Given the impacts of coronavirus on businesses across a broad range of sectors, a widespread take-up of loan deferral options from banks was to be expected. Indeed, media attention has focused predominantly on distressed businesses seeking loan repayment deferrals.

However, the results from a recent CommBank survey of more than 900 businesses paint a very different – and surprising – picture.

While around 28% had deferred or planned to defer their principal and interest repayments for a six-month period, government incentives aimed at boosting growth were proving more popular. Around half of the surveyed companies said they planned to take advantage of the increased instant asset write-off (50%) or accelerated depreciation deductions (46%), if they hadn’t already.

Whilst 28% of companies have deferred or plan to defer their principal and interest repayments for a six-month period, a greater proportion are opting for other forms of government financial support, designed to fuel business growth.

Below, we take a look at the ways your business can benefit from the existing government initiatives and ensure you’re taking the steps to strengthen your business during a stagnant economic environment.

Taking advantage of tax deductions

As an alternative to flexible loan payment arrangements, the government is offering stimulus measures, such as increasing the instant asset write-off to $150,000 for all businesses with an annual turnover of less than $500 million. They have also made it possible to accelerate depreciation deductions, to 50% of the cost of an asset on installation, in addition to normal depreciation deductions, in the year of purchase.

These initiatives have proven to be remarkably popular with Australian businesses. 50% are taking advantage of the instant asset write-off and 46% are using accelerated depreciation deductions.

Notably, the construction sector has been most active in leveraging these tax benefits, with almost three in four using the instant asset write-off. However, the uptake has been significant even in industries that were severely impacted by the pandemic. For example, more than two in five businesses in the retail and hospitality and health and education sectors have accessed accelerated depreciation deductions. With these strategic decisions, Australian businesses are continuing to persevere during the difficult times.

Choosing tax over loan deferral options

Which of the following Government stimulus and support measures is/will your business use to help you through the coronavirus crisis? 
Yes
Not sure  
No
Instant asset write-off increased to $150,000 and extended to businesses with an annual turnover less than $500 million
50%
15%
34%
Accelerated depreciation deductions - ability to deduct 50% of the cost of an asset plus normal depreciation deductions in the year of the purchase
46%
22%
32%
Loans deferral options offered through the banks - ability to defer principal and interest repayments for all loans attached to the business for a period of six months
28%
12%
60%

Adapting and investing for the future

The data collected by CommBank suggests that, while many businesses have experienced revenue losses as a result of coronavirus, others have made gains or adapted to the new environment. These forward-thinking businesses are anticipating sector, industry-specific or market opportunities once the economy begins to recover – and drawing on government financial support to expand their asset base and gear up for future growth.

In fact, one in ten businesses have already used additional financing to fund their growth within Australia. The greatest demand has come from companies with a turnover between $2M and $10M. Although these small-medium enterprises (SMEs) have been hard hit by the pandemic, they show high levels of confidence that they can recover or even expand over the next 12 months.

To support these future growth opportunities, 10% of businesses are investing in more plant, equipment and vehicles. Organisations in the production and construction sectors have been most active in drawing on additional finance facilities to purchase new plant, machinery and technology – at 19% and 16% respectively. 

A helping hand from the RBA

The Reserve Bank of Australia (RBA) has set up a three-year Term Funding Facility to help provide small businesses with greater access to lower interest rates.

The facility is available to banks and authorised deposit-taking institutions to enable them to pass on interest savings to business borrowers, particularly SMEs.

Although a quarter of businesses are planning to use the RBA Term Funding Facility to invest in future growth, so far only 6% have taken up this offer. As with other types of funding, these organisations are most likely to be in the construction sector, where almost 1 in 2 businesses are planning or using this facility.

CommBank has the RBA Term Funding Facility in place, and is ready to help small and medium business owners access a lower interest rate. As a result of our hands-on support, 58% of our business customers are using or planning to use this facility in the current financial year.

Talk to us

To find out more about CommBank’s Asset Finance solutions, visit commbank.com.au/assetfinance or call 1800 ASSETS to access your local Australian based Asset Finance Specialists.

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Things you should know

The CommBank survey statistics used in this article are based on a survey of 906 businesses, conducted by ACA 

Research for CommBank between 23 June and 8 July 2020. All statistics used are from this research unless otherwise stated.