On the 30th March the Federal Government announced a further stimulus package with the release of the “JobKeeper” payment initiative ($17.6B) aimed at supporting employers to retain their workforce while managing through the commercial disruption of COVID-19.
For businesses that have or are facing standing down of employees, the program provides a mechanism to retain connection with employees. There is no need for an immediate return to work for the impacted employees. Simply re-engage with those stood down, advise them that as an employer you wish to support them through the JobKeeper program and ensure the payments ($1500/fortnight) are made to them (provided the person was engaged as an employee as at 1 March 2020).
The program will reimburse eligible businesses for $1,500 (gross) per fortnight for each employee. There is no uplift for employees earning more than $1,500 per fortnight and no reduction for employees earning less than the $1,500 threshold amount. The program allows for those employees previously earning less than the $1,500 threshold to be provided a pay increase up to the threshold amount and then the employer can access the subsidy for that individual as well. The guidance states there should be no obligation on the employer to pay superannuation on the uplift in the latter case.
It is critical that businesses are aware of the short-term cash flow burden that the JobKeeker program will create. The JobKeeker reimbursements are in arrears and accordingly will only begin to be made by the government to businesses from the 1 May 2020. As a result each business will need to fund a month (April) of the payments to their employees before there is any offset of an inflow of the JobKeeker payments. The cash flow impact should be considered carefully and included within your weekly cashflow forecasts that should be being developed, used and scrutinised on a regular basis. For some businesses this funding gap may not be viable for the first month.
At the time of the announcement the legislation has not been drafted and we expect more detail to become available when the legislation is introduced and enacted and we will provide more information as it becomes available.
Key Point Summary
- The JobKeeper payment is a subsidy of $1,500 (gross) per fortnight per eligible employee of your business. This program will be administered by the ATO and the payments will be paid to the employer business that has experienced a downturn of more than 30% (50% for businesses with turnover over $1bn).
To be part of the subsidy , employers will need to ensure that their employees remain on the payroll and are still in receipt of wages from the employee. Examples of how the JobKeeker payment works in different scenarios are provided in the ATO Fact Sheet
- Key Dates
- From 30 March 2020 for a maximum of six months (ie to 30 September)
- For employees employed at and continue employment from 1 March 2020
- First payments in the first week of May 2020 backdated to 30 March 2020
- Applies to
- Employers with a turnover of less than $1 billion and their turnover will be reduced by more than 30% relative to a comparable period a year ago (of at least a month).
- Employers with a turnover of greater than $1 billion and their turnover will be reduced by
- Eligibility – two levels
- Employer test (refer below)
- Employee test (refer below)
There are two levels of eligibility for employers and employees.
- Turnover below $1bn that have experienced a reduction in turnover of more than 30% relative to a comparable period 12 months ago (of at least a month); or
- Turnover of $1bn or more that have experienced a reduction in turnover of more than 50% relative to a comparable period 12 months ago (of at least a month); and
- Sole traders and the self-employed with an ABN and not-for-profits (including charities) that meet the turnover tests are eligible for the JobKeeper payment.
- Were employed by the relevant employer at 1 March 2020; and
- Are currently employed by the employer (including those who have been stood down or re-hired); and
- Are full time, part-time, or long-term casuals (a casual employee employed on a regular basis for 12 months as at 1 March); and
- Are at least 16 years of age; and
- Are an Australian citizen, hold a permanent visa, are 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.
While it appears that businesses without employees can potentially qualify for JobKeeper Payments, it is not clear at this stage what conditions will need to be satisfied.
How is the Turnover Reduction (30%) Measured
To establish that a business has faced either a 30% (or 50%) fall in their turnover, most businesses would be expected to establish that their turnover has fallen in the relevant month or three months (depending on the natural activity statement reporting period of that business) relative to their turnover a year earlier.
Where a business was not in operation a year earlier, or where their turnover a year earlier was not representative of their usual or average turnover, (eg. because there was a large interim acquisition, they were newly established or their turnover is typically highly variable) the Tax Commissioner will have discretion to consider additional information that the business can provide to establish that they have been significantly affected by the impacts of the Coronavirus.
The Tax Commissioner will also have discretion to set out alternative tests that would establish eligibility in specific circumstances (e.g. eligibility may be established as soon as a business has ceased or significantly curtailed its operations). There will be some tolerance where employers, in good faith, estimate a greater than 30% (or 50%) fall in turnover but actually experience a slightly smaller fall.
How the Support is Calculated
The ATO will administer this program and will make the $1,500 payments based on payroll information to the employer. The payments will be made monthly in arrears, so it is essential that you ensure your business and your employees continually meet the eligibility criteria.
The business will continue to receive the payments for eligible employees while they are eligible for the payments. While the program is expected to run for 6 months, payments will stop if the employee is no longer employed by the relevant employer.
How the Support is Provided
To access the JobKeeper subsidy please call your Account Manager to assist you with the registration process, the calculations and the implementation.
If you want to manage the process yourself, you must:
- Applications are not yet open. However, you should register your intent to apply for the JobKeeper subsidy with the ATO (ATO Registration Link). You have plenty of time to register your interest as the first payment will not be made until the first week of May 2020. The ATO will be providing regular updates and advise when you can lodge your application.
- Assess turnover
- Ensure you have an accurate record of your revenue for the 2018-19 income year and for the 2019-20 year to date
- Ensure you keep an accurate record of revenue from March 2020 onwards
- Compare your revenue for the whole of March 2019 with the whole of March 2020 (or if you are a Quarterly Activity Statement lodger then compare the revenue for the quarter ended 31 March 2019 with the revenue for the quarter ended 31 March 2020). The turnover test is subject to further clarification which we expect the ATO to issue in the coming weeks.
- Measure the % decline in your revenue and ensure it has declined by more than 30% before making the application (fine to register if you think your turnover will decline by more than 30%)
- If you are not eligible in March you may become eligible in another month. You need to review this on a monthly basis for the next six months to the 30 September 2020
- Identify Eligible Employees
- Nominate the employees eligible for the JobKeeper payments – you will need to provide this information to the ATO and keep that information up to date each month. The ATO will use Single Touch Payroll to pre-populate the information in most cases.
- Notify all eligible employees that they are receiving a JobKeeper payment. Employees can only be registered with one employer.
- Continue to pay eligible employees. It is unclear at this stage if the employer must continue to pay their employee the same salary if it was more than the subsidy amount.
- Pay superannuation guarantee on normal salary and wages amounts paid to employees. If the employee normally receives less than $1,500 per fortnight before tax, the employer can decide whether to pay superannuation on the additional amount that is paid as a result of the JobKeeper program or not
Sole traders and the self-employed can register their interest in applying for the JobKeeper payment with the ATO. These businesses will need to provide an ABN for the business, nominate an individual to receive the payment, provide the individual’s TFN and declare their continued eligibility for the payments. Payments will be monthly to the individual’s bank account.
Frequently Asked Questions
What if the employee’s income was or is ordinarily less than $1,500 per fortnight?
The full amount of JobKeeker must be paid to eligible employees. This means that if the person’s ordinary gross fortnightly earnings are less than $1,500 per fortnight then they will start to receive increased fortnightly payments from their employer. Alternatively, where an employee’s ordinary gross fortnightly income was more than $1,500, the employer can provide a top up.
Who is an eligible employee?
The payment will be available for each employee who was on the books as at 1 March 2020 and who is retained or continues to be engaged. This includes those who have been stood down but not those who have been made redundant. It will, however, be available if a person is subsequently rehired, as long as they were also on the books on 1 March. The payment is available to full-time and part-time workers, as well as casuals who had been employed on a regular basis for at least 12 months.
Employees must be advised they are in receipt of the JobKeeper payment by the employer.
Who is an eligible employer?
Eligible employers, not-for-profit and self-employed individuals (businesses without employees) that meet the turnover test. In relation to self-employed individuals, no details have been provided relating to the structure of the business (eg. sole trader, company or trust).
An employer is eligible if the business has turnover of:
- less than $1 billion which has reduced by more than 30% compared to a comparable period a year ago (of at least a month), or
- $1 billion or more and turnover has reduced by more than 50% compared to a comparable period a year ago (of at least a month),
- However, the business cannot subject to the major bank levy.
How does an eligible employer apply?
Eligible employers can register their interest (ATO Registration Link). in applying for the JobKeeper payment via the ATO website from 30 March 2020. It has not been confirmed when formal applications will be available.
Employers with employees will be able to apply online and identify eligible employees. On a monthly basis updates will need to be provided to the ATO but the details of these updates is not yet known. The employer will receive the payment and be responsible for ensuring eligible employees receive the JobKeeper payment of $1,500 per fortnight (before tax).
Is super guarantee payable on JobKeeper payments?
Super guarantee is not payable on JobKeeper payments. This means if an employee is receiving more than their usual salary because of the JobKeeper payment, SG will only be payable on the employee’s ordinary salary amount. On the other hand, where the employee’s salary is only partially subsidised by the JobKeeper payment, the employer is still liable to pay superannuation guarantee on the full salary.
It is not yet understood how this will be determined for eligible casual workers whose fortnightly hours are subject to fluctuation.
How is the payment treated for social security and tax purposes?
JobKeeper payment is treated as income for social security purposes and may impact eligibility for income support. It is expected that this payment is taxable income of the employee, however, this has not been clarified.
Can an employee be receiving both JobKeeper and the JobKeeker Payment from Centrelink?
Because the JobKeeper payment is assessable for social security purposes, individuals who start to receive JobKeeper will need to report any change in their income to Services Australia (formally Department of Human Services).
The current income test cut off point for JobKeeker payment is $1,086.50 per fortnight for a single person with no dependants. This means that a single person receiving JobKeeper is effectively ineligible for JobKeeker payment due to the income test. For more information on the income test cut off points for JobKeeker refer to the Services Australia website.