Morrison unveils $50,000 grants for bushfire-hit SMEs as “useless” loans come under fire

grants

Prime Minister Scott Morrison wants to examine state disaster responsibilities. AAP/Bianca De Marchi.

Small businesses affected by Australia’s bushfire crisis will have access to cashflow support grants, low-interest loans and additional tax relief under a federal government assistance package announced Monday.

After a week of consultation with small business lobbyists and regional business chambers, the Morrison government said grants valued at up to $50,000 and low-cost loans up to $500,000 will be available for about 192,000 firms estimated to be located in bushfire-affected areas.

It comes after the announcement of a $76 million tourism recovery package on Sunday, which will be drawn from the $2 billion National Bushfire Recovery Fund, targeting domestic and international perceptions Australia is not safe to travel to.

Existing extensions for business activity statement and GST lodgements will also be extended to late-May under ongoing efforts from the tax office to ensure bushfire-hit firms aren’t worrying about their obligations.

Prime Minister Scott Morrison, Small Business Minister Michaelia Cash and Emergency Management Minister David Littleproud have been under pressure to outline how taxpayers will assist bushfire-hit small businesses, amid warnings insolvency rates will skyrocket if nothing is done.

Speaking to the ABC on Monday morning, Cash said businesses in disaster-declared areas that have “as a result of the fire, been damaged”, will be eligible to apply for the $50,000 grants, intended to shore-up short-term cashflow.

The government has also said businesses experiencing downturn as a result of the fires will be eligible, with more detail about requirements expected to become available in the coming days.

“This is all about responding to the needs of small businesses on the ground, getting that cash out to them so they can rebuild and get back to doing what they do best — and that is, of course, being the backbone of their community,” Cash said.

Taxpayers will foot the bill, although the government has not announced a cap on the funding, leaving the majority of spending open-ended.

“Mechanisms are already in place with the varying state governments and we will use the existing mechanisms,” Cash said.

“Money is already flowing.”

Peter Strong, chief executive of the Council of Small Businesses of Australia (COSBOA), welcomed the support on Monday, but said there appears to be less support for firms that have not been directly affected, although are nonetheless experiencing downturn as a result of the fires.

“These are still businesses that have been impacted, so we’ll be looking at that with a magnifying glass,” Strong tells SmartCompany.

“This is an event we don’t usually experience; questions, of course, will come out of this.”

“Useless” loans come under fire

The concessional loan scheme — first floated by Littleproud earlier this month — will extend the availability of $500,000 low-cost loans for drought-stricken farmers to all small businesses affected by the fires, repayable on a 10-year term with two-years interest-free.

After two years, interest will accumulate at about 0.6% (the current 10-year government bond rate).

The loans are already copping criticism, following small business ombudsman Kate Carnell’s assertion last week that the repayments could make things worse for many firms.

Robbie Robertson, owner of Top Lake Boat Hire Merimbula and Sunsets Kiosk, tells SmartCompany the loans are a “never never” solution.

“It’s useless,” he says.

“It’s going to help a percentage of businesses, but we’re a static turnover business that relies on tourism.

“I’ve only got so many seats in my cafe and running at maximum I turn over pretty much the same each year.”

Robertson and other businesses in his local area are doing it tough in the wake of the fires, which he says ruined tourism during the most important trading period of the year.

“We’re going to have a long, low and tough season,” Robertson says.

“Between rent and insurance, we have to find, in the next week or three, $28,000.”

Robertson’s business has not been directly damaged by the fires, so he would not be eligible for the grant program detailed by Cash on Monday morning.

Nevertheless, he reports daily income has fallen from about $5,000 at this time last year to between $400–600.

About “90% of us can’t pay the bills”, he says.

Australia’s historic tourism disaster

Monday’s small business package followed Sunday’s announcement of a $76 million tourism support package, which the Prime Minister, who served as a tourism marketing executive in a previous life, dubbed an “initial push” to help the sector recover.

Estimates about the impact of the bushfires on tourism have ranged from several hundred million dollars to more than $4 billion.

“Australian tourism is facing its biggest challenge in living memory,” Morrison said in a statement circulated Sunday.

“One in 13 Australian jobs rely on tourism and hospitality, so our $76 million investment is an urgent injection to help all those hotels, restaurants and cafes and tour operators get back on their feet.”

Federal Tourism Minister Simon Birmingham said Australia’s international reputation has been severely damaged by the bushfires, noting the importance of tackling negative perceptions.

“Just as it will be a long and challenging process for communities as they rebuild from fires, it will also take time and sustained effort to recover from the saturation of media coverage and mistruths told online that have scared potential visitors away, including from parts of Australia that remain completely unaffected by fire,” Birmingham said in the same statement.

Robertson welcomed efforts to improve tourism to his community, but said federal spending aimed at tackling negative perceptions about Australia was more likely to help tourism hotspots in major cities such as Canberra, Melbourne and Sydney.

Treasury to doll out advice

Part of the package includes $3.5 million for a small business bushfire financial support hotline, slated to be overseen by Treasury.

Under the scheme, 10 financial counsellors will provide advice to an estimated 100 small businesses each day.

While the government hopes the advice line will support businesses trying to plan for the future, the measure falls short of advocates’ calls for subsidised appointments with accountants and consultants.

“It’s not going to have much impact,” Strong says.

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