- $31.9bCash flow boost for employers and charities of up to $100,000, up from $25,000.
- $20bAugmented Newstart payments for workers who lose their jobs
- $40b facilityGovernment-guaranteed loans of up to $250,000 for 3 years for small businesses.
Cash payments for small and medium business have been boosted to $100,000 each, and they will also have access to cheap government guaranteed loans, as part of a $66 billion coronavirus rescue package to be announced on Sunday.
While the $100,000 payments can be used for wage subsidies, workers who have been laid off or stood down will be given fast access to a new welfare wage to tide them over.
Sunday’s bailout scheme, the second announced in less than two weeks, will not be the last, as the government has signalled a third package will most likely be needed.
After announcing $17.6 billion in economic stimulus measures the week before last, Prime Minister Scott Morrison and Treasurer Josh Frydenberg will unleash another $66 billion on Sunday, with the aim of propping up small and medium business and affected workers, for at least the next six months.
Combined with the $17.6 billion first package and the $105 billion the Reserve Bank of Australia and the government gave the banks last week so they could provide cheap loans, that takes to $189 billion to total so far thrown at the crisis – which is 9.7 per cent of GDP.
Mr Morrison said the crisis was “going to get worse before it gets better”.
“We want to help businesses keep going as best they can or to pause instead of falling apart. We want to ensure that when this crisis has passed Australia can bounce back,” he said.
“There is a lot of pain coming but we’re going to cushion the blow as best we can.”
A key measure of the first package, the $25,000 payments for businesses with turnovers up to $50 million a year, will be hiked to a maximum payment of $100,000 per business and extended to not-for-profit charities.
The escalation of the scheme will see its cost balloon from $6.7 billion to $31.9 billion.
Under the scheme, businesses which pay the Australian Tax Office income tax on their employees’ salary and wages either quarterly or monthly will receive a payment equal to 100 per cent of the amount withheld, up to a maximum of $100,000 per business.
The government expects the scheme will benefit about 690,000 businesses employing around 7.8 million people and 30,000 not-for-profit charities.
Welfare wage to cost up to $20b
The welfare wage for workers who are stood down or lose their jobs will be an augmented version of Newstart and will be structured to help tide them over until the crisis passes. Current Newstart recipients will also receive the new wage but only until the crisis is over and the wage is scrapped.
The cost of this new wage, the full details of which will be unveiled Sunday, is expected to be between $10 billion and $20 billion.
Also to be announced Sunday, will be a new $40 billion loan facility for small and medium businesses. This is to complement an announcement by the banks on Friday that they would freeze repayments on business loans for six months, at a cost to the banks of $8 billion.
Under the new measure, known as the Coronavirus SME Guarantee Scheme, the government and the banks will tip in $20 billion each for loans to be administered by the banks.
The loans will be interest free for the first six months, and will be for a maximum of $250,000 over three years. The government will guarantee 50 per cent of each loan.
The scheme will apply to new or existing customers of banks and non-bank lenders and there will be no fees.
Mr Frydenberg said: “These are extraordinary times requiring extraordinary measures but Australians can be reassured that their government is working day and night to protect their health, wellbeing and livelihoods.”
The measures come on top of the $750 one off payments to welfare recipients announced in the first stimulus package, as well as the government preparing to subsidise the wages of up to 120,000 apprentices.
An example of how the payments work
Sarah owns and runs a building business in South Australia and employs eight construction workers on average full-time weekly earnings, who each earn $89,730 per year. Sarah reports withholding of $15,008 for her employees on each of her monthly Business Activity Statements.
Under the government’s changes, Sarah will be eligible to receive the payment on lodgement of her BAS. Sarah’s business receives:
- A credit of $45,024 for the March period, equal to 300 per cent of her total withholding.
- A credit of $4,976 for the April period, before she reaches the $50,000 cap.
- No payment for the May period, as she has now reached the $50,000 cap.
- An additional payment of $12,500 for the June period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.
- An additional payment of $12,500 for the July period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.
- An additional payment of $12,500 for the August period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.
- An additional payment of $12,500 for the September period, equal to 25 per cent of her total Boosting Cash Flow for Employers payments.
Under the previously announced “boosting cash flow for employers” measure, Sarah’s business would have received a maximum payment of $25,000.