It’s been a wild ride so far in 2020. Research by OnDeck Australia, highlights how the small business community is managing the impact of the COVID-19 pandemic.
OnDeck’s study of more than 300 SME owners nationally, found that eight out of ten (86%) SME owners say their business has been impacted by the pandemic – 47% report being ‘severely’ impacted. However, the impact has not been negative across every sector. Some industries such as home improvements and online sales, have seen significant upticks.
Nonetheless, among those SMEs feeling the pinch, just under half say COVID-19 has seen a loss of revenue. Two out of five SMEs say they have had to slow or halt operations. One in four have experienced delays in the delivery of their products or services.
Small businesses fare better
Interestingly, OnDeck found that smaller businesses are coping better with the disruption of COVID-19 than their larger counterparts. As a guide, 83% of businesses with annual turnover below $200,000 say they are being impacted by COVID-19 compared to 90% of businesses with turnover above $200,000.
We’ve seen this greater level of resilience mirrored across other events. Less than one in two (49%) of businesses with turnover below $200,000 say they have been impacted by climate and weather-related events such as bushfires, compared to 65% of larger businesses.
Cameron Poolman, CEO, OnDeck Australia, believes this greater resilience “Reflects the ability of smaller enterprises to act fast, engage in a more nimble response and explore new sources of revenue.”
He adds, “The ingenuity of small business owners, who have pivoted their expertise into new opportunities is remarkable.”
The big concern is recession
The challenges of COVID-19 have been met in a variety of ways by small businesses. And, even among ‘severely’ impacted SMEs, one in two expect to recover within six months.
But as lockdowns ease, greater challenges could lie ahead.
The real concern for SMEs is the possibility of a recession. OnDeck found that 58% of SMEs believe a serious economic slowdown would lead to a drop in revenue – potentially having much greater reach across the business community than COVID-19.
One in three SMEs unaware of $150,000 tax break
While 75% of SMEs say tax cuts would make the road to recovery easier, over one-third of the nation’s SMEs could be missing out on the tax savings of newly enlarged instant asset write-off, simply because they are unaware of it.
By way of background, on 12 March 2020 the Morrison Government raised the limit of the instant asset write-off from $30,000 to $150,000, and expanded eligibility to include businesses with annual turnover below $500 million, up from $50 million previously. Treasurer Josh Frydenberg has also now extended the inflated business tax break until 31 December 2020, after it was set to expire on 30 June 2020.
As Cameron explains, “This write-off is available to 3.5 million Australian businesses. So our research is showing that over one million enterprises could miss out on the opportunity to save on tax today while investing for tomorrow’s growth, because they are unaware of the write-off.”
On the plus side, 46% of SMEs that are aware of the instant asset write-off say they are likely to take advantage of it. Close to half these SMEs (46%) plan to use the tax break to invest in IT equipment, vehicles (46%), manufacturing equipment and machinery (19%) and office furniture (15%).
Cameron points out, “To benefit in this tax year, the asset needs to be in place and ready to use by 30 June 2020. This makes it important for SMEs to contact OnDeck or their broker for help arranging finance to take advantage.
“However, with the Treasurer’s deadline extension, business now have the opportunity to take advantage of this break in the 2020/21 tax year as long as the assets are in use or installed by December 31, 2020.”
For those enterprises that need finance to fund a new capital asset, OnDeck has a fast application process – much of which can be completed online, often with funds available in as little as one working day. Visit ondeck.com.au for more information.
 The Australian Taxation Office has indicated that the instant asset write-off for passenger cars is limited to the business portion of the car limit of $57,581 for the 2019–20 income tax year. The excess cost of the car cannot be claimed under any other depreciation rules. https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/Simpler-depreciation-for-small-business/Instant-asset-write-off/
Prepared by OnDeck Capital Australia Pty Ltd ABN 28 603 753 215 (“OnDeck”) for general information purposes only. Content may belong to or have originated from third parties and OnDeck takes no responsibility for the accuracy, validity, reliability or completeness of any information. Information current as at June 2020. You should not rely upon the material or information as a basis for making any business, financial or any other decisions. Loans issued in Australia are subject to the terms of a loan agreement issued by OnDeck. Loans are subject to lender approval. OnDeck® is a Registered Trademark. All rights reserved.