Future-Proof Protocol: 10 Necessary Measures To Safeguard Your Finances. Business x Personal

March 26 2020

Written by Brodie Haupt

Co-Founder of WLTH Finance Tracker & Properlytics

Please read if you want assistance in releasing the pressure valve and the burden of financial stress.

Read time- 15 minutes

This is an open, honest and transparent viewpoint to help increase chances of financial survival through this extraordinary time. I feel being at the forefront of financial literacy across multiple facets of the finance industry, it is my civic duty to share my thoughts on how the Australian community can adopt some important measures both personally and as business owners to navigate through this tough and testing period. 

Through my own journey as a multiple-business owner, tech founder, husband, father and friend I will share my overall viewpoint and skew on how I best think you can tackle the imminent stress and pressures that most of us are already really feeling the unquantifiable impact of. 

I should also make an important note, that this is by no way financial advice and should only be taken as my personal opinion with the hope this could make a difference to at least one person’s situation.  

 

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Ten Measures of the FUTURE-PROOF PROTOCOL

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1. Communicate

Start talking to the relevant parties. Open the conversation and don’t be afraid to ask for help. Utilise tech to keep in contact with family and friends. Self-isolation doesn’t mean to socially isolate. Talk with family, friends, colleagues regularly to lean on for social support. 

1a. Business

Depending on your situation, business, sector and a myriad of other variables communicate with your customers, clients, staff and supply chain. The best way to deal with these issues is head-on. You may even be politely surprised by the response, however, at the very least, it will give clarity around where you stand. 

Speak to your accountant about your projected cash flow and what you are entitled to under the government incentives. 

Don’t be afraid to negotiate pay cuts with your staff as opposed just letting certain members go, if you can afford too. At the very least ensure you have an open line of communication with your team about what you are planning.  

Reach out to your landlord and ask what they are doing around rental relief if any? Speak to all your suppliers and let them know what to expect, so they can plan too. As in business, we are all interdependent on one another. 

1b. Personal

If you have lost your job, speak with your employer and accountant around what can be done to help your situation. 

If you are still lucky enough to be employed but are worried about the business you work for or the industry you work in, don’t underestimate the power of negotiating a positive outcome for both of you. As in good times, we expect pay rises, so should we understand pay cuts in tough times. You may be able to save employment with open comms. 

Reach out to colleagues and friends who may be in a similar position and come up with an action plan. 

2. Think Change

We have an enormous opportunity to completely rethink the way we conduct and run our lives with COVID-19. As we all enter self-isolation we have a real ability to hit the metaphorical reset button on how we operate in every facet of our lives. Try to see the positive in this and start to utilise creative thinking in order to find a more effective and efficient way to do things. Change the way you work and develop good habits. 

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2a. Business

As we are forced to either pivot business models, careers or entire industries we need to think with an open mind. Write a business plan and work out how you could digitally transform your business if you can? The digital revolution just got a huge push thanks to COVID-19. Work out how you could adapt. Look at what competitors are doing? We have an enormous amount of free information available to help businesses get online, deliver e-commerce and service their clients digitally. What can you do to ensure this is possible? Even just utilizing free services like Google Meet to conduct face-to-face video calls can be a game-changer.  

2b. Personal

Don’t be afraid to think outside the box and work out ways you can become more valuable to your employer. Offer up ideas, put in extra effort and be understanding of the huge pressures your business owners may be under. If you already have been made redundant or let go, it’s time to think of ideas that can help you plug the hole while this saga passes. Make a plan for everything you can do to ensure you can cover your costs. If you do have the cushion of savings and can wait it out, then look into online learning and upskill during this time. Oxford and Harvard have some great and cost-effective online learning models. 

3. Budget

COVID-19 has completely changed the way everyone has to go about their lives and made people think about how they are managing their money. Now more than ever it is important to look at your spending critically and decide if certain items that have always been recurring through subscriptions and additional costs on top of your everyday needs are essentials or nice to haves. In order to project cash flows accurately, we need to know our cost base and do a hard reset on our outgoings. A great way to do this is through an updated budget. 

3a. Business

Revisiting your budget in a time like this is critical for success. Identify every cost in your business and find anywhere you can make savings in your entire supply chain. From staff costs, to rent, to products, subscriptions, cleaning, leasing. This is a time where you need to review and negotiate every agreement and contract. This will help you clearly identify what needs to be paid first. If you know you can’t afford to pay some suppliers, jump on the phone and communicate. People are reasonable and a payment plan may be something you can agree on. Make sure you utilise your CFO, bookkeeper or accountant to help you project revenue in alignment with the government incentives, so you understand when the funds will be made available. 

3b. Personal

It is important at a time like this to minimise spending so you know exactly where your money is going. Filtering expenses into categories makes it easier to see where your money is going and will assist when setting a budget. For example, if you are tracking expenses for Groceries, repayments, work, and kids you will know what you are spending across those groups.

When it comes to setting a budget, you will be able to give yourself a budget for each of these. As you go through the month, you will be able to keep on top of how you are tracking so that if you need to pull back on one of these areas then you can keep within your target. If a category has gone over budget, you can remove money from a different area so that you stay under your overall budget.

We have decided to put together a COVID Financial Support Package together for every Australian to access through offering out our financial tools for free throughout the crisis until it is over by way of a coupon code. 

We want to help all Australians to get on top of their finances throughout this time and offer our WLTH Plus subscription for Free for a minimum of 6 months.

If you would like to access the WLTH Finance Tracker to help you budget through this tough period, check out the article below. 

http://news.wlth.com.au/covid-financial-support-package

4. Sub-City

We now live in a world where digital subscriptions from streaming services rule our lives and constantly bill our credit or debit cards without us really noticing the impact. Take the time to consciously clean out your subscriptions.

4a. Business

One Acronym, SASS stacks. I was at a marketing conference late last year and we did an exercise to count how many platforms we used in our stack and my colleague and I counted 60 platforms we were paying for to run the engine of the business. Extortionary to think. Then you start adding in streaming services, telco, and internet services and it becomes a bitter pill to swallow. 

But don’t worry, there are alternatives out there. There are many services you can utilise that have the same capabilities but are either free or 10% of the cost of the major players in each sector. Do a full analysis of all your subscriptions and only keep the necessary ones. 

An easy way to stop the bleeding immediately is by cancelling the linked card the subscriptions come off and only re-enter the new card details once you have ordered a new one. This will enable you to consciously decide if it is absolutely imperative to your business or if there is a better cheaper option out there? Which is generally the case.  

4b. Personal

In an age where we have unlimited paid apps, food delivery apps and streaming services like Netflix, Kayo, Stan, Spotify, Apple Music, Amazon Prime, Disney+, Spotify & Apple music dominate our daily lives, surely there is something you can cull to cut down on non-essential spending. 

I did this recently and to think up until last year I used my brother's logins for Foxtel Go as I was too tight to pay for Foxtel, only to end up paying double across all of the above services. 

Streaming has moved at a crazy rate of knots over the past 24 months, surely it would be prudent to only have 1 or 2 and swap between the rest? 

See below an article that shows you how to manage your subscriptions via your i-phone, if that’s what you use, like me. 

https://support.apple.com/en-au/HT202039

5. Incentives

Know what you are entitled to from the Government/s. Local, State and Federal incentives, unwrapped. 

Each Council and State Government have individual initiatives outside of the Federal incentives listed below. Research, research, research, and share!

As an example, the Qld State Government is offering the Queensland COVID-19 Jobs Support Loans which is a 12-month interest-free loan up to $250,000. 

This is to support Queensland businesses impacted by COVID-19 retain employees and maintain their operations.

The $500 million concessional loan facility will comprise low-interest loans of up to $250,000 for carry on finance with an initial 12-month interest-free period for businesses to retain staff.

Information on the concessional loans will be available at:

http://www.qrida.qld.gov.au/news-and-events/Media-releases

5a. Business

ASSISTANCE FOR BUSINESS

Claim on tax while working from home

Working from home comes with its own challenges, not least the additional costs that it imposes. So, is it possible to claim a tax deduction for any of these extra costs? Absolutely, yes.

If you work from home, you can claim the work-related proportions of household costs such as:

- Heating, cooling and lighting bills. 

- Costs of cleaning your work area.

- Phone (mobile and/or landline) and internet expenses. 

- Small capital items, like monitors, chairs, desks and stationary.

To see a full list check out the article source below. 

https://www.smartcompany.com.au/finance/tax/working-from-home-coronavirus-tax-claim/

Cash flow for Employers

Employers with aggregated annual turnovers of less than $50 million will receive tax-free payments/credits to their tax accounts of between $20,000 and $100,000.  This is significantly increased from the measure announced last week (with payments initially intended to be between $2,000 and $25,000) and now also applies to Not-For-Profits and charities that employ people.

The payment is made in two parts. The first relates to the March – June 2020 lodgement period (amounts of between $10,000 and $50,000). The second relates to the June – September 2020 lodgement period. The second-period payment will total the same amount as that which was paid in the first period. 

Details of the scheme are:

  • Payments made to active employers that were established before 12 March 2020;

  • The amount will be a credit to the Activity Statement Account with the ATO in the amount of the withholding from wages (100% of the amount withheld), up to a maximum of $50,000, but with a minimum of $10,000 even if nothing is withheld as long as wages are paid.

  • If you lodge monthly, your initial period is March, April, May and June 2020.  Your second period is June, July, August and September. The March 2020 lodgement will pay 300% of the withholding amount, to make it consistent with those that lodge quarterly.  The second-period payments will be one-quarter of the initial period payments.

  • If you lodge quarterly, your initial period is Jan – March, and April – June.  Your second period is April – June and July - September 2020. The second period of payments will be half of the initial period payments.

Example: Sarah’s Construction Business

Sarah owns and runs a building business and employs 8 construction workers who each earn $90,000 per year. Sarah reports withholding of $15,008 for her employees on each of her monthly Business Activity Statements (BAS).

Under the Government’s changes, Sarah will be eligible to receive the payment on lodgement of her BAS. Sarah’s business receives:

  • A credit of $45,024 for the March period, equal to 300% of her total withholding for March.

  • A credit of $4,976 for the April period, before she reaches the $50,000 cap.

  • No payment for the May period, as she has now reached the $50,000 cap.

  • An additional payment of $12,500 for the June period, equal to 25% of her total first-period payment.

  • An additional payment of $12,500 for the July period equal to 25% of her total first-period payment.

  • An additional payment of $12,500 for the August period, equal to 25% of her total first-period payment.

  • An additional payment of $12,500 for the September period, equal to 25% of her total first-period payment.

In total, Sarah’s business will receive $100,000.

Previously Announced Measures Still Apply

There is no change to the measures announced regarding:

  • Increasing the Immediate depreciation write-offs threshold for eligible businesses up to $150,000 per eligible asset;

  • Providing an investment incentive to accelerate depreciation claims for eligible businesses where an immediate depreciation claim is not available;

  • Providing a wage subsidy of 50% for apprentice/trainee wages for eligible businesses.

ATO Deferrals

BASs for March – June 2020 are expected to be able to have the payment automatically deferred until 13 July 2020. No interest will be payable on the debt if paid by the new due date. The lodgement should still be made on time and we believe you will need to apply for the deferral. 

PAYG tax instalments are also able to be varied down for the March 2020 quarter. The ATO advises that no penalty will apply, even if the instalments would have been due under normal circumstances.

Other payment arrangements can also be negotiated, either by the business owner or by your accountant. 

Payroll Tax Deferrals

Businesses required to make payroll tax instalments in Queensland can apply to delay these payments until 3 August 2020.  This applies to the March – June quarterly payments and you can apply online if you have been affected by COVID-19.  The tax is still payable at this stage, but the delay should assist with cash flow.

Access to Business Loans

The government will guarantee 50% of borrowings to support new short-term unsecured loans to SMEs (up to $40 billion of new lending). The government is providing a temporary exemption to responsible lending obligations to make the process quick, and the major banks are working on their own loan packages to assist.  The RBA will also fund banks at low interest rates to ensure the credit is available. Contact your bank to discuss the options they might have available.

FINANCIALLY DISTRESSED BUSINESSES

Statutory Demands & Bankruptcy Proceedings

For a creditor to issue a statutory demand (which can often force companies into liquidation) the debt owed will need to be at least $20,000 (up from normally $2,000) and the timeframe to respond will be increased to 6 months (up from 21 days).  This applies for 6 months.

Additionally, the minimum debt for a creditor to initiate bankruptcy proceedings will increase to $20,000 (up from $5,000) and the timeframe to respond will be increased to 6 months (up from 21 days). This applies for 6 months.

Personal Liability for Insolvent Trading

Directors are relieved from personal liability for insolvent trading if they incur normal debts while continuing to trade in the ordinary course of business, for a period of 6 months.  Debts incurred by companies will still be payable by those companies.

Corporations Act Obligations

The Treasurer is being given the power to temporarily amend the Corporations Act, to ensure companies can make quick decisions without being technically legally constrained by provisions of the Act.

https://treasury.gov.au/coronavirus/businesses

https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Cash_flow_assistance_for_businesses_0.pdf

5b. Personal 

ASSISTANCE FOR INDIVIDUALS

Early Access to Superannuation

Eligible individuals can apply through myGov to receive up to $10,000 of their superannuation before 30 June 2020, and a further $10,000 between 1 July 2020 and 30 September 2020. To be eligible you must be:

  • Unemployed; OR

  • Eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (single or partnered), special benefit or household allowance;  OR

  • On or after 1 January 2020:

  • You were made redundant;

  • Your working hours reduced by 20 per cent or more; OR If you are a sole trader, your business was suspended or there was a reduction in your turnover of 20 per cent or more.

These payments will not be taxable and will not affect Centrelink payments.

Income Support Payments

Those who are receiving a job seeker payment, youth allowance for jobseekers, parenting payment (single or partnered), special benefit or household allowance will be eligible to receive a “Coronavirus Supplement”.  The supplement is $550 per fortnight and applies for 6 months commencing on 27 April.

Jobseeker Payment and Youth Allowance Jobseeker criteria expand to allow access for permanent employees who are stood down or lose their employment, sole traders, self-employed, casual workers and contract workers who meet income tests as a result of the economic downturn.  The one week waiting period is also waived.

https://www.theguardian.com/world/2020/mar/23/am-i-eligible-for-centrelink-payments-how-to-apply-for-the-coronavirus-supplement

Reduced Superannuation Minimums

The minimum account-based pension drawdown percentage is halved for the 2020 and 2021 financial years.  This should mean investments do not need to be sold at depressed values to fund pension payments. For example, if you are 66 years old your normal pension drawdown minimum percentage is 5% of your account balance.  However, for the 2020 and 2021 years, the minimum will be 2.5% of the account balance.

Stimulus Payments

Two payments of $750 each will be paid to social security, veteran and other income support recipients and eligible concession cardholders. The first payment will be from 31 March 2020 and the second will be from 13 July 2020.

6. Switch Savings

In this time we should be looking at what ‘switch savings’ we can make by swapping our essential services supply chain in order to secure cheaper rates. This can include things like internet providers, telcos, energy, gas, and private health providers. For businesses, this can also include things like changing cleaning companies, stationery and printer suppliers and plant hire.

7. Loan Review

Hardship policies with lenders

Every lender in Australia will have ‘hardship policies’ in place for their business, already.

Most lenders have a 3-month deferral or ‘loan holiday’ arrangement which can be reviewed again and extended by a further 3 months after the original period is over. 

While some of the majors have already come out and issued announcements that they will allow eligible customers to make use of this, don’t be fooled by them not passing on the interest rate cuts. These hardship policies were already in place and the big banks are using this an opportunity to highlight the policy and not pass on the reduction. 

You should really contact a broker and check if the loan product you are currently on is the best product for you? Utilize an online platform service so you can work out the best product for your situation while you are in isolation. 

In our finance business, we are now seeing some owner-occupied interest rates coming out in the low 2’s, which could save you hundreds of dollars per month. If you would like to speak to a broker at Inception Finance today, then click the link:

https://inceptionfinance.com.au/contact/

7a. Business

Australian banks are set to defer repayments of small business loans for six months, for SMEs affected by the ongoing COVID-19 crisis. The Australian Banking Association (ABA) today released a small business relief package, suggesting struggling small business owners will be let off their loan repayments for the time being.

ABA chief Anna Bligh said the relief will likely apply to more than $100 billion in existing small business loans. In a statement, she estimated that, depending on take-up, it could return “as much as $8 billion back into the pockets of small businesses”.

The package is intended to support small businesses during the continuing economic downturn as a result of the spread of COVID-19. It’s intended to help them stay open and operational for as long as possible, and to keep staff in jobs, Bligh said. Businesses will have to apply for the deferrals, but banks are implementing fast-track approval processes, in a bid to offer support as soon as possible.

The announcement comes just a day after the federal government and the Reserve Bank announced a total of $105 billion in loan facilities for banks and non-bank lenders, to incentivise them to issue credit to small and medium businesses.

https://www.smartcompany.com.au/finance/economy/coronavirus-australian-banks-pause-small-business-loan-repayments/

With so much uncertainty around at the moment, we also wanted to offer out for free our Properlytics platform for Australians to model their home loans and property cash flow. To help Australians through this hard time, we are offering 6 months free as a minimum to allow every Australian to access this tool, should they wish to utilise it.

It is times like this that everyone needs a helping hand. With so many changes to interest rates at the moment, let us help you understand how they affect the cash flow and operating costs of your home and investment properties.

If you would like to access Properlytics to help you accurately project the cash flow of your property through this tough period, check out the article below. 

https://news.properlytics.com.au/covid19-support-for-property-investors

7b. Personal

Aussies struggling to keep their head above water as a result of the coronavirus pandemic have been thrown a lifeline after NAB announced its customers would be able to pause their mortgage repayments for six months.

The announcement came after Australian Banking Association CEO Anna Bligh announced a multibillion-dollar package for small businesses also struggling to stay afloat due to the COVID-19 outbreak.

https://www.news.com.au/finance/business/coronavirus-small-businesses-defer-loan-repayments-for-6-months-anna-bligh-says/news-story/0b13c4832ec30a45b71ced3958932857

8. Wellbeing

Take care of yourself both physically & mentally. While gyms are one of the most affected industries, there are plenty of gyms pivoting to offer classes via video call and enablement tools to ensure their members keep physically fit, while in isolation.  

Utilise free services and sources to help you cope. Mental health is very important when it comes to dealing with financial stress, as it is one of the main contributors to poor mental health.   

A colleague of mine sent this link out to our team this week articulating that there is so much in the media promoting awareness around hygiene but very little around mental health and coping mechanisms to promote taking care of your mental health through this time. 

https://www.blackdoginstitute.org.au/COVID-19

9. Increase Awareness

Be mindful of the decisions we make through this period and how it may affect our cash flow, ourselves and others. 

If you are going to order takeaway food, try calling the restaurant directly, instead of using Uber Eats and forgive the pun, but eating away their profits. 

Try ordering fruit and veg direct from a supplier that delivers. To help that SME but also by limiting the risk of exposure to the virus by not going to a major supermarket. 

Try your hand at growing herbs and veggies at home. 

Spring clean and try your hand at a reselling platform like eBay.  

You could even look at swapping goods with others. 

One other point we need to be mindful of is being kind to one another. Share a smile with a stranger, connect with family and friends and reach out to your loved ones.

10. There is an endpoint

There is an end, but it will be different! Use this as an opportunity as a fresh start to rewire your brain and look at what opportunities lay ahead. We are all in this together. 

If anything this will teach society some positive hygiene habits and help reset a lot of cost bases for businesses nationally. Whether it takes 6 or 9 months, there is light at the end of the tunnel.

I saw my mother-in-law share the below post on Facebook and I thought I would share the content. 

“I just got this message from a friend of a friend who is an expat just emerging from 7 weeks of lockdown in China:”

´We are just finishing our 7th week of E-Learning, seven weeks of being mainly housebound and seven weeks of uncertainty. We are healthy, we are happy, and we are humbled.

We are allowed to move around freely now with a green QR code that we show when we get our temperature taken. You get your temperature taken everywhere, and it's just become part of the routine. Most restaurants and shopping centres are now open, and life is coming back to our city.  

As we watch the rest of the world begin their time inside; here are some of my reflections on the last seven weeks:

  1. Accept that you have no control over the situation. Let go of any thoughts of trying to plan too much for the next month or two. Things change so fast. Don't be angry and annoyed at the system. Anxiety goes down, and you make the best of the situation - whatever that might be for you. Accept that this is what it is and things will get easier. 

  2. Try not to listen to/read/watch too much media. It WILL drive you crazy. There is a thing as too much! 

  3. The sense of community I have felt during this time is incredible. I could choose who I wanted to spend my energy on - who I wanted to call, message and connect with and found the quality of my relationships has improved.

  4. Appreciate this enforced downtime. When do you ever have time like this? I will miss it when we go back to the fast-paced speed of the 'real world'.

  5. Time goes fast. I still haven't picked up the ukulele I planned to learn, and there are box set TV shows I haven't watched yet.

  6. As a teacher, the relationships I have built with my students have only continued to grow. I have loved seeing how independent they are; filming themselves to respond to tasks while also learning essential life skills such as balance, risk-taking and problem-solving, that even we as adults are still learning.

  7. You learn to appreciate the little things; sunshine through the window, flowers blossoming and being able to enjoy a coffee in a cafe. 

To those just beginning this journey, You will get through it. Listen to what you are told, follow the rules and look out for each other. There is light at the end of the tunnel.

In Summary

Our behavioural reaction to the COVID-19 crisis as a community has to be one of collaboration, sharing ideas and information in order for everyone to have an opportunity to get through this. 

We need to lift each other up and support each other as Australians and as people. 

One of my favourite quotes that encapsulates this notion is below; 

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We need to dream of the solution together. Our dream is exactly where we need to start if we want to make what seems impossible, possible. That’s our vision - and all things possible start with a vision, followed by passion, a plan, hard work and the support of others. 

I hope you have enjoyed what I have written and maybe 1 or 2 points can help you and your situation. Feel free to share the article and pay-it-forward to those that may benefit.