As many of you will know, Australia is officially going through a recession. It’s the first time our country has been in a recession since 1991, with the economy shrinking 7 per cent from April to June thanks to Covid-19.
According to data from the Australian Bureau of Statistics, this is the biggest fall since the government began keeping records in 1959. It’s a big deal.
As a result, the government has been doing all they can to stimulate the economy, support the population and our businesses. In addition to measures like JobKeeper and JobSeeker, this has also included the Cashflow Boost for Business Package which was one of the very first measures introduced by the Australian government in March of this year.
What is the Cashflow Boost for Business Package?
Don’t remember what the Cashflow Boost for Business Package was? Fair enough - a lot has happened since March!
Basically, this package consisted of temporary cash flow boosts aimed at supporting not-for-profit, small and medium businesses to help handle the economic downturn that occurred as a result of the pandemic.
Under the program, eligible businesses would receive $20,000 to $100,000 when they lodged their business activity statements.
The amount would be equivalent to the amount that companies withheld from employees’ salaries (also known as PAYG).
This money would then be delivered as credits within the activity statement system and be applied to reduce liabilities arising from the same activity statement. Businesses didn’t need to apply for the cash flow boost, but would automatically receive it when they lodged their BAS.
This boost came in two waves. The first applied from March to June 2020 and the second from June to September 2020.
And, while we know that the boost will be finishing up at the end of September, the government hasn’t explicitly told the public how this will happen - whether the boost will be immediately cut off or slowly phased out.
How will the end of the cashflow boost affect me?
Whether you are a business owner or an employee, the end of the cashflow boost will definitely affect you - so it’s best to start preparing your budgets and wallets for the coming months.
As an employee, it’s important to realise that your workplace may not be able to keep all its employees on board at its current capacity.
Coupled with JobKeeper being reduced by 20 per cent, this could mean reduced hours, reduced pay or - in the worst case scenario - loss of staff members. Your employer will have already started thinking about how they’re going to handle this, but if they haven’t yet communicated to you, it’s definitely worth asking your boss what the next steps will be. Consider asking questions such as:
- Is there going to be a reduction of my hours or salary? If so when will this take place and for how long?
- What will this mean for the support that our customers/clients will receive?
- What does this mean for the workload of my fellow colleagues?
For employers who are preparing for the end of the cashflow boost, you’ll need to start considering how you will manage this for both your business and your staff members. I recommend asking yourself questions like:
- Will you be applying for JobKeeper 2.0?
- Can your current cashflow support the reduction of JobKeeper and removal of the Cashflow Boost?
- Have you considered other funding support?
- Can you support the payment of Activity Statements and PAYG without the Cashflow Boosts?
- Have you made a plan for your changing staffing and resource needs?
- Will you need the same amount of staffing support in the coming months?
- Have you amended your business plan and budget to account for the upcoming changes?
- Have you communicated your plans to employees?
It’s no secret - these are tough times and there are further challenges ahead that we need to start preparing for. And while there are significant questions that stand unanswered by the government, it’s important to keep informed and aware of updates in these areas and how they may have a very real impact on you and your finances.
Regardless of whether you’re an employee or business owner, I highly recommend speaking to your financial advisors about how you can best prepare for the upcoming months should they have a negative financial impact on you.
As we adjust to the new norm of the Australian economy, and the recession we unsurprisingly find ourselves in, it’s important to look forward, plan where possible and most importantly, look after one another! It’s a wild world out there - but we truly have it better than most here in Australia and for that, and the beautiful Spring weather, I’m grateful.
This piece was written originally for Yahoo Finance Australia.