JobKeeper carve out for high growth startups

James Riley
Editorial Director

High-growth companies that have been impacted by the health and economic crisis have been thrown a lifeline with a special carve-out to access the historic $130 billion JobKeeper package passed by Parliament on Wednesday.

The policy tweak will be welcomed by the startup sector, which had argued fast-growing businesses that had nonetheless been hit by the deep economic slowdown would not be able to meet the JobKeeper requirement of a 30 per cent year-on-year hit to revenue.

The ‘problem’ is growth. A fast-growing company that might have doubled or tripled revenue in the year since March 2019 could still have taken a savage drop in revenue, but not be able to meet the 30 per cent drop in revenue for the month of March compared to the same month in 2019.

Alex McCauley
Alex McCauley: Startup sector can help lead the recovery phase of the COVID crisis

These companies still need to keep contact with their highly skilled and much sought-after employees and will provide an engine room of jobs growth if they can make it to the other side of the current economic challenges, according to StartupAUS chief executive Alex McCauley.

It is understood the legislation will allow the ATO to apply a discretionary element to this 30 per cent revenue drop eligibility requirement to give a cohort of startup companies that have hit a high growth curve – but still in an investment mode – to access the JobKeeper scheme.

Mr McCauley welcomed the JobKeeper scheme and applauded the government’s action in finding a structure to enable business to maintain the employer-employee relationship, but said growth companies needed the special consideration.

“For lots of high growth companies, and this is not just startups but applies to lots of growing businesses, if they have been growing very strongly over a period of time, they can still have taken a precipitous hit to revenue, but not 30 per cent below the 2019 level in the year-ago month,” Mr McCauley told InnovationAus.

It is understood the carve out will give the ATO a discretionary power to use a different comparison period to better reflect the impact of the revenue drop. The ATO will be allowed to assess “highly variable” revenue in a different manner, with revenue that has grown at fast rate now classified as “highly variable”.

Mr McCauley said startups were highly reliant on difficult-to-find talent, and access to the scheme was important.

“[JobKeeper] really helps where startups are feeling the pinch, and that’s in how to look after people that have been stood down as a result of COVID – and everyone wants to be making sure that they are looking after employees and former employees,” he said.

“That puts them in a position where they should be able to rebound quickly at the other end of this because they have maintained the connection with their workforce.

“These companies are built almost entirely on the talent. There is talent and there is technology and these two things are intertwined, where the talent is building the technology. And so if there is a way to keep connected with that talent – supported by government – this is just so valuable to these companies.”

It is understood that ‘newly established businesses’ may also be a special criteria where the ATO will have a discretionary provision in applying JobKeeper requirements. This is particularly important for companies that may be pre-revenue and still at a stage of research and development.

“There are actually lots of businesses doing deep R&D. These can be pharma businesses, or deep tech businesses in software and hardware and all kinds of other companies that build a big user base before they generate revenue – and there are a lot of jobs here,” Mr McCauley said.

“These are companies that you really want to be healthy on the other side of all of this.”

The startup sector with its high-growth, highly agile businesses would be important to the economy in the immediate rebuild phase at the end of this current health and sconomic crisis.

“I think you will see a lot of these companies that are built for speed just come flying out of the gates when things start to rev back up. The best founders out there will focus on how they can capture lots of that value straight away,” he said.

“This sector can help lead the recovery.”

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