The Morrison government’s coronavirus economic stimulus package is an important step to supporting the economy, but there are bigger concerns that are not addressed according to Roger Mendelson, CEO of Prushka.
With SME owners facing the decision to shut their doors for upwards of two weeks, Mendelson says small business owners in particular, will need greater support. For businesses that rely on weekly revenue to meet their payroll, he suggests the government should allow employers to offset wages for workers against GST liabilities of the business, to ensure workers continue to get paid.
“While the Morrison government’s multi-billion-dollar economic plan to mitigate coronavirus challenges is a timely, sensible and proportionate response, there are bigger concerns that are not being addressed by this stimulus package and the impact on business operations could still be catastrophic,” says Mendelson.
SME owners may have to seriously consider closing doors for two weeks or longer, with many not being able to afford to do this and pay wages.
“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. Without this, there is a real risk to businesses that rely on weekly revenue to meet their payroll.
“There is then a flow-on impact to households where we’ll see an increase in mortgage defaults and residential rent arrears due to lost wages.”
Mendelson also warns the instant asset write-off is likely to have little effect on stimulating the economy.
“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.
“Businesses 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.”
Mendelson is pushing for the government to introduce cash flow assistance for small business owners.
That will allow businesses to take the grants as on offset against their BAS, which will allow for funds to be received quickly,” he said.
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