The Federal Government has released the second stage of its plan to cushion the economic impacts of COVID-19, with a total of $189 billion injected into the economy by all arms of government.
According to Prime Minister Scott Morrison, the Federal Government will provide up to $100,000 to eligible small and medium sized businesses and not-for-profits that employ people, with a minimum payment of $20,000.
“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,” he said.
Additionally, the minimum payment is being increased from $2,000 to $10,000, and will be available from 28 April.
By linking the payments to staff wage tax withholdings, Mr Morrison said businesses will be incentivised to hold on to more of their workers.
Furthermore, the Prime Minister highlighted that the payments are tax free, flowing automatically through the Australian Tax Office.
“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,” Mr Morrison 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. 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 measure is expected to benefit an estimated 690,000 businesses that employ over 7.8 million people. Small and medium business entities with aggregated annual turnovers under $50 million are eligible.
An additional payment will also be made from 28 July, with eligible entities receiving a payment equal to the total of all of the Boosting Cash Flow for Employers payments received.
“This measure is expected to cost $31.9 billion over the forward estimates period, including the value of the measure announced in the first stimulus package,” Mr Morrison said.
For regulatory protection and financial support, the Federal Government will also establish the Coronavirus SME Guarantee Scheme, designed to grant small and medium enterprises (SMEs) access to working capital.
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,” Mr Morrison said.
“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.”
According to Treasurer Josh Frydenberg, the $189 billion economic support package represents the equivalent of 9.7 per cent of Australia’s gross domestic product.
“The government is taking unprecedented action to strengthen the safety net available to Australians that are stood down or lose their jobs and increasing support for small businesses that do it tough over the next six months,” Mr Frydenberg said.
“These extraordinary times demand extraordinary measures.”