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Mixed response to government’s stimulus package

Maja Garaca Djurdjevic
Maja Garaca Djurdjevic
13 March 2020 3 minute readShare
government stimulus package

The government’s stimulus package to help the economy battle the coronavirus has garnered applause from businesses around the country, but a few have expressed concern that some key issues have been overlooked.

While the likes of the Tax Institute, Business NSW, the Business Council of Australia, Master Builders Australia and CreditorWatch have mostly praised the government for delivering a “targeted and well thought through” package, the CEO of debt recovery firm Prushka has argued that some big concerns have been overlooked.

Admitting that the plan is “timely, sensible and a proportionate response”, Roger Mendelson warned that there are bigger concerns that are not being addressed and that the impact on business operations could still be catastrophic.

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With SME owners facing the decision to shut their doors for upwards of two weeks, Mr Mendelson explained that small employers in particular will need greater support.

“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,” Mr Mendelson said.

 

“Without this, there is a real risk to businesses that rely on weekly revenue to meet their payroll.”

Explaining that the stimulus payments will be effective, Mr Mendelson opined that a voucher system would be more reliable in injecting cash back into the Australian economy at a fast pace.

He said: “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.

“Business 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.

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“On the other hand, cash-flow 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.”

Weathering the storm

Business NSW CEO Stephen Cartwright said that the government’s “decisive action” to address the “looming economic challenges” will allow a quicker recovery after the storm passes.

“Combined with the $10,000 grants for those indirectly impacted by bushfire, these measures will help businesses manage their cash flow and keep staff employed,” Mr Cartwright said.

He called on all sides and levels of politics to pull together, urging the NSW government in particular to follow Queensland’s lead and use its “strong balance sheet to boost confidence for local businesses”.

“Last week, the Queensland government gave their employers a six-month payroll tax holiday — it’s time for NSW to do the same,” Mr Cartwright said.

Limited cash-flow benefits

Also praising the government on Wednesday was the Tax Institute.

Senior tax counsel Professor Bob Deutsch expressed hope that “these measures will pass swiftly through Parliament with the support of the opposition so that relief is provided immediately.”

“Previously, we advocated to have the small business instant asset write-off increased. While the $150,000 will expire on 30 June 2020, we hope to see a further announcement about the future of the instant asset write-off beyond 30 June 2020 in the upcoming May budget,” said Professor Deutsch.

While he applauded the Tax Office for offering administrative support to taxpayers, Professor Deutsch warned that it will only provide limited cash-flow benefits.

“Businesses will have to be mindful that they will still need to meet these obligations at some time in the near future.”

Preventing company failures

Speaking in favour of the package, CEO of CreditorWatch Patrick Coghlan opined that it will help prevent what would have been “a serious increase in company failures”.

“When it comes to small businesses, issues with cash flow 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,” he said.

“Just one payment default can have a ripple effect — in fact, 50 per cent of businesses that incur a payment default enter into administration within 18 months.”

He warned that 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 do.

He said: “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.”

Mixed response to government’s stimulus package
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Maja Garaca Djurdjevic
Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of My Business. 

Maja has a decade-long career in journalism across finance, business and politics. Now a well-versed reporter in the SME and accounting arena, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies and enabling citizens to influence decision-making.

You can email Maja on [email protected] 

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