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Small businesses taking advantage of federal and state government stimulus measures will need to deal with the hard reality of the post-September crunch, warn accounting professionals.
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Tough post-JobKeeper conversations needed now, warn tax professionals
07 July 2020
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12 minute read
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The end of September is shaping up to be a critical time for many businesses with the JobKeeper wage subsidy set for its legislated end, the cessation of temporary insolvency relief and the resumption of deferred loan repayments.
Close to 900,000 businesses are now on JobKeeper, covering 3.3 million employees, with each business satisfying the requisite drop in turnover at some stage to qualify for the payments.
SV Partners director Stuart Otway believes business owners need to start assessing whether their business can stand on its own two feet without government supports in place.
“Many business owners will face combined pressure of the need to once again rely solely on their own turnover as well as creditors seeking to recover debts, some of which could have been outstanding prior to March 2020,” Mr Otway said.
“Prudent business owners should plan for these changes now. In particular, business owners, with the help of their accountant and advisers, should look to assess the viability of their business in a post-COVID world in an objective manner.”
Mazars tax partner Jamie Towers believes cash-flow forecasts will be essential, with tough conversations potentially on the cards with non-viable businesses.
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“If the particular business doesn’t foresee any cash flows coming into the business after [the government’s stimulus measures come to an end], they really need to be thinking about how to move forward, whether they bring the business to an end or they change the business to allow it to keep trading,” Mr Towers said.
“The business needs to rethink how it can survive these turbulent times.”
Creditor activity
With small businesses owing a collective $16.5 billion in tax debts in 2018–19, and the ATO looking to recommence its debt and lodgement intervention activities shortly, directors have been urged to start negotiating payment plans.
“Most creditors will be expecting such requests and many credit managers including the ATO will be receptive to customers that act in a proactive and open manner,” Mr Otway said.
“Creditors, including the ATO, expect business owners to be proactive in the management of their business and will be less likely to entertain repayment plans, debt compromises when business returns to ‘normal’, so now is the time to start this planning process.
“If the business isn’t viable, that should be identified early so that a plan can be formulated to turn the business around.”
Refer clients on
Acknowledging the workload and stress that the profession had to deal with in supporting clients with the government’s stimulus measures earlier this year, Mr Towers believes practitioners will soon be called upon again to help clients deal with the September cliff.
However, he believes practitioners should start leaning on each other, particularly when client discussions begin to drift from their realm of expertise.
“The smaller practitioners or those practitioners that either don’t have the time or the expertise, I think they can take a lot of advice from the medical field — if you think of a general practitioner, when it gets too difficult, they refer to a specialist medical adviser,” Mr Towers said.
“If you’re a general accounting practitioner and you’ve never had to deal with liquidations or insolvencies or things like that before, go and seek the advice of a turnaround specialist or an insolvency adviser to help clients through that.
“Your clients will appreciate that you can’t be everything to all clients and will appreciate you pointing them in the best direction.”
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