With the Treasury estimating that 150,000 workers could lose their jobs once JobKeeper comes to an end on 28 March, the ATO has warned employers that they could lose access to the wage subsidy payments if they deny workers their redundancy entitlements.
The ATO said it will keep an eye out for schemes where an employee will not receive certain entitlements when the employment ends, such as a redundancy payment, or where wages received by the employee are paid in substitution for payment of entitlements.
Using an example of a fictional business, Wicket’s Sports Emporium, the ATO highlights how an employee had been made redundant in January and had been urged to substitute his entitlement to an eight-week redundancy payment for JobKeeper payments until the end of March.
“In this situation, Wicket’s Sports Emporium’s eligibility to those JobKeeper payments may be denied based on there being a contrived scheme,” the ATO said.
“Employees may contact the ATO Tip-off line on 1800 060 062 if they are concerned they are receiving wages funded by JobKeeper in substitution for a payment they would normally expect to receive upon termination.”
‘Develop an exit plan’
With just two days to go before the $90 billion JobKeeper program comes an end, CPA Australia business and investment policy senior manager Gavan Ord believes accountants will have their work cut out for them in assisting distressed clients.
According to the ATO, just over 1 million employees and 370,000 businesses are still supported by the JobKeeper program.
“Businesses that are still reliant on JobKeeper to pay salaries are likely to experience cash flow problems when it comes off,” Mr Ord said.
“They may need assistance from their accountant to work out how best to respond to this challenge. The SME Recovery Loan Scheme could provide a source of external finance if needed. Businesses should speak to their bank about this.”
CreditorWatch chief economist Harley Dale said that while the implications of JobKeeper ending will not be as severe as first anticipated, around 8,000 businesses are still predicted to be insolvent by the end of the financial year.
“The greatest magnitude of uncertainty is that we don’t know how many companies aren’t commercially viable,” Mr Dale said. “These businesses are about to be brought to the fore and recovery never happens in a straight line — watch this space.”
For Mr Ord, he believes accountants should proactively assess their business client’s situation and develop an exit plan with them if needed.
“Accountants should consider reaching out to clients who are still receiving JobKeeper and inquiring whether they may be at risk of insolvent trading,” Mr Ord said.
“If so, it’s vital that the business owner and directors understand the implications (including legal liability) of incurring debts they can’t pay.
“For some businesses, the end of JobKeeper may spell the end of the road. But there may be assets in the business which can be realised so they don’t walk away empty-handed.
“Business clients may not be aware that closing down is not simply a case of shutting their doors and walking away. If they go about it the wrong way, the consequences may follow them for a long time. Encourage them to talk through or develop an exit plan with you.”