The coronavirus stimulus package announced by the federal government yesterday promised grants of up to $25,000 for small businesses, an extension of the instant asset write-off scheme, and support for those employing apprentices and trainees. It also offered one-off payments to those on welfare and pensioners, in a bid to keep some cash running through the economy.
But, while a headline figure of $25,000 looks appealing, it’s a maximum figure, based on 50% of tax paid on employees’ salary. Meanwhile, some are concerned that those who receive the one-off $750 payment will likely hold on to it, instead of spending. And the instant asset write-off really only applies if you have enough cash lying around to invest in new assets anyway.
So, is this the support small businesses need to get through the coronavirus downturn? Or do the measures fall short?
Here’s what some of Australia’s business leaders think.
Patrick Coghlan, chief executive of CreditorWatch
“When it comes to small businesses, issues with cashflow can have immediate and real-life flow-on effects. It can be the difference between a business owner’s ability to not only pay staff but also school or daycare fees.
“Just one payment default can have a ripple effect — in fact, 50% of businesses that incur a payment default enter into administration within 18 months.
“When faced with financial strife, SMEs don’t have the same ability to lay off employees, offer redundancies or shut down part of their operations, that larger businesses or corporations do. They simply don’t have the balance sheet to weather a downturn.
“The government’s stimulus package is much needed and cash injections for small businesses will go a long way in helping owners to keep themselves afloat in these turbulent times. Without this help, we’d be likely to see a serious increase in company failures.”
Professor Bob Deutsch, senior tax counsel at The Tax Institute
“We are pleased to see small business is being directly supported by the package.
“It is our hope and expectation that these measures will pass swiftly through parliament with the support of the opposition so that relief is provided immediately.
“Specific targeted tax measures and administrative support have been announced as part of the stimulus package.
“Previously we advocated to have the small business instant asset write-off increased. While the $150,000 will expire on June 30, 2020, we hope to see a further announcement about the future of the instant asset write-off beyond June 30 in the upcoming May budget.
“As mentioned by the commissioner … the ATO has also released a number of administrative measures. We welcome the administrative support that the commissioner is offering to taxpayers as part of the stimulus package.
“However, it only provides limited cashflow benefits. Businesses will have to be mindful that they will still need to meet these obligations at some time in the near future.”
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Dominque Lamb, chief executive of National Retail Association
“With numerous economists forecasting that the uncertainty generated by coronavirus could tip the Australian economy into recession, measures to assist business could not come a moment too soon.
“Retailers will particularly welcome the increase to the instant asset write-off. This is a measure the NRA has been advocating for and is welcome news to SMEs across the country.
“The measure to accelerate depreciation deductions will encourage short-term business investment and spur economic growth which will be absolutely pivotal in averting a recession.
“Managing cashflow will be a major challenge for businesses in the coming period. Providing a stimulus payment to SMEs, coupled with the wage subsidy for trainees and apprentices, will help combat a decline in business confidence and help keep many retailers heads above water.
“Ensuring that consumers keep spending is vital and the stimulus payments to lower-income Australians will hopefully achieve that. We urge all Australian’s receiving this payment to not shy away from spending it at the shops to support jobs in retail.”
Stacey Price, founder of Healthy Business Finance
“My immediate reaction is the government is trying to help. However, I often feel with these stimulus packages, business owners are expecting cash in their pockets without having to do anything and without having to qualify for anything.
“That’s not what a stimulus package is. I think there’s going to be a lot of very small business owners that won’t get a lot of benefit at all.
“Particularly, sole traders who don’t have any staff, don’t hire apprentices, don’t have cash to buy new assets. There’s going to be very limited benefit to that group.
“The government is trying to do an amazing thing, but I think it’s going to divide a lot of business owners who don’t have staff, and I think they’re actually going to feel quite angry that they’re not getting what others are.
“We work with a lot of tradies, and some of their building supplies are now restricted in what they can access
“They can’t fulfil jobs, which means they can’t get paid.
“If they’re sole traders and they don’t employ anyone, they don’t get any of the major benefits listed in this stimulus, as I understand at the moment.
“If they don’t need any new equipment, the benefit to them is going to be very, very small.
“But their sales have been impacted just as much as somebody next door who has three staff but does the same trade.
“Most people in the current economic conditions don’t have spare cash to invest in assets, so although the increase in the instant asset write-off to $150,000 sounds amazing, that will pretty much impact very few business owners in the small to micro space.”
Greg Ellis, chief executive of MYOB
“We welcome the Prime Minister’s strong response and decisive action to support Australia’s small businesses.
“Today’s announcement of sliding scale tax-free cash grants, wage subsidies for trainees and apprentices, accelerated depreciation deductions, and a significant boost to the instant asset write-off scheme will go a long way toward helping small business owners to manage their cashflow and to retain their employees through this turbulent period.
“Australia’s two million small businesses are the heartbeat of our economy, and after a very difficult start to the year due to the bushfire crisis, and now the impact of coronavirus, our priority is not only to help small business survive but also to come out of this stronger.”
Roger Mendelson, chief executive of Prushka Fast Debt Recovery
“While the Morrison government’s multi-billion-dollar economic plan to mitigate coronavirus challenges is a timely, sensible and proportionate response, there are bigger concerns that are not being addressed by this stimulus package and the impact on business operations could still be catastrophic.
“SME owners may have to seriously consider closing doors for two weeks or longer, with many not being able to afford to do this and pay wages.
“A scheme needs to be considered whereby businesses with turnovers of less than $25 million annually could offset wages for workers against GST liabilities of the business, so they can keep paying laid-off workers.
“Without this, there is a real risk to businesses that rely on weekly revenue to meet their payroll.
“There is then a flow-on impact on households where we’ll see an increase in mortgage defaults and residential rent arrears due to lost wages.
“The stimulus payments will be effective, however, a voucher system would be more reliable in injecting cash back into the Australian economy at a fast pace.
“I have concerns the instant asset write-off increase won’t provide a meaningful impact for many businesses until it’s too late, given the direct financial benefit won’t hit until after tax time.
“Businesses are more worried about keeping their doors open and other immediate issues, so this is unlikely to be effective as the benefits are remote and far away.
“On the other hand, cashflow assistance for business is a sound initiative that will allow businesses to take the grants as on offset against their BAS, which will allow for funds to be received quickly.”
Ed McManus, chief executive of Deliveroo Australia
“Deliveroo welcomes the federal government’s announcement of a stimulus package to help support small businesses through the challenging economic times expected as a result of the coronavirus outbreak.
“In particular, we welcome the government’s support for small business, which includes a one-off cash grant up to $25,000 and a 50% wage subsidy to eligible employers of Australia’s 117,000 apprentices plus initiatives supporting investment back into their business. These initiatives will help the restaurant sector provide ongoing employment, invest in new equipment and mitigate against an economic downturn.
“The restaurant sector will continue to face significant challenges as a result of coronavirus, which is why the government’s stimulus package will provide welcome help to small businesses across the country.
“We encourage everyone to read the relevant health advice and take necessary precautions, but to continue to support small business, including the restaurant sector.”
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