On 28th March 2021, the Australian Government is planning to phase out JobKeeper. The payment was originally introduced in March 2020 at the start of the covid-19 pandemic to encourage affected businesses to keep staff employed during the nationwide lockdown.
JobKeeper is a wage subsidy payment made via the tax system. On top of keeping Australians employed, the scheme also aims to stimulate Australia’s economy and to benefit the sectors who were worst hit by the pandemic. In addition to employees, self-employed people and sole traders were included in those receiving the payment.
Craig Dangar from C&D Restructure & Taxation Advisory says that “I would argue JobKeeper has been a boon for businesses with a fundamentally successful business underlying it but for those on the margins it has been delaying the inevitable. For most businesses the timing of phasing out JobKeeper in March is appropriate, but there are still some sectors that are going to need ongoing support, most notably hospitality, events and to a lesser extent quasi medical (such as laser treatments and cosmetic businesses)” says Mr. Dangar.
Since January 4, eligible businesses have been receiving $500 per week, down from $600 for any staff member who is working a minimum of 20 hours per week that has been employed by the company prior to the pandemic. Other employees are given a payment of $325 per week, which is from $375 per week. The total cost of JobKeeper has exceeded $90 billion.
Many hospitality workers are concerned as they have noticed that since their payment has been reduced, the hours they have been rostered to work have consequently also been reduced.
Since 4th January, many hospitality workers have had their hours reduced from 25 to 30 hours per week all the way down to 10 to 15 hours a week. Some employees have said that even when the restaurant they worked for was busy and they were required to stay back at clean, they would get in trouble with their manager if they stayed past the number of hours which JobKeeper was paying them as their management was reluctant to want to pay them out of pocket.
This difficult situation which has been experienced by many hospitality workers indicates that things could get very messy for a lot of employees once 28th March arrives. When JobKeeper is phased out the risk of covid-19 will still exist and with the possibility of future lockdowns occurring many hospitality venues and their employees are at the crossroads.
“There is a big risk for individuals who are employed in the hospitality industry and it that needs immediate addressing by the Government. JobKeeper has been excellent for businesses but there is an argument that it is time for targeted relief to support employees working in sectors that are still struggling” says Craig Dangar.
Preparing for life after JobKeeper is going to be no easy task for a lot of businesses. If your business has been relying on JobKeeper payments, there will challenging times for your company over the next couple of months.
With as much detail as you can, it is advised that business owners put together a forecast for the next few months. Get out the spreadsheets and take note of the following; From an incoming perspective: Sales figures (based on both last year and other – more normal – years, plus recent activity), any incoming grants, any royalties, franchise fees or license fees, any investment in the business or any tax refunds. From an outgoing perspective: Office space rental cost, product and operational costs, marketing, salaries and any loan repayments.
Balancing these will give you a positive or negative flow figure. Examine this closely with an accountant if required. As soon as you have a clear understanding of how the next few months will look financially, you can realistically consider making necessary spending adjustments to your business.
The Federal Government has also recently announced that the JobSeeker payment will permanently rise to $615 a fortnight from April 2021 onwards. This means that the base rate of the JobSeeker payment will be increased by $50 a fortnight once the coronavirus supplement concludes next month.
The permanent $50 increase will commence on 1 April and will be applied to JobSeeker, Youth Allowance, Abstudy Austudy, and Parenting Payments. The increase is projected to cost about $9bn over the next four years.
Despite the phasing out of JobKeeper, the Australian Government has introduced a new scheme called “JobMaker” with an ambition to get more young Australians back into the workforce. JobMaker offers an incentive to encourage employers to hire new employees aged between 16 and 35. There is a huge focus on getting this age group back into the workforce as they were the age group that lost the highest number of working hours on average during the peak of the covid-19 pandemic in Australia.
Employers could be eligible for potentially up to $10,400 over a 12-month period for each new employee they hire aged between 16 and 29. Employers could also receive $5,200 for each new employee they hire aged between 30 and 35. The scheme commenced on 7th October 2020 and will conclude on 6th October 2021.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 07 36086800.
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