RSM Australia

A better approach to JobKeeper?

Tax Insights

With speculation rife over the future of the JobKeeper scheme, we explore what has worked with the scheme, what hasn’t and possible changes to the scheme that may be considered when the Treasurer releases his economic update and the results of the Treasury review into the scheme.

There have been numerous media reports recently surrounding common issues with the scheme including:There have been numerous media reports recently surrounding common issues with the JobKeeper scheme.

  • Inconsistent guidance provided by ATO officers causing confusion around eligibility criteria and subsequent denial of eligibility;
  • The scheme could be extended to 31 December but no changes to be made prior to this date;
  • Lack of eligibility due to a change in the entity carrying on a business;
  • Lower subsidy amount post-September (somewhere between $1,000 and the current $1,500);
  • Reduced / tiered payments post-September, particularly around casuals and part-time employees;
  • Lack of eligibility of start up or research and development businesses with no GST turnover;
  • No changes to the business participation test;
  • Issues surrounding eligibility of new business and sole traders either not required to register for GST or who report on a quarterly or annual GST basis;
  • New decline in turnover test, particularly for non-impacted businesses or those outside of hospitality and tourism;

  • Monthly testing rather than one-off tests;

  • The eligibility of profitable businesses in certain industries for JobKeeper due to seasonal or industry specific timing differences impacting on GST turnover;
  • The impact of zombie companies on solvent businesses due to non-payment or late payment of debt and creditor invoices;
  • Deliberate alteration of business models in order to artificially satisfy the decline in turnover test; and
  • The lack of incentive for recipients of JobKeeper or JobSeeker to engage in paid work at an equivalent or lower rate of pay.

Please be aware the above points and common issues are the outcome of recent media reports and speculation and as such, is intended as general information only and should not be considered advice on any matter and should not be relied upon as such. If you have any questions regarding JobKeeper, please contact your local RSM office.

Whilst the scheme overall has provided a lifeline to many businesses, issues such as the ones outlined above highlight the need not only for a review of the functionality of the scheme but also ongoing eligibility.

What is clear is that in states like Victoria and New South Wales which are still experiencing community transmission, the extension of the JobKeeper program will be essential for the ongoing survival of many businesses.

Ongoing support for certain industries such as the hospitality, entertainment and certain retail trades may also be required, however, given the financial impact on the Australian economy and the need to ‘fill the hole’ left behind, the JobKeeper scheme may need to be redesigned to ensure only those directly impacted by COVID-19 retain eligibility.The extension of the JobKeeper program will be essential for the ongoing survival of many businesses.

We suggest a model that provides flexibility around the ability to exit and re-enter the JobKeeper program based on a sustained need for financial support. This may improve the integrity of the program and ensure financial support is directed to where it is most needed.

Perhaps a means test for both business and employee eligibility is also required.


The future of JobKeeper eligibility

The ATO and Treasury are provided with to date economic data on the monthly actual and projected GST turnover of each business enrolled in JobKeeper and this data could be used to identify business industry groups who need more targeted financial assistance and those who do not.

There is a question as to whether businesses which experienced a projected decline in turnover in March purely due to the immediate uncertainty at the time, but have subsequently experienced an increase in sales or profitability should remain eligible for the program.

If so, the question needs to be raised whether continued eligibility could be tied to positive performance measures such as increased employment, retention of existing employees or the engagement of new apprentices and trainees.


JobKeeper for Zombie companiesIf JobKeeper continues to be provided to these entities, or is extended, there is real risk to creditors and to employees and this is arguably not consistent with the policy intent.

Recent media reports surrounding zombie companies and the risk that continued enrolment in the JobKeeper program could send business owners broke due to the accrual of payroll liabilities such as leave entitlements also raises concern.

If zombie companies are relying purely on JobKeeper to meet minimum wage conditions, and there is a risk of non-payment of other creditors and the potential loss of employee entitlements on voluntary administration or appointment of a liquidator, should eligibility for JobKeeper be denied?

Whilst no doubt, not a popular suggestion, we question whether providing ongoing access to JobKeeper and the possible extension of certain ASIC concessions to potentially insolvent companies is prudent.

If JobKeeper continues to be provided to these entities, or is extended, there is a real risk to creditors and to employees and this is arguably not consistent with the policy intent.


Employees on JobKeeper - Refusing to work?

Reports of employees refusing to work, obtaining alternative work while continuing to receive JobKeeper from their primary employer, or being disinterested in engaging in paid employment also requires urgent address by the government.

Whilst we appreciate the challenges faced by the government when designing the JobKeeper scheme, the fact that the minimum JobKeeper ‘wage’ is tied to the National minimum wage is proving to be a disincentive for some individuals to engage in paid work.

This is inconsistent with the intent of the policy and adds to the burden faced by business owners who have become quasi Centrelink offices and are now spending valuable time that could be spent working in their business on JobKeeper administration.


Consistent with submissions made by professional bodies, RSM also supports the review of eligibility criteria tied to lodgements of 2018-19 income tax returns or the reporting of taxable supplies in the approved form before 12 March 2020.This JobKeeper issue requires urgent consideration and could be easily rectified with the introduction of a retrospective amendment to the rules.

The apparent backflip by the ATO on the interpretation of this criteria, particularly for eligible business participants, has resulted in an unfair and inequitable outcome for many small businesses.

Many small business owners and start up entities, despite being told by ATO case officers on release of the JobKeeper rules they would be eligible, have subsequently been denied JobKeeper, in many cases simply because they chose to report their GST obligations on a quarterly basis rather than a monthly basis.

This issue requires urgent consideration and could be easily rectified with the introduction of a retrospective amendment to the rules.


What's next for JobKeeper?

We understand the Treasury and the government have engaged with multiple industry groups and have sought feedback on the effectiveness of the JobKeeper scheme.

We hope that the constructive feedback provided has been taken on board and will be reflected in any amendments or extensions to the scheme.

JobKeeper has provided a lifeline to many businesses and it has helped keep people employed, and whilst we strongly believe the scheme should continue in some form, urgent and targeted change is required to ensure those who need the support the most, receive it.

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How can RSM help?

If you require assistance with any of the above, a review of your JobKeeper eligibility calculations, a review of employee eligibility, or a review of your compliance with administrative obligations, please contact your local RSM office today.

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