Thousands of Australian businesses have had a horror start to the year with drought, bushfires and floods. Now COVID-19, also known as Coronavirus, is a large concern across Australia, threatening many Australian businesses nation-wide.
The Australian Taxation Office (ATO)’s Small Business Counts July 2019 Report states that small businesses in Australia account for almost 98% of businesses, making 35% of Australia’s gross domestic profit and employing 44% of Australia’s workforce.
With factories in China remaining closed and millions of people confined to their homes and banned from travelling, the Coronavirus is a growing risk for Australian businesses and could cause an increasing number of company insolvencies, especially for the retail, hospitality and tourism industries.
Australia’s Economic Relationship with China
Australia is the most China-reliant economy in the world, with approximately a third of the country’s exports going there. Chinese nationals also make up roughly 38% of Australia’s foreign students and 15% of its tourists who spend between $12-$16 billion a year.
With the Coronavirus continually spreading, Australia China Business Council CEO Helen Sawczak told SBS News that Australian businesses were already feeling the effect of fewer Chinese tourists and students. “There is definitely a loss of confidence given the virus outbreak. Until the situation is alleviated there is going to be a significant impact on the Australian economy.”
Research by PricewaterhouseCoopers found that the impact of China restricting the number of citizens who could visit or study in Australia puts the cost at around $2.3 billion.
Based on findings by Roy Morgan, around 1 in 6 Australian businesses (15%) have already been affected.
According to the December 2019 NAB Business Survey, business confidence in Australia is at an all-time low, with the number of pessimistic businesses outnumbering optimistic businesses, the weakest result in over 6 years.
With this, difficult operating conditions have translated to increased insolvencies across the country. The Deloitte Weekly Economic Briefing found that company insolvencies rose 4.6% in the 2018-19 financial year, following a two-year period of declines.
The construction industry remains the most stressed, representing 19% of all appointments. Following close behind is the accommodation and food services industry on 13% and the retail industry on 7%.
Australian Treasurer Josh Frydenberg has warned the economic impact of the Coronavirus will be significant as Australian businesses brace for a hit to their bottom lines.
Desperate Call for Government Assistance
The Council of Small Business of Australia (COSBOA) is urging the Australian Government to provide much-needed financial assistance. Businesses need help to safeguard the almost certain financial effects of Coronavirus.
Peter Strong, Chief Executive of COSBOA told SmartCompany there are a range of scenarios for how Australian businesses may be affected by the ongoing crisis. This includes:
- A high level of illness creating a shortage of workers,
- Periods of low trade and poor customer activity resulting in a lack of business and job loss, and
- Employees and business owners forced into quarantine affecting the viability of the business.
COSBOA is calling for urgent assistance, including:
- A direct cash injection for Coronavirus-affected businesses,
- Tax forgiveness such as tax deferral for BAS, PAYG and super,
- Wage assistance for businesses forced to stand down employees, and
- A one-off payment to households in regions impacted by major outbreaks.
How Tax Debt Resolved Can Help
If your business is experiencing financial hardship due to the Coronavirus outbreak, now is the time to get in touch with your bank. The Australian Banking Association announced on 14 February that there is help on offer for small businesses such as deferring loan payments, waiving fees and charges and restructuring loans.
If you’re worried about not being able to pay your upcoming BAS or are struggling with an overwhelming tax debt, it’s important to seek professional help as soon as possible. The team at Tax Debt Resolved can assess your company’s current financial position and discuss options moving forward, including negotiating with the ATO on your behalf to get a payment plan in place. Get in touch with our team today on 1300 628 586 for a free 30-minute consultation.