Government announces second coronavirus stimulus package
Over the weekend the government announced the second stage of its economic plan to cushion the economic impact of the coronavirus, pledging a further $66.2 billion to support business and sole traders.
As of Sunday, total of $189 billion is being injected into the economy by all arms of government in order to keep Australians in work and businesses in business.
This includes $17.6 billion for the government’s first economic stimulus package, $90 billion from the RBA and $15 billion from the government to deliver easier access to finance, and $66.1 billion in Sunday’s economic support package.
The latest package includes:
- Support for households including casuals, sole-traders, retirees and those on income support;
- Assistance for businesses to keep people in a job; and
- Regulatory protection and financial support for businesses to stay in business.
Prime Minister Scott Morrison said the government was acting to cushion the blow from the coronavirus for businesses and households to help them get through to the other side of the crisis.
“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,” the Prime Minister said.
“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.”
Boosting cash flow for employers
The government is providing up to $100,000 to eligible small and medium-sized businesses, and not‑for-profits (including charities) that employ people, with a minimum payment of $20,000. These payments will help businesses’ and not-for-profits’ cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff.
Under the enhanced scheme from the first package, employers will receive a payment equal to 100 per cent of their salary and wages withheld (up from 50 per cent), 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 28 April 2020.
By linking the payments to business to staff wage tax withholdings, the government is hoping to incentivise businesses to hold on to more of their workers.
The payments are tax free, there will be no new forms and payments will flow automatically through the ATO.
This measure is expected to benefit around 690,000 businesses employing around 7.8 million people, and around 30,000 NFPs (including charities).
The government explained that small and medium business entities with aggregated annual turnover under $50 million and that employ workers are eligible. NFPs entities, including charities, with aggregated annual turnover under $50 million and that employ workers will now also be eligible.
An additional payment is also being made from 28 July 2020. Eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments received.
This measure is estimated to cost $31.9 billion over the forward estimates period, including the value of the measure announced in the first package.
Coronavirus SME Guarantee Scheme
The government also said it will establish the Coronavirus SME Guarantee Scheme, which will support small and medium enterprises (SMEs) to get access to working capital to help them get them through the impact of the coronavirus.
Under the scheme, the government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs.
The government’s support will enhance lenders’ willingness and ability to provide credit to SMEs, with the scheme able to support $40 billion of lending to SMEs.
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.
This builds on the investment the government is making to enable smaller lenders to continue supporting Australian consumers and small businesses, through providing the AOFM an investment capacity of $15 billion to invest in wholesale funding markets used by small authorised deposit-taking institutions (ADI) and non-ADI lenders.
It further supports the Reserve Bank of Australia’s announcement of a $90 billion term funding facility for ADIs that will reduce the cost of lending, with particular incentives to lend to small and medium enterprises.
The government will guarantee up to $20 billion to support $40 billion in SME loans.
Temporary relief for financially distressed businesses
The government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive.
The package also includes temporary relief for directors from any personal liability for trading while insolvent. The Corporations Act 2001 will be amended to provide temporary and targeted relief for companies to deal with unforeseen events that arise as a result of the coronavirus.
This builds on the support for business and business investment provided in the government’s first economic support 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.
Early release of superannuation
The government will also 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 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 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.
This measure is estimated to cost $1.2 billion over the forward estimates period.
The government is temporarily expanding eligibility to income support payments and establishing a new, time-limited coronavirus supplement to be paid at a rate of $550 per fortnight. This will be paid to both existing and new recipients of the JobSeeker Payment, Youth Allowance for job seekers, Parenting Payment, Farm Household Allowance and Special Benefit.
The coronavirus supplement will be paid for the next six months. Eligible income support recipients will receive the full amount of the $550 coronavirus supplement on top of their payment each fortnight.
This measure is estimated to cost $14.1 billion over the forward estimates period.
An increase of up to 5,000 staff for Services Australia will assist to support delivery of new government measures.