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Industry backs financial schemes to aid COVID-19-affected businesses

The Australian Government and major banks have announced a fresh wave of financial measures – including cash grants, loan repayment deferrals and changes to insolvency laws – to help businesses to remain operational amid the coronavirus crisis.

The Federal Government’s $66.1 billion economic support package, announced on Sunday, comes on top of its first $17.6 billion economic stimulus package, $90 billion from the Royal Bank of Australia and $15 billion from the government to deliver easier access to finance.

Optometry Australia has voiced its support for the initiatives, which now total $189 billion, stating it is “pleased to see further economic relief measures announced”.

As part of its new Boosting Cash Flow for Employers initiative, 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.

Read more: Stimulus package to drive ‘big-ticket’ purchases

The payments are designed to help businesses’ and not-for-profits’ maintain their cash flow in order to keep operating, pay rent, electricity and other bills, as well as retain staff.

Under the enhanced scheme from the first package, employers will also receive a payment equal to 100% of their salary and wages withheld (up from 50%), 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, available from 28 April.

“By linking the payments to business to staff wage tax withholdings, businesses will be incentivised to hold on to more of their workers,” Prime Minister Mr Scott Morrison said.

“The payments are tax free, there will be no new forms and payments will flow automatically through the [Australian Tax Office].”

This measure is expected to benefit approximately 690,000 businesses employing around 7.8 million people, and around 30,000 not-for-profits.

Morrison said small and medium business entities with aggregated annual turnover under $50 million and that employ workers are eligible.

An additional payment is also being made from 28 July, with eligible entities receiving an additional payment equal to the total of all Boosting Cash Flow for Employers payments that have been previously paid.

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.

Loan repayments deferred

The Australian Banking Association (ABA) on Friday announced banks will defer loan repayments for six months for small businesses affected by COVID-19.

“Small businesses are the most vulnerable part of the economy and present the most pressing need for assistance,” ABA CEO Anna Bligh said.

“This assistance package will apply to more than $100 billion of existing small business loans and depending on customer take up, could put as much as $8 billion back into the pockets of small businesses as they battle through these difficult times.”

Bligh said banks are putting in place a fast-track approval process to ensure customers receive support as soon as possible.

Regulatory protection

The government will also establish the Coronavirus SME Guarantee Scheme which will support small and medium enterprises (SMEs) to get access to working capital.

Under the scheme, the government will guarantee 50% 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.

Morrison said the program would complement the government’s plan to cut red-tape to allow SMEs to get access to credit faster.

“The measures the government is announcing today, along with the previous announcements, will deliver a total of $125 billion to support Australians get through the impact of the coronavirus,” he said.

“The government will guarantee up to $20 billion to support $40 billion in SME loans.”

Insolvency laws

The government is also temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond.

Specifically, it will increase the threshold at which a creditor can issue a statutory demand from as low as $2000 to $20,000. The threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings will increase from its current level of $5000 to $20,000. Both measures will last for six months.

The time companies have to respond to such demands they receive will also be increased from 21 days to six months.

Further, there will be temporary relief for directors from personal liability when the company is 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.