A full-blown national coronavirus (COVID-19) outbreak will create real problems for all Australian enterprises, big and small alike. But it is the viability of Australia’s 2.3 million small business, and the livelihood of more than 4.5 million Australians they employ, that will be most at risk.
This is because most small businesses do not have the cash reserves and post-crisis borrowing power that is currently enjoyed by larger businesses. Many small businesses have seen their scarce reserves diminished by the combined impact of a prolonged drought, bushfires and flood disasters even before this crisis begins.
In order to avoid the closure of large numbers of small businesses and consequent loss of jobs, all levels of government must immediately advance concessional tax measures in two distinct stages of pre-crisis and post-crisis support.
First stage measures should allow small business owners to keep much needed cash to keep their doors open and their staff employed, as opposed to paying taxes. Specific tax measures might include immediate forgiveness of payroll tax to December 31, 2020; bringing forward the 25% small business tax rate from the 2022 financial year to the 2019 financial year, to allow tax refunds from the prior year; and deferral of BAS payments until January 2021.
Second stage measures should promote business investment – big and small – immediately following the crisis. Such measures might include removing the current cap on the instant asset depreciation (IAD) concession for all small businesses in the 2021 financial year and introducing a new IAD concession for investments of up to $500,000 by larger Australian businesses.
Big businesses tend to buy from small businesses, so supporting big business with a new investment allowance as part of the recovery measures makes lots of sense.
These measures can be readily advanced via existing government institutions and do not require the completion of lengthy grant and loan application forms, which means that they can be delivered quickly and effectively.
Eligibility for these concessions would be facilitated using the existing Australian Taxation Office definition of a small business, that being a business with an aggregate annual turnover of up to $50 million.
The measures will undoubtedly come at a cost to federal, state and territory governments, but this cost pales in comparison with the near term and longer term economic and social costs that come with a ‘do nothing’ or a ‘do little’ response.
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