Top 7 Disruptions for Australian Businesses in 2020

The start of the new decade has been rocky with challenge, crisis and turbulent on so many different fronts.

Here are the top 7, disruptions, risks and ‘watch outs’ Australian businesses need to prepare for right now.

1. COVID-19

COVID-19 is by far the biggest disrupter for every Australian.

The rapid global spread of the contagious respiratory virus has set off a domino effect of calamity on the global economy, health systems, and overall social interactions with the most acute pain being experienced by the tourism, hospitality and entertainment industries particularly with the newly enforced social distancing measures and public gathering restrictions which has ensued a number of large scale events to be cancelled or postponed.

To both contain the spread of the infection and mitigate free fall in sales, businesses have responded in different ways, including

• Reducing staff rostered hours
• Increasing cleaning rotations across ‘high touch points’ including lifts, bathrooms and communal spaces
• Revising hotel occupancy forecasts
• Freezing permanent recruitment
• Deferral of major procurement decisions
• Cash management strategies such as payment term extensions with major suppliers
• Suspending non-business critical travel
• Enforcing COVID-19 refund policies for booked events
• Encouraging leave without pay for employees
• Alternate working arrangements for employees i.e. work remotely
• In extreme cases, temporary shut-down of operations including staff redundancies

Whilst the Federal Government have been quick to manage the economic fallout of the virus through its stimulus package of $17.6 billion which includes cash flow boost to small business of $6.7 billion, time will ultimately tell whether the fiscal injection will be  ‘spent’ or ‘stashed’ and more importantly whether it will be sufficient to offset widespread public anxiety and enforced social distancing measures. It will be a delicate balance for businesses and governments to not only ensure community safety but also encouraging pragmatic customer patronage and foot traffic.

2. ATO Increased Focus on Small Business

With over 4 million small businesses in Australia who contribute 30% of Australia’s tax revenue, it’s no surprise that the ATO are heavily scrutinising small business tax compliance.

• Small Business Tax Gap

The small business income tax gap refers to the difference between the total amount of income tax collected from small businesses and the amount the ATO estimates would have been collected if all small businesses were full compliant.

The ATO estimates the gap to be approximately $11.1 billion largely driven by businesses not declaring all income, not fully understanding their tax obligations or claiming deductions for items that do not have any connection to income.

• Superannuation Guarantee Charge

Superannuation compliance continues to catch small businesses out as this requires employers to withhold the charge from employee wages and on remit these to the relevant super funds which tends to be difficult for some businesses as it represents cash that is not directly paid to the employee and can therefore  be used to instead to fund immediate operating expenses of the business. This, together with the failure to remit Pay As You Go Withholding Tax have historically been the cause of many small business failures.

3. Tougher penalties for ‘Wage Theft’ & Underpayments

In light of George Calombaris’s Made Establishmentunderpayment of $7.8 million in wages and the numerous other companies across not only food but also professional and financial services, the Australian government are considering tougher penalties for businesses who do not take precautionary steps and have appropriate processes to ensure they are paying their employees correctly.

4. Impact of bushfires on fresh produce

The devastation of the recent bushfire season has flowed on to the foodservice industry in the form of increased fresh produce prices due to the destruction of vast amounts of local agricultural land.

As an example, the price of honey, a major ingredient to many foodservice providers which contributes over $15 billion to the Australian agricultural industry, has increased significantly due to the bushfire damage to beehives on the Australian East Coast. As a flow on, destruction of hives has impacted farmers who rely on bees to pollinate many fruit-based crops such a pears, apples and strawberries.

5. Cyberattacks

Economic uncertainty drives crime which makes businesses highly susceptible to cyber-attacks which can significantly cripple operations and potentially put sensitive information at risk as was seen in January this year when major logistics company, Toll Group lost several weeks of trading through a Ransomware attack.

6. Changing consumer patterns

Virus anxiety is now beginning to drive a shift in consumption behaviour.

Fear of going to supermarkets have further fuelled traffic to online food ordering platforms particularly companies that deliver fresh ingredients for home-made meals. Fear of job lay-offs have further deterred consumption on discretionary areas such as clothing, beauty services and electricals however driven a frenzy in stock piling of long-life grocery items such as rice, pasta and tinned vegetables.

7. Social Morale and Mental Health implications

Whilst there has been so much focus on the economic and physical health risks posed by the coronavirus, we have yet to consider the implications this will have on the overall mental well-being of our communities. ‘Panic hoarding’ and social distancing measures will likely have impacts on society’s morale and motivation.

So where to from here? A contagious plague, tax scrutiny, rising costs and consumer anxiety? Is there hope?  Yes, there are always opportunities in any crisis and whilst in the short term, businesses will need to make hard decisions and face difficulties in the long-term businesses will take valuable learnings and will emerge more resilient when the disruption passes.

For more information, get in touch with Sabella Consulting & Solutions for free tools and resources.