As a small business severely impacted by the government- induced economic depression brought on by their response to the Covid-19 pandemic, at the Fremantle Herald we thought it timely to provide some public feedback on two of the Morrison government’s much publicised economic support packages, namely the “cash low boost” and JobKeeper.

Both of these schemes were designed on the run and it wasn’t a surprise that both were flawed from the start and continue to be despite continued tinkering.

Cash flow ‘boost’ for SME employers

This program is in fact not a cash flow boost but rather a tax offset.

The “boost” to an employer’s cash flow is in most cases never seen. Rather the amount is only credited to an employer’s Tax Office account.

The (up to $50,000) credit is simultaneously created by and then applied to any amounts due to the ATO as a consequence of lodging an activity statement for the business. 

For most businesses no cash will ever hit their bank account.

JobKeeper

This program should more accurately be called Unemployment Hider and was largely a direct response to the lengthy winding Centrelink queues that formed following the first lockdown announcement.

By keeping many otherwise redundant (and therefore unemployed) or ‘hibernated’ workers officially on the payroll, the official unemployment rate (and just as importantly the Centrelink queues) will be kept much lower than would otherwise be the case.

The flat $1,500 per fortnight per eligible employee for each eligible business is in most cases less than half of what a full time employee would be paid.

The payment itself is taxable to the business and the wages paid must also have PAYG tax deducted, so the government is ensuring that part of the payment returns to the ATO as tax.

Indeed many businesses have chosen not to participate in the program because of the cash flow lag, which is very pronounced, as this scheme is only a partial reimbursement and is in arrears. 

Employers have to pay to up to seven weeks of wages to employees before receiving a subsidy for part of each employee’s wages and only for four weeks’ worth at a time. 

In fact it won’t be until mid October that the final payment for past wages will be received. There will be many businesses that will not survive to see that date.

As at the time of writing, the Fremantle Herald had still not yet received any JobKeeper payment and we are not the only one still waiting.

The future?

In addition to JobKeeper, JobSeeker and the banks’ loan repayment deferrals all come to a shuddering halt in mid or late September (or earlier if some in the government have their way) and it will be very interesting to see the government’s reaction to the almost guaranteed second round of economic collapse that will result and the Centrelink job queues that will re-form.

It won’t be good for the economy or for ScoMo’s popularity either.