A crackdown on jobkeeper compliance has cut off 9,000 businesses who had been receiving the wage subsidy, as accountant groups and small business advocates warn that tough eligibility requirements which exclude recent start-ups could stifle entrepreneurship and halt “Australia’s next Atlassian”.
The warning of a potential lull in new businesses comes after an earlier alert, first issued by members of the National Tax Liaison Group to Treasury in June, that a technicality in the jobkeeper legislation threatened “financial and emotional” hardship for thousands of newly established sole traders who recently started businesses.
Since June the Australian Tax Office has issued more than 34,000 letters to jobkeeper-reliant businesses that it believed were either ineligible or required further information to prove eligibility, under a compliance scheme that largely affected sole traders who started their businesses after the end of the 2018-19 financial year, but before the March cut-off date.
Under the original jobkeeper legislation, and changes announced last month, no business started after March can be eligible for the subsidy.
Guardian Australia had previously spoken with several business owners who believed they were eligible for jobkeeper as part of the ATO’s alternate eligibility criteria (for new businesses unable to prove a 30% reduction in turnover over the past financial year), with many claiming their situations closely matched the example for an eligible new sole trader outlined by the ATO.
Despite several of the businesses claiming ATO call centre operators told them they were eligible, including hundreds of childcare providers who were relying on jobkeeper during the government’s period of free childcare, the ATO has now confirmed all “new businesses from 1 January 2020 would need to be registered for GST and report monthly, in order to meet the additional integrity requirement of having taxable supplies in a relevant period”.
The GST requirement also means a business started in the second half of last year, but which reported GST annually, is ineligible for jobkeeper, even with a 30% income reduction.
Affected businesses have complained the “integrity rule” was not made clear by the ATO’s website or phone operators. When Guardian Australia asked the ATO to provide a link to its website explaining the GST requirement, a link was sent to the general eligibility page which did not state sole traders – who are traditionally set on quarterly reporting periods by default – would need to change this.
While the businesses will not be able to claim jobkeeper payments for the months since they were suspended in June, the ATO’s website now suggests that those affected who received the $1,500 a fortnight payments before the crackdown would be considered “honest mistakes”, and won’t have to pay the money back to the tax office.
The ATO would not specify how many of the 9,000 businesses were deemed ineligible due to the GST requirement, or from incorrectly reporting their income reduction.
Updated jobkeeper compliance figures come after the heads of nine accounting bodies, including CPA Australia and Chartered Accountants Australia, issued a warning to the government in June, via the NTLG, about what they claimed was a lack of clarity regarding the GST integrity rule for new businesses.
“The financial and emotional impact that the ATO jobkeeper payment cessation letters will have on genuine start-up business operators who had already started receiving jobkeeper payments is expected to be substantial,” the letter, addressed to the Treasury and copying the ATO and treasurer Josh Frydenberg, said.
“Many will complain, with some justification, that the cessation of jobkeeper is driven more by ATO systems than careful consideration of whether genuine business activity is in fact conducted,” it said.
A Treasury spokeswoman said the letter had been “considered”.
Elinor Kasapidis, tax policy adviser at CPA, told Guardian Australia the external members of the NTLG were “disappointed” they did not receive a response to their letter.
“There has been no relief for new businesses, and given the sustained period of economic downturn, many of these businesses will struggle to remain viable,” she said, urging the government to consider funding tailored to new businesses.
She also said the situation in Victoria meant entrepreneurs now considering starting up a business felt they had little certainty that a strong opening period couldn’t be ruined by potential lockdowns.
“Policy isn’t just about today ... You need to maintain and reinvigorate that confidence otherwise people will think twice about starting up a new business, especially when lockdown events are beyond their control.
“Businesses need to know if they can take that risk [to start], that’s why we’re calling on the government to support them, because they could be Australia’s next Atlassian, or the next big startups,” Kasapidis said.
Peter Strong, the chief executive of the Council of Small Business of Australia, said he expected to see less startups as a result of the economic downturn, and said the government needed “to do something proactive”.
He said support didn’t have to be via jobkeeper, and could include incubators for new businesses missing out on government support starting out during a period with lockdown risk.
“We need to empower local business communities. For people to put their hands in their own pockets and take that risk now, you’ve got to give them some certainty,” Strong said.
“It’s not just about one less person out of a job, but they’ll be the people who can drive more employment for others.”