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Here’s How Harvey Norman Got Away With Only Paying Back A Fraction Of JobKeeper Money

While individuals are being bombarded with Centrelink debt letters, businesses are staying very quiet indeed.

by Edwina Storie  2 September 2021
Image of Gerry Harvey against JobKeeper ad

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Harvey Norman founder Gerry Harvey has decided he’s no longer discussing two subjects — JobKeeper and the pandemic.

“Every time I open my mouth about JobKeeper I get into trouble,” Gerry Harvey told reporters for SMH and The Age.

On Tuesday it was announced that Harvey Norman would pay back $6.02 million in JobKeeper subsidies to the federal government. But that is less than a third of the estimated $22 million the corporation received. (During the pandemic, the company was also called out for offensive signage and calling on parents to ‘volunteer’, to help with the back-to-school surge.)

The $6.02m figure from Harvey Norman covers money received by the company-controlled entities, whereas a remaining $14.5 million went to privately owned franchisees. So what does that mean and how can businesses that turned a profit during the pandemic get away with keeping millions of dollars in subsidies?

JobKeeper 1.0

So when you walk into a Harvey Norman store, there are actually many private companies operating on the floor, selling products, whether that be computers, white goods, TV screens, whatever.

“Harvey Norman is a product of its franchisees,” Dean Paatsch, director of corporate advisory group Ownership Matters, told Junkee. “It has no employees in its stores in Australia selling shit apart from through these franchisees. But technically, they are separate entities so thus could make a separate application for JobKeeper.”

Back in early 2020 when we had no idea how this whole COVID thing would pan out, the requirements to register as a business for JobKeeper were very loose — large entities had to show a 50 percent downturn in sales year-on-year, while smaller entities had to show a 30 percent decline. And of course at the time, we were all going into lockdown.

“The rules were so lax in JobKeeper, that even if you didn’t experience either that 50 percent down or 30 percent down, but you forecast it — in the middle of the pandemic — you would get JobKeeper,” explains Paatsch.

But if your forecast was wrong, and you actually turned a profit, well, that’s technically not your fault. There were no clawback rules to JobKeeper for businesses.

Pandemic Profits

Harvey Norman had record sales and earnings for the 2020-2021 financial year. According to The Guardian it posted a profit increase of $521 million on the previous year.

The company benefitted from the mass pivot to WFH — we all had to establish home offices, and were suddenly spending so much more time at home. (We couldn’t leave! Many of us still can’t! What a time to be alive!)

There were many businesses that projected a loss at the beginning of 2020 when the world was shutting down, only to find they were fine — better, even. So much so, that the amount of JobKeeper payments that were sent to businesses that did just fine, and actually increased their turnover, totalled $13 billion — 195,381 of them, according to The Financial Review. (If you like to know just some of the companies check out page three of this Parliamentary Budgetary Office Paper.)

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Paatsch explains that over the life of the JobKeeper program, the payments lasted longer than the lockdowns. “All of the other states bar Victoria were locked down for two months, but they got wage subsidies for six. And this is where the profiteering comes in — if you’re getting your employees wages paid by the taxpayer, you’re getting effectively free labour.”

“No one is suggesting that [Gerry Harvey] didn’t comply with the law,” says Paatsch. “On the contrary; you’d be knocking yourself out to offend the law because it was so loose. Gerry has paid back the amount which was in his direct control, which is a gesture that’s open to many other companies that haven’t repaid.”

The Government has chased nearly 12,000 people to repay debts for receiving both JobKeeper and Centerlink payments, but businesses are expected to work on an honours system. Back in January, Federal Treasurer Josh Frydenberg clarified that businesses were under “no legal obligation to repay that JobKeeper amount… if they do so, I’m not going to say no.”

Paatsch explains that the laws relating to the receipt of a pension are incredibly tight. “Whereas the laws relating to employer’s receipt of JobKeeper are extremely loose.”

“They’re chasing 11,000 people for about $30 million bucks. What we know is that there are a 157,000 businesses that received $13 billion dollars… The ATO accepts that the rules were so loose that it would be wasting its time trying to collect money from those businesses because they were legally entitled to it.”

Public Pressure

Several major companies that made extra JobKeeper cash have pledged to pay back the JobKeeper subsidies. Domino’s pledged in January to return $792,000, Toyota said it would return $18 million, Seek has paid back $9.8 million of the $18 million it received, and Domain has returned $6.5 million of $11.9 million. But this is only due to ‘good will’.

Andrew Leigh, Shadow Assistant Minister for Treasury, said on ABC Radio Melbourne yesterday afternoon that it was clear Gerry Harvey repaid the $6.02 million due to public pressure.

“The only reason we got that public pressure is because the corporate watchdog, ASIC, required listed companies to disclose their JobKeeper to the share market,” said Leigh. “But then we don’t know about other big firms that aren’t listed in the stock market.

“JobKeeper was set up by the Government with no transparency around it.”

If There’d Been More Transparency We Might Not Be In This Mess

The US, UK, New Zealand and several European nations all built transparency into their wage subsidy schemes during the pandemic. In New Zealand, your name was on a public database, and this prompted people to pay back extra subsidy payments at a much higher rate — Paatsch says 5.45 percent of it has been voluntarily repaid.

“If Australian businesses had repaid voluntarily like Gerry did at the same rate as New Zealand, we would have received $4.9 billion dollars in return, which is about a third of the Commonwealth spends on secondary schools.”

“JobKeeper was an $89.3 billion dollar giveaway,” says Paatsch. Only 0.25 percent of the entire program has been voluntarily repaid, and a vast majority of that has come from publicly listed companies that are subject to transparency and scrutiny, he says.

Unfortunately, businesses that never struggled during the pandemic may never have to repay that money. It’s all perfectly legal. But it’s you and I who will foot the bill. And it’s a big one.