The Federal Government and Treasury officials are currently grappling with how to wind-back JobKeeper and other forms of COVID-19 stimulus as the Australian economy gradually emerges from lockdown.
At Chartered Accountants ANZ we’ve been engaging with Treasury officials as they prepare recommendations for the Treasurer.
Their task is difficult. The recovery of Australia’s economy is at stake, and with it the livelihoods of many citizens.
Our members tell us that there are many businesses which remain viable only because of government support. Lenders and creditors are circling. Our members also tell us that some businesses that were performing badly before COVID 19 are delaying their inevitable closure and increasing the risk that other businesses will be brought down with them.
Having worked at frantic pace to help implement urgently needed stimulus measures, accountants hope that the manner in which they are wound back is more orderly.
Thankfully, there are two factors which can help achieve this.
The first is real-time data, obtained from Single Touch Payroll and the monthly JobKeeper reports employers are obliged to give the ATO.
The second is time.
Time to develop more accurate criteria for determining who is robust enough to be weaned-off taxpayer funded support. Time to make any on-going support more tailored to specific business or industry circumstances and dependent on the achievement of targets (financial and non-financial). Time to determine criteria to ensure only viable businesses benefit from government support. Government-backed loans could be preferable to grants.
Take JobKeeper for example.
It seems to CA ANZ that the government needs to be flexible in the way it winds-back the wage subsidy.
The accompanying diagram identifies a range of approaches and no doubt there are others. A combination of these could be utilised.
CA ANZ has put forward possible revisions to JobKeeper which include:
- Using actual GST turnover numbers reported on a monthly basis to determine continued JobKeeper eligibility.
- Giving business adequate notice that JobKeeper will be withdrawn.
- Compensating for actual wages up to $1,500 (or gradually reducing amount) per fortnight.
- Increasing the required reduction in the turnover threshold to qualify.
- Determining employees by reporting on single touch payroll.
- Excluding employers that are heavily compensated by government grants.
- Only providing JobKeeper to businesses that are ‘good’ tax citizens (lodgements up to date, tax debt payment plans in place and complied with etc)
The recent decision regarding JobKeeper for the childcare sector illustrates an industry approach which could be rolled out elsewhere, noting however that childcare is a subsidised sector with an established support framework.
Regrettably, the wind-back of JobKeeper will inevitably focus management attention on staff numbers. More Australians will get to know JobSeeker.
But let me conclude by emphasising that it’s not just government officials that carry the load here.
Now is also the time for management and those who advise them to develop and war game a range of recovery scenarios.
Gone is the traditional pre-1 July budgeting process. 2020-21 will be a year full of adjustments as our clients adapt not just to changes in government support, but also to new ways of doing business with a laser-like focus on costs.
Regular client ‘check-in’ decision points will be important too. As circumstances change, will your client be better off pushing through or calling it a day and starting afresh?
The business recovery and strategic advice of Chartered Accountants will be crucial on the road to recovery.
CA ANZ continues to advocate for a modest, targeted government subsidy which encourages small business operators to seek it.