4 Additional Small Business Relief Measures to Help Manage Operating Expenses during COVID19

4 Additional Small Business Relief Measures to Help Manage Operating Expenses during COVID19

The Australian economy is suffering as a result of COVID19 and the stringent control measures implemented. Small business in particular is bearing the brunt.  They do not have the same level of cash flow reserves or access to funds for survival as do their larger counterparts. Small business relief measures are important lifelines for them.

The need for their survival becomes even more evident when you look at how much they actually contribute to Australia’s economy.

 The Small Business Counts 2019 Report, published by the Australian Small Business and Family Enterprise Ombudsmandefines small business as:

“A business with a Goods and Services Tax activity less than $2m per annum or employing up to 19 people”

According to this report, small businesses account for almost 98% of ALL business in Australia – 62.1% are sole traders and 35.6% are, by definition, small businesses. Large businesses only account for 2.2% in total.

The infographic below highlights how significant the small business sector is to our economy. Of the universe of employers, they account for 93.8% of all employers in Australia. They employ 44% of the total Australian workforce and contribute 34% towards our GDP. As a result, the Australian government simply cannot allow small businesses to fail.

The numbers are indeed staggering.

Small Business Contribution to Australia's Economy 2019

Small Business Contribution to Australia’s Economy 2019

How COVID19  has impacted the economy since 29 March

The Australian Bureau of Statistics is conducting ongoing surveys to monitor the economic impact of COVID-19. The outlook is grim.

In the first week, following the Government’s March 29 announcement of additional social distancing restrictions and business support measures, a survey of 3,000 businesses indicated that:

  • 10% had ceased trading, with 70% citing COVID19 as the main reason
  • 66% reported reductions in turnover and cashflow
  • 47% have made changes to their workforce
  • 38% have changed how they deliver their products or services, including shifting to online services.
  • 38% have renegotiated lease and rental arrangements
  • 24% have deferred loan repayments

The most recent survey conducted between 22 April and 28 April 2020 confirms that COVID19 will continue to have a far reaching impact on business viability over the next 2 months.

  • 72% reported that reduced cash flow will impact them negatively 
  • 69% indicated that a reduced demand for goods and services is expected to have an adverse impact 
  • 41% indicated a reduced ability to pay operating expenses

Small Business Relief

To support small business, we’ve compiled a list of additional small business relief resources that are available besides the JobKeeper subsidies. Links to supporting documentation are also provided.

In providing this list , we note that eligibility requirements apply and some codes are yet to be legislated.  Businesses will need to assess each potential small business relief offering on its own merits.

1. Banking Relief

Banks are offering small business relief on both existing and new loans.

  • Existing loans: Small businesses will be able to defer principal and interest payments for up to 6 months. They will still have the obligation to pay it back. Eligible small businesses will need to show that they owe less than $3m of total debt to creditors. They must also be current and not in arrears on any payments as of 1 January 2020. 
  • New Loans: Small businesses experiencing short term cash flow issues will be able to access new loans or overdrafts at very low interest rates.  They will not have to make any repayments on these new loans for the first 6 months. The moratorium on loan repayments applies to all new loans issued until 30 September 2020 and is backed by the Government’s SME Loan Guarantee scheme.

These benefits are not automatic. Small businesses need to contact their bank directly to discuss eligibility.

2. Electricity Relief

The Australian Energy Regulator (AER) has released a Statement of Expectations under which energy providers are expected to provide support to its customers in financial distress. In principle, the energy suppliers must show a commitment to: 

  • Offer payment plans or hardship arrangements to small business customers in financial stress, including small businesses eligible for the JobKeeper Payment
  • Not disconnect any residential or small business customers(including small businesses eligible for the JobKeeper Payment), without their agreement, before 31 July 2020 and potentially beyond.
  • Defer any referrals of customers to debt collection agencies for recovery actions, or credit default listing until at least 31 July 2020.
  • Modifying existing payment plans if a customer’s changed circumstances make this necessary.
  • Waive disconnection, reconnection and/or contract break fees for small businesses that have ceased operation, along with daily supply charges to retailers, during any period of disconnection until at least 31 July 2020.
  • Provide clear and transparent communications with customers about issues addressed in the statement of expectations 
  • Minimise the frequency and duration of planned outages for critical works, and ensuring that they provide as much notice as possible so business can plan around this

Each state is providing further variations some which will be automatically applied.

  • Queensland: Small and medium businesses that consume less than 100,000 kilowatt hours (kWh) will receive a $500 rebate automatically applied on their electricity bills
  • Tasmania: Electricity bills will be waived for the first quarterly bill received after 1 April 2020 and will be capped for 12 months for all regulated electricity customers
  • NSW, Victoria and SA: The Energy supply Network across these territories is providing a 100% rebate relief to small businesses “mothballing” over the 1 April to 30 June 2020 quarter. Eligible small businesses are defined as those that consume less than 40MWh or 400GJ per annum.  They will need to show that their consumption usage is down by 25% verse the same consumption period in 2019.

3. Rental Relief

The government has introduced a mandatory code of conduct that forces landlords to accept reductions in rent in proportion to a tenants reduction in turnover. Whilst yet to be legislated, businesses with less than $50 million in annual turnover and that are eligible for the JobKeeper wage subsidy scheme, will be protected by the new code.

The code includes a common set of 14 principles including that: 

  • Tenants cannot be evicted during the pandemic and must remain committed to their lease terms
  • Landlords must not terminate leases for non-payment of rent during the COVID-19 pandemic 
  • Landlords must provide at least 50% of rent relief as “waivers“ and the remainder as “deferrals” 
  • Tenants must pay back any deferments in accordance with their agreements
  • Landlords must pass on any benefits they get for their properties to the tenants, in the appropriate proportions

4. Internet Services Relief

Many ISP (Internet Service Providers) are already offering a range of support packages for customers struggling to pay bills. We advise that you to contact your provider directly to see if they have a support scheme you can access.  

The NBN has also announced it is making a  $50 million support package  available to its wholesale network in support of new small and medium businesses contracts.  It is available until 30 September.  Retailers will decide how the NBN internet relief benefits will be applied.