Australia's 1.2 million sole traders will have to hire two people in order to claim one JobMaker hiring credit, in what's been described as a "major disincentive" to take-up the Morrison government scheme.
Treasurer Josh Frydenberg announced in last month's budget businesses will be able to receive a hiring credit of up to $200 per week for each job seeker aged 18 to 29 they take on, or $100 for every person aged 30 to 35 they hire out of the dole queue.
However they will have to prove the new hire represents a growth in their overall staff to claim the wage subsidy.
This is to ensure older staff are not ditched to make way for younger, subsidised workers.
However Institute of Public Accountants general manager of technical policy Tony Greco said the baseline headcount test has an inherent flaw when it comes to businesses that don't employ anybody.
According to draft guidelines published, businesses which had no employees as of September 30 will not be eligible for JobMaker for the first person they hire, but can get the hiring credit for subsequent staff they take on.
"Yeah, I think it's reasonable to say that it's going to be a substantial disincentive for a small business to want to go down that down that path, especially given that more than 60 per cent of small businesses don't employ. And you're asking them, not only to put on one extra person, but an additional person so I think it's not highly attractive to small business," Mr Greco said.
"Also in light of the fact that it's only $200 per week, or $100 per week, depending on on the age of the applicant, I think it's fair to say that it's a disincentive for that large cohort to come on board."
The scheme also requires businesses to use Single Touch Payroll, which also disadvantages sole traders.
"It's not mandatory for micros, those who employ less than four people, to to be on Single Touch Payroll, that's also another disincentive for the smaller end of the spectrum," Mr Greco said.
Mr Greco said it was a huge missed opportunity.
"We know that 1.2 million small businesses are not employing and you know, that's a large number," he said.
"If only 25 per cent of that that sector put on one extra person, it equates to a large number but it's not highly attractive to the micros in its current form."
A Treasury Department spokesperson said the JobMaker Hiring Credit did not have any specific rules for sole traders.
"All businesses will have a minimum baseline headcount of one. This means that businesses that currently do not have employees will not be eligible for the first employee hired.
"This rule reflects that many businesses will have individuals that have an ownership interest in the business that will also work in the business.
"As such, this rule aims to target the JobMaker hiring credit to hiring of employees that are additional to those with ownership interest in the entity."
The scheme has already come under fire for favouring big businesses.
The Council of Small Business Organisations Australia says the subsidy is too low to motivate small businesses to recruit a young job seeker.
"Big businesses will not be motivated to recruit new workers they have not already planned to hire," the council said in a submission to a parliamentary inquiry.
"These larger businesses are likely to treat the hiring credit as an accounting exercise rather than a motivator to recruit. They will simply include the subsidy payments as income in their balance sheets.
"If this likely scenario eventuates it will result in the scheme being ineffective and will lead to considerable wastage of taxpayer funds."
Canberra Business Chamber chief executive Graham Catt was concerned the plan to pay the hiring credit in arrears quarterly would make it even tougher for small business to take advantage of the scheme.
"Small businesses who are struggling with cash flow generally wouldn't be in a position to use this benefit," Mr Catt said.
The Australian Retailers Association has urged government to bring forward the first JobMaker payment from February 2021 to before Christmas, to ease pressure on businesses ahead of their busiest trading period of the year.