There are 2 types of businesses in Australia. Those that employ staff and those that don’t. The number of businesses as at 30 June 2019 that don’t employ staff makes up 61% or 1.4 million of the total 2.4 million businesses in Australia, as well as 33% of the GDP created in Australia based on a recent Australian Bureau of Statistics report. These are enormous numbers and involve a huge number of people.
The legal structure of these businesses is made up of sole traders, partnerships, trusts and companies. All of which do not employ staff, so they rely solely on the business owner to succeed.
The average turnover of these businesses is around $200 000 per annum but the average net profit or take home “salary” would be anything from $60 000 and above.
Most, if not all of these 1.4 million individuals running these businesses, now have no income.
The government has done a great job at providing some type of compensation for those businesses that employ staff, but very little for those that don’t.
However, the allowances such as the jobseeker allowance, will not replace the “salary” of the majority of these business owners, as it is much greater than the allowance received.
These owners have structured their expenses according to their incomes prior to the Coronavirus crisis which we currently find ourselves in.
I expect that very soon the Government will introduce a package for non- employee businesses.
My suggestion is as follows:
- Pay the business owner a tax-free income of 60% to 70% of their monthly average taxable income over the previous 2 years during the duration of this crisis. This will enable them to pay their mortgages and any other expenses as normal.
- I would not get Centrelink involved as they already have enough to deal with, but rather set up a special fast acting emergency on-line application form managed by a newly created division within the Australian Tax Office. It’s important to make this process as painless as possible, with very little communication required from the business owner.
By providing business owners with an income at the same level that they had before the crisis, they will be able to feel like human beings again and get the economy functioning again.
Perhaps this way we can prevent Australia from going into another recession.