COVID-19 may well change the world; however, right now small business owners are focussed on navigating the immediate issues: cashflow uncertainty, fear, and the welfare of their workforce and customers.
Small business has always been practical and pragmatic, robust and resilient. Embedded in their communities, they are first and hardest hit when economies tank, natural disasters strike, or governments change the rules.
While government health departments had lengthy scenario planning sessions for risk mitigation on a possible pandemic, small business did not. Those plans were endorsed on February 17 - days after the first Coronavirus patients appeared in Australia - by the Prime Minister, who then declared he was off to the footy. Despite the planning, even those at the highest level were unprepared for the swift escalation of both the virus and the planned actions required.
Behind the scenes the government machinery stayed back, worked late and rolled out a raft of measures - nearly $18 billion of them in early March. Then redrafted and upgraded support, as increasingly restrictive measures were deemed necessary. With government assistance of $189B or about 9.7 % of GDP, announced a few days later and the cost to business and the economy still unknown, it's easy for small business owners to be initially overwhelmed by the sheer speed, size and scale of this crisis.
The third assistance package announcement on 30 March saw the Australian Government recognise further assistance was needed. This initiative is aimed at maintaining the links between employers and employees, so that businesses can rebound, when the pandemic passes. The Government announced a $130B package that provides between 70% (of a medium wage) to 100% of a wage in industries like retail and hospitality. The $1500 per fortnight for six months from 1 March, will roll out through the employer's payroll and the ATO single touch payroll system.
The payment will be made to employers so they can continue to pay employers as part of payroll, therefore circumnavigating the social security system. While the payment won't meet everyone's financial needs, combined with rent and mortgage relief and deferrals and other subsidies in the 2nd and 3rd packages, it provides a raft of assistance options.
- Total COVID-19 assistance package now stands at an unprecedented $320B or 16.4% GDP.
- Now employees, sole traders, casuals and part-time workers will be paid a flat rate $1500 per fortnight if business turnover has dropped >30%
- Employees must have 12 months employment with their employer to qualify
- Businesses with >$1m need to meet >50% turnover impact
- Pegged to assist 6 million employees and keep them off social security
- Payments backdated to start 1 March and payments flow from first week in May
- Includes New Zealanders on 444 Visas and Not for Profits
- Administered through employer's payroll systems and ATO, through one-touch payroll.
- The government, opposition and senior public servants will meet and brief in the coming weeks before putting the measures up in bills a scaled-down Parliament.
- Partners can earn up to $80K and still be eligible.
What's not happening
- Doesn't include temporary Visas holders.
- No superannuation levy on this payment.
- People who have gone to unemployment Job Seeker can go back to Job Keeper, with their employer's agreement to put them back on the books.
Small Business Recognition
While the surreal progression of mortality and morbidity statistics flash across our screens, small business assistance has been at the heart of the government's response. Aided by a flotilla of industry organisations, small business has been represented and acknowledged in government assistance as an incredibly important part of the national economy and recovery. And the public service, with the aid of superfast internet communications, media and industry, has provided succinct details of assistance in a matter of days, sometimes hours.
Size, speed and scale
The size, scale and speed of the government's reaction has been breathtaking and frightening, reflecting the seriousness of the threat. To have detail on an estimated $189B of spending to the public on a Sunday afternoon is worth acknowledging. There's also been pragmatism; rolling out the in-principal commitments first and adding the details later, as well as using existing institutions to implement the assistances and making it scalable and targeted. The 2nd stimulus package Bills were introduced and passed in Parliament on 25 March, just 3 days after being announced. A scaled down parliament will be recalled to pass the 3rd package in early April.
Government & Business Co-operation
For small business, there's a lot of assistance on offer based on honest co-operation and partnership. The ATO, Department of Human Services, ASIC, Treasury, and Education and Training are just a few of the huge Government Departments who are co-operating with business to provide scaffolding for recovery. This sort of inter-governmental agency co-operation and business involvement is (to use an overused word) unprecedented.
For business owners, the opportunity to access these programs is made available because, for the first time ever, they're probably not too busy trying to run a business. Right now, they're all trying to save their businesses, not just for a few days or weeks but over 6 - 12 months. Within this time frame, with no cashflow, staff, or customers, they can take time, ring industry bodies, read government websites, and complete the streamlined application processes for a raft of measures that are being implemented almost immediately. A government website has been established specifically for the purpose www.australia.gov.au to amalgamate the responses from many different Government Departments into one place. It even comes with its own What's App.
Small businesspeople are smart enough to navigate the government's assistance packages. On assessment of their websites, many are making a huge effort to make themselves and their assistance packages available and accessible. The true test will be in the application and implementation, when the rubber hits the road and the funding hits the bank account. Will it be enough and in the right places? It's hard to know in this rapidly evolving situation, but it's a good start. The government is cognisant that it has to nurture business through the health implications so business has the ability to bounce back.
The timing of the assistance in various stages is provided on this government website: treasury.gov.au - Australian Government Economic Response to Coronavirus The economic support is in three core areas: support for individuals and households, support for businesses, and business cash flow.
Support for Individuals and Households
The government is temporarily expanding eligibility to income support payments and establishing a new, time-limited coronavirus supplement to be paid at a rate of $550 per fortnight. This would be paid to both existing and new recipients of the eligible payment categories. This would become available to sole traders and the self-employed, for example, who can continue to earn some money and obtain the supplement. Payments start on 27 April and the government estimates spending of $14,133 million. Many restrictions have been removed to make it easier to access.
Cash for Low Income People
To eligible individuals in hardship or on low incomes, there are two payments of $750. These start on 31 March, with the second payment in July.
For those small businesses people with turnover or hours reduced by 20% or more, those on social security programs, and people made redundant, there's tax free access to $20K of your super funds in 2 tranches over 4 months. Further, the government will temporarily reduce superannuation minimum drawdown rates by 50 per cent for the 2019-20 and 2020-21 income years. It will also lower the social security deeming rates in response to the low interest rate environment.
Access to cash flow when you employ people
For businesses with less than $50M turnover in the prior year, there is a tax free subsidy from $20,000 to $100,000 where you have employees. It applies for the period March to September this year (2020) and works with your BAS when you lodge your normal PAYG statement (monthly/quarterly). The ATO will apply a credit against your account up to 100% of your PAYG payments. It appears that this means you make your payment, less the credit. Or you will receive a subsidy payment from the ATO if you have low income employees who pay no tax. The amount you receive will depend on the size of your business.
Financial Distress Assistance
To help businesses get through a temporary period of insolvency, there is temporary relief from creditors' demands against you plus temporary relief for your personal liability as a director while trading insolvent. The federal government has temporarily raised the threshold for creditors to issue a statutory demand on a company from $2,000 to $20,000. This applies for six months. It has also increased the time allowed for a company to respond to statutory demands from 21 days to six months. This also applies for six months.
Small to Medium Business Financial Targeting
Other measures include:
- Lifting the threshold to $150,000 (from $30,000) - and making more businesses eligible to use it up to a turnover of $500 million. Available this financial year.
- Offering businesses a time-limited incentive to invest by accelerating depreciation deductions. Available this financial year.
- Wage assistance to help small businesses to keep their apprentices and trainees. From April.
- Financial support to help regions and communities most affected by the Coronavirus to recover. From mid-April through the ATO as soon as practical.
- Initial support to our airline industry through up to $715M of relief from a range of taxes and government charges. From February to September.
- Establishment of a loan guarantee arrangement between the government and participating banks to cover the immediate cash flow needs of SMEs.
- The Australian Office of Financial Management has been provided with an investment capacity of $15B to invest in structured finance markets used by smaller lenders
- The Reserve Bank of Australia has a support package of measures to support the Australian economy.
Mental health and emergency care
- Announced 29 March by the Prime Minister
- A $1.1B boost for mental health, domestic violence, Medicare and emergency food relief
- Telephone medical consultations and incentives for GP bulk billing and longer hours
- $150M for domestic, family and sexual violence due to a 75% increase in demand due to Coronavirus
- Mental health support of $74M using online programs and communications campaigns, support programs, and a raft of other specific measures. Go to Head to Health for help finding a digital mental health resource. See the Prime Minister's media release for more details about the mental health package.
COSBOA has compiled a list of quick links for help available to small businesses. This can be viewed at http://www.cosboa.org.au/covid-19.