Date posted: 1/06/2020

Weaning business off JobKeeper part of a bigger reform agenda

CA ANZ has given Treasury our thoughts on possible JobKeeper wind back options – all have major ‘Pros’ and ‘Cons’

The CA ANZ Tax Team has been liaising with Treasury officials on JobKeeper – what’s worked well, what hasn’t and ideas for how the government should wean businesses off the wage subsidy as the economy hopefully improves post COVID-19.

We highlighted the enormous workload borne by CAs and urged officials to be more cognisant of the implementation risks associated with adjusting current stimulus measures and any reforms. Adequate lead times must be provided so that we and the clients we serve have an opportunity to plan and adapt.

CA ANZ has given Treasury our thoughts on possible JobKeeper wind back options – all have major ‘Pros’ and ‘Cons’. There is no one recommended approach, and elements of each option could be factored into Treasury and government thinking. The options include:

  • Reducing the JobKeeper amount for all current employers receiving JobKeeper (Lower the cash subsidy)
  • Winding-back JobKeeper for “recovering” businesses (Business specific approach)
  • Winding-back JobKeeper for “recovering” industries (Sector specific approach)
  • Gradually adding new eligibility criteria for continued JobKeeper support (Move the dial)
  • Narrowing JobKeeper to focus more on SMEs (Top-down approach)

There is no easy option: all involve job losses as affected businesses streamline operations, dismissing some employees whose wages are no longer subsidised. Underemployment is also likely to rise. All Australians can only hope this doesn’t occur on a large scale, and to some extent we can influence outcomes if we lift our consumer spending.

All the options listed above also place a heavy onus on business operators (and their CA advisers) to make hard decisions about continued business viability. This is the harsh reality emerging which some have unkindly dubbed “The Cliff”.

Based on feedback we’ve received from CAs, we didn’t even contemplate talking to Treasury about an overnight (“cold turkey”) cessation of JobKeeper for all businesses from 27 September 2020. We understand this is a view shared within government circles. 

But sooner or later however, JobKeeper must cease and, if necessary, the government will likely consider targeted assistance to those businesses (or industry sectors) considered deserving and which have a good chance of coming good.

All businesses models are under scrutiny because of the pandemic. Management must start planning now for what their business looks like without the wage subsidy and other government COVID-19 support. Strategic business advice provided by CAs will be vital to their deliberations.

Fortunately the discussion around winding back JobKeeper is not one dimensional. The government has embarked on a wholistic reform approach, covering a range of complex economic and social issues. But lifting overall consumer demand is the key.

CAs have climbed one mountain to ensure their clients access COVID-19 support. More challenges lie ahead before we see off the problems caused by this awful virus.

Search related topics