FINANCIAL ACCOUNTING – 2021 SEMESTER 1 VIDEO PRESENTATION

FINANCIAL ACCOUNTING – 2021 SEMESTER 1 VIDEO PRESENTATION

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Introduction

COVID-19 has brought a lot of Australian businesses to their knees, leading to massive loss of jobs and loss of businesses. In response, the Australian Government small business stimulus/relief package was announced earlier this month as part of a number of several relief and stimulus packages intended to help in the sustenance of small microenterprises through the ongoing COVID-19 pandemic. The overall aim of the packages are to help in keeping small businesses afloat, a sector that has especially been hit hard by the pandemic. It is important to note that the decision to help these small businesses comes as a result of the number of people who have lost their means of sustenance, including business owners and employees in different parts of the country. Another aim of the Australian Government small business stimulus/relief package is to keep the majority of the Australian workforce working in the informal sector in work. Although the measures are temporary, scalable, and targeted, they are aimed at helping small businesses rise as the economy tries to recover from the slump that occurred since the announced of the coronavirus pandemic in March 2020. These measures will rescue a number of struggling businesses, help to boost employment, and keep a lot of Australians employed during the pandemic.

Description of Policy

The Australian Government small business stimulus/relief package will include a number of packages designed for different business types and for various needs. First, the SME Recovery Loan Scheme is mean to supplement the JObKeeper Payment Plan that was issued early this year. The SME Recovery Loan Scheme will be a business loan that will offer business owners the opportunity to refinance their existing loans with commercial lenders. The features of the SME Recovery Loan Scheme include: 80% government guarantee, repayment holidays and extensions amounting to 24 months, 7.5% interest rate cap, maximum $5 million loan size, and a maximum repayment period of up to 10 years.

In the same Australian Government small business stimulus/relief package, another bundle for small businesses is the JObMaker Hiring Credit, announced to encourage small enterprises to hire young people for new openings. The payment will be available for eligible employers for up to 1 year, for all positions issued to young people. In this program, employers will receive $200 per week for employees hired in the stipulated period aged between 16 and 29 years, and a $100 for those aged 30 and 35 years.

The Australian Government small business stimulus/relief package also highlights tax benefits in the form of the Tax and Fringe Benefits Tax Concessions. The concessions were announced to include tax reduction for individuals, reduction of business start-up expenses, changes to fringe benefits tax for employees, incentives on research and development, and a loss carry back offer for small businesses. On this basis, the Australian Tax Office will consider relief for tax obligations to specific small business that are eligible for such programs, including deferral of tax payments for periods not exceeding four months.

Interest of the Issue to External Stakeholders

Some of the main stakeholders include small business owners, their employees, customers, local communities, the government, and suppliers. The tax relief and stimulus packages that the government has rolled out to small businesses in Australia will be critical in ensuring that the Australian worker remains employed during the current difficult financial times. Customers will be happy to know that their favorite brand is still in business, while suppliers will be able to keep their business open too. The local community stands to gain more as these small businesses support the growth of local communities. Young people are also set to gain from the tax relief programs and the considerations for their employment.

Statement of Position

I find the Australian Government small business stimulus/relief package a very effective way to keep the country’s economy running despite the difficult economic and employment conditions brought about by the COVID-19 pandemic. Tax relief programs, tax back provisions, loan provisions, writing off bad debts, and other tax deductible expenses will be important in keeping businesses afloat. When accounting for the relief and stimulus packages, tax payments will be debited in the income tax expenses and credited in the cash account. Likewise, tax refunds received will debit the cash account and credit the income tax expenses, while planned tax refunds will debit the income tax receivables and credit the income tax payable. For small businesses, a business activity statement will be required. For those eligible to the Australian Government small business stimulus/relief package, a payroll report will be necessary, including a quarterly business activity statement, and the fringe benefit tax details. These disclosures are required due to their role for impacting the direction of a business, whether through banks, suppliers, local governments, local communities, third party partners, or any other external stakeholders.

Reference List

Small Business Development Corporation (SBDC) 2021, Australian Government small business stimulus/relief package, Government of Western Australia, viewed 27 April 2021, <https://www.smallbusiness.wa.gov.au/blog/coronavirus-stimulus-package-small-business>