Debt fears over Victoria’s $3b business relief plan

Business groups fear a fresh wave of "zombie" companies as employers already in debt and unable to trade through the COVID-19 crisis are hit with large tax debts to the state government at the end of their deferral.

Premier Daniel Andrews announced a new $3 billion business support package on Sunday, to the relief of business and industry groups clamouring for government assistance and as Victoria recorded 41 new cases of the coronavirus, with seven more deaths.

Premier Daniel Andrews addresses the media on Sunday.Credit:Penny Stephens

But there were warnings that tax breaks contained in the package, which defer $1.7 billion in payroll tax payments until next financial year, were simply storing up trouble for businesses as they struggle to recover from the economic crisis.

Despite the warm reception from business for the government's rescue plan, the state's 412,000 sole traders must wait several more days to see the details of the relief planned for them.

The government said it was putting the final touches to the "complex" task of developing a support package for such a large and diverse sector.

The new state spending includes $1.1 billion in cash grants for small and medium-sized businesses and a $251 million Licensed Venue Fund targeted at the hospitality sector offering grants of up to $30,000.

Mr Andrews sent out a message to Prime Minister Scott Morrison that Victoria would need further support.Credit:Getty Images/Alex Ellinghausen

"Over the three months alone till the end of the year, 1.36 million Australians living in Victoria will receive $10.9 billion in JobKeeper support, accounting for more than 60 per cent of all JobKeeper payments across the country," the Prime Minister said.

"Victoria is where the need is greatest at the moment because of the scale of the outbreak that has occurred and that is why the majority of payments will be made in Victoria.

"Where additional support is needed above the considerable support already provided by the federal government, this should be done by those states directly."

Cain Parkin and Ashlyn Trickett, owners of the popular Moonee Ponds wine bar and bottle shop Suburban Cellar, cautiously welcomed Sunday's announcement, saying additional state government grants and a potential waiver of its $900 liquor licence fee might help the business weather the COVID-19 storm.

"In future years as businesses get over this thing, there's no doubt we pay it back anyway when we become profitable and pay tax," Mr Parkin said.

"It just adds that little bit extra to get through this six to 12 months."

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