With the revival of border closures and the discovery of a new strain of the coronavirus, we must prepare so we can cushion any pain our businesses may suffer the rest of the year. Here are the top 5 policy changes SMEs need to know in 2021:
- temporary debt relief measures ended on 1 January
- JobKeeper is extended until 28 March
- new insolvency process
- supplier payment times, and
- HomeBuilder extension.
We are seeing in January the start of a range of real problems for small business that are still pretty sluggish, and haven’t recovered at this point.
– Kate Carnell, Australian Small Business and Family Enterprise Ombudsman
Temporary debt relief measures ended on 1 January
As of 1 January 2021, temporary debt relief changes have ceased.
The bankruptcy threshold was also amended to the following:
- the minimum amount of debt that can trigger bankruptcy is $10,000, down from $20,000
- an individual has to respond to a bankruptcy notice 21 days, reduced from six months
- temporary debt protection allows for 21 days relief from creditors, instead of six months.
With the temporary amnesty lifted, creditor’s statutory demands against debtors will revert back to a $2,000 minimum debt. Debtors will have 21 days to comply with these statutory demands.
JobKeeper is extended until 28 March
The government has extended JobKeeper until 28 March. Some of the important provisions are the following:
- actual GST turnover declined in the December 2020 quarter relative to the same period in 2019
- tier one rate for employees who satisfy the 80-hour threshold will be $1,000 per fortnight
- tier two rate will be $650 per fortnight for those working fewer than 20 hours per week
Businesses who are already receiving JobKeeper payments need not re-enrol. They do need to declare their revenue and pay their employees the new JobKeeper amounts. They also need to continue to complete monthly business declarations.
You can read detailed provisions of the extended JobKeeper here.
Businesses that still qualified for JobKeeper – because turnover was still down 30 per cent – risked losing staff who decided to take jobs at full pay in more buoyant parts of the economy, Ms. Carnell told The Australian Financial Review. Those that lost JobKeeper would not only have to pay staff in full but would also lose rent and utility relief, which could also force layoffs, Ms. Carnell added.
There would soon be a “purge” of defunct businesses that should have failed last year.Marcus Ayres, managing director for restructuring at Duff & Phelps
“We’ll also see businesses that held on too long being wound up immediately – as opposed to restructuring either formally or informally – but it won’t be of a scale predicted by doomsayers,” Mr. Ayres added.
New insolvency process
The new insolvency process for small businesses is effective from 1 January. Among the notable features of the process are:
- transition from ‘creditor in possession’ model to ‘debtor in possession model’
- businesses with liabilities of less than $1 million stay in control of their business
- a restructuring practitioner can help insolvent businesses create a plan
With small businesses staying in control of their business, they can continue to trade while reorganizing their debts. Only at least 50% of creditors need to vote in favor of the plan for it to be approved. If the creditors do not approve the plan, the company may be placed into liquidation. Another alternative would be placing the company in voluntary administration.
Supplier payment times
Addressing delayed payment times, which adversely affects the cash flow of SMEs, the government rolled out, effective January 1, the Payment Times Reporting Scheme (PTRS) for large businesses (or those with a total yearly income of more than $100 million).
Here are some of the changes expected to happen alongside the rollout of the PTRS:
- businesses will detail their supply chain financing arrangements including reverse factoring in an online register
- a regulator will publish the first public report in the online register in July
- SMEs can opt in or out of a small business identification tool, which helps larger businesses find out who their suppliers are
- civil penalties will kick in for large businesses that fail to report or give false information to the regulator after 12 months
The government extended the HomeBuilder program to 31 March. Changes to the program include:
- $15,000 grant for building contracts signed between 1 January and 31 March, inclusive
- applications can now be submitted up until 14 April
- extension to the construction commencement timeframe from three months to six months
- increase to property price cap for new build contracts in NSW and VIC to $950,000 and $850,000, respectively, where the contract is signed between 1 January and 31 March, inclusive
Failing to plan is planning to fail, or so the famous saying goes. Every year brings us new challenges, some unexpectedly worse than others. We cannot completely predict all that would happen to our businesses this year, but for situations that are within our control (e.g. regulatory compliance), it is best to prepare as early as now given we already have a guide on policy changes SMEs need to know this 2021.
If you are a business who is struggling to collect on delinquent accounts, we advise you to lodge your debts before the real pain in the economy starts to happen.
Liam White joined the Slater Byrne Recoveries team in early 2013. He has worked across the credit & dispute resolution industry for a number of years. He is currently National Head of Sales at Slater Byrne Recoveries.