Frydenberg warned less than three months into JobKeeper that millions were going to firms with rising turnovers

Treasurer Josh Frydenberg was alerted less than three months into JobKeeper that businesses were getting taxpayer support while increasing their turnovers.

Key points:The Treasurer knew billions in JobKeeper were going to businesses with increased turnoverBusinesses that no longer qualified for JobKeeper continued to receive support for six monthsJosh Frydenberg said Treasury did not advise on any changes to JobKeeper at the time

The $89 billion wage subsidy program has been tainted by revelations billions of dollars were handed to companies while they increased their turnovers, and in some cases recorded bumper profits.

The ABC has confirmed the Treasury department told Mr Frydenberg in mid-June last year that 15 per cent of JobKeeper businesses sampled had boosted their turnovers in April 2020.

Mr Frydenberg announced in July that eligibility would only change from late September.

In the three months between July and September, at least $10 billion went to firms that increased turnovers, compared to the same period in 2019, according to the Parliamentary Budget Office (PBO).

"Josh Frydenberg was warned … that money was leaking out of the program to firms that didn't need it," federal Labor MP Andrew Leigh said.

Andrew Leigh
Labor MP Andrew Leigh is critical of the way the JobKeeper scheme was run.(ABC News: Nick Haggarty )

"He should have tightened the program at that stage, and yet he let it run unadjusted for a full six months.

"Over that period, billions of dollars went to firms that didn't need it and ended up in the pockets of millionaire CEOs and billionaire shareholders."

ATO finds increased turnover in one in six businesses

Businesses that qualified during the first phase of JobKeeper remained in the scheme for up to six months, no matter what happened to their turnover during that period.

Some companies entered the program based on an actual downturn in business, while others qualified after estimating their turnover would drop below the threshold required.

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.

Data review exposes truthHands remove cash from a wallet

Analysis by the federal Parliamentary Budget Office has found $38 billion in JobKeeper payments went to employers that did not suffer sustained downturns below threshold levels.

Read more

April 2020 was the first full month of the scheme, and lockdowns were in place in every state and territory.

The Australian Taxation Office examined April business activity statements for 26,000 JobKeeper recipients with annual turnover above $20 million.

It found about 3,900 business — or around one in six — had increased turnover in April compared to 2019.

It supplied this data to the Treasury department by early June.

Treasury alerted Mr Frydenberg to the 15 per cent finding on the afternoon of Friday, June 19, in an email obtained by the ABC using Freedom of Information laws.

Federal Treasury building in Canberra. Sept 2014.
The federal Treasury building in Canberra.(ABC News: Kathleen Dyett)

Prime Minister Scott Morrison and the Treasurer announced on July 21 that companies would need to prove a downturn if they were to remain in the scheme beyond late September.

In an opinion piece earlier this year defending the scheme, the Treasurer said he was right not to change eligibility sooner.

He wrote: "With the economy in June last year experiencing its largest quarterly fall on record and the labour market extremely weak, Treasury's advice was clear: 'There are compelling arguments to maintain JobKeeper in its current form.'

"This was the advice irrespective of the fact the review found 15 per cent of businesses subsequently had actually increased their turnover."

The Treasury department — which designed the scheme — released a report this month, which argued that many companies that recorded higher turnovers still 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.

"Treasury's report made clear that looking at through-the-year growth in turnover was misleading for young businesses," Mr Frydenberg said.

Billions for companies that did not qualify

All states and territories were in lockdown in April 2020, before restrictions began to ease in May, including in New South Wales and Western Australia.

Victoria was the only jurisdiction in lockdown between July and September last year.

This three-month period saw the highest rate of JobKeeper payments to companies that increased their turnover, or did not fall below the threshold levels within the quarter, according to the Parliamentary Budget Office (PBO).

The front of a Harvey Norman store.
Harvey Norman founder Gerry Harvey repaid $6 million of the estimated $22 million the company received in JobKeeper after record profit, but did not say why.(Supplied)

During this period, at least $18 billion flowed to companies where turnover did not fall by 30 per cent compared to the year before, according to the PBO.

This represented about 58 per cent of the JobKeeper payments for the quarter analysed by the PBO.

The ABC's 7.30 program has previously revealed that about $6 billion in JobKeeper was racked up by more than 75,000 businesses that increased turnover during both the June and September quarters last year.

Judgements 'premature', says Treasury

The 15 per cent finding was later publicly released in Treasury's three-month review of JobKeeper.

The report said it was "premature to make any judgement about whether there are businesses being supported by JobKeeper that may not merit support".

"A variety of factors may be at play here," it said.

"The availability of JobKeeper may have given some businesses a sufficient lifeline to remain open rather than have to close and turnover surprised on the upside.

"Some businesses may have brought forward revenue in April to maintain good cash flow."

Mr Frydenberg said Treasury's advice at the time "was to keep JobKeeper in its current form".

"In June last year, only one-quarter of the jobs lost in April and May had been recovered, and 300,000 people were still stood down on zero hours due to COVID."

Loading form…Posted 2 Nov 20212 Nov 2021Tue 2 Nov 2021 at 6:45pm, updated 3 Nov 20213 Nov 2021Wed 3 Nov 2021 at 4:10amShareCopy linkFacebookTwitterArticle share optionsShare this onFacebookTwitterLinkedInSend this byEmailMessengerCopy linkWhatsApp


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