Government urged to widen wage subsidy criteria

Government urged to widen wage subsidy criteria

Concerns have been raised that eligibility criteria for the federal government’s $130 billion bailout plan for business is too restrictive and many businesses with spiralling revenue projections could miss out; and with parliament in recess, first payments are unlikely to be available until May at the earliest.

Prime Minister Scott Morrison yesterday announced an unprecedented stimulus package for businesses and not-for-profit operators affected by COVID-19, with wage subsidies of up to $1,500 a fortnight a centrepiece of the plan.

However, criteria that requires businesses to demonstrate that they have already experienced a 30 per cent drop in revenue to be eligible has been criticised for being too restrictive.

RSM director Tracey Dunn described the stimulus as fantastic and unprecedented, but told Business News the Treasury had not yet defined the test parameters around determining reductions in revenue, and how revenue would be defined.

Ms Dunn said information available from Treasury indicated the reduction in revenue will be measured after March 1, and must be relative to a comparative period from a year ago.

“The information available also indicates the employer must have already experienced a reduction in revenue of 30 per cent or more,” she said. 

“This may be problematic for businesses who have not traded for a full year and for businesses who have employees but have not derived any revenue as they are still in a development phase such as junior explorers, or research and development entities.

“These businesses may have also missed out on the cash boost for business if they did not derive assessable business income or be registered for GST and made taxable supplies during the relevant period, even though they still had employees.”

Roxburgh Securities senior securities adviser Steve Blizard said many businesses such as financial planners, media businesses or others that relied on advertising, and law firms may also be in danger of missing the boat on the stimulus.

He said while many of those businesses had not yet taken a 30 per cent revenue hit, many were facing significantly bleak forward earnings projections for the next six months.

“The policy doesn’t meet its criteria,” Mr Blizard said. “What they want to do is say they’ve stopped the unemployment rate going up, but for a lot of businesses like mine, that’s not going to happen.

“If they’d paid me the payment it could stop unemployment rising, but if they don’t, it is going to happen.

“Hundreds of thousands have registered for it, but then they start reading the fine print and realise they aren’t going to get anything.”

RSM’s Ms Dunn said the likely delay in getting the legislation passed would also result in many businesses already reeling from significantly reduced cash flow to come under more pressure.

“That’s going to be dependent on when they can recall parliament and when they can get it passed through both houses,” she said.

“The problem is, assuming this does pass, which I expect that it will, the cash is not going to flow until May at the earliest. 

“So for those businesses that are really struggling now and needing to make decisions over whether they continue or what they do with their staff, may find it difficult to get through to May without any cash flow support.”

Ms Dunn said the message that any sort of assistance may be more than a month away was a hard one to deliver to clients.

“I have been inundated overnight with queries from small business, medium-sized businesses, people who want to retain their staff,” she said. 

“They’re looking at an uncertain future, there are people who have lost their jobs who are wanting to know if their employer might be eligible for this, and at this stage, there is little information that we can provide other than what is in the Treasury fact sheets and in the media releases. 

“People are desperate for support.”