The government has announced the second stage of its stimulus package to help reduce the economic impact of COVID-19.
A total of $189 billion is set to be injected into the economy to keep Australian businesses trading and Australians employed.
The package, which is equivalent to 9.7% of GDP includes; assistance for households including casuals, sole-traders, retirees and those on income support; further assistance for businesses to keep employees in a job; and, regulatory protection and financial support for businesses to stay in business.
Business support – keeping Australians in a job
The support for businesses to keep their employees in a job centres on boosting cash flow for employers.
Under this new package, the government is providing up to $100,000 to eligible SMEs that employ people, with a minimum payment of $20,000.
These payments will help businesses’ cash flow so they can keep operating, pay their rent and bills and retain staff.
Under the updated scheme from the first package, employers will receive a payment equal to 100% of their salary and wages withheld (up from 50%), 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 April 28 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 government said in a statement.
“The payments are tax free, there will be no new forms and payments will flow automatically through the ATO.
“This measure will benefit around 690,000 businesses employing around 7.8 million people, and around 30,000 not-for-profits.”
SMEs with aggregated annual turnover under $50 million and that employ workers are eligible to receive this payment.
Not-for-profit entities, including charities, with aggregated annual turnover under $50 million and that employ workers will now also be eligible.
Casuals and sole traders
Those affected by the economic downturn will be able to access a "coronavirus supplement" of $550 a fortnight for the next six months.
This is inclusive of other benefits, so if those already receiving payments through Jobseeker, they can claim both.
Sole traders and casual workers who are currently making less than $1,075 a fortnight will be eligible to receive the full supplement.
Early access to super
The government will allow individuals in financial stress as a result of the coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21.
Eligible individuals will be able to apply online through myGov for access of up to $10,000 of their superannuation before July 01, 2020.
They will also be able to access up to a further $10,000 from July 01, 2020 for another three months.
They will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
Business support – keeping businesses trading
To further support Australian businesses during this time, the government is set to establish the Coronavirus SME Guarantee Scheme which will support SMEs to get access to working capital.
Under the program, the government will guarantee 50% of new loans issued by eligible lenders to SMEs.
This support aims to enhance lenders’ willingness and ability to provide credit to SMEs with the scheme able to support $40 billion of lending.
SMEs with a turnover of up to $50 million will be eligible to receive these loans.
The government will provide eligible lenders with a guarantee for loans with the following terms:
- Maximum total size of loans of $250,000 per borrower
- The loans will be up to three years, with an initial six month repayment holiday
- The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan
As part of the loan products available, the government will encourage lenders to provide facilities to SMEs that only have to be drawn if needed by the SME.
This will mean that the SME will only incur interest on the amount they draw down. If they do not draw down any funds from the facility, no interest will be charged, but they will retain the flexibility to draw down in the future should they need to.
The scheme will complement the announcement the government has made to cut red-tape to allow SMEs to get access to credit faster.
It also complements announcements made by Australian banks to support small businesses with their existing loans.
The Prime Minister Scott Morrison said that while the next few months will be difficult for businesses, the new measures should help to cushion the blow.
“We want to help businesses keep going as best they can and for as long as they can, or to pause instead of winding up their business.
“We want to ensure that when this crisis has passed Australian businesses can bounce back.
“Our focus is on cushioning the blow and providing hope to every Australian that we will get through this and come out the other side together.
“We know this will be temporary. That’s why all our actions are geared towards building a bridge, keeping more people in work, enhancing the safety net for those that aren’t and keeping businesses alive so they can get to the other side and stand up their workforce as quickly as possible.
“We know Australia’s more than three million small and medium businesses are the engine room of our economy. When they hurt, we all hurt.
“The next few months are going to be a difficult journey but we all have a role to play to adapt to the changes we’re facing, to cushion the impact of what is happening and to pull together so we can bounce back when we get to the other side,” he said.
These updated support measures build on the first package which included; increasing the instant asset write off; backing business investment by providing accelerated depreciation deductions; supporting apprentices and trainees; and, targeted support for Coronavirus-affected regions and communities.