COVID19 business devaluation

Has COVID-19 devalued your business?

If you are selling your business, merging, acquiring or inviting in new investors, you need to understand the value of your business. 

balloon burstBut, to what degree does the pandemic impact on value? Should you discount or hold firm to pre COVID-19 performance on the basis that 'we're going to come out of it eventually'?

Fair market value is the price that would be negotiated in an open market between a knowledgeable, willing but not too anxious buyer and a knowledgeable, willing but not too anxious seller dealing at arm's length within a reasonable time frame. Value and price may not be the same thing. The price you are offered (or offer), will often depend on the anxiousness of the parties. For example, a seller that does not need to sell where the business being sold adds synergy value to the purchaser, may look to obtain a premium on value. And, even where a quick sale is required it may not be discounted if the liquidated asset value of the business remains high (i.e., the assets of the business are worth more broken up and sold off than as a whole).

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Understand your external environment

The COVID-19 pandemic has implications well beyond the economy

It has changed how business operates and how consumers act. 

resilienceWhile comparisons are made to the 2008 Global Financial Crisis and the recessions of the 1980s and 1990s, the reality is, we have no case study. There is no rule book for the post pandemic road to recovery as this is not an economic event. The pandemic pulls the economy up short curtailing both supply and demand; businesses are not operating at capacity and fewer people are working. 

The Federal Budget is released on 6 October and we're expecting to see the Government invest heavily in job creating projects. Many of these will be focussed on infrastructure. Each of these projects will have a flow through effect to the broader economy. We'll bring you our insights the day after the budget and you should loom to see if there are opportunities your business can capture.

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Forecasting during a pandemic

Now, more than ever, business operators should have a plan in place to manage during uncertain times

Even if your business is not directly impacted, it's likely your customers, your supply chain, and your workforce will be to some extent.

break evenSo, how do you plan for uncertainty when every assumption is subject to change?

Understand where you stand now
Businesses fail (or fail to thrive) for a myriad of reasons, but the precursor is often a failure to understand what is occurring and what to monitor. Strategically, managers need to be on top of their numbers to identify and manage problems before they get out of hand. If you do not know what the key drivers of your business are - the things that make the difference between doing well and going under - then it's time to find out.

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JobKeeper Alert

JobKeeper eligibility changes

With the employee test date for JobKeeper moved to 1 July 2020, some additional employees might have become eligible for JobKeeper. 

JulyThe August JobKeeper monthly business declaration is due by 14 September and is different to the previous form as it covers three JobKeeper fortnights.

Employers need to ensure that they identify all additional employees who could be eligible for JobKeeper to ensure that they comply with the "one in, all in" principle and that they meet the nomination requirements.

The first round of JobKeeper ends on 27 September 2020. To receive JobKeeper from 28 September 2020, employers need to reassess their eligibility with reference to actual GST turnover for the September 2020 quarter (for JobKeeper payments between 28 September to 3 January 2021), and again for December 2020 quarter (for payments between 4 January 2021 to 28 March 2021). However, we are still waiting on the rules relating to these periods to be released.

From this date, the JobKeeper payment rate will reduce and split into a higher and lower rate based on the number of hours the employee worked.

Collins Hume have implemented operational changes that ensure we continue to keep you and our team safe. Read them here ยป

COVID-19 and your SMSF

COVID-19 has impacted many SMSFs. We look at the key issues.

Early release of superannuation
early release of superWhen a member of your fund wants to access up to $10,000 of their superannuation early under the COVID-19 measures, there are some additional steps that trustees need to take. Trustees will need to ensure their deed allows for early release, the member has met the eligibility criteria for release, and ensure that no funds have been released until the release authority from the ATO has been received. This will be a 2019-20 audit area of focus.

Tenant Rent Relief
Setting rent for a tenant that is less than market value in an SMSF is usually a breach of superannuation laws. If the rental relief is provided to a related party, then the situation can become trickier as the difference between the rent charged and the market value can amount to a loan and potentially put the fund in breach of the in-house asset rules.

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