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Stimulus package reaction: “There are bigger concerns not addressed”
Australian Prime Minister Scott Morrison speaks to the media during a press conference at Parliament House in Canberra, Friday, April 3, 2020. (AAP Image/Lukas Coch)
Wed 8 April 2020 - 7:06 amExpert
The Morrison government’s economic plans to mitigate coronavirus challenges is a timely, sensible and proportionate response, however there are bigger concerns not addressed.
Through constant communication with our client base of over 58,000 Australian SMEs, we have seen that almost every business is severely impacted by the unfolding COVID-19 recession.
The stimulus packages and plans, as they stand, need tweaking to provide more immediate support for SMEs. The tax-related incentives announced in the first package have been rendered ineffective, as businesses are fighting for survival right now. Profits for the remainder of the financial year will be offset against losses in March to June, so few businesses will benefit from this.
Regardless of government incentives, not many businesses will be committing to capital expenditure during this time. There are measures to be implemented that will safeguard the livelihood of Australian small businesses.
Waive superannuation guarantee levy
It may seem like an extreme measure, however we’re in unprecedented times where the survival of Australian small businesses is paramount. As it stands, the superannuation guarantee levy constitutes an effective tax on all businesses equivalent to 9.5 per cent of their employee’s salary or wages.
For small businesses in particular, this gives them immediate access to more of a cash buffer to help them through this tough period. While not ideal, by waiving the levy for a short period of six months, it would allow for Australians to retain their jobs in the long run and be in a position to continue receiving their superannuation guarantee in the future. For small business in particular this would provide them with an immediate cash buffer to help them through these tough times.
Waive payroll tax
We’re seeing Depression-era queues for welfare and a massive employment subsidy; it’s simply ludicrous to continue with payroll tax. While some steps have been taken to waive payroll tax, such as Victoria’s program to waive it for those with less than $3 million in payroll, I suggest that each state immediately waive payroll tax for six months for all businesses, as an encouragement for employers to keep their staff employed.
Victoria’s plans will realistically only help a small portion of businesses as those with a payroll under $650,000 aren’t required to pay payroll tax anyway. In our experience, there are very few SMEs with a payroll over the $650,000 mark which renders this package ineffective. Given the Federal government is subsidising wages, it makes no sense to then tax payrolls at the same time. They should waive payroll tax for all business regardless of the size of their payroll.
The stimulus packages announced by the government is a pragmatic response to this unprecedented crisis that will no doubt ease its economic impact. For many of the more than two million small businesses in this country that rely on weekly income to keep the lights on, more immediate action is needed to help them survive.
Prushka CEO, Roger Mendelson, has over 44 years experience as a commercial lawyer. Prushka handles debt and claims recovery for the corporate, small business, medical and insurance sectors – sectors in which it has dominant market share.
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