The move is expected to improve cash flow for around 690,000 businesses and 30,000 not-for-profits, with a turnover under $50 million, supporting nearly 8 million jobs, more than half of those in NSW and Victoria alone. All businesses will receive at least $20,000, Treasurer Josh Frydenberg said.
Today’s announcement builds on the previous package, doubling the payment to employers to pay staff from 50% of their wages to 100%, doubling the maximum in the process. The Treasurer said their payments won’t require any new paperwork and will come tax from automatically from the ATO.
The cash flow injection for business is part of a $66 billion stimulus package to keep the nation on its feet as it deals with the economic impact of the coronavirus shutdown. The latest stimulus follows on from the $17.6 billion response unveiled last week.
Government guarantees for business loans, relief for company directors in dealing with insolvent trading legislation, and making it harder to bankrupt and business and giving it longer to respond are among the changes being made to help companies through the COVID-19 crisis.
Prime Minister Scott Morrison said Sunday’s announcement was just “the first tranche” for Australians who will feel the hardest blows first
“We cannot prevent all the many hardships, many sacrifices that we will face in the months ahead,” he said.
“And while these hardships and sacrifices may break our hearts on occasion, we must not let them break our spirit and we must not let them break our resolve as Australians.”
The government will guarantee 50 per cent the value of new bank loans to SMEs, with the potential to free up around $40 billion in finance. The government will guarantee unsecured loans of up to $250,000 for a term of up to three years. No repayments will be required for six months.
The Coronavirus SME Guarantee Scheme will be offered on loans taken out in the six months from April 1, but can’t be used to refinance existing loans.
‘No quick fix’
Prime Minister Morrison said there is no two-week quick fix “or shut down and it all goes away and we get on with our business”.
“We have to steel ourselves for at least the next six months and the measures were put in place we need to be prepared to carry on for at least the next six months,” he said.
The cash for SMEs will be linked to a company’s wages bill, based on the taxes it pays, with those who shed staff having their payment reduced or stopped.. The ATO will calculate how much a business will receive based on BAS forms lodged on April 21 and the quarterly BAS due on April 28, and begin making the credits as quickly as possible.
The government says the combined economic assistance response to COVID-19 is now worth around 10% of Australian GDP or $189 billion.
Sole traders who have seen their income fall by 20 per cent or more will be able to gain early access to their superannuation in a move worth up to $27 billion, which Treasurer Josh Frydenberg says is just 1 per cent of the $3 trillion.
Among the other measures of support announced by the Treasurer is a change to the bankruptcy threshold from $2000 to $20,000, with businesses given six months instead of the usual 21 days to respond to a claim.
“The third part of our package will provide regulatory shield for what are otherwise profitable and viable businesses that find themselves under severe financial pressure as a result of the coronavirus,” Frydenberg said.
The government will also provide relief for company directors over the next six months when it comes to the strict laws on personal liability when the company is trading while insolvent.
Social security support
Among initiatives PM Morrison said would “supercharge the safety net”, a range of existing social security payments will be increased and the eligibility rules will be softened.
A $550 per fortnight additional Coronavirus supplement will be paid to existing and new recipients of the JobSeeker Payment, Youth Allowance, the Parenting Payment, Farm Household Allowance and Special Benefit for the next six months, on top of their existing benefits, injecting $14 billion.
The $750 stimulus payment announced 10 days ago will be doubled to $1,500 for social security and veteran income support recipients and eligible concession cardholders, but not for those who’ll receive the Coronavirus supplement. The extra $750 will be paid on July 13 to around 5 million people and is worth around $4 billion. The first $750 is due to be paid at the end of the month.
People under financial stress will also be able to access up to $10,000 of their superannuation this financial year, and a further $10,000 from July. They won’t need to pay tax on the money and it won’t affect Centrelink or Veterans’ Affairs payments. Applications will need to be made online via myGov.
The Government is providing up to $100,000 to eligible small and medium-sized businesses, and not‑for-profits (including charities) that employ people, with a minimum payment of $20,000. These payments will help businesses’ and not-for-profits’ cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff.
Under the enhanced scheme from the first package, employers will receive a payment equal to 100 per cent of their salary and wages withheld (up from 50 per cent), with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $10,000. The payment will be available from 28 April 2020.
By linking the payments to business to staff wage tax withholdings, businesses will be incentivised to hold on to more of their workers.
The payments are tax free, there will be no new forms and payments will flow automatically through the ATO.