Australia’s JobKeeper programme has paid out $70 billion to more than 900,000 business supporting more than 3.5 million jobs in the six months to the end of September. It is a remarkable programme that helped bring Australian unemployment down from 15% to its current level of 7.4%.
JobKeeper is soon being phased out
The government's JobKeeper largesse is not infinite. JobKeeper payments are scheduled to fall by 16% from just after Christmas, on 4th January 2021. Payments for eligible full-time employees will drop from $1,200 to $1,000 per fortnight, or 16.7%. There is a somewhat smaller percentage decline of 13% for part-time employees as payments decline from $750 to $650. And there have been no statements regarding extending the programme past its current 28th March 2021 expiry date.
Indeed, the Australian Treasurer, Mr Josh Frydenberg said in July “As the economy gradually improves, Treasury expects that the number of JobKeeper recipients will reduce substantially, with around 1.4 million people remaining eligible in the December quarter, 2020 and 1 million in the March quarter, 2021,"
A recent Sensis survey states that ‘nearly one in three small businesses (29%) say that when the Federal Government’s JobKeeper program finishes at the end of March it will have a major impact on their business’.
Clearly, as JobKeeper payments decline, the financial pressure on companies can only increase.
The ATO's relief due to COVID-19 will not last forever
The financial stresses imposed by COVID-19 has seen the ATO offer a variety of tax reliefs to provide companies with breathing space to manage their cash flow. These generally fall into three categories: reductions in interest penalties, extension of payment deadlines and the speeding up of of tax refunds.
Some examples of these items include:
Payment plans for managing existing and ongoing tax liabilities;
Reducing or even cancelling (ie remitting) interest and penalties incurred in 2020;
Allowing changes to Pay As You Go (PAYG) instalment payment plans; and
Changing the GST reporting cycle from quarterly to monthly which permits companies with less than $20 million of turnover to gain swifter access to GST refunds.
But this leniency has limits and some of the screws are already being tightened. For example, the ATO has permitted meaningful changes to PAYG instalment plans for the 2019-20 tax year. But in 2020-21 they have somewhat higher requirements. The ATO will not apply penalties or charge interest for ‘excessive variations where a PAYG tax-payer has made a ‘best estimate’ of their year-end tax liability.’ This could be seen as a warning shot at proprietors who overly aggressively pushed down their income forecasts so as to reduce instalment payments during the year.
Whilst these changes will no doubt be gradual, they come along with reductions in the JobKeeker payment scheme, which decreases 16% in the first quarter of 2021, and as yet we see no sign of a third extension to the programme beyond the first quarter of 2021.
Cash is King
In a world where JobKeeper payments are falling, and the ATO is starting to tighten its exemptions, the requirement to manage cash flow will be more vital than ever. One overlooked source of funds is Invoice Financing whereby businesses can draw up to 90% of the value of their accounts receivable ledger. To learn more about how Earlypay can help, please contact your Broker or BDM, or call us directly on 1300 760 205.
If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].