Ruling clears Virgin Australia JobKeeper liability

Any JobKeeper overpayments to Virgin employees are likely to be borne by taxpayers rather than the airline’s administrators.

Thousands of Virgin Australia staff are waiting to see if a buyer can be found for the airline. Picture: Lyndon Mechielsen/The Australia

Any overpayments of the JobKeeper allowance to Virgin Australia employees are likely to be borne by taxpayers rather than the airline’s administrators Deloitte.

More than 8200 of Virgin Australia’s 10,000 employees have claimed a total of $24.8m in the JobKeeper payments of $1500 a fortnight.

Administrators were concerned that due to the untested nature of the JobKeeper program and the short time frame for applications, inaccurate information may have been provided to Virgin Australia management that could result in overpayments.

“If any such liability were to arise, it should not be recoverable from the administrators personally,” said a submission from Deloitte to the Federal Court.

A Federal Court hearing on Wednesday to address the question of liability was quickly wrapped up by Judge John Middleton after hearing from lawyers for Deloitte and the Australian Taxation Office. Justice Middleton said he would make the orders proposed to ensure JobKeeper payments to employees continued and excluding administrators from any personal liability to repay overpayments.

Appearing for the ATO, Peter Hanks QC told the hearing the deputy tax commissioner had taken the position that the orders requested by the administrator were appropriate, in light of the “particular circumstances” — “In particular, the fact Virgin Australia is one of two national airlines operating in Australia, the fact the COVID-19 pandemic has resulted in severe and ongoing restrictions on travel in the interests of national security and thirdly, the group of companies under administration employs more than 10,000 workers.”

Virgin Australia went into administration last month with debts of almost $7bn owed to banks, aircraft lessors, landlords, bondholders and employees.

Deloitte is seeking a buyer for the airline, and on Monday announced a shortlist of four bidders to move to the next stage of the sale process.

They include private equity firms Bain and BGH Capital, Arizona-based airline investor Indigo Partners and New York-based hedge fund Cyrus Capital.

All of the bidders are restrained from discussing their plans and proposals publicly.

In an interview with the Centre for Asia Pacific Aviation, Indigo Partners’ managing partner Bill Franke said the non-disclosure agreement ran to many pages.

“It is a multi-page non-disclosure agreement with mind-boggling detail that only an Aussie law firm could dream up,” Mr Franke said. “At the end of the day we see Australia as a very interesting market; it’s a duopoly with Qantas and Virgin Australia. We think that a helpful competitive environment. We think the country needs two airlines and we want to assist Virgin Australia in being one of those two airlines.”

Although he would not reveal what Virgin Australia might look like under Indigo Partners’ ownership, Mr Franke said ultra low-cost carriers traditionally performed much better than legacy airlines following internationally consequential events.