“Small business slips under the radar”: Why is no one talking about the government’s ongoing ‘cashflow boost’ payments?

cashflow boost

Treasurer Josh Frydenberg. Source: AAP/Lukas Coch.

For a lucky few, the free money fountain is still trickling. But shhh! Don’t tell anyone.

Australia’s economy has healed at record pace. Despite occasional lockdown outbreaks, business conditions are at a record high, as measured by the National Australia Bank in May.

“By state and industry, the strength in activity is evident everywhere,” it said in a note to clients.

But small businesses are still getting fat handouts in the long tail of Australia’s most insanely generous business program.

Crikey wrote about this last week: a $35 billion program that somehow sailed under the radar. The government gave a sum of money to small businesses equal to double the cost of all our doomed Joint Strike Fighters, and the media ignored it, focusing on JobKeeper instead.

The program, called cashflow boost, was different from JobKeeper in that businesses did not need to suffer to qualify. You could have been a toilet paper profiteer or a home office equipment vendor enjoying the best business conditions in history and still have qualified for handouts of up to $100,000, as long as you were a small business (or charity) with a turnover of less than $50 million.

And the handouts are still going, the accounting and advisory firm Johnston Advisory’s principal Ben Johnston says.

“It hasn’t been in the media anywhere but the government has been giving money to a lot of people who were previously rejected … because the ATO were incorrectly interpreting their eligibility,” he said.

“In the last month the ATO has been sending out letters to clients and saying: ‘Sorry, on the back of a Federal Court ruling we are now actually going to be giving you your cashflow boost payments, because we interpreted it wrong at the time’ … I daresay it would be in the tens if not the hundreds of millions of dollars.”

The continuing largesse owes its origins to a Queensland small businessman named Jeremy Apted. He took the commissioner of taxation to court for denying him cashflow boost simply because he had no active ABN at the time. After a range of appeals he won, and now the government is on the hook for yet more payments.

In early 2020 the cashflow boost was landing in environments where it was a lifeline, but now the payments flutter down into piggybanks already stuffed to bursting. Businesses are flush.

“This client I’ve got cried on the phone pretty much,” Johnston said. ”[They told me:] ‘We needed it then, we got through it, we’ve got money now and we’ve got this 20-grand bonus that we didn’t think was ever going to come through.’ ”

As the final hundred million dollars or so in free money flows to small businesses, it is worth reflecting on how such a program avoided our attention. Yes 2020 was a busy year with a lot to think about, but how can the government give out $35 billion to its core demographic — small business — and not get a few more headlines?

I asked University of NSW economist Cameron Murray if he considered the policy to be a good one.

“No,” he said.

“Thirty five billion dollars is roughly $3500 for each of Australia’s 10 million households. Instead of sharing these funds around to support spending across the economy, it went to 800,000 small-company-owning households only and missed many small businesses that operate under different structures — for example, sole traders.

“When you consider that one alternative way of putting that much money into people’s bank accounts was to do it equally across households, which would then provide customers to these businesses, then you can see that there are better and fairer ways to support economic activity.”

When the media was ignoring the cashflow boost, Murray was one of the few to draw attention to it.

[SmartCompany also published numerous reports on the cashflow boost payments for small businesses, a few of which can be found here, here and here].

“Why these billions evaded media scrutiny is a bit of a mystery, but something we should try and learn from,” he said.

“Was it because the payment seemed so ridiculous that it made sense for everyone who received it to keep quiet to ensure the absurdity did not become widely known and the payment revoked? That’s the only story that makes sense to me at the moment.”

Pocket the money and shut up? Probably a good strategy. Nobody is paying attention. Because while the media is very alert to the doings of big business, small business slips under the radar.

The financial press scour the minutiae in the reporting of the biggest 200 companies in Australia. It’s easy to whip up furore about Gerry Harvey pocketing $22 million in JobKeeper payments. But if a program gives away more than a thousand times as much to a much larger block of small businesses, scant attention is paid.

“Should this experience change how we think about government actions?” Murray said. “We often concede that governments care about their budgets and that is why they choose to enact one policy over another. But when we witness billions of giveaways like this, we should reassess. Maybe they don’t care about how much they spend? Maybe they only refer to budgetary impacts for things they don’t want to do but ignore them for things they do want to do?”

It’s an important insight. Some spending is so easy for government that it waves it through, while other programs are subject to enormous scrutiny.

The media is at times complicit. Instead of going along with that, we should work hard to scrutinise the big spends, not just the big headlines.

This article was first published by Crikey.

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