Private Capital Industry JobKeeper Program Eligibility

6 May 2020

One of the Federal Government’s key initiatives to the COVID-19 crisis is the JobKeeper Program. Eligible businesses can receive a wage subsidy payment of $1500 per fortnight per employee for up to 6 months.

The JobKeeper payments have been of critical importance to many businesses across the economy. However, strict eligibility conditions apply. The basic criteria, relevant for our industry, are:

- A business that was carrying out business in Australia on 1 March with at least one eligible employee that continues to be employed; and

- Faced a decline in revenue of at least:

o 30%, for an aggregate turnover of $1 billion or less; or

o 50%, for an aggregate turnover of $1 billion or more.

With the private capital industry operating in every sector of the economy, there are many nuances impacting individual investee businesses’ ability to access the JobKeeper Program. However, we identified three main obstacles facing our industry. These are:

1) The need to aggregate turnover – although private capital-backed Australia businesses within a fund operate independently, their turnover must be aggregated when assessing JobKeeper payment eligibility. For some funds, this results in needing to apply the 50% reduction in aggregate turnover test, despite individual businesses being well below the $1 billion threshold.

2) Ineligibility of employee special purpose vehicles (SPVs) – Employee SPVs may find it difficult or impossible to demonstrate a reduction in turnover due to their corporate structure. As a result, these employees would be not be eligible; and

3) The impact on high growth businesses – For some high growth businesses, particularly start-up businesses, a flattening of sales can be crippling. These businesses would fail well before seeing a 30% reduction in turnover but would not be eligible for JobKeeper payments.

In response, the Australian Investment Council conducted a survey of members to identify the impact of the rules on our industry. As a result, we raised our concerns with government and engaged directly with the Coronavirus Business Liaison Unit and the JobKeeper division within Treasury, and the ATO. Through this engagement, which included multiple meetings, we have increased the awareness of how the private capital industry operates and highlight the impact of the rules on private capital-backed Australian businesses. We were also successful in working with other industry stakeholders to highlight issues common across industries.

As a result of pressures and insights from various stakeholders, the government implemented a number of changes to the eligibility criteria. Most importantly for our industry, these include:

- ‘Alternative tests’ for fall in turnover. These alternative tests accommodate situations such as: when an acquisition, disposal or restructure distorts a comparison period’s turnover; where a business had substantial growth in revenue in the period before 1 March; and, businesses has cyclical turnover; and

- Changes to allow eligibility for employees employed through special purpose labour service entities.

These changes are a great outcome for our industry and will save many Australian businesses and Australian jobs.

We would like to thank those members that participated in our survey. Your input assists us to effectively represent the industry and in bringing about important changes.

As further details of the JobKeeper Program emerge and businesses assess their eligibility, there may be other obstacles that surface. If you are facing difficulties and feel that the Australian Investment Council can be of assistance, please contact us.