Finance

JobMaker may need some fine tuning to help small business and sole traders

- November 3, 2020 3 MIN READ
JobMaker tuneup

The Australian Government’s JobKeeper scheme has almost done its job and we will see it exit in March 2021. This may see some still wanting as the economy starts its real recovery from the COVID-19 pandemic. Enter stage left, JobMaker, echoing the government’s three-prong objective: Jobs, Jobs and Jobs, writes Wayne Debernardi, general manager public affairs, Institute of Public Accountants.

There is little question that job creation is a major need in a recovering economy, along with the infrastructure investment to attract more employment.

Why we need JobMaker

At the time of writing, the exact rules are still to be articulated, and in recent media, we can see some confusion.  Did the Treasurer really mean the creation of 450,000 jobs when he spoke on Budget night or are the whispers from Treasury of 45,000 jobs more akin to reality?  One could do the sums based on the $200 or $100 per person newly employed over the two-year period and somehow fit it into the $4 billion spent.

I’m just not good at maths but let’s agree that we need to create jobs and JobMaker is something we should all welcome for an economy where thousands have been displaced due to the pandemic; particularly small business operators and the many shop doors that have closed, possibly forever.

Before JobMaker hits the road, let’s pause in the pit lane for a moment to see if there is any fine-tuning that may help its journey along.

Does JobMaker need fine-tuning?

Keep in mind JobMaker is all about job creation or more importantly, incentivising existing businesses to employ new staff.

The ‘JobMaker Hiring Credit | Budget 2020-21’ fact sheet suggests that payments to the employer are paid in arrears.  That is somewhat understandable as the system must have integrity and the ATO as the JobMaker administrator will certainly want to know that wages have been paid before due recompense.  JobKeeper ran to similar rules.

However, a business and in particular, a small entity that faces cashflow issues may not be as quick to take up the incentive, particularly as the fact sheet indicates the first payment is available from 1 February 2021.  It’s a numbers game.  An employer is asked to start employing from 7 October 2020 and the earliest they will receive a JobMaker hiring payment is 1 February.  Large businesses may have the resources to absorb the time and await payment but many small businesses where cash flow is king may struggle.  Remember, the amounts involved under JobMaker are much smaller than those that were on the table under JobKeeper.

JobMaker leaves out sole traders

Let’s explore where an existing business currently had no employees as of 30 September 2020.  The minimum baseline is one, so they will not be eligible for the first employee hired but will be eligible for the second and subsequent eligible hires.  While this requires some clarification, it may be interpreted that a sole trader needs to employ two additional employees to qualify for one JobMaker hiring payment.

Again, it’s a number game but when you consider that more than 60 per cent of small businesses are non-employing entities, there could be major lost opportunities to incentivise such businesses to employ for the first time. Even if less than half of all these entities just employed one additional employee, the numbers could be significant as there are over 1.2 million small business non-employing entities.

Then there is the administration of the scheme and thankfully it rests with the ATO which did a sterling job in very short notice with the administration of JobKeeper which involved over 989,000 employers and 3,600,00 employees.

Why the STP stipulations?

JobKeeper, however, did not discriminate between employers who were Single Touch Payroll (STP) compliant and those who were not. Proposed JobMaker eligibility criteria for employers is that the scheme will be administered through STP.  Again, this may be highly discriminatory towards smaller employers as it is not mandatory for all employers to be STP compliant. Micro employers defined as those with one to four employees, can report quarterly through their intermediary such as a tax agent until 30 June 2021.

The exclusion of these entities does not accord with the policy objective of incentivising all employers to take on additional employees. Similarly, there are closely held entities which are also exempted from STP until 30 June 2021. Some larger entities may look towards the incentive so excluding the smaller ones is quite restrictive.

Perhaps the above represent some of the possible pitfalls in the proposal but with a few tweaks for small business, we can get JobMaker on the road and hear its engine roar.

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