Practical guide to COVID-19 relief for estate agents
There is so much written about COVID-19 relief measures for businesses that it is an ‘information overload’ for small business owners (and estate agents) to discern what is relevant in these difficult times. Here’s what you should know at present.
Cash flow planning for the next few months will be crucial to survive. Estate agents are already battling to plan their commission income due to all deeds’ offices being closed during the lockdown and once they reopen, working through the backlog of property transfers already in the pipeline will take some time. The rental side of most estate agents’ businesses is also under pressure due to the rapidly increasing trend of tenants not paying rent due to lack of income because of COVID-19 restrictions such as the current lockdown.
Much has been written on the COVID-19 relief measures for businesses over the last 10 days. For small business, it is an “information overload” and owners are struggling to establish what is relevant in these difficult times.
This article aims to highlight the more important and practical relief measures relevant to the average estate agency business.
Here is a short summary of what might help plan cash flow:
- Claim some employee cost from the UIF
At this early stage, this claim (from UIF) only applies to those workers who receive a salary or wage and excludes those (i.e. agents) earning commission only as they don’t contribute towards UIF. Apply for the Covid-19 UIF aid by completing and submitting the Temporary Employer-Employee Relief Scheme (TERS) forms, which you can obtain by sending a blank email to firstname.lastname@example.org. Your payroll administrator can assist with populating the employee data on the application forms.
The concern in the market is that these benefits will not reach the employer in time to pay the employees. Some experts have indicated that government may eventually allow refunds to employers where they have paid the April salaries and then claim it back form UIF. However, the industry still await confirmation of this. Until then, it is suggested to claim for all salaries (not just the unpaid), even if a portion is paid or some leave pay is paid out.
- Reduce your monthly PAYE payment – use the deferral offered by SARS
Tax compliant small to medium sized businesses qualify for the deferral of the payment of 20% of the PAYE liability (excluding UIF and SDL liabilities). SARS will not be able to impose administrative penalties and interest for the late payment thereof. The deferred PAYE liability will have to be paid to SARS in equal instalments over the six-month period commencing on 1 August 2020, i.e. the first payment must be made on 7 September 2020. In order to quality for this deferral, your annual turnover must not exceed R50 million for the 2020/2021 year.
Where owners can afford to take smaller salaries for themselves and defer part or all of their normal salaries this will further reduce the PAYE payment.
- Reduce your monthly PAYE payment – claim ETI from SARS
The Employment Tax Incentive (ETI) was and still is aimed at encouraging employers to hire younger and less experienced work seekers in the age group of 18 to 29 and who earns below R6 500. Normally, the employer could only claim the incentive during the first 24 qualifying months of employment (not consecutive months).
This ETI benefit have now been expanded for the period of 1 April to 31 July 2020 to now include workers up to the age of 65 who earns below R6 500 and it now includes those workers whose first 24 qualifying months period have already been claimed for.
The maximum amount of ETI claimable during the four-month period for qualifying employees have been increased from R1 000 to R1 500 in the first year of employment and from R500 to R1 000 in the second year of employment.
The maximum amount of ETI claimable during this four-month period for those employees who have surpassed the first 24 qualifying months is R500.
SARS will further fast track the payment of the ETI reimbursements from twice a year to monthly to allow compliant employers to have cash on hand as soon as possible.
- Reduce your bi-annual provisional tax payments
Whilst profits for the 2021 financial year will certainly be lower in most businesses there is relief from SARS for income tax. Most businesses have a February year-end. SARS has also granted a deferral of provisional taxes in order to assist with cash flow. The first provisional tax payment due by 31/8/2020 will be based on 15 percent (not 50%) of the estimated total tax liability. The second provisional tax payment due by 28/2/2020 will be based on 65 percent of the estimated total tax liability. The deferred payments will be due only by 30/9/2021.
- EAAB Fees
Although nothing has been published by the Estate Agency Affairs Board (EAAB) there might be the possibility of deferring annual EAAB fees which might include the fees for the annual EAAB audit. This will have to be discussed between the EAAB and Independent Regulatory Board of Auditors (IRBA) after the lockdown. Tax practitioners say they expect an announcement in this regard towards the end of April or early May.
- Defer loan repayments to the banks
The four major retail banks have offered some form of relief by offering payment holidays to small businesses for the next three to four months. Tax practitioners urge all to contact their individual banks for information in this regard.
By using the above relief options estate agents might be able to overcome the cash crunch of the next 12 months. The measures seek to defer expenses and, hopefully, when the deferred payment must be paid, the monthly cash flow have recovered to such an extent that the deferred payments can be done.
It is also important to engage and negotiate with external parties (suppliers, landlords, etc) to agree to appropriate funding arrangements for the next three to six months.
At this early stage, there are probably more questions than answers from small business owners and you are advised to look out for regular updates regarding all these relief measures, which are published almost on a daily basis.
Further relief measures
The following relief measures may most likely not be applicable to all but may be applicable to certain estate agents in exceptional cases:
- Debt Relief Finance Scheme
The Debt Relief Finance Scheme is designed and tailored to provide financial relief on current debts and repayments of small, medium and micro enterprises (SMMEs). In order to qualify for assistance for funding, the SMME must demonstrate the direct relation/connection of the impact or the potential impact of the novel COVID-19 pandemic on its business operations.
Applicants must be registered on https://smmesa.gov.za; and priority will be given to businesses owned by women, youth and persons with disabilities. There are other qualifying criteria as well. Other relief offered can be found at www.dsbd.gov.za.
- Sukuma Relief Programme
The Rupert Family and Remgro Limited have donated R1 billion to alleviate the impact of the COVID-19 crisis. The donation is managed by Business Partners who have set up a platform called the Sukuma Relief Programme. At the time of writing, this program was temporarily closed, as more applications had been received than the funds allow. Announcements on future applications are expected soon.
- South Africa Future Trust
The Oppenheimer family have donated R1 Billion to alleviate the impact of the COVID-19 crisis on the employees of SMME’s. Eligible employers apply for the scheme via their bank and provide a list of names of employees at risk due to COVID-19.
Currently it still stands that the nationwide lockdown will end at midnight on Thursday 16 April. It may be extended, as has happened in many other countries – we all hope that doesn’t happen here as the economic cost in terms of businesses closed and jobs lost will be devastating. Whatever happens, COVID-19 will still be with us and the need to implement measures that keeps the spreading of the virus at bay. All businesses therefore has to adapt and find new ways of keeping the wheels turning, even beyond lockdown.