Prime Minister Scott Morrison has announced the Coalition’s $23 billion stimulus package- but what exactly does it mean for small businesses? Let’s unpack it.
Morrison told reporters in a press conference in Canberra earlier this week that “we’re supporting 690,000 businesses that employ Australians because, as I said, it’s about keeping Australians in work.” He added that “we’re going to do everything we can to ensure they’re best positioned to bounce back strongly on the other side.”
“The 4.7 billion of demand stimulus that’s going into the economy is going to be supporting sole trader businesses,” he said. “It’s designed to actually improve cash flow that is going in the economy and that, of course, supports those of businesses. Last week, we focused very much on the stimulus-type activity, encouraging investment, encouraging demand into the economy. Providing support to small businesses.”
“Measures that we are focusing on now are of a different nature. They are focused more on the cushioning impact of the safety net for individuals and small businesses,” he added. The measure are said to be in place until June next year.
Key Points from the announcement of the stimulus package:
About $6.7 billion over four years will fund grants of up to $25,000 to businesses with $50 million in turnover. These grants, between $2000 and $25,000, will be paid automatically to businesses who employ people, with the trigger being them sending their employees’ tax withholdings to the tax office.
Businesses that pay salary and wages will receive a minimum $2000, even those not required to withhold tax.
The government will also spend $700 million over four years to expand the instant asset write-off for businesses. The threshold will be raised from $30,000 to $150,000 and expand access to businesses with an annual turnover of up to $500 million, from $50 million previously.
About 117,000 apprentices are expected to benefit through wage subsidies for employers with fewer than 20 employees. The cash injection will subsidise apprentice wages for up to nine months with the aim of keeping them in a job in challenging economic circumstances, which the government admits will put pressure on small businesses.
Casual workers unable to attend work due to coronavirus will be eligible to apply for the Government’s sickness payment.
The SBS, is reporting that as many as 1.5 million sole traders won’t “benefit from the bulk of the economic stimulus measures the Morrison government has set up to deal with coronavirus.”
According to their statistics, more than three in every five businesses in Australia don’t employ anyone other than the owner.
“The biggest measures, grants between $2,000 and $25,000, will be paid automatically to businesses who employ people, with the trigger being them sending their employees’ tax withholdings to the tax office,” they added.
Peter Strong of the Council of Small Business Organisations of Australia said that there needs to be more action from the government to support sole traders, stating that “if they are struggling with their business because they’ve got no customers… there’s a different package that we need to look at… Because when the virus is finished, then the whole idea is that they’ll be able to re-trade,” he said.
Paul Guerra of the Victorian Chamber of Commerce and Industry Chief Executive said “this package won’t solve the coronavirus problem but will help ease the cashflow hardship many businesses are facing and help them to pay bills, pay staff and stay afloat.”
Roger Mendelson, CEO of Prushka Fast Debt Recovery has said that although the stimulus package is a sensible response, there are bigger concerns that have not been addressed that could be catastrophic. A scheme needs to be considered whereby businesses with turnovers of less than $25 million annually could offset wages for workers against GST liabilities of the business, so they can keep paying laid off workers.”
“Without this, there is a real risk of businesses that rely on weekly revenue to meet their payroll,” he added. “There is then a flow-on impact to households where we’ll see an increase in mortgage defaults and residential rent arrears due to lost wages. The stimulus payments will be effective, however a voucher system would be more reliable than injecting cash back into the Australian economy at a fast pace.”
Mendelson added that “I have concerns the instant asset write-off increase won’t provide a meaningful impact for many businesses until it’s too late, given the direct financial benefit won’t hit until after tax time”