The wine industry has been significantly impacted by the Covid-19 pandemic. In light of this, the Australian and South Australian Governments have announced significant support to assist the industry through to better times. The Federal Government support is estimated to reach $320 billion in total representing 16.4% of GDP.
The support offered to the industry is provided in several different ways including:
The cash flow boost represents cash payments in respect of the reporting of PAYGW on the submissions of the March 2020 to September 2020 Business Activity Statements (BAS) or Instalment Activity Statements (IAS). Where entities qualify for the boost they will receive a minimum of $20,000 and a maximum of $100,000 over the relevant period. The payment is based on when the ATO is notified of the relevant PAYGW amounts.
The JobKeeper Program represents the most significant support ever provided by the Federal Australian Government. Where businesses are eligible, they are paid $1,500 pre-tax per fortnight, per eligible employee, for up to 6 months from 30 March. Importantly for many employees working within the wine industry, this will allow their employer to retain them in challenging economic times.
To be eligible for the program, amongst other eligibility criteria, businesses must demonstrate that their GST turnover has reduced by 30% or more as a result of the pandemic. With reduced wholesale sales from the forced closure of hospitality venues in addition to the reduced retail sales as a result of the closure of cellar doors, many wineries will be eligible for the program.
From 12 March 2020 until 30 June 2020 the instant asset write-off threshold will increase from $30,000 to $150,000 for businesses with an aggregated turnover of less than $500 million. For wineries that do have available funds or are able to secure low-interest finance this presents an excellent opportunity to secure viticulture farming machine or other assets of significant value in a tax effective way.
From 25 March 2020 to 25 September 2020 there is relief for directors from personal liability for trading while insolvent. This relief only covers debts incurred during the specified six month period and only applies in circumstances where there is no dishonesty or fraud. In addition there is an increased threshold for creditors to issue statutory demand from $2,000 to $20,000. This should be considered by wineries when they are making supplies to financially distressed businesses which could include those in the hospitality industry.
The ATO is being supportive during this time and with direct discussion with the taxpayer or their agent will accept deferals of payments of BAS debt, income tax assessments, FBT assessments and excise taxes. This can provide significant cash-flow support for those in the industry that have been significantly impacted by the pandemic. Taxpayers may also seek to vary PAYG income tax instalments to nil to further assist cash-flow.
The South Australian Government is offering $10,000 grants for small business that have been severely impacted by Covid-19. This may include wineries that have had to close cellar doors, cancel events and had wholesale sales reduced by closures to the hospitality industry. To be eligible, the business must have turnover of greater than $75,000 and total Australian payroll of less the $1.5 million, amongst other eligibility criteria. There is an application process required to access the grant.
For businesses with annual payroll between $1.5 million and $4 million there is a 6 month waiver of payroll tax. For those businesses with payroll in excess of $4 million there is a deferral of payroll tax to support cash flow. Submissions are still required to Revenue SA. Other States have made similar announcements.
Nexia Edwards Marshall are committed to assisting clients during these difficult times. Please contact Raoul Stevenson, or your trusted Nexia Edwards Marshall adviser if you have any questions in respect of the relief measures offered.
The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall Adviser.