JobKeeper 2.0 is undoubtedly good news for businesses and employees currently eligible for the subsidy, but the Australian Government has clearly indicated the lifeline is limited both in duration and value: Recipients need to start swimming by themselves against strong economic currents.
Sooner or later, the Treasurer will need to call time on the growing COVID-19 outlays.
Even though governments can currently borrow at absurdly low rates, future generations of Australians cannot be expected to pay for this largesse for ever and ever.
Tax reform anyone? It's Highly unlikely, according to the people we talk to in Canberra, but I wouldn't rule out the removal of a few tax deductions and concessions in the coming Federal Budget. But then again, some political observers are talking up the chance of an early Federal Election and we all know what happened to Labor's tax policies in the 2018 Election.
But back to JobKeeper.
The next cliff
March 2021 is shaping up as the next key economic cliff and not just because that's when JobKeeper 2.0 is scheduled to end.
Banks, landlords, suppliers and other creditors are all circling, keen to establish the viability of the businesses they deal with. Although most are still playing the Team Australia game, some will bear their teeth eventually and seek to recover business debts, as is their right.
A CA's skills in budgeting, cashflow management and business recovery have never been more important. And let's add dispute mediation and negotiation while we're at it.
Systems thinking – measuring turnover
JobKeeper 2.0 is again built around ATO systems, this time with actual GST turnover (compared with the comparable 2019 period) being used in determining whether there has been requisite decline in turnover – 15%, 30% or 50%.
The need for businesses, especially small business to project GST turnover to determine eligibility for JobKeeper 1.0 caused many businesses and accountants great stress as their workload suddenly increased with limited blanket lodgement extensions for their existing, business as usual workload.
The prospect of the ATO retrospectively questioning these projections made in times of great uncertainty added to this. This risk is still live with the ATO Integrity Unit out and about checking up on JobKeeper 1.0 applications and supporting documentary evidence.
As noted, JobKeeper 2.0 addresses this concern by replacing the need to project GST turnover with the requirement to compare actual GST turnover. This means that most businesses will generally be able to assess eligibility based on details reported in the Business Activity Statement (BAS).
But the hiccup is that this will generally need to be reported before the BAS lodgement deadline so that employers can meet the wage condition (which requires them to pay their eligible employees before receiving the JobKeeper payment in arrears from the ATO).
We are yet to see details as to how this will play out. But Treasury has noted that the Commissioner of Taxation will have the discretion to extend the time an entity has to pay employees in order to meet the wage condition, so that entities have time to first confirm their eligibility for the JobKeeper Payment.
Systems thinking – proving an ongoing decline in turnover
The policy designers have also inserted an eligibility test that will require businesses to have an ongoing significant decline in turnover. That is:
- From 28 September 2020, actual turnover in the June and September quarters 2020 will be scrutinised, with businesses needing to demonstrate that they have met the relevant decline in turnover test in both of those quarters to be eligible for the JobKeeper Payment from 28 September 2020 to 3 January 2021.
- From 4 January 2021, a similar approach applies but for this period businesses must have a decline in turnover in each of the June, September and December quarters 2020 to remain eligible for JobKeeper from 4 January 2021 to 28 March 2021.
Weaning a business off JobKeeper
For those businesses with fluctuating fortunes, once JobKeeper is lost because of a once-off good quarterly result, it appears from the new ongoing decline in turnover rules (see above) that there's no way back into JobKeeper if things go pear-shaped the next quarter. This 'once you're out, you're out' approach will no doubt focus the minds of those keen to access JobKeeper for as long as possible. The ATO's Integrity Unit will be watchful.
Tiered JobKeeper payments and behavioural responses
The so-called 'tiered' approach to JobKeeper 2.0 was expected, such was the outcry from some quarters about the JobKeeper 1.0 pay increases given to those who historically earned less than the standard JobKeeper 1.0 rate of A$1500 per fortnight.
When we are (hopefully) on the road to recovery, the journey could be hampered by a flat A$1500 rate distorting wage relativities between lower and higher paid jobs potholes that dampen incentives to work, and detours that hamper labour mobility and the reallocation of workers to more productive roles.
But the catch in JobKeeper 2.0 for those seeking the Tier 1 (higher) rate of subsidy is the 20+ worked hours test, determined by looking back to average hours worked way back in February 2020. Those working in payroll and HR will no doubt groan at some of the tasks likely coming their way.
The behavioural response from both employers and employees to this Tier 1 and Tier 2 JobKeeper regime will be watched with interest. Anecdotal evidence suggests some employers are winnowing staff numbers down to 'key talent' as part of a broader cost containment strategy. Employees on the other hand have tolerated a low wage growth economy for long enough to realise that switching jobs is the way to get ahead.
No good news for start-ups
No attempt has been made to address the shortcomings of JobKeeper 1.0 for start-up businesses that commenced shortly before the pandemic or were brave (foolhardy?) enough to commence business once COVID-19 emerged.
This is no policy oversight.
Rather, it appears to reflect the triumph of bureaucratic, systems based thinking: if the ATO computer has no evidence of business activity (gleaned from a BAS or income tax return), then the computer says 'No' to JobKeeper. Sure, pop-up employer and pop-up employee JobKeeper rorting arrangements needed to be stopped. But there are many aggrieved, genuine start-ups (and their advisers) currently knocking on the door of the Inspector-General of Taxation.
CA ANZ resources and JobKeeper advocacy
The CA ANZ Tax Team has put together a few resources on JobKeeper 2.0 for CAs. We hope you find them useful. More will follow, as well as webinars.
We'll also be working hard to provide constructive input to the consultations that will now occur, and Treasury has already indicated that (unlike JobKeeper 1.0) there'll be time to listen and take our views onboard.
CA ANZ will also take a keen interest in the process for enabling JobKeeper 2.0.
The use of Legislative Instruments to implement and amend JobKeeper 1.0 'on the run' have dismayed us a bit. So-called LIs have reduced Parliamentary scrutiny and empowered officials in a way that is concerning some in our CA community.
Our best ally is our members: your insights and suggestions help us every day. Please keep your contributions coming.