The secrets of JobKeeper

Late on Saturday, the government released its first comprehensive guide as to how JobKeeper will work, so now we can more accurately see where there will be “winners” and “losers”. And there will be a lot of enterprises in both categories.

For a large a number of enterprises it will be the actions that management take in the next week or so that will decide which side of the ledger they fall on. Today’s commentary is about isolating some of the traps and pointing out many of the required quick actions to ensure that as many of my readers as possible move to the winning side.

As you will see there are arbitrary and often unfair distinctions between JobKeeper winners and losers.

Normally commentators like me are critical of such differences in treatment. But in this case urgent action was required and JobKeeper was grafted on to the only existing payment system available — the Business Activity Statements (BAS). Unfortunately, BAS was not designed for JobKeeper, but a new system would have taken too long to design.

Prime Minister Scott Morrison and Treasurer Josh Frydenberg decided speed was vital and they would take the inevitable arbitrary inconsistencies on the chin. They were right to take that decision.

Unless an enterprise is a start-up or linked to agriculture (where there is a complex set of different rules), to gain the full six months’ JobKeeper payments, turnover — in an enterprise with a turnover of less than $1bn — must fall 30 per cent in either March or April. Later months are then not tested. For enterprises with turnover over $1bn, turnover must fall by 50 per cent. Enterprises can gain JobKeeper payments if turnover falls in later months but not for the full six months.

But the BAS turnover measurement was never designed for JobKeeper. It’s a combination of cash sales and invoices for work done. And so, in both March and April, enterprises are sending out invoices for past services to people that they now know have no hope of paying. Accordingly, their real net income will fall 30 per cent because the invoices will not be paid.

But the BAS system treats bad debts differently, so enterprises which are being ravaged by non-payment, such as suppliers to closed restaurants, miss out.

Such enterprises should be on their accountant’s doorstep on Tuesday morning to see if there is any allowable justification for not sending out invoices to people who can’t pay. It may also be possible to go to the Australian Taxation Office for help. There needs to be good reasons for not sending the invoices out, because there is a danger that deferring invoices may backfire in a couple of years. JobKeeper money might need to be returned.

Even if enterprises achieve a 30 per cent turnover reduction in March or April they will fail if all their longstanding employees do not receive a minimum payment of $1500 a fortnight in April.

Given more than a week has passed in April, enterprises will have to back-pay these employees and make sure the higher rate is kept up in April and extended into May.

For those relying on a 30 per cent fall in April turnover, they have seven days from the end of the month to report their turnover fall. JobKeeper payment will not come from the government until mid-May — that delay can be a significant cash burden for a struggling business. And those that stood down (not retrenched) employees must put them back on the payroll, with payments of $1500 a fortnight backdated to the start of April.

To fund the cash burden, banks have to be sure the enterprise qualifies for JobKeeper. And, anecdotally, it seems some banks are being more helpful than others.

Many enterprises will find it too tough to qualify. Meanwhile low-paid casuals who have been in the same job for a year will be overjoyed because they will receive a pay boost for six months.

Conversely, many enterprises have employees who receive more than $1500 a fortnight but in the current situation they are not worth that sum and the enterprise wants to reduce their pay to the JobKeeper rate of $1500 a fortnight. To do that the enterprise must reduce the employees’ hours worked so the JobKeeper payment represents the same hourly rate they were previously being paid.

And as has been well publicised, while the self-employed are covered, with a mum and dad partnership only one can be classified as the entrepreneur and receive JobKeeper allowances. The other can receive a Centrelink payment. Of course, if mum and dad actually work as employees for a family company, they can both receive JobKeeper.

Finally, there are these words: “Businesses, individuals and entities that deliberately enter into contrived arrangements with the sole or dominant purpose of reducing their turnover in order to gain access to JobKeeper payments or increase the amount of JobKeeper payments they receive will not be entitled to the payment or the increased payment and the general interest charge will apply on the overpayment under Section 19 of the Act.

“In addition, significant administrative as well as criminal penalties are also likely to apply to the parties involved in such schemes.”

In principle that’s an important statement because crooks will try and rort the scheme.

The ATO has a good a record in a crisis but has a dangerous, deep-seated, anti-small business culture. Let’s hope the good “crisis behaviour” is maintained but they also catch the crooks.

Footnote

A reader has alerted me that the legislation turnover “test period” must be “a calendar month that ends after 30 March 2020 and before 1 October 2020”. He read that as excluding the month of March whereas I said a 30 per cent fall in March was allowable. The explanation is that there are 31 days in March so as long as your 30 per cent fall incudes Tuesday March 31 you are eligible for six months JobKeeper.,