24th July, 2020
The Federal Government has thrown a lifeline to small businesses, extending JobKeeper payments for six more months.
A second phase of the JobKeeper program will provide a crucial lifeline to Australian small businesses until March 2021, Treasurer Josh Frydenberg announced on Thursday.
While the program includes lower rates and additional eligibility testing, it’s been welcome with a sigh of relief by the country’s cash-strapped small business owners and soloists.
The Government has opted for a step-down approach to economic support.
From October to December, the payment will reduce to a fortnightly rate of $1200 per full time employee and $750 for employees working 20 hours or less per week. From January until March, that payment will reduce again to $1000 for full time workers and $650 for part time workers.
Small businesses, including sole traders, will need to prove their eligibility again in October and January by showing their turnover has fallen by 30 percent.
While Australia entered the pandemic in a position of economic strength, the support measures extended during recent months have increased debt levels significantly.
But the economic fallout from the pandemic has forced the Federal Government deficit to a record high of $86 billion, with coronavirus causing devastation across the economy.
In announcing the JobKeeper extension today, Treasurer Josh Frydenberg described the country’s economic position has dire, saying the country is in the worst economic crisis since the Great Depression.
Indeed, the economic fallout from forced lockdowns and closures to stop the spread of coronavirus has forced some small businesses to shut their doors for good.
And through no fault of their own, as a result of the pandemic, around 709,000 jobs were lost around the country in the June quarter, government figures reveal.
Despite this, Frydenberg said Australia will escape the pandemic relatively unscathed compared to other nations.
“Australia has performed on a health and economic front better than almost any country in the world,” he said.
Frydenberg described the Government’s unprecedented economic response as temporary and targeted with measures to support individuals, households and businesses through the crisis, without undermining the structural integrity of the budget.
This includes the $85.7 billion JobKeeper Payment, expanded eligibility for income support payments, the Coronavirus Supplement, support payments for households, temporary cash flow support for employers and increasing and expanding access to the instant asset write-off.
More than 960,000 businesses and not-for-profits and more than 3.5 million individuals have been covered by the JobKeeper payment. As of 16 July, payments totalled more than $30 billion.
As part of the economic plan, the Government also announced $2 billion to give Australians access to retraining and upskilling in sectors with job opportunities, as the economy recovers from the pandemic.
The necessary and unprecedented level of economic support has significantly impacted the country’s budget. The underlying cash balance is forecast to decrease from balance in 2018/19 to a $85.8 billion deficit in 2019/20 and a $184.5 billion deficit in 2020/21.
The extension of income support comes as welcome relief to many, who were concerned that September could mark doomsday without it.
Australian Small Business and Family Enterprise Ombudsman Kate Carnell said small businesses are breathing a sigh of relief following the announcement that JobKeeper would be extended for a further six months.
“Thousands of small business owners across Australia will be sleeping better tonight, knowing JobKeeper will be maintained in its current form until the end of September,” said Carnell.
She said the payments are reducing at a reasonable rate, in line with predictions of economic recovery and trading conditions picking up.
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“It’s generous support for small businesses, who can now plan ahead for at least the next six months.”
“Crucially, it will allow struggling small businesses to continue operating and paying their staff. It will also keep small businesses connected to their staff, who have been stood down, so they can re-engage their team when the time comes to ramp up,”
Carnell said many of the small businesses struggling now were viable and strong just a few months ago, and many have the capacity to recover.
“The Government is providing the safety net these small businesses need to help them get to the other side of this crisis,” said Carnell.
More information from Treasury on JobKeeper 2.0 is available here.