The COVID Business Closure

FAST ACTION Needed for a Fairer Solution

At the end of 2019 there was were an estimated 2.2 million Small Businesses in Australia, providing personal income and employment to over 5 million Australians.

ACA Research* who have been conducting research weekly on the impact of COVID-19 has had on SME’s since the crisis commenced have identified some alarming concerns of business owners. These include:

78% of small to medium-sized enterprises now reporting a decline in revenue due to the pandemic, the highest level reported since the research commenced.

46% of businesses located in Victoria anticipating declining revenues over the next 4 weeks.

Only 29% of business owners expect revenues to return to pre-COVID levels by October, compared to 53% in early June.

72% are now concerned about business survival, up from 62% two weeks earlier.

(This represents over 1.5 million businesses)

The ABS surveyed businesses during the week of July 15-23 reporting that 10% (220,000 businesses) that they would close when government financial support ended**.

The US Federal Reserve Chairman, Jerome Powell remarked in May 2020*** that “Avoidable household and business insolvencies can weigh on growth for years to come. Long stretches of unemployment can damage or end workers’ careers as their skills lose value and professional networks dry up, and leave families in greater debt.4 The loss of thousands of small- and medium-sized businesses across the country would destroy the life’s work and family legacy of many business and community leaders and limit the strength of the recovery when it comes. These businesses are a principal source of job creation—something we will sorely need as people seek to return to work”

It is the view of Small Business Australia that personal insolvency or bankruptcy caused by the public health crisis response should not be subject to the existing Australian insolvency and bankruptcy laws and regulations. While some temporary measures have delayed the onset of the ability of creditors to trigger debt recovery actions,   these changes to policy provide only limited protection and little peace of mind to small business owners.

In survey’s conducted by News Corporation’s online publications, by Small Business Australia and by ACA Research, over 80% of surveyed business owners want the protection of their businesses, their personal finances and reputations through a form of COVID Business Closure.

A COVID Business Closure is NOT equivalent to the existing legal insolvency or bankruptcy approach and can be simply implemented by the Federal Government. A COVID Business Closure would facilitate a fair and rapid finalisation of an existing business, in circumstances where the owner and creditors share the financial pain, with and the owner when ready in the future being able to get started in business again without the legal and emotional costs of being made legally bankrupt.

Please contact your local member of parliament today

Ask for immediate action on establishing a COVID Business Closure to protect our small business operators.

The faster such a measure is implemented and communicated broadly to accountants and business owners, the faster we will be able to limit the financial cost to the economy.

The faster we will see a reduction in the curve related to business owner mental health issues.

The faster owners and their families will be able to reconceive life after the closure of the business.

The faster these hearts and souls of their local communities, can regain their financial independence and generate the jobs that only their skill sets and determination will create.