to amend an FBT return (as we are equipped with the tools and skills to negotiate what can be a tricky area filled with complexities and traps). Now’s the best time to speak with us about your FBT liability, what you might need to include in your return and more. Start a conversation with us today.

Cash Flow Checks For Businesses Are Best Done As Soon As Possible

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After the stress of the holiday period, there are plenty more times throughout the year that cashflow issues can become a recurring problem that you need to get on top of.

Small businesses with cash flow problems may put themselves at risk of failing or suffering significant financial hardship.

Cash flow provides a business with stability so they are able to pay employees, avoid loan defaults and pay the overheads necessary to keep their business up and running. Follow these tips to boost your cash flow so you can secure your business’ future.

Perform A Business Health Check

Preparing financial statements will give you an objective insight into the health of your business. Identifying if you have a cash flow problem is the first step to coming up with solutions. Looking into the following reports will allow you to see if your cash flow is up to scratch.

  •     A balance sheet will tell you what your business is worth on any given day. The value of your business is calculated by subtracting your liabilities from your assets.
  •     Profit loss statements reveal if your income is meeting your expense requirements. If your profit is dipping below your expenses, it is time for a change.
  •     Cash flow reports reveal the money that is going in and out of your business over a set period and identify peak and off-peak periods

Use A Business Budget

After analysing your cash flow situation, is your cash flow cyclical?

Creating a yearly budget is not only imperative to receive financing in future, but will also help you identify the best months to save to cover the quieter months. Where applicable, business owners can consider flexible rostering, whereby employing casuals and using a flexible roster can help you cut back on hours when you need to improve your cash flow in quiet periods.

When you have identified your quieter periods of the year, try to find additional revenue streams for when cash is low. Is there a product or service that could be introduced? Work with your team for new ideas to cover low cash months.

Get On Top Of Your Accounts Receivable

Allowing late repayments jeopardises your cash flow and can put you in a tight financial spot. Avoid being out of pocket by implementing some of these credit policies:

  • Collect the debts on time – allowing late payments means that you’re without those funds for longer
  • Offer an early bird discount to incentivise early repayments – it pays to repay that kindness
  • Set credit limits and payment terms – know exactly what your terms and conditions are so that you can make sure that those who owe you are abiding by them
  • Make credit applications and carry out credit checks on all new customers
  • Penalise late payments with interest – set a specific interest rate that will apply and which you deem as fair.
  • Consider cutting down on inventory – unsold stock can be a waste of funds, and if you’re finding yourself with plenty of it, you may not need to be ordering as much.
  • Request upfront payment or a non-refundable deposit where viable, especially when dealing with large orders.

If you’re looking for assistance with invoicing, chasing payments or a general checkup of your business’s cash flow situation, accountants like us are equipped to help. Speak with us to find out what we can do for you.

Common Mistakes Often Made By SMSF Trustees That You Can Avoid

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Involvement in an SMSF can put certain responsibilities in their trustees hands, and those who overlook important details or find themselves reported to the ATO for failing to fulfil those responsibilities may risk incurring financial, civil or criminal penalties.

As SMSFs often involve multiple members, the risk of non-compliance grows. You might be doing the right thing, but can you say the same thing about your fellow trustees?

That is why the role of the trustee should not be taken lightly as with greater control comes greater responsibility, should the administration of your SMSF go awry.

Make sure your retirement nest egg is protected by avoiding these common mistakes made by SMSF trustees.

Breaching The Sole Purpose Test

SMSFs must be maintained for the sole purpose of providing retirement benefits to your members (or for their dependents if a member dies before retirement). You will fail the test if a member gets any financial benefit through an investment, aside from increasing the return to your fund.

For example, a member’s personal use of a holiday house purchased by the fund, without making rental repayments, would breach the sole purpose test. The rules can become complex, which is why seeking professional advice may be wise. Trustees who breach the sole purpose test will lose their fund’s concessional tax treatment and could be liable for civil and criminal penalties.

Financial Assistance & Member Loans

Trustees can make the error of accessing their SMSF funds at will instead of following strict super laws. You cannot access your SMSF bank account to give financial assistance or loans to members or members’ relatives, improve your cash flow, repay debts or make personal investments. There have also been reports of withdrawals from SMSFs accidentally on mobile banking apps. Avoid ATO sanctions and keep your bank accounts separate to ensure no premature withdrawals are made from your SMSF account.

Failing To Lodge Paperwork On TIme

SMSF trustees must comply with demanding reporting and recordkeeping requirements. Your SMSF will have an annual audit. Failure to produce certain documents or make the deadline date will result in your SMSF being reported to the ATO. It is crucial to keep accurate records of all decisions and transactions should the ATO take an interest in your SMSF. A financial advisor may be helpful to take the stress out of keeping on top of your paperwork.

Not Planning For The Death Of Another Member

The death or illness of a member of your SMSF can have devastating effects on your retirement savings if you are not prepared. Dependency on one member to administer the SMSF can destabilise the fund if they pass away. Ensure that responsibilities are evenly distributed, if necessary, and that there is a clear understanding of the processes of the SMSF.

Go further than taking out life insurance policies and take the following precautions:

  • Educate all of the members on the basic rules and strategies of your SMSF
  • Employ an accessible financial advisor to answer any questions you may have about it, and to ensure that you remain compliant.
  • Allow access to passwords and account numbers for all members
  • Regularly review your binding death benefit nominations
  • Know the processes of your SMSF, and be aware of the responsibilities of the trustees.

Business Activity Statements – How To Take The Sting Out Of The Quarterly Payment

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Been hearing a lot about business activity statements, and feeling more than a little pressure?

Kicking off the new year for your business shouldn’t be shrouded in the darkness that can be a looming BAS. But how can you be certain that your business is prepared?

To start with, demystifying the BAS might alleviate some of that anxiety and pressure your business may have been facing. Essentially, a business activity statement (BAS) is a government form that all businesses must lodge to the Australian Tax Office (ATO). All businesses registered for GST need to lodge a business activity statement (BAS). This can be done with the assistance of a registered tax agent or BAS agent.

A BAS is a summary of all the business taxes you have paid or will pay to the government during a specific period of time. You may lodge your BAS monthly, quarterly or annually (depending on the size of your business you may not have the annual or quarterly option) or may do so through your tax/BAS agent.

When lodging your BAS, you need to include these payments within it:

  • Goods and services tax (GST)
  • Pay as you go (PAYG) income tax instalment
  • Pay as you go (PAYG) tax withheld
  • Fringe benefits tax (FBT) instalment
  • Luxury car tax (LCT)
  • Wine equalisation tax (WET)
  • Fuel tax credits

A BAS is issued by the ATO either monthly or quarterly. A form needs to be lodged with the ATO and payment made to the ATO by the due dates as follows:

  • For monthly BAS: within 21 days of the end of the month on the form
  • For quarterly BAS:
    • Quarter July – September: Due 28 October
    • Quarter October – December: Due 28 February
    • Quarter January – March: Due 28 April
    • Quarter April – June: Due 28 July

(as registered tax agents we are given an extension to most of these deadlines)

You may instead be eligible to submit an Instalment Activity Statement (IAS). In the IAS, the ATO tells you every quarter what your GST instalment amount is and where applicable your PAYG instalment amount is.  Essentially, the IAS is a form that is similar to the BAS, but simpler in that you do not have to be concerned about GST and some other nominated taxes.

Businesses that are not registered for GST and individuals who are required to pay PAYG instalments or PAYG withholding (such as self-funded retirees) use this form to pay PAYG.

IAS provides a little more flexibility in the arrangement as the instalments are advised by the ATO on what you need to pay to cover your liabilities.

You may be able to vary those amounts if you feel that the advised instalments are too much or not enough to cover your liabilities. You may also be able to pay the amount in one lump sum at the end of the year. Before changing the amount due, or the timing of the payment, it’s best to consult with us (or your registered BAS agent) for additional advice to suit your circumstances.

Preparing For Your BAS

Your IAS and BAS can be used to assist in monitoring your business finances. Though you only need to lodge these every quarter, waiting until the due date to get all of the information you require for the statements may cause you to miss out on critical observations (such as how much you may actually owe the ATO).

Daily tracking of your income and expenses can assist in calculating your GST and other liabilities on your BAS, and allows you to ensure that there won’t be any nasty surprises waiting for you.

Here are some tips on how you can prepare for your BAS or IAS this quarter

  • Get everything up to date (such as your accounting software), and ensure that all of your bank feeds are imported, allocated and reconciled.
  • If you are completing the BAS yourself, ensure that the reports from your accounting software are printed off every week – this should give you an estimate of what you would have to pay if your BAS was due right away.
  • Check that your bank account for your business has enough money in it to cover your BAS payment.
  • Create a profit and loss statement after printing your BAS reports to show you how much money has been made in the week (or month) to date

SME Recovery Loan Scheme Rules Amended To Cope With Impact

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Are you an SME who has been impacted economically by COVID-19, and who could use financial assistance to get back on their feet?

The SME Recovery Loan Scheme has been extended to 30 June 2022 with a reduced Government guarantee of 50 per cent. This is known as the 2022 Scheme expansion, where loans will be available from 1 January 2022 at the new Government guarantee.

Earlier this year (April 2021), the Government announced the SME Recovery Loan Scheme (also known as the Scheme), which was designed to support economic recovery and provide continued assistance to small and medium enterprises dealing with the economic impacts of the coronavirus pandemic.

The Scheme was initially slated to be available from 1 April 2021 through to 31 December 2021 at a Government guarantee of 80 per cent of the loan amount.

The scheme is open to small and medium-sized businesses with up to $250 million turnover including self-employed and non-profits. The Scheme has been open to (so far) eligible SMEs that were:

  • The recipient of a JobKeeper payment between 4 January 2021 and 28 March 2021 (only approved under this eligibility prior to 1 October 2021)
  • Affected by the floods in eligible LGAs in March 2021 (only approved under this eligibility criteria prior to 1 January 2022
  • Adversely economically affected by COVID-19 (can only be approved under this eligibility criteria prior to the Scheme Expansion Date, 1 October 2021).

These loans that are issued under the Scheme are able to be used to refinance existing loans, or for a broad range of business purposes, including to support investment. They cannot be used to:

  • Purchase residential property
  • Purchase financial products
  • Lend to an associated entity, or
  • Lease, rent, hire or hire purchase existing assets that are more than halfway into their effective life.

These loans may be used to refinance any pre-existing debt of an eligible borrower, including those from the SME Guarantee Scheme.

Participating lenders are offering guaranteed loans on the following terms under the SME Recovery Loan Scheme (2022 Scheme expansion):

  • the Government guarantee will be 50% of the loan amount
  • the expanded Scheme will not be available for loans to flood-affected SMEs that are not adversely economically affected by COVID‑19
  • the expanded Scheme will commence on 1 January 2022 and end on 30 June 2022.
  • lenders are allowed to offer borrowers a repayment holiday of up to 24 months
  • loans can be used for a broad range of business purposes, including investment support
  • loans may be used to refinance any pre‑existing debt of an eligible borrower, including those from the SME Guarantee Scheme
  • borrowers can access up to $5 million in total, in addition to the Phase 1 and Phase 2 loan limits
  • loans are for terms of up to 10 years, with an optional repayment holiday period
  • loans can be either unsecured or secured (excluding residential property)
  • the interest rate on loans will be determined by lenders but will be capped at around 7.5 per cent, with some flexibility for interest rates on variable rate loans to increase if market interest rates rise over time

Loans that are backed by the scheme will be available through participating commercial lenders. The decisions to extend credit and the management of the loan remains with the lender.

The SME Recovery Loan Scheme may be a viable option for your business if it has been impacted by financial hardship. If you would like to know more about this scheme, you can begin that conversation with us or a participating lender.