Business update: Australian Government announce further support for business
The Australian Government’s response to the economic impact of coronavirus (COVID-19) has escalated from a position of ‘stimulus’ to providing a ‘safety net’ with a new $66 billion package announced today.
Combined with the $17.9 billion stimulus announced last week and the Reserve Bank’s provision of $105 billion in credit to lending institutions to support small to medium enterprises, the Prime Minister has indicated that support to date now constitutes $189 billion of assistance - which equates to around 10% of Australia’s gross domestic product.
Small to medium enterprises (SMEs) are firms with an annual turnover of less than $50 million. There are 690,000 SMEs in Australia employing around 7.8 million people.
The safety net initiatives are targeted at:
- supporting individuals without employment with streamlined access to the Jobseeker allowance (formerly Newstart) and a doubling of current allowance payments - $14.1 billion
- providing limited access to superannuation balances for individuals (including sole traders) who lose their jobs or whose hours or income is reduced by more than 20%
- supporting businesses by boosting their cash flow with grants to support operating expenses including wages, providing they keep active - $31.9 billion
- a Government Guarantee of 50% for lenders to SMEs for new unsecured loans to be used for working capital, and temporarily removing the responsible lending obligations for loans to SMEs
- protecting businesses with higher thresholds to apply before actions can be taken toward bankruptcy or insolvency, including temporary relief for directors liability, and additional powers to the Treasurer to make temporary relief provisions under the Corporations Acts.
These measures are designed to support individuals and businesses that will be most directly affected by this crisis.
Read more information on the Australian Government's economic response to the Coronavirus (PDF 1.01 MB).
Further detail on safety net initiatives
Expanded Job Seeker allowance
Those without a job can immediately access the Job Seeker (Newstart) allowance of $550 per fortnight.
From 27 April 2020 you can also access an additional Coronavirus allowance of $550 per fortnight if you receive the Jobseeker, Youth and Farm Household allowances, Parenting Payment and Special Benefits.
There will be streamlined access to Services Australia, removal of some evidentiary requirements and reduced means testing and waiving of waiting times.
For more information read the Australian Government's income support for individuals (PDF 1.05 MB).
Access your super
People who are unemployed, made redundant or have had their working hours or sole trader turnover reduced by 20% or more will be allowed to access up to $10,000 from their superannuation balance before 30 June 2020, and up to another $10,000 between July and October 2020.
For more information read the Australian Government's early access to superannuation (PDF 156 KB).
Boosting cash flow for employers
The first stimulus package allowed SMEs to claim back 50% of the withheld tax of employees up to $25,000. The new safety net doubles that to 100% of tax withheld being claimable with a maximum of $50,000. A further claim during the period July to October 2020 can now also be made, making the potential assistance available to a business up to $100,000.
Registered Australian charities and not-for-profits will now have access to these payments. Any organisations that don’t withhold tax, can recover a minimum payment of $10,000.
Read more information on the Australian Government's cash flow assistance for businesses (PDF 250 KB).
Temporary relief for financially distressed businesses
The threshold at which a creditor can issue a statutory demand on a company has been increased from $2,000 to $20,000, and the timeframe to respond to that demand has been extended from 21 days to six months.
Similarly, the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will increase from $5,000 to $20,000 and the timeframe for response also extended to six months.
Company directors will be temporarily relieved of their duty to prevent insolvent trading. Debts will still be payable, and this will not absolve acts of dishonesty or fraud.
Read more information on the Australian Government's temporary relief for financially distressed businesses (PDF 197 KB).
Supporting the flow of credit
The Australian Government will provide a guarantee of 50% to SME lenders for new unsecured loans to be used for working capital. SMEs will be able to borrow up to $250,000 for up to three years with an initial six month repayment holiday. No assets will need to be provided as security for these loans. The arrangements could take the form of a credit facility with interest only payable on the amounts drawn down.
Banks will still apply their credit assessment processes with the expectation they will 'look through the cycle' to sensibly take account of the current economic uncertainty. Current responsible lending obligations will be suspended for these purposes.
Read more information on the Australian Government's supporting the flow of credit (PDF 145 KB).
Jobs Rescue and Recovery plan
Last week the Northern Territory (NT) Government announced a $65 million Jobs Rescue and Recovery plan to help stimulate the economy and keep Territorians in jobs.
This package is the second phase of the response to the significant economic impact of coronavirus (COVID-19), and is complementary to initiatives offered by the Australian Government to all jurisdictions.
The NT Government continue to monitor the situation and we will share updates with you when available.