Post COVID-19, how do we get business back on its feet?
Out of isolation, consumer confidence is returning. Business confidence will take a little longer and governments are willing to spend big to boost the engines of the economy.
The big winners will be those who look to where the government is heading with their investment incentives and gets there ahead of the crowd. I am not talking about pharmaceuticals, or mask manufacturing or making the materials to manufacture masks – those ships have long sailed.
Yet to be launched is a federal grant of $20,000 to change over commercial lighting to LED efficiency lighting. To be eligible you need to have a turnover of less than $10 million but there are few other conditions other than first in best dressed to enjoy the reduced power bills.
Asher Christophers of Austep Lighting Consultancy tipped me off to the program. Round one was non-profits, Asher helped out a lot of charities earlier this year. Round two will open in “mid 2020”. Asher’s tips are to get a lighting quote now, ready and in-writing, and watch the Energy website (www.energy.gov.au), though a good lighting consultant should do all that for you.
Free LED lighting is an election promise being fulfilled, however the new opportunities that caught my attention are:
- My merchant banker mate tells me that money has left the stock market and is looking for bargains to snap up, increasingly turning to new opportunities.
- Import substitution and “buy Australian” offers opportunities.
- Federal and state governments are subsidising and supporting “shovel ready” and “screwdriver ready” projects. Buy local scores highly.
- Some state governments are even helping with premises, subsidising rentals, and offering large grants if you are going to set up a factory in certain areas of need.
- Grants of up to $250,000 to conduct feasibility studies and further support in the form of grants and interest-free/loan guarantees can be worth millions. They already gave $1 million dollars to see the Poly Waffle chocolate bar reinvented.
Out of these tough times, some new and valuable businesses will emerge. It could be yours if you can move quickly. If you are not feeling so entrepreneurial, there are numerous assistance packages and more will emerge, making any list provided here out of date before the mail arrives.
JobKeeper is the big one and I trust you applied in time. Promised to last until September 30, 2020 we have already seen that Childcare workers will be excluded on short notice.
From what I hear from Canberra, there will be more changes to eligibility criteria, meaning more sectors drop out, or it might be based on the size of the company or even turnover improvements. It’s best to plan now for JobKeeper to stop on two week’s notice, just in case.
A positive announcement is that the instant write-off for purchases up to $150,000 has been extended by six months to 31 December, 2020.
The original program gave us only two months or so to take this up. So, we saw a few expensive Utes being purchased but few cost saving/job creating investments like a 100kW commercial solar system. That investment usually takes 100 days to design and install, making it tough to meet the 31 June deadline.
“Instant write-off” does not mean free. Let’s say a 99.9kW solar system will cost $135,000. There is an upfront federal subsidy that varies with latitude but in Brisbane you will get a $57,000 discount. So the net price on a simple flat tin roof would be $78k + GST. But, you do not pay that. Instead, you take out a preferential rate green loan and finance it over five years. That is safe because the system has a 4.2 year payback, meaning you will be saving more on your power bill than your repayments – cash flow positive.
I say loan not a lease – so that you own the asset – that is important. Now, when it comes to tax time, the ATO normally declares that solar systems last for 20 years (warranties are 10 years). You only get a deduction of $78,000/ 20 = $3,900 each year. Under the instant write-off you can deduct the entire $78,000 this year and reduce your tax bill this year, and next year if you have a tax loss carry forward.
This is what I mean by smart business thinking in today’s environment. Instead of buying an expensive truck, invest in an asset that reduces your business costs and improves cash flow from the first month. It even increases the value of your business – with lower power bills and business valuation based on a multiple of net earnings, you have instantly increased the value of your business.
It’s not just one bite of the cherry. You can make as many business purchases, up to $150k, as you like. But please, not only an imported truck – consider how you can also invest in your community. Buy local and deliver local jobs.
How to get help
Most of the assistance and advice you need is what industry associations and the local chamber of commerce should be spoon-feeding you. In practice, you may need to step out and find opportunities for yourself. Start with your local state and federal MP’s office where you could access a long list of assistance options.
PEA is offering a hand too. Just send the editor, Elaine, an email briefly outlining what you need to know, and we will get Gary Fooks or one of our team to help you get the ball rolling.
Gary Fooks is chair of the Blue-Sky Alliance.Gary has been working on small engine emissions standards since 2005 and was announced as the Environment Minister’s Clean Air Champion in 2015.