Speaking to an audience of small business owners and stakeholders at the Brisbane Business Hub, Federal Member for Brisbane Trevor Evans and BDO Partner Mark Molesworth warned that businesses need to prepare themselves for JobKeeper payments to end shortly, and explained how the Federal Budget can help.
Since it was announced in March, the JobKeeper scheme, one of the largest economic packages ever implemented in modern Australian history, has helped businesses struggling with the impact of COVID-19 to pay their employees. But, tax expert Molesworth warned, the payment appears to be coming to an end – and businesses must be ready to go on without it.
Life after JobKeeper
“You need to understand that JobKeeper’s tailing out, and the intention would appear to be that it continues to tail out,” Molesworth said.
“For the month of October, the rate at which JobKeeper can be claimed per employee goes down from $1500 a fortnight to $1200 a fortnight for employees working more than 20 hours a week, and $750 for those working less than 20 hours a week. From January through to March, it tails off again to $1000 and $650, respectively.
“Whether the payment continues on past March next year is very questionable, and even if it were to continue, it would be at a much lower rate… it’s quite possible there will be further stimulus, but the Government is going to be more and more careful about how it spends its money. I think it’s going to design programs so that they’re only providing support for businesses that have a long-term future, and cutting the others loose at some point.”
Trevor Evans MP, the Assistant Minister for Waste Reduction and Environmental Management and the former CEO of the National Retail Association, said he couldn’t predict whether his Government would continue the payment past March.
“Members of Parliament and policymakers at all levels aren’t going to be able to predict what the next array of measures are going to look like, because policymaking is happening at the moment in a much faster and more responsive way than I’ve ever seen in the course of my adult life,” he said.
Molesworth said that JobKeeper is becoming “less relevant” in Queensland as businesses get back on their feet and can no longer demonstrate the 30 per cent year-on-year decline in turnover required to claim the payment, but warned not everyone will survive.
“I suspect there are a number of businesses that aren’t going to survive the end of JobKeeper,” he said. “There are certainly still a large number of businesses that are on repayment holidays with their banks and negotiating terms with their suppliers. I think those are the businesses that are going to struggle come March next year when JobKeeper turns off.
“I think it’s incumbent on businesses to be forecasting during this period, and to know what it means for them if JobKeeper doesn’t exist after March. I think it’s beyond doubt there are zombie businesses out there that the government will not be keen to support forever. Working out whether or not you are one of those zombie businesses is going to either help you take steps to close down your business in a controlled and sensible way, or encourage you to make the changes you need to make so your business survives.”
The Budget bonanza
In lieu of the JobKeeper payment, Molesworth urged small businesses to take advantage of the stimulatory measures offered by the Federal Budget.
“Make sure you’re aware of everything the Government has for you,” he said. “The 2020-21 Budget is a massive hand-out of funds to businesses, and you need to make sure you’re not missing out on any of it… to be slightly cynical, the Government’s going to want to get back to surplus eventually, and they’re going to ask you to help to pay the money back. You might as well get it on the front end.”
Evans pointed to the removal of all caps from the existing enhanced instant asset write-off incentive as an example of how the 2020-21 Budget can help small businesses.
“Unless you’re a company with more than $5 billion in turnover, you can now get an immediate tax deduction for every single investment you make in capital expenditure this year,” he said. “That’s not going to help a business that is fundamentally in a loss-making position, but for all of those businesses who have a projected path to expand and employ more people over the coming years, they’re going to be able to do that much more quickly.
“There’s also the [$2 billion] additional assistance in the R&D Tax Incentive scheme, and funding for apprentices… there are up to 100,000 apprenticeships on offer right now that the Federal Government will pay for half of.
“About 90 per cent of the extraordinary funding in the Budget is due to last for no more than 100 weeks. It’s going out the door this financial year and next financial year, to ensure the economy doesn’t dive as deep as it otherwise would have.
“But it’s not about propping up zombie companies… many of the stimulatory measures in this Budget have been very deliberately designed to support the companies most likely to do the best over the next 10 years.”