The hiring credit, announced in the federal budget, proposes to pay employers $200 a week for each new employee they hire aged 16 to 29, and $100 a week for those aged 30 to 35.
The ATO is set to administer the scheme, with employers to claim the credits each quarter in arrears, commencing from February 2021.
To be eligible, employers need to be reporting through Single Touch Payroll (STP), registered for pay-as-you-go (PAYG) withholding, hold an Australian business number (ABN), and be up to date with their tax lodgement obligations.
With micro employers — those with one to four employees — and closely held entities exempt from reporting through STP up to 30 June 2021, the Institute of Public Accountants believes many businesses will find themselves shut out from the wage subsidy.
Of the 2.3 million overall businesses population, 89 per cent of them are either micro businesses or sole traders, according to the Australian Small Business and Family Enterprise Ombudsman’s 2019 report.
“JobKeeper did not discriminate between employers who were on STP versus those that were not,” said Tony Greco, the IPA’s general manager of technical policy.
“While we understand from an administration perspective why the ATO prefers to deal with an employer who is STP compliant, this is highly discriminative towards smaller employers.
“By excluding such entities, this does not accord with the policy objective of incentivising all employers to take on additional employees.”
Further, according to the government’s fact sheet, the hiring credit will not apply for the first employee hired by a business that had no employees at 30 September and will only kick in for second and subsequent hires.
Mr Greco believes the criteria will disincentivise the 62 per cent of businesses that are sole traders with no employees from accessing the hiring credit.
“We interpret this to mean that a sole trader needs to employ two additional employees in order to qualify for one JobMaker hiring payment,” Mr Greco said.
“The JobMaker hiring credit would have incentivised such entities to consider hiring someone for the first time.
“Even if less than half of all these entities put on one additional employee, it would represent a significant number as there are over 1.2 million small-business entities that are non-employing.”
Legislation for the JobMaker hiring credit has yet to be passed and has been referred to the Senate economics legislation committee for scrutiny. A report is due on 6 November.
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.