The most rampant era of welfare rorting in Australia’s history drew to a close when the Jobkeeper subsidy came to an end. Luke Stacey and Michael West investigated how the big grifters turned Jobkeeper into profit keeper.
The New Daily conducted an extensive coverage of ASX JobKeeper recipients and the shortfall of wage subsidy repayments despite paying shareholder dividends and executive bonuses.
The government has kept its corporate welfare payments a secret but TND found (among the public disclosures from the companies themselves):
- More than 60 ASX businesses disclosed receiving JobKeeper and other handouts
- They recorded combined profits of $8.6bn over the past 18 months
- They funnelled more than $3.6bn in dividends to investors since last April
- They paid back just $72m
- They paid out $20m in bonuses to executives.
Once eligible, now accountable
Michael West Media is not shining the light on profits to argue that, some companies at some point didn’t fall below the 30% revenue threshold (50% for businesses with a turnover of more than $1 billion) and were, therefore, ineligible for the scheme.
However, for businesses like Nine whose primary operations were not hindered by lockdowns – and only reported a 2% drop in revenue for the period – their failure to pay back JobKeeper in full is nothing more than a grift.
Not to put too fine a point on it, the public has been footing the bill for their employees and should be paid back. There is nothing in the legislation however to compel these grifters from paying back their handouts.
How do they get away with it?
Overall profits in annual or half-yearly accounts don’t specify a company’s month-by-month performance, where their income may have dropped below 30% in the months spanning the peak of the pandemic.
Each month, or alternatively every quarter, businesses are required to send a Business Activity Statement (BAS) to the ATO for them to determine how much GST each must pay. This tax legislation is what the government has used to pay the JobKeeper wage subsidy to employers. The ATO refers to a company’s BAS numbers for months during hard lockdowns against those same months in 2019 to determine how much JobKeeper the employer should get.
This may explain why property giants like Lendlease and Mirvac, which have paid $103 million and $305 million in dividends respectively, were able to rort it. Mirvac has received some $22 million in JobKeeper despite revenue of around $2 billion a year.
For example, Mirvac issues the tax office with a BAS for each entity it controls in Australia, with some potentially reporting the requisite drop in revenue for certain months last year.
This presents an apparent loophole in the JobKeeper scheme as it appears that businesses are able to break down their profits for each segment, disregarding their overall surplus. And even if a company returns to income that is near or exceeding pre-Covid levels, employers can stay on the scheme because according to the legislation:
“The decline in turnover test needs to be satisfied before an entity becomes eligible for the JobKeeper payment. Once this occurs there is no requirement to retest in later months”.
It’s for this reason that despite a positive turnover made by wealthy ASX groups, they have still benefited from the JobKeeper scheme. And so long as the government does not mandate a repayment where necessary, it leaves the door open for the stimulus to contribute to shareholder dividends and bonuses at the board level.
A notable example being retail billionaire Solomon Lew and his Premier Investments empire. Despite the pandemic, the group, which owns brands including Just Jeans and Smiggle, reported a 30% increase in profit, to $138 million, at the end of last financial year. A large part of this rise can be attributed to the $70 million they received in government wage subsidies, accounting for more than 50% of their profit for the year. The group did not disclose what percentage came from JobKeeper.
The high turnover resulted in approximately $57 million in dividends paid to shareholders, of which Lew himself received $24 million. The retail magnate also leveraged the pandemic to operate his 1200 retail stores rent-free.
Premier is yet to release its half-yearly accounts, nor have they issued any statement with the intention of repaying their various government wage subsidies.
A report last year from government advisory service Ownership Matters revealed some of the worst offenders of ASX companies paying bonuses to key management personnel while also receiving JobKeeper.
From these findings, Michael West Media reported that “Qube Holdings (QUB) gave its … key managerial personnel $2.78 million in the 2020 financial year.” Star Entertainment Group, owners of Sydney’s Star Casino, received $65 million in government subsidies and still managed to pay bonuses to executives of $1.39 million. Other ASX entities shown to be rorting the subsidy include aforementioned Super Retail with executive bonuses exceeding $2 million, Lendlease, NIB Holdings and retail empire Accent Group.
Other frontrunners repaying the subsidy include Toyota, Domino’s Pizza, holiday property operator Ingenia Communities and retail furniture empires Adairs and Nick Scali. Even still, many of these returns have not been made in full.
In a free enterprise economy, the government is not allowed to contribute to a company’s dividends. Considering dividends are dictated by an entity’s profits – enhanced by JobKeeper – this is exactly what has happened in many cases.
Below is an excerpt of the ABC’s recent analysis, ‘How Jobkeeper turned into profit maker‘.
For a conservative government obsessed with bringing its budget into line and eradicating six years of its own deficits, JobKeeper at first glance looked like a scheme lifted straight from the texts of the much-reviled John Maynard Keynes.
Roundly proclaimed as a game changer when introduced, there’s no doubt the $90 billion flagship scheme was wildly successful.
It kept 3.6 million Australians off the dole queue and tied to their employer. And as a secondary political benefit, that had the happy effect of obscuring the true level of unemployment, which only counted those on JobSeeker.
But with the program about to end next week, the shortcomings now are becoming clear: that billions of dollars of taxpayer cash was doled out to not just struggling businesses or those whose earnings had slumped, but to businesses and households that boomed during the lockdowns.