What happened to those 150,000 firms in JobKeeper limbo? The ATO can’t say

tax

ATO commissioner of taxation Chris Jordan. Source: AAP Image/Mick Tsikas.

When the Australian Tax Office (ATO) admitted to a $60 billion “reporting error” in JobKeeper estimates last month a curious detail was noted midway through the statement: 150,000 businesses were stuck between enrolment and declaration, or the final step before payments start flowing.

In the face of a startling administration error that saw hundreds of sole traders complete their enrolments after declaring they had more than 1000 workers on their forms, the revelation received little attention in the media.

But those 150,000 businesses in JobKeeper limbo —40% of which were sole traders— were against the clock to make declarations for an estimated 600,000 workers before the deadline for crucial March and April payments on May 30.

Those payments, covering the first two JobKeeper fortnights when many businesses were suffering through the worst of the COVID-19 lockdowns, would equate to as much as $1.8 billion in subsidies.

And while employers are now approaching the deadline for May declarations, the ATO says its still unable to say how many of these businesses made it in to the program or gave up. The tax office also declined to provide up-to-date figures on the total number of employers currently accessing wage subsidies when SmartCompany asked.

“At this stage, due to our general end of month reporting processes, we are unable to provide an update on how many more businesses completed their applications for April,” an ATO spokesperson said.

As at May 20, 10 days before the deadline for April declarations, about 910,000 businesses were receiving JobKeeper payments, but it is also unclear how many of these businesses have made their May declarations, the deadline for which is June 14.

“We are unable to provide assured data at this stage for how many businesses have completed declarations so far for May,” an ATO spokesperson said.

Interestingly, in his opening statement to the COVID-19 Senate Committee on Tuesday, ATO Commissioner Chris Jordan said $12.96 billion in JobKeeper payments had been made to about 872,000 businesses by June 4, covering about 3.3 million workers.

Those figures suggest at least some of the 150,000 businesses made the declaration deadline for April,  as about 759,000 businesses had received $8.7 billion in payments by May 20.

However, without data on how many new employers have entered the system for JobKeeper fortnights in May, or up-to-date numbers on employers currently accessing the program, it’s impossible to determine where the businesses in JobKeeper limbo and their workers went.

JobKeeper limbo: Where did they go?

The lack of transparency about the ongoing operation of the wage subsidy scheme comes amid concerns that many businesses have struggled to access JobKeeper payments, perhaps because they were not immediately aware there was a two-stage verification process, or because they did not have the cashflow to front-up wages during April.

There have been suggestions, including from the ATO, that those in JobKeeper limbo may have realised they were ineligible for the payments because economic conditions did not deteriorate as much as feared, although businesses are required to make declarations about their eligibility when they enroll, and the turnover test is only applied once.

Cashflow concerns were a key focus among federal cabinet Ministers in April, so much so it was reported Prime Minister Scott Morrison had a growl at Australia’s bank bosses, which culminated in hastily launched JobKeeper “bridging finance” hotlines, designed to extend debt to SMEs struggling to pay wage bills ahead of reimbursement.

Launched in late April, three days after JobKeeper enrolments opened, the hotlines were spruiked by Treasurer Josh Frydenberg as a lifeline to struggling firms. However, it soon emerged the loans were the same as those already being offered by the banks, and the hotline itself was the only material addition.

It appears businesses didn’t flood the phones either. SmartCompany asked the major banks how many firms contacted the hotlines, and it appears only a few thousand firms have made inquiries.

National Australia Bank had received about 1000 calls by late May, while ANZ’s hotline has averaged about 75 calls per day since launch, peaking at 250 towards the end of April.

While there were no shortage of anecdotal reports about business owners struggling to pay wages heading into JobKeeper in April, an Australian Bureau of Statistics survey found only 8% of small businesses reported giving the scheme a miss because they couldn’t afford to pay staff.

Others SmartCompany has spoken to, particularly sole traders, said they were not aware there was a secondary declaration process after enrolment, instead believing they would be contacted by the ATO about their acceptance into the program after enrolling.

Enrolments and ATO scrutiny

While enrolling in JobKeeper was on the minds of many businesses heading into April, it has since emerged the tax office wasn’t closely scrutinising what businesses submitted on those forms, instead focusing its analytical tools on the secondary declaration process.

This much was evident after the ATO and Treasury came clean about sole traders submitting forms claiming they had 1,500 workers. These numbers subsequently informed estimates about the uptake of the program, and were only discovered as errant after several weeks.

“We did not build rigorous analytics behind the field that asked for the estimated number of employees a business had, instead focusing our integrity measures on questions that related directly to payments,” Commissioner Jordan told the Senate on Thursday.

It also became clear during Tuesday’s Senate hearing that many large employers had enrolled in JobKeeper but not declared, even after the first rounds of payments had started to flow in May.

“In the first few weeks the number of employees reported seemed to be on a trajectory consistent with the Treasury estimates. But once employers began to confirm the actual employees covered as part of stage two, we identified within a fortnight that the numbers were less than expected,” Jordan said.

“This appeared to us to be because many large employers had not lodged their stage two applications. This understanding was reinforced when we conducted outreach with some large employers who confirmed they hadn’t yet finalised their applications.”

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