Proposed JobKeeper Payment
The Federal Government has announced (as part of its Coronavirus Stimulus Package) the introduction of a new JobKeeper Payment to assist eligible employers (and self-employed individuals) who have been impacted by the Coronavirus pandemic to continue to pay their workers.
The following is a broad summary of the key aspects of the proposed JobKeeper Payment, based on the Government’s Joint Media Release dated 30 March 2020 and the information that is currently available on the Treasury website at www.treasury.gov.au.
What is the JobKeeper Payment?
The JobKeeper payment is a subsidy that will be paid through the tax system to eligible employers (and self-employed individuals) impacted by the Coronavirus.
Eligible employers will be able to claim a subsidy of $1,500 per fortnight, per eligible employee, from 30 March 2020 (with payments commencing from the first week of May 2020), for a maximum period of six months.
This subsidy will be paid by the ATO monthly in arrears and will ensure that an eligible employee receives a gross payment (i.e., before tax) of at least $1,500 per fortnight.
Self-employed individuals (i.e., businesses without employees) can also qualify to receive the JobKeeper Payment.
The JobKeeper payments will help employers retain employees (even those who have been stood down) through this difficult time.
Eligibility For Employers
Employers are eligible if:
their business has a turnover of less than $1 billion and their turnover will be reduced by more than 30 per cent relative to a comparable period a year ago (of at least a month); or
their business has a turnover of $1 billion or more and their turnover will be reduced by more than 50 per cent relative to a comparable period a year ago (of at least a month); and
the business is not subject to the Major Bank Levy.
The employers (including not-for-profit entities) must have been in an employment relationship with eligible employees as at 1 March 2020 and confirm that each eligible employee is currently engaged in order to receive JobKeeper payments.
Self-employed individuals (businesses without employees) that meet the turnover tests that apply for businesses are eligible to apply for JobKeeper payments. They will need to provide an ABN, nominate an individual to receive the payment, provide that individual’s Tax File Number and provide a declaration as to recent business activity.
Eligibility For Employees
Eligible employees are those who:
are currently employed by the eligible employer (including those stood down or re-hired);
were employed (an existing employee) by the employer at 1 March 2020;
are full-time, part-time, or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020);
are at least 16 years of age;
are an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder; and
are not in receipt of a JobKeeper payment from another employer
How is the JobKeeper Payment applied by an eligible business?
The underlying purpose of the JobKeeper Payment is to ensure that eligible employees are paid a gross minimum amount of $1,500 per fortnight. In particular, for eligible employers who receive the JobKeeper Payment for an eligible employee, the employee will receive this payment basically as follows:
If the employee ordinarily receives at least $1,500 in gross salary income per fortnight, they will continue to receive their regular income according to their prevailing workplace arrangements. In this case, the JobKeeper Payment will effectively subsidise part or all of the employee’s gross fortnightly salary income.
If the employee ordinarily receives less than $1,500 in gross salary income per fortnight, their employer must pay the employee a minimum gross fortnightly salary income of $1,500 under the JobKeeper Payment scheme.
If an employee has been stood down, their employer must pay the employee a minimum gross fortnightly salary income of $1,500 under the JobKeeper Payment scheme.
If an employee was employed on 1 March 2020, has subsequently ceased employment with their employer, and then has been re-engaged by the same employer, the employee will receive a minimum gross fortnightly salary of $1,500 under the JobKeeper payment scheme.
An eligible employer receiving the JobKeeper Payment in respect of one or more employees will be required to notify each employee that they have been nominated as eligible employees for the employer to receive the payment. Furthermore, an eligible employer has the option of choosing whether or not to provide superannuation guarantee support in respect of any additional salary income (to the extent that it relates to the JobKeeper Payment) paid to an eligible employee by an employer.
Where an employer receives the JobKeeper Payment for an eligible employee who has been receiving income support through Centrelink (or Services Australia) as a result of having been stood down or their hours being reduced, the employee will need to report the JobKeeper Payment as income, as this could affect their entitlement to such Centrelink support.
How to register
Initially, businesses can start to register their interest in applying for the JobKeeper Payment via the ATO’s website. The first payments under this measure are expected to be made to an eligible business from the first week of May 2020.
Eligible employers that apply for the JobKeeper Payment via an online application will need to provide supporting information demonstrating a downturn in their business, and must report the number of eligible employees employed by the business on a monthly basis.
Businesses without employees (e.g., self-employed individuals) will need to provide an ABN for the business, nominate an individual to receive the JobKeeper payment and provide that individual’s Tax File Number, as well as provide a declaration on the recent business activity (presumably, to demonstrate the downturn in the business). These businesses will also need to provide a monthly update to the ATO in order to declare their continued eligibility for the JobKeeper Payment.
Important notes
The program is not yet legislated. It is the government’s intention to recall Parliament to legislate the program. Accordingly, the progress and form of the confirming legislation should be monitored.
Further guidance on the measurement of the prerequisite turnover decline is expected.
The $1,500 per fortnight remuneration threshold is the gross payment (before tax) due to the employee. It does not include superannuation.
The Government has stated that superannuation is not required to be paid on the pay increment made by an employer for employees requiring a remuneration uplift to qualify for the program. However, it is not yet clear how other on-costs (such as payroll tax and work cover) will apply.
Employees must be advised that they are in receipt of the JobKeeper payment by the employer.
Care needs to be taken to ensure that employees registered under the scheme are not linked to more than one business – a commonality in many sectors with a casual work force. While the ATO will support the assessment of employees through data collected through single touch payroll, there is a risk of multiple claims for an employee with numerous jobs, and it is unclear which employer may carry the subsequent ATO recovery risk.
It is critical that businesses are aware of the short-term cash flow burden that the program will create. The reimbursements are in arrears and accordingly will only begin to be made by the government from 1 May 2020. Consequently, each business will need to fund a month of the payments to employees before there is an offsetting inflow from the program. The cash flow impact should be considered carefully and included within cashflow forecasts.
Learn more about the JobKeeper initiative.
Let’s Talk
For an in-depth discussion of how these initiatives might affect you and your business, please contact us on + 61 3 9527 5041.