Business owners, insolvency experts and bureaucrats are cautiously awaiting to see how the end of JobKeeper is going to impact the Australian economy over the coming weeks.

Insolvency laws were introduced during the peak of the covid-19 lockdown to protect businesses. On top of this the $90 billion JobKeeper wage subsidy scheme made it possible for millions of Australians to remain employed over the course of the pandemic.

Some businesses in Melbourne at the very worst were closed for up to eight months during the pandemic. With no income or opportunity to open their business to customers, the JobKeeper subsidy threw business owners a lifeline and made it possible for them to put food on the table and support their family.

When it was first introduced in March 2020, JobKeeper gave businesses $1,500 per fortnight for each employee to help pay their staff’s wages.

The main objective of the scheme was to maintain a connection between workers and employers, allowing a quicker recovery when the health crisis was under control.

As a direct consequence of the government’s stimulus the number of Australian businesses winding up halved in 2020. This is surprising when taking into consideration that Australia went into its first recession in three decades.

The “safe harbour” provisions have concluded, and the end of JobKeeper will now force the majority of marginal businesses to close permanently.  

There is going to be tens of thousands of Australian employees out of work who don’t have jobs to go to now that their employer is no longer trading.

The discontinuation of JobKeeper which came into effect on Sunday 28th March will result in the closure of a large number of “zombie businesses”. A zombie business is a business that is only able to exist with the support of government stimulus, once the government incentives are ended the business is no longer able to survive.

Suspending insolvency laws assisted companies with riding out the turbulence of the pandemic. But it has also propped up unprofitable businesses, and possibly masked a bigger problem.

According to statistics from the Australian Securities and Investments Commission (ASIC), the average number of businesses entering administration each year slightly exceeded 9,300 before the pandemic.

The regulator’s figures for 2020 revealed that only 4,943 companies went under. This is a huge decrease and its major reason for dropping so low is JobKeeper.

JobKeeper made it possible for many businesses to keep all of their employees on the payroll, engaged in in their day-to-day activities with the business.

As a result of JobKeeper a lot of businesses managed to keep their most experienced staff. Without JobKeeper having to find and reemploy new skilled staff would’ve cost a lot of time, money and resources who were desperate to re-open as soon as restriction were lifted.

One of the biggest success stories of JobKeeper is that it prevented the unemployment rate from spiking. Employees who were paid JobKeeper were still considered as ’employed’ even though they were being paid by taxpayer funds, in many cases to work zero hours.

At the peak of the pandemic, almost a third of Australian workers were on JobKeeper. This totalled to 3.6 million Australian workers, out of a work force of around 13 million.

The number of employees across the country requiring JobKeeper has dropped as the economy continues to recover. The number of Australian workers on JobKeeper dropped down to 1.6 million in October, 1.5 million in December and 1.1 million in January.

On Wednesday 24th March the ATO announced that over $64 million was paid to Australian businesses out of error under the JobKeeper wage subsidies scheme. The ATO has made it clear that it won’t be pursuing this huge amount of money as employers have claimed the money “in good faith”.  

The ATO has revealed that $283 million of the $90 billion distributed to businesses during the JobKeeper scheme was paid out of error before the ATO could stop the payments.  

$138 million of the incorrectly paid money has been recovered, $82 million is currently being pursued, and $64 million will not be clawed back due to the Commissioner’s discretion.  

Post Author: Craig Dangar

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