Referral of the inquiry
1.1
The Coronavirus Economic Response Package Amendment (Ending Jobkeeper Profiteering) Bill 2021 (the bill) was introduced into the Senate on 21 June 2021 by Senator Nick McKim (Australian Greens) as a private senator's bill and read a second time on the same date.
1.2
On 24 June 2021, the Senate referred the bill to the Senate Economics Legislation Committee (the committee) for inquiry and report by 20 June 2021. On 11 August 2021, the Senate granted the committee an extension to report by 1 October 2021. The Senate granted a further extension on 1 October 2021 to report on the inquiry by 15 October 2021.
Purpose of the bill
1.3
In his second reading speech, Senator McKim, explained further the intent of the bill:
[S]omeone has to hold greedy big corporations to account in this country… [I]f you're making enough money to buy a private jet or pay executive bonuses, then you should pay back JobKeeper … This will [list of large entities that received JobKeeper] end the Morrison Government-approved secrecy around JobKeeper profiteering … Simply appealing to these billionaires' better natures won't work … It's time to force the billionaires and the big corporations to do the right thing and pay back JobKeeper.
Background
JobKeeper
1.4
The bill seeks to amend the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (the act) which provided the authority for the JobKeeper Payment scheme—a wage subsidy to assist employers during the COVID-19 pandemic—that was announced and commenced on 30 March 2020.
1.5
In a joint media release the Prime Minister the Hon Scott Morrison MP and the Treasurer the Hon Josh Frydenberg MP stated:
The $130 billion JobKeeper payment will help keep Australians in jobs as [well as] tackle the significant economic impact from the coronavirus. …The payment will be open to eligible businesses that receive a significant financial hit caused by the coronavirus.
1.6
To be eligible for JobKeeper, employers needed to satisfy—amongst other elements—the decline in turnover test:
their business has an aggregated turnover of $1 billion or less (for income tax purposes) and they estimate their turnover has fallen or will likely fall by 30 per cent or more; or
their business has an annual turnover of more than $1 billion (for income tax purposes) and they estimate their turnover has fallen or will likely fall by 50 per cent or more; and
their business is not subject to the Major Bank Levy.
1.7
The JobKeeper scheme ended on 28 March 2021 and the Treasurer said:
Today the temporary emergency support program JobKeeper comes to an end. It has achieved its objectives of supporting businesses and saving jobs, preserving employment relationships and delivering much needed income support across the economy.
JobKeeper was an economic lifeline which helped keep around a million businesses in business and 3.8 million Australians in a job at the height of the pandemic. The Reserve Bank of Australia estimated that JobKeeper saved at least 700,000 jobs.
1.8
Early reporting on JobKeeper profiteering can be traced to Dr Steven Hamilton who told the committee 'I've written more on JobKeeper than anyone else'. Initially, Dr Hamilton along with other academics, Anthony Forsyth and David Peetz reported that '[t]argeting only businesses experiencing a revenue loss limits profiteering'. Several months later, Dr Hamilton reported with Chris Edmond that:
There's been talk of businesses gaming revenue to qualify (most firms need only say they expect revenue to fall by 30 per cent in a single month to qualify for the entire six months) … By deleting just two words in the JobKeeper regulations, eligibility could move from being once and for all to being month by month. If a business expected revenue to recover in the following month, they would no longer qualify. This wouldn't preclude them from qualifying again later should economic conditions deteriorate …
Analysis of JobKeeper
1.9
Detailed reports have also been produced, including by Ownership Matters (OM)—a governance advisory firm that 'advise[s] institutional investors who rely on the audited financial statements of listed entities to make investment decisions and to ascertain the financial health of a listed entity'—on the effect of JobKeeper and other government subsidies for Australian Securities Exchange (ASX) 300 companies during May‑August 2020 (original release September 2020) and the calendar year 2020 (updated release in March 2021). During the calendar year 2020, OM found:
Approximately 32 per cent (95 of 299) ASX 300 listed entities disclosed they had received government subsidies in calendar year 2020.
Aggregate government subsidies received by ASX 300 for CY20 [calendar year 2020] was $3.786 billion, with JobKeeper accounting for more than 60 per cent—at least $2.453 billion across 75 entities.
JobKeeper recipients also received $1.036 billion via government subsidies in other countries (or under other schemes).
Another $295 million in other government subsidies (including foreign governments) were received by entities that disclosed no JobKeeper receipts.
The six largest JobKeeper recipients—[Qantas] QAN ($726 million), [Crown Resorts Ltd] CWN ($254 million), [Flight Centre Travel Group] FLT ($195 million), [Star Entertainment Group] SGR ($152 million), [Eagers Automotive Limited] APE ($129 million) and [G8 Education Ltd] GEM ($102 million)—accounted for approximately 63 per cent of all JobKeeper payments.
1.10
Part way through the delivery of JobKeeper, Treasury released a fact sheet outlining how the scheme's integrity was being protected 'from the eligibility requirements to specific rules to address contrived schemes and fraud'. This fact sheet also included the reporting and record-keeping in place to verify compliance:
Entities report to the Commissioner of Taxation information about themselves and their employees and on a monthly basis payments made to employees, information on turnover and other matters relevant to their entitlement; and
ATO conducts compliance and audit activities.
1.11
Also, in relation to reporting, the Australian Securities and Investments Commission (ASIC) issued a guidance note on financial reporting—that included JobKeeper—under COVID-19 conditions requiring:
Entities should appropriately account for each type of support and assistance from government, lenders, landlords and others. Both the financial report and operating and financial review should prominently disclose significant amounts, the commencement date and expected duration of support or assistance. Examples include JobKeeper, land tax relief, loan deferrals and restructuring, and rent deferrals and waivers.
1.12
At Budget Estimates 2021–22, Senator Jess Walsh questioned ASIC about examining entities' JobKeeper reporting. On notice, ASIC reported that its financial reporting surveillance program reviewed 255 financial reports of listed entities and found 75 separately disclosed the amount of JobKeeper receipts. Further, ASIC stated:
It is not practical for ASIC to provide the total number of entities that had disclosed JobKeeper receipts in their financial reports. More than 28,000 financial reports are lodged with ASIC annually.
1.13
Treasury conducted a review of the first three-months of the JobKeeper payment—to determine if there should be any changes before its scheduled end on 27 September 2020 and an extension—that was released in June 2020. Overall Treasury found:
… an extension to JobKeeper is needed, coupled with a fresh eligibility test to ensure that JobKeeper is well targeted.
1.14
The Australian National Audit Office is conducting a review into the administration of the JobKeeper scheme and is due to report in December 2021.
1.15
Since the hearings, Treasury has released a report titled ‘Insights from the first six months of JobKeeper’ which presents Treasury analysis on the first six months of the JobKeeper Payment (to 27 September 2020), reflecting on the design and initial impacts of JobKeeper as a key element of the Government’s macroeconomic response to COVID-19.
Summary of the bill
1.16
The bill amends the act—inserts one schedule that contains three definitions and two items—to prevent large entities from profiteering off JobKeeper payments by deferring input tax credits and introducing transparency via the publication of information.
Item 1
Inserts definitions for annual turnover, JobKeeper payment and JobKeeper scheme in section 6 of the Act.
Item 2
Inserts section 19A, defining when an entity has profiteered from JobKeeper payments, and setting out that such entities will have their entitlement to claim input tax credits delayed for a ten year period or until the entity voluntarily pays the sum which it profiteered from JobKeeper payments, whichever is the earlier. [Item 2] … also inserts section 19B, requiring the Commissioner of Taxation to publish information about each entity that has received JobKeeper payments.
Defining profiteering
1.17
Section 19A sets out when an entity or group of entities has profiteered from JobKeeper payments. An entity has profiteered from JobKeeper if during a financial year an entity:
(a)
received one or more JobKeeper payments—that is a payment under the JobKeeper scheme from 1 March 2020 to 28 March 2021;
(b)
carried on business in Australia;
(c)
annual turnover—that is the total proceeds of sales of goods and/or services; commission income; repair and service income; rent, leasing and hiring income; government bounties and subsidies; interest, royalties and dividends; and other operating income—for the financial year was more than $50 million; and
(d)
made a profit, paid a dividend and/or paid a bonus to an executive of the entity.
1.18
A group of entities will have profiteered from JobKeeper if during a financial year the above elements are present for any one of the entities in the group or the group of entities together and in addition 'the entity is a member of a group of entities that is a group of a kind prescribed by the rules'.
Deferring input tax credits
1.19
Where an entity or group of entities has profiteered from JobKeeper payments, its entitlement to the input tax credit for a creditable acquisition or a creditable importation will be deferred until the earlier of:
the entity voluntarily pays the Commonwealth an amount equal to the total amount of JobKeeper payments received by the entity or the relevant profit amount—total amount of profit, dividends paid and bonuses for applicable financial years—if that amount is less than the total amount of JobKeeper payments and gives the Commissioner of Taxation written notice of the payment amount and date the payment was made.
1.20
This proposed section is effectively introducing a 'repayment mechanism'.
Publication of information
1.21
Section 19B requires the Commissioner of Taxation to publish information—name of the entity and the entity's ABN; total amount of JobKeeper payments received by the entity; details of any voluntary payment the entity has made; and any further information prescribed by the rules—for an entity that received JobKeeper payments and its annual turnover for a financial year during this time is more than $50 million. This information is to be published on a publicly available website as soon as practicable.
Commencement
1.22
The bill commences the day after it receives royal assent.
Legislative scrutiny
1.23
The Senate Standing Committee for the Scrutiny of Bills has no comment in relation to the bill.
Human rights implications
1.24
The Parliamentary Joint Committee on Human Rights made no comment on this bill thereby indicating that the bill 'do[es] not engage or only marginally engage[s], human rights; promote[s] human rights' and/or permissibly limit[s] human rights'.
1.25
The Explanatory Memorandum (EM) stated that the bill does not engage any of the applicable rights or freedoms and concluded that the bill is compatible with human rights as it does not raise any human rights issues.
Financial impact
1.26
The EM provided no assessment of the bill's financial impact.
Regulation Impact Statement
1.27
The EM provided no Regulation Impact Statement.
Conduct of the inquiry
1.28
The committee advertised the inquiry on its website and wrote to relevant stakeholders and interested parties inviting written submissions by 9 July 2021. Following the extension of the inquiry, submissions were reopened until 3 September 2021.
1.29
The committee received seven submissions, which are listed in Appendix 1.
1.30
The committee held two public hearings for the inquiry:
Friday 23 July 2021 in Canberra; and
Friday 10 September 2021 in Canberra.
1.31
The names of witnesses who appeared at the hearing can be found at Appendix 2.
Structure of the committee's report
1.32
The committee's report comprises the following chapters:
Chapter 1 provides background and explains the provisions of the bill; and
Chapter 2 outlines the views on the bill.
Acknowledgements
1.33
The committee thanks the individuals and organisations who assisted the committee with its inquiry, particularly those that made written submissions and participate in the committee's public hearing.