The Federal Government’s JobKeeper Payment Scheme is the most significant business stimulus package ever offered in Australia’s history. The scheme was unrolled in response to the devastating effects of the COVID-19 pandemic on local businesses. The ethos behind the scheme being that if Australians can stay employed and working for their pre-pandemic employer, we may be able to preserve some level of pre-pandemic business normalcy.
The details of the JobKeeper scheme are well known and can be summed up as a reimbursement payment of $1,500 (before tax) per fortnight for eligible employees where the business is able to demonstrate a decline of 30% in turnover.
The most recent reporting by the ATO states that over 872,000 businesses have been approved for JobKeeper and circa 3.3 million employees are now receiving the benefits of this stimulus. All in, the scheme is reported to be supported by a $70 billion carve out of Australia’s Federal Budget.
What we can expect in the coming months
With the scheme now reaching its projected mid-term, the ATO have begun to investigate fraudulent and ineligible claims. So far, a reported 6,500 businesses have already been removed from the program. The ATO’s compliance team are now reviewing applications for the following behaviours which may indicate a delinquency by an applicant:
– Payments to people who do not meet the eligibility requirements or are not employees;
– Falsifying records or revising activity statements to meet the fall in turnover test;
– Applying for JobKeeper where there is no evidence of carrying on a business or there is no assessable income from carrying on a business;
– Employers failing to pass on the full $1,500 payment to eligible employees;
– Multiple eligible business participant claims;
– Employees being incorrectly excluded under the one-in-all-in rule;
– There are penalties for making false claims and not complying with your obligations; and
– Instances where the actual and projected turnover have significantly diverged.
The ATO have urged all participants and applicants to perform a self-assessment of their applications. If there are any instances of an ‘honest mistake’, the ATO does have some limited discretion to work with the applicants on remedying the issue. If you are concerned that you or your employer may have done the wrong thing, the ATO have created a ‘tip-off’ line so the matter can be brought to their attention in priority.
The timeline for the scheme is also uncertain. At the date of publication, we are now in the 8th fortnight of JobKeeper. The scheme is slated to be in effect until 27 September 2020, meaning it will have been in effect for a total of 13 fortnights. Due to the uncertain nature of the pandemic, the administration of the scheme has not always been consistent and it is likely that we will see further updates to how and when it will be fully wound down.
For example, in the normal course, businesses were to lodge their monthly declarations between the 1st and 14th day of the month following the claim period (i.e. apply by 14 June for the May period). The declaration identifies the business’ participant and eligible employees for the claim period. However, in June we saw that deadline brought forward to 30 June, for the June 2020 period. If you have not already applied for JobKeeper by 30 June for the June period, the ATO has taken a strict stance of not accepting late applications.
Another example of the changes recently made to the scheme is for persons already receiving child care subsidies and sole traders operating child care services. As of 20 July, those persons will no longer be eligible for the JobKeeper payment.
It is unclear what changes will be to come. However, given the Government’s record of stripping away eligibility and now their undertaking a review for compliance, we consider it likely that these measures herald the early stages of the JobKeeper Scheme being systematically wound down.
There has been a growing concern from within the local business community, financial advisors and body of insolvency practitioners that the JobKeeper package, along with the amendments to the Corporations Act to preserve businesses that we are now facing an economy of zombie businesses – i.e. businesses that would otherwise be dead if not for Government stimulus.
This is a very real concern for those businesses that operate on a trade credit basis or with delayed payment terms. The general advice we have been giving our clients in response has been to tighten the timeframes for payment provisions within their terms and conditions and to not let debts exceed $20,000. This has a twofold effect:
- Debts under $20,000 can be dealt with quickly and efficiently in the small claims court of most states. Once judgment is obtained, you can take steps to enforce the judgment debt, including placing the judgment debtor on creditor watch (thus stifling the debtor’s ability raise other debts before dealing with your judgment); and
- Debts over $20,000 can be dealt with by statutory demand, but the lapsing period for the payment under the demand has temporarily been extended from 21 days to 6 months.
If you are concerned that your business may in fact be a ‘zombie company’, you should seek advice from a suitably qualified insolvency practitioner. Directors of companies have duties to ensure they act in the best interest of the company, its members and its shareholders. Those duties have been preserved throughout the course of the pandemic, meaning it is as important as ever to ensure your business is sustainable not just while the stimulus is available but also when that stimulus is gone.
Directors of companies should turn a critical eye to their trade debtors, aged receivables, supply lines and customer books. If you identify that your business is reliant on certain companies or individuals paying large sums back or making major orders in the near future, you should also consider what those parties’ viability is likely to be once the stimulus is no longer available. The earlier you make this analysis, the better equipped you and your business will be at avoiding becoming a zombie company.
How to get help
The circumstances around the JobKeeper Payment Scheme are complex and highly unusual. Seeking the advice of a suitably qualified professional is key to making sure your business survives the pandemic. Rostron Carlyle Rojas Lawyers have serviced local communities in Brisbane, Sydney and Melbourne for nearly 20 years. We survived and advised our clients through the GFC and will continue to do the same through the COVID-19 pandemic.
Should you have any questions about the JobKeeper stimulus package or require help in securing your business as the package is wound down, Rostron Carlyle Rojas Lawyers is here to assist.