If you own a solar business, the government has announced a surprisingly generous support package for small/medium businesses. Here’s what you need to know.
On March 12th, in response to the economic slowdown caused by the coronavirus and bushfires, the Australian Government announced a $17.6 billion economic stimulus. Then, at some point in the last week, they must have spoken to someone in the Treasury who actually knows what’s going on, because they then increased it by an order of magnitude to $189 billion.
This is 9.7% of GDP and well over twice the size of the stimulus we had 12 years ago for the Global Financial Crisis. Because a large part of the stimulus consists of loans and convincing people to blow a portion of their retirement savings, the direct cost to government accounts that will have to come from tax revenue in the future is estimated to be around $66 billion.
I wasn’t sure we’d get a stimulus because the Coalition has spent the last 12 years saying how bad they are. Lucky for us, we’ve been saved by their utter lack of principles. While I’m pleasantly surprised by the large scale economic response to the crisis, I am far less impressed by their response to the actual crisis crisis. Because the official reaction to the pandemic has so far been weak, it appears up to us to take additional measures to improve the safety of ourselves and those we care about.1 This appeals to my sense of independence, but it’s really not a good idea when it comes to public health. Hopefully, this giant stimulus indicates the government is about to get serious when it comes to containing the disease.
The economic stimulus is designed to support business and will assist the solar energy industry in a range of ways. I’ll describe the provisions it contains, but only in general terms because I’m not an accountant and aren’t qualified to give advice on business taxation.2
I’ll also mention a form of economic support that is coming from the banking sector. They are allowing small businesses and homeowners to defer loan payments for 6 months.
Six Ways The Stimulus Supports Business
The official government webpage is here, but here’s a summary:
- Businesses with an annual turnover of under $50 million will receive a subsidy of $20,000 to $100,000. This will be done by allowing them to keep all their employee’s PAYG tax payments over either a 4 or 6 month period to a maximum of $50,000. Then, at the end of this period, the government will give the businesses an amount equal to what they have already received.
- The government will pay half the wage of current apprentices and trainees for up to 9 months for businesses with less than 20 employees, with a maximum subsidy of $21,000 per apprentice/trainee.
- Tax deductions have been increased for business investments. This is very useful for anyone wanting to install commercial solar systems and I’ve already written about it here.
- Businesses will be protected from going bust by temporarily making it more difficult for creditors to wind them up.3
- One billion dollars will be spent on assistance for severely affected regions such as those heavily dependent on tourism or overseas education, but most of it — $715 million — will be used to help airlines.
- A variety of steps will be taken to ensure low interest loans will be available.
I’ll go into more detail on these points, but first I’ll mention a form of support coming from the banking sector and cover the rationale for having a stimulus in the first place — just so people will know why the government has done an about-face on this.
Banks Allowing Loan Payments To Be Deferred
An additional form of support that’s not part of the government stimulus package is being provided by banks. They now allow small businesses to defer loan payments for 6 months. Not having to make repayments for half a year is obviously useful for any business doing it hard. However, this is not a free lunch, as once the 6 month deferment period is over loan payments will either be increased or the pay back time extended. The big banks have also announced they will allow the same for home loans.
Why A Stimulus?
Normally when the economy heads starts having a hard time the Reserve Bank of Australia reduces interest rates.4 This puts more money in the pockets of anyone with loan payments, which includes the two-thirds of home owners with mortgages. It also makes borrowing cheaper, so people are more likely to splurge on new cars and furniture or invest in solar panels. Lowering interest rates to boost the economy is called a monetary stimulus.
At the moment it’s impossible for Australia to cut interest rates enough to avoid the expected economic downturn because they are at a record low of only 0.25%:
It’s not practical to lower interest rates below zero because paying people to borrow money creates problems. If a speedy response is wanted — which it is — additional action that goes beyond changing interest rates is required and is called a fiscal stimulus.
The Treasury regards interest rates under 3% as a danger zone where it may not be possible to rapidly respond to economic shocks. Australia has been in this Kenny Loggins zone for 7 years, so we’re actually lucky we haven’t needed a fiscal stimulus until now.
The current stimulus is sterilized, which means we’ll have to pay for it in the future. While this is a concern it doesn’t justify not having a stimulus, because we’ll be worse off if we let the economy tank. But it does mean promised future tax cuts are unlikely to occur or will instead be cancelled out by other tax increases and/or spending cuts.
When the economic outlook is bad and there is no room to adequately lower interest rates, it is possible to have an unsterilized stimulus that doesn’t have to be paid back.5 We’re not getting one of these because, while our government is fine with us being under prepared for a pandemic6 or having less than 30 days supply of petrol, when it comes to fiscal policy they lack all sense of adventure.
The Aussie Dollar Is Down
After the stimulus was announced the on the 12th the Australian dollar fell and is now at its lowest point in over 14 years at $0.58 US. It may drop much lower today. Part of this is because Australia’s inflation rate will be higher than it would be without the stimulus, but it probably also means the money market isn’t expecting the US to have an effective economic stimulus. It’s almost as if people don’t think the US leadership knows what it’s doing.
This doesn’t mean we’re going to be living in squalor on the Aussie dollar. A low dollar helps exporters and it’s likely you’ve cancelled your overseas holiday anyway. The dollar will probably recover at some point. There is a reason why we have pictures of kangaroos on our coins. It’s just not possible to know when it will happen.
Money for Business! — Including Solar Installers
In order to help keep businesses in business, the government is providing a $20,000 to $100,000 subsidy to those that pay staff and have an annual turnover of less than $50 million. The subsidy works by letting businesses keep the worker’s PAYG tax. The maximum amount that can be kept is $50,000 and if it is under $10,000 the government will boost it to $10,000. Then, in October, the government will give businesses an additional amount equal to the amount they have kept.
This will apply to activity statement lodgements for the 3rd and 4th quarter for those that lodge quarterly or March, April, May, and June for those that lodge monthly. But to make it more equal, businesses that lodge monthly will have the amount for March tripled:
If a business has employees but doesn’t withhold tax, for example if it only has staff who are under the tax free threshold, then the business will receive the minimum payment of $20,000.
Details of how it works, as well as examples, can be found here.
This is a cunning incentive because not only does it give businesses a reason not to sack people, they also have an incentive to give them more hours if they are going to come in below the maximum subsidy of $100,000.
It’s particularly aimed at small businesses. While I’m no accountant7, it appears to me that if employees are being paid the median wage or salary8 of around $57,000 a year, then the subsidy will top out at perhaps 10 full time employees.
Reducing Your Super Contributions May Make Your Boss Money
It appears to me in some situations a small business would receive more stimulus money if employees making voluntary superannuation contributions reduced the amount or stopped entirely. I’ll leave it up to minds more devious than my own to think of ways this could be exploited, but because reducing voluntary superannuation payments would tend to stimulate the economy, I can’t decide if this is a bug or a feature of the government’s plan.
Government Pays Half Apprentice/Trainee Wages
Businesses with apprentices or trainees can receive a subsidy of half their pay for 9 months from the start of this year until the 30th of September, up to a maximum of $21,000 per apprentice/trainee.
Again, details are here.
This incentive is clearly designed to provide cash to small businesses while encouraging them to keep (mostly) young people employed.
“That is working, That’s the way you do it, Give money to business and trainees half free…”
Instant Tax Write-Off For Commercial Solar — And Other Things
The government has temporarily improved tax deductions. This is useful for any business that can benefit from installing commercial solar power or any solar installer who wants to buy equipment such as safety gear or a new truck. I’ve already written about this, so I won’t go into detail, but here’s a brief summary:
Assistance For Severely Affected Regions
The stimulus will provide $1 billion in assistance for regions severely affected by the coronavirus and bushfires. It’s not yet clear exactly what this will involve, but it will include a waiver of fees and charges for tourism businesses in the Great Barrier Reef Marine Park and entry fees for Commonwealth National Parks. But most of it — $715 million — will go in subsidies to Australia’s airlines. I’m sure this is quite a relief to all of us, as I know I’ve lost a lot of sleep over losses suffered by the global financial conglomerates that mostly own Qantas.
If there is any money left after giving a hand to J.P. Morgan and other major financial investors in our airlines, I hope there will be a little left over to help the hospitality industry. From what I’ve heard, hours have already been cut to the bone, so there is going to be a lot of pain for people working in that part of the economy.
Administrative Tax Relief
The government says the Australian Tax Office will provide some administrative relief for people affected by the coronavirus on a case by case basis. I don’t know what this means — they’re not in a habit of letting people off paying taxes — but if you are having problems you can contact them and see what they say.
Loan Money Will Continue To Roll Out
The stimulus package will use a variety of methods to ensure money lent at low interest rates will continue to be available to households and businesses. If you want details they are available on this page.
In addition, the government is temporarily making it harder to foreclose on businesses that are in financial difficulty, so if your business is on the ropes, you should have a little breathing space and can hope the stimulus will turn things around.
Getting Solar Installed Is Not A Coronavirus Risk
One thing people can do to keep the economy ticking over and people employed is to install solar power systems, whether residential or commercial. Getting solar panels now will help out the country as a whole and will benefit yourself by putting more money in your pocket in the future through reduced electricity bills — or by putting them into credit so your electricity retailer gives you money.
One thing you do not have to worry about when getting solar is contracting coronavirus. It a low risk activity to begin with and solar installers have adapted to the crisis by streamlining paperwork and cutting back on the need to enter homes, so now it’s not necessary to have any face to face contact to get it. I’d say it’s safer than having groceries delivered, since you’re not going to bring those solar panels into your home. And put them in your mouth.
Economic Response Better than Response To Actual Crisis
While Australia’s coronavirus fiscal stimulus is, as a percentage of GDP, the largest ever made by a developed nation in peacetime, we can’t be certain it will be enough. The economic downturn could always be even worse than expected. The stimulus comes to 9.7% of our $2 trillion GDP. This is a hefty amount, and it is always possible to have a second round of stimulus if necessary.9 If the economy does worse than the government expects, then more fiscal stimulus is the only effective tool we have left, as there is so little room to lower interest rates before they hit zero.
As this is the developed world’s largest stimulus, we’re not making the mistake of having one that’s clearly inadequate. During the Global Financial Crisis in 2007-2008 Australia was the only developed country that had a stimulus equal to the size of the expected economic downturn and, as a direct result, Australia was the only developed country to avoid recession. I think this has taught the Coalition the importance of a timely and proportional response.
Unfortunately, and quite likely fatally, so far they haven’t applied the same lesson to the coronavirus itself. When I compare our response to the actions of a nation like Taiwan — which has a population almost as large as ours and a lot more contact with China — it really makes it clear Australia has screwed up, as they have less than one eighth the total case numbers we do.
Actions So Far Have Been Insufficient
At first I wasn’t too worried about the coronavirus taking off here because it’s just a virus. When I say that I don’t mean it doesn’t have the potential to kill hundreds of thousands of Australians, I mean we know how to deal with them. It’s not as if the coronavirus is going to magically start tunneling through walls or pick up guns and start shooting people. It can only spread the way viruses normally do.
If we clamped down hard as soon as there was evidence it was spreading, then the vast majority of us would be safe. Unfortunately, the government decided to err on the side of danger and appeared to hope it would somehow be far less infectious here. Maybe they thought we’d be protected by our warmer climate, or the fact we’re not as kissy-kissy as the Italians, or they believed in the mystical protection granted to us by the power of Vegemite. Perhaps we are safe and it’s a lot less infectious in Australia than medical experts expect it to be, but that’s one hell of a gamble.10
This might sound very stupid, but I seriously expected more from the government that failed to take extra precautions when warned we were heading into a disastrous bushfire season and that has been happy for years with our national supply of petrol and diesel being under 30 days.11 I’m hoping the massive stimulus means the government is about to get serious, but to limit spread of the virus and protect people at high risk, such as my parents, I recommend we all take action on our own initiative to help keep people we care about — and don’t care about — safe.
Staying Safe From Coronavirus
While the Government’s coronavirus stimulus is a good idea, the best thing we can do to protect the economy is limit the spread of the virus. This is because an economic benefit only occurs if, overall, people get more of what they want and normal human beings do not want their loved ones to suffer and die. Just because it’s not easy to put a dollar amount on this kind of loss doesn’t mean it isn’t real. Losing a loved one may take time to sink in, but when it does, it’s the realest thing there is.
Please take care of yourself, limit social contact, keep your distance from strangers, and wash your hands after any activity that could possibly expose you to the virus. Anything that gets your hands clean helps, but ordinary soap is best. Washing your hands for 20 or 30 seconds is good, but washing them with soap for just 5 seconds is infinity times better than not washing them at all.
I have to admit I’m behind the curve myself. I only just realized I can paywave and not touch filthy coins and notes. To help out I’ve ordered a coin washing machine from the United States and because our notes are plastic, it should be able to handle them too. It will take over 72 hours to get here, so if it was contaminated with coronavirus it should be safe by the time it arrives. Please feel free to send me all your filthy money and I will carefully launder it so it can be used it to stimulate the economy safely. And because immediate action is required, I promise I won’t waste any time sending it back to you before using it to boost the economy.
Footnotes
- So mostly just me then. ↩
- At the end of this article I will give some advice on how to avoid the coronavirus, even though I’m not qualified to do that. Why am I giving advice on one thing but not the other? It’s because if I give bad tax advice and you lose money, you’ll be capable of beating me up. But if my advice causes you to die from Coronavirus I’m safe because I don’t believe in ghost fists. ↩
- “Wind them up” actually often means “break them down and sell the pieces”. ↩
- This is called the cash rate and is how much interest large, trusted borrowers have to pay. But they won’t give it to me no matter how trusted and large I get. ↩
- When done right this avoids deflation. For an example of it not being done right, see the economic policy of Zimbabwe. ↩
- We have not spent nearly enough on pandemic preparation, but at least we’re not like the United States where opponents of their 2008 economic stimulus cut $870 million US from pandemic preparation. ↩
- Hopefully, this disclaimer will be enough to keep me out of court. Unfortunately, I don’t know if it will because I’m no lawyer. ↩
- The median wage/salary is lower than the average wage/salary because there are a small number of people who earn huge amounts of money. For example, the CEO of Macquarie Bank, Shemara Wikramanayake, is paid over $18 million a year. ↩
- It’s also possible the stimulus will be too large — and we should all be hoping it is, because it means the virus kills less people than expected — but too much stimulus is less of a problem than too little. ↩
- Tragically, very basic hazard reduction steps have not been taken. Just one example — it’s nuttier than a lumpy chocolate bar that air conditioners are still being run in public areas such as airports and supermarkets, as lower temperatures increase virus survival time and spread. While it’s not a good idea to switch off ventilation, it’s likely to be a good idea to heat these places if they’re under 26 degrees. (Or the temperature medical experts recommend, rather than the maximum temperature a random blogger finds comfortable.) ↩
- You might think we’d see some action on this now oil has fallen over 50% from 2 months ago, but maybe this is one oil can they’ll keep kicking down the road. ↩
About Ronald Brakels
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Cracking explanatory article Ronald, mixed with your humour, time to start a rhumour for your Pulitzer.
Makes a lot of sense. Very informative, thanks.
Bad though the bug bastardry may be, it’s clear the socio-economic fallout will be much worse ~ and MUCH longer-lasting. (Start counting from FIFTY years out!… and imagine an unrecognisable world.) And it isn’t something you can apprehend by counting the number of corpses; they’ll probably amount to ewer than WWII.
For anyone wants to maintain life as we know it self-sufficiency is the only way to face the future. (including energy production).The toilet-paper stampede will apply to everything (although we all have but one bum…and no use for it anyway when the shops go under) – even stuff that doesn’t exist/has no value. Check out https://en.wikipedia.org/wiki/Tulip_mania , where, eventually, you could buy three houses for the price of ONE (particular) tulip bulb.
The cash being thrown at THE virus (supposedly YOUR tax-dollars) is actually currently-printed currency, not based on ANY form of actual wealth, but merely a numbers-game of book-balancing, and as such is nearly valueless. The more they print and hand out the more worthless it becomes.
survival in the Brave New World will need entirely different values and perspective from our recent ones.
Students of history will realise we’ve been-there-done-that on other occasions. As tate elsewhere, adaptation is benchmark upon which all else is founded.
I suggest you quickly spend all your money before it becomes worthless. Beans are 65 cents a tin at the local supermarket, although at your age I’d recommend a home delivery, just to be on the safe side.
Fortunately I don’t need advice on how to deal with money. After 14 years of trading in the stock-markets without a single loss (and almost four years of consistently taking money off the bookies) I have rather more money than there are baked beans available. And yes, I’m in the process of ‘validating’ it even as we speak. (Would you like to see a photo of a couple of hundred-thousand dollars the VicPol. recently deposited into my bank-account after they’d investigated it’s source?) When was last time YOU had almost a $million under your mattress, Ronald? Show me yours and I’ll show you mine.
And as for age…. don’t forget I’ve seen pictures of you, and I’m hardly surprised you’re familiar with the price of baked beans. 😉
More seriously, I don’t suppose you can remember when a large paper-bag full of 2-Billion-Mark Reichsmarks (usually FOUR RM to one US dollar) couldn’t buy you a loaf of bread? My grandfather could – and until recently I had a photo of him showing off just such a bag. ….or how about when umpteen bankers jumped out of multi-story buildings because the entire contents of their banks were worth zilch – virtually overnight?
But you may remember waking up one morning about 35 years ago to the headlines that ‘Every Australian was today 12% poorer than he was yesterday’? It was when Keating floated the $AU without advance warning.
Be advised: the aftermath of this funny little virus thing will be much more destructive and long-lasting than any damage the Bug itself could .create.
Who doesn’t remember the German Weimar Republic hyperinflation of 1923?
https://core.ac.uk/download/pdf/6993605.pdf
GAWD I HATE BULLIES!! Such as morons who make derogatory comments about another, and then don’t allow a response which exposes their stupidity. Apparently being fat (though gutless), ugly and not-very-bright excuses an utter lack of manners – or even common decency.
My challenge stands! Show us what you’ve got!
And all the rest. https://www.bbc.co.uk/bitesize/guides/ztxbsg8/revision/2 All of which led directly to WWII and beyond.
These days the world economies are far more closely connected and far more assiduously ‘managed’ – read ‘manipulated’.. The crash that’s in the wind will be much worse ad longer-lasting than any damage the actual virus could even dream of doing.
And in the survivors it will raise a litany of moral dilemmas: eg. What do you do when a shipload of refugees fleeing their own devastated shores arrive in Darwin or Perth or Sydney seeking help and comfort and some sense of safety?
Actually, I think the answer’s already been revealed.
We’ve all seen the locks and chains on the rubbish bins common these days.
The answer is obvious. Help them out for the common good because the pandemic has shown we’re all in this together. If we care about our own safety we’ll get the developing world up to modern standards of hygiene as rapidly as we reasonably can.
Sound pragmatic advice. But I think it goes much further than that ~ particularly since none of us get out of here alive anyway. Someone or other made the point that WHEN you die is not nearly as important as HOW you die. ie. Will your ancestors take pride in being related to you? That suggests that there are higher motives than ‘caring about our own safety’. But we ARE all in the same boat: and it’s our own fault. The current predicament (one of many;and more in the future) is entirely due to the barbaric Asian treatment of animals.Covid 19 is DIRECTLY the result of that ‘culture’ – which degrades ALL of us. And more indirectly, though absolutely definitively, the fault of ‘The West’ for not stamping out such practices by force of arms if necessary, in the name of asserting our touted human decency. That ‘decency’ is the only claim to fame we have between here and the ends of the Universe.
Are you inviting India to invade us?
Because that’s how you get India to invade us.
?????? Don’t understand the question/connection.
However:- “As it turns out, hyperinflation generally coincides with wars and a series of ill-advised and inflammatory fiscal policy decisions, but at the core is a result of a rapid increase in the money supply that is not supported by growth in the economy.”
https://www.cnbc.com/2011/02/14/The-Worst-Hyperinflation-Situations-of-All-Time.html
The ‘devloped world’ has been sailing close to the wind for years (eg. 87% of the ‘workforce’ being in the ‘service industries’ and paid for NON-productive (wealth-creating) ‘jobs’.
Now, in response to the delinquent virus our government is throwing around TRILLIONS of freshly-minted cash which has NO legitimate basis whatsoever… not even a bogus one. Instead of hoarding toilet-paper anyone with brains would be hoarding the stuff that creates its raison d’être!
Here’s yet another ‘Asian Culture’ practice that ought to be stopped at any cost -whether because it might well start the next pandemic o because of the barbaric degradation with which it contaminates all ‘human values’.
https://secure.peta.org.au/page/49042/action/1?utm_source=PETA%20AU::E-Mail&utm_medium=Alert&utm_campaign=0420::skn::PETA%20AU::E-Mail::farfetch::::aa%20em&ea.url.id=4665637
Allowing such bastardry to continue without even raising a protest might well be grounds for suggesting that, from a longer perspective, some bug driving our species to extinction may not be such a bad thing after all.
While most angora fur is produced in Asia, I’m not sure it counts as an Asian culture practice when two of the most economically important angora rabbit breeds are literally called the English Angora and the French Angora.
To quote Shakespeare:.. “What’s in a name?
‘Culture’ is usually reckoned to be ‘a usual practice’. I suspect that if an Englishman or Frenchman were caught doing such things he’d be lynched before the coppers could arrest him!
Probably not, since the production of foie gras involves a French person applying a pneumatic feeding pump to a duck.