Australia confronts Jobkeeper profiteering amidst disclosure concerns

July 23, 2021

With Australian proxy season preparations now underway, the Australian federal authorities are looking to introduce a public register of companies that use the government’s JobKeeper programme. Debates around the proposed bill centre over the impact and fairness of Covid furlough support and a lack of corporate transparency over the uptake and use of wage subsidies.

Australia's JobKeeper programme was introduced to allow companies to retain workers and pay those who were stood down due to the impact of the coronavirus pandemic. JobKeeper has helped millions of workers and businesses get by during lockdowns, however, concerns have been raised with the lack of corporate transparency on payments and potential profiteering. This occurs if an entity made a profit, paid a dividend to shareholders, or paid a bonus to an executive whilst in receipt of a JobKeepers payment.

In contrast to New Zealand, Australia has no publicly available register of companies that have received JobKeeper payments. This black hole in corporate reporting means companies can avoid investor scrutiny on the use of government subsidies. Recent reports suggest that up to $12.5bn went to businesses that did not suffer any downturn in revenue as a result of COVID-19, with $4.5bn going to businesses that saw their revenues increase.

In light of these revelations, on June 24 the Senate handed a new amendment to the JobKeeper bill intended to prevent profiteering to its Economics Legislation Committee for public review and consultation. Originally presented as a private members bill by the Green Party, the bill attracted seven consultation submissions from academia, business, and trade bodies before the July 9 cut-off for contributions.

As it stands, the Bill attempts to solve JobKeeper profiteering by:

1. Requiring the Australian Taxation Office to publish a list of all entities in receipt of JobKeeper payments, and how much they received, excluding those with an annual turnover of less than $50 million.
2. Delaying the ability of certain entities to claim any GST input credits for ten years, or until they pay the amount of JobKeeper they received equal to the amount of profits made and/or executive bonuses paid during the Financial Year period in which it received the JobKeeper payment. These entities do not include businesses with an annual turnover of less than $50 million.

Some companies have voluntarily repaid their JobKeeper payments to the government, motivated by the reputational risk and public scrutiny brought about by disclosures they have already made which highlight government support and assistance. Such disclosures were requested by a July 2020 guidance note from the Australian Securities & Investment Commission (ASIC).

However, public scrutiny may not always result in the repayment of JobKeepers payments, as the case of Harvey Norman has shown. There is also a lack of formal guidance on how disclosure should be provided resulting in companies taking varying approaches to such disclosure.

Following the Senate Committee's consultation on the proposed amendments to the JobKeepers Bill, they held a public hearing with participation from the Australian Shareholders Association and the Australian Council of Trade Unions, amongst others. Participants in the Public Hearing expressed support for the proposed public register, although concerns were raised over retrospective changes to the law in requiring companies to repay wage subsidies.

In light of the expressed concerns over the retrospective nature of the clawback provisions in the Jobkeeper legislation and the fact that it is a Private Members Bill brought forward by an opposition party, the bill could struggle to pass. The Senate has until August 20 to come to a final decision on the amendment, after which it will go to vote.

Amidst growing support for a transparency register and expectations for companies to repay wage subsidies, the debate around this bill may be the first step toward greater disclosure on the uptake and use of government support. There is no doubt it would greatly assist investors in engagement with companies over human capital management and decision-making.