With the COVID-19 coronavirus crippling the Australian economy and affecting livelihoods, the Australian Federal Government has announced a range of measures to support small to medium-sized enterprises (SMEs).
The total stimulus (including for individuals) announced to date is worth $320 billion, or 16.4%1 of the size of the Australian economy.
If you’re a small or medium business operator we explain below some of the benefits you may be eligible for.
The government has announced a wage subsidy program under which it will pay eligible businesses (and not-for-profits) a minimum of $1,500 per worker, per fortnight for up to six months. All workers who were employed by a business on 1 March 2020 are eligible.
The subsidy covers full-time, part-time and casual workers (providing casuals have been with the business for more than a year) including stood-down employees. Sole traders are also eligible if they meet the business eligibility requirements.
Payments will be made in the first week of May 2020, but will be backdated to 30 March 2020.
To qualify, businesses with turnover of less than $1 billion need to have lost at least 30% of their revenue, and businesses with turnover of $1 billion or more need to have lost at least 50% of their revenue. In both cases, the business must keep the worker employed, and the payment must be passed onto the employee.
To receive the payment, businesses will need to apply to the Australian Taxation Office (ATO).
Cash flow measures
The government is providing two tax-free payments to eligible SME and not for-profit businesses. To qualify, your business must employ people and have an aggregated annual turnover of less than $50 million.
The amount received will be determined by staff salaries and wages, as businesses will receive a payment equal to 100% of the tax on salary and wages they withhold to the Australian Taxation Office (ATO), initially from a minimum of $10,000 to a maximum of $50,000. If your business isn’t required to withhold tax you will receive the minimum payment of $10,000.
This payment will be delivered by the ATO as an automatic credit in the activity statement system from 28 April 2020 when you lodge your activity statement.
Businesses will then qualify for a second payment equal to their first payment. This will be received in instalments as automatic credit when lodging activity statements through June and September 2020, bringing the total minimum payment to $20,000 and the total maximum payment to $100,000.
These payments are aimed at helping SMEs pay their rent, electricity and other bills, and retain staff. Around 690,000 SMEs and 30,000 not-for-profits are expected to be eligible.
Additional payments for some SMEs that employ apprentices/trainees
Businesses with less than 20 full-time employees, which includes apprentices/trainees, can also apply to have the government pay 50% of their apprentice/trainee’s wage for up to nine months, from 1 January to 30 September 2020, to a maximum of $21,000 per apprentice/trainee.
The subsidy will also be available to businesses of any size who take on an apprentice/trainee who has been let go by another business.
Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network provider and can register for the subsidy, which is expected to support up to 70,000 small businesses, from early April.
Other assistance measures for businesses
- The government has introduced a Coronavirus SME Guarantee Scheme, under which it will underwrite 50% of new short-term, unsecured loans to SMEs by lenders. SMEs with a turnover of up to $50 million will be eligible for a maximum loan of $250,000 over three years, with no repayments due for the first six months. Australian banks, including AMP Bank, have also announced they will defer repayments on existing loans for SMEs affected by the coronavirus for up to six months.
- The government is increasing the instant asset write-off threshold from $30,000 to $150,000 and expanding it to include all businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020. This is to encourage business owners to continue investing in business assets.
- The government is also introducing a time-limited 15-month investment incentive by accelerating depreciation deductions. Eligible businesses will be able to deduct 50% of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance. This will apply to businesses with aggregated turnover below $500 million and to the purchase of new assets.
Outlook for the Australian economy
AMP Capital Senior Economist Diana Mousina says that while the government stimulus is welcome, it’s unlikely to be enough to keep Australia from falling into recession.
Ms Mousina says that the combined economic impact of the summer bushfires, lower Chinese tourism and education spending, global coronavirus shutdown and recessions in the US and Europe will all take a toll, however the government’s spending measures should help to limit the severity of the downturn.
“The fiscal stimulus package will help in limiting the depth of the Australian recession, it will help to keep companies afloat (and should provide some limit for keeping the unemployment rate from skyrocketing) and it is necessary to get a strong recovery after the virus has run its course.”
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