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Australia: At least $38b in JobKeeper went to companies where turnover did not fall below thresholds, data finds

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JobKeeper payments worth $38 billion went to employers that did not suffer sustained downturns below threshold levels, new data reveals.

The wage subsidy program was the largest economic support in Australia's history, costing $89b when it ended earlier this year.

However, questions persist about the billions of dollars handed to companies that increased turnover or where turnover did not fall by 30 per cent.

Fresh analysis by the federal Parliamentary Budget Office (PBO) found at least $38b went to companies where turnover did not fall below thresholds during the quarter for which they claimed support.

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"Of course, JobKeeper was a good idea," federal Labor MP Andrew Leigh said.

"But the way in which it was administered has led to some of the biggest waste in the nation's history."

When announcing the wage subsidy program, the federal government said most companies would need to show a 30 per cent fall in turnover.

However, the rules were soon relaxed to allow employers to qualify based on an estimated reduction in turnover.

Once employers qualified — based on an actual downturn or a projection — they remained in the scheme for up to six months until late September, receiving $1,500 per eligible employee each fortnight.

However, many firms did not suffer as much as feared, and $38b of the $72b examined by the independent PBO went to companies where quarterly turnover did not fall below the thresholds.

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That represents 53 per cent of the taxpayer cash spend that was examined.

"Every dollar paid out on JobKeeper needs to be paid by Australians, either in the form of higher taxes, lower services or more debt," Dr Leigh said.

Most businesses had to prove, or estimate, a 30 per cent turnover fall, while that figure was 15 per cent for not-for-profits and 50 per cent for large companies.

Federal Treasurer Josh Frydenberg said a recent report by his department showed businesses that received JobKeeper were heavily impacted by the pandemic.

"It saved lives and livelihoods and supported more than four million Australians and a million businesses during the greatest economic shock since the Great Depression," Mr Frydenberg said.

$1.3b to companies where turnover tripled

The PBO has examined turnover during the quarter employers racked up JobKeeper and compared it to the same three-month period the year before.

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Its data revealed that $1.3b went to companies where turnover tripled during the quarter for which they claimed JobKeeper.

And a further $1.3b was paid to companies that doubled their quarterly turnover.

"We had firms that were doubling or tripling their revenues, and yet still getting money from Josh Frydenberg," Dr Leigh said.

"At a time at which he should have been a frugal custodian of the nation's finances, he was spraying money around like a Formula One winner spraying champagne over the crowd."

Overall, at least $19b — or 27 per cent of payments examined by the PBO — went to companies that increased quarterly turnover while receiving the taxpayer support.

However, in a recent review, the Treasury department — which designed JobKeeper — argued that many companies that appear to have done better actually experienced downturns.

Treasury said turnover could appear higher for firms that had grown over the previous year before COVID-19 struck, even though they suffered a hit to turnover.

The Treasurer says the PBO numbers "overstated the value of payments flowing to businesses that had turnover increases".

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Small business pays back JobKeeper

There was no obligation for profitable JobKeeper recipients to repay taxpayer support, but some have decided to voluntarily return the money.

Hipcamp is an online marketplace for camping, connecting holidaymakers with landowners and holiday parks.

The company claimed JobKeeper early last year to help retain its two existing staff.

However, business boomed after regional travel reopened, and between July and September last year, turnover almost quadrupled compared to 2019.

"It so happened that the pandemic, ironically enough, was actually a great thing for our company," Hipcamp Australia general manager James Ho said.

Mr Ho said it was "only right" for the company to repay the $51,000 in JobKeeper it ha received.

"It was less of an economic decision … it was really more in the spirit of what we thought was the intent of the JobKeeper payments," he said.

Where the money went

Despite warnings mid-year that many JobKeeper firms were increasing their turnovers, the government decided not to change the scheme until late September.

The highest rate of JobKeeper being paid to companies that increased their turnovers, or did not meet thresholds, was recorded in the July – September period last year, where most states, apart from Victoria, largely remained open.

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In that quarter, at least $18b — about 58 per cent of the money analysed — went to companies that did not dip below the turnover thresholds.

Eligibility was tightened in late September and, again, in early January 2021, forcing companies to demonstrate an actual downturn to remain in the program.

Yet, at least $4b was accrued in the December quarter by firms that did not fall below the thresholds between October and December.

And, between January and March, more than $2b was racked up by companies that did not fall below the thresholds during that period.

Companies that qualified for payments in the December or March quarters, based on previous downturns, did not need to also suffer falls within those quarters.

There was no clawback mechanism for any period of JobKeeper, although the Australian Taxation Office (ATO) is pursuing a small fraction of companies that claimed despite being ineligible.

Scheme did its job, expert says

In its review, the Treasury department said testing the turnovers of companies sooner risked slowing the recovery because some firms would reduce production to qualify.

"If it had been designed differently — for example, if it was more tightly targeted or shorter in duration — this would have affected macroeconomic outcomes and the course of the recovery," Treasury department boss Steven Kennedy said last week.

University of New South Wales economics professor Richard Holden said the scheme did its job and it was the right call not to adjust JobKeeper for six months.

"The idea was to provide certainty in a time of radical uncertainty," he said.

"And the way you provide certainty is to make something simple, clear and not subject to change within a certain timeframe.

The PBO's figures were obtained by Labor MP Andrew Leigh and the PBO obtained its data from the ATO, which administered the JobKeeper scheme.

The analysis excludes certain businesses, including those that did not record GST turnover in the corresponding quarter the previous year, and those that did not lodge a Business Activity Statement.

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