The JobKeeper payment was announced on the 30 March 2020 by the Federal Government to assist eligible employers (and self-employed individuals) who have been impacted by the Coronavirus pandemic to continue to pay their workers.
The JobKeeper payment is designed to help businesses keep their employees on the payroll during government-ordered closures and dwindling profits. The government hopes that when businesses are ready to re-open after the hibernation period, employees will be able to go back to work quickly and with little interruption.
The JobKeeper payment has not been passed into legislation as yet. It is expected that the JobKeeper payment scheme will run for 6 months. There are still a lot of details to be worked out, but the following is a broad summary.
We have tried to trim all the detail down to the barest essentials, so please contact one of our staff members if you require more detail.
What is the JobKeeper Payment?
Simply, it is a subsidy that will be administered through the ATO. Eligible employers (and self employed individuals) will be able to claim $1,500 per fortnight, per eligible employee from 30 March 2020 with payments to commence in the first week of May 2020.
The subsidy will be paid by the ATO in arrears and will ensure that the eligible employee receives a gross payment of $1,500 per fortnight before tax. Not that this is to be considered taxable income.
When are you eligible?
Eligibility is separated by whether your business turns over more or less than $1 billion. As our clients don’t have a turnover of more than $1 billion, we will only cover the latter’s eligibility criteria.
The criteria is quite simple, if you have a turnover of less than $1 billion, you must be able to prove your business has seen a 30% decrease in revenue as a result of COVID-19, or you expect this will soon be the case.
Self employed individuals (i.e. businesses without employees) or sole traders that satisfy the above requirement may also be eligible to apply.
You must prove you’ve suffered, or expect to suffer, a 30% decrease in revenue relative to a comparable prior period.
What employees can be claimed for?
Before you can claim the employee must satisfy the following requirements:
• are currently employed by the eligible employer (including those stood down or re-hired)• were employed 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• are not in receipt of a JobKeeper Payment from another employer
If your employees receive the JobKeeper Payment, this may affect their eligibility for payments from Services Australia as they must report their JobKeeper Payment as income.
How do I apply?
Initially you register your interest on the ATO website at www.ato.gov.au . It appears that before the payments start, you will be required to fill out an online application. We would encourage you to register even if you are unsure if you will qualify. Even if your turnover has not fallen by 30% immediately, you may become eligible if it falls below this level at a later stage.
Eligible employers will need to identify eligible employees for JobKeeper Payments and must provide monthly updates to the ATO. Participating employers will be required to ensure eligible employees will receive, at a minimum, $1,500 per fortnight, before tax. It appears that the ATO will use the STP system to confirm eligible employees.
It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment.
Businesses without employees will need to provide an ABN for their business, nominate an individual to receive the payment and provide that individual’s Tax File Number and provide a declaration as to recent business activity.
People who are self-employed will need to provide a monthly update to the ATO to declare their continued eligibility for the payments. Payment will be made monthly into the individual’s bank account.
Further details for businesses for employees will be provided on the ATO website.
The payment is considered taxable income for the employee. If an employee has applied to receive income support though Services Australia (i.e JobSeeker), the employee should advise Services Australia that they are now being paid the JobKeeper subsidy. The employee may no longer be eligible for income support from Services Australia as a result of receiving the JobKeeper Payment. Effectively they are mutually exclusive.
To keep it as simple as possible, eligible employees will receive at a minimum $1,500 (pre tax) per fortnight. Employers are able to top up the payment, so employees receive their normal wage.
Where employers participate in the scheme, their employees will receive this payment as follows;
• If an employee ordinarily receives $1,500 or more in income per fortnight before tax, they will continue to receive their regular income according to their prevailing workplace arrangements. The JobKeeper Payment will assist their employer to continue operating by subsidising all or part of the income of their employee(s).• If an employee ordinarily receives less than $1,500 in income per fortnight before tax, their employer must pay their employee, at a minimum, $1,500 per fortnight, before tax.• If an employee has been stood down, their employer must pay their employee, at a minimum, $1,500 per fortnight, before tax (even if they are not working).• If an employee was employed on 1 March 2020, subsequently ceased employment with their employer, and then has been re-engaged by the same eligible employer, the employee will receive, at a minimum, $1,500 per fortnight, before tax.
Superannuation and PAYG Tax Withheld
As the JobKeeper payment is effectively a subsidy against gross wages the employer will still deduct tax from the payment and submit it to the ATO on your behalf.
As best we can determine there is no Superannuation Guarantee Contribution payable on this subsidy. The employer must continue to pay superannuation on the amount paid in addition to the subsidy but can choose whether to pay superannuation on the JobKeeper amount.
Important Points to Note
a) 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.
b) Further guidance on the measurement of the prerequisite turnover decline is expected.
c) The $1,500 per fortnight remuneration threshold is the gross payment (before tax) due to the employee, it does not include superannuation.
d) Government has stated 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.
e) Employees must be advised they are in receipt of the JobKeeper payment by the employer.
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 the weekly cashflow forecasts that most middle market businesses have developed and are scrutinising regularly. For some businesses this funding gap may not be viable.
Further, there are integrity measures that businesses should watch for when applying for the program. A key challenge is ensuring that the 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.
Your questions answered
Q: What should people that have been stood down ask their (former) employers?
A: Enquire if they could be re-instated and are thus eligible for the payment, as long as they were employed prior to March 1, 2020. There is no need for an immediate return to work for the impacted employees. It is recommended that employers re-engage with those stood down, advise them that as an employer they wish to support employees through the JobKeeper program and ensure the payments ($1500 a fortnight) are made to them (provided the person was engaged as an employee as at 1 March 2020).
Q: Is the $1,500 per fortnight dependent on your spouse’s wage?
A: No. Your partner’s wage is irrelevant to the Job Keeper allowance, and the threshold for the Job Seeker allowance has increased to $79,762 and varies up to $100,000.
Q: Is there tax withheld on those payments?
A: Yes, the employee will get the net amount into their bank account.
Q: What happens to staff that are currently taking paid or unpaid annual leave?
A: They should discuss this with their employer, We would probably recommend they return to work.
Q: Since payments won’t be made until May, what do you suggest employers do until then to keep their staff on?
A: Cut back hours and pay & think laterally, use for example online sales, remote advising, and have your staff do things like stocktaking, cleaning and training.
The ATO is not going to give you the $1,500 per fortnight if you didn’t pay your employees [in April] because they were stood down. You need to re-engage those employees now and pay them out of your cashflow for this month, and then the government will be reimbursing you.
Q: What happens after six months when the government’s payments stop but the employer is still struggling financially?
A: This is unpredictable and will be a situation that is unique to each business owner.
Q: Is there any obligation for an employer to pay staff more than $1,500 a fortnight?
A: No, there isn’t. Although it is assumed that for employees on more than $1,500 a fortnight that the same amount will be paid.
Q: Does the employer have to pay superannuation?
A: This is optional, not compulsory on the JobKeeper portion of the Gross Wages paid.
Q: Would casuals or part-time workers who usually make less than $1,500 a fortnight still get the full amount?
A: Yes, as long as they can prove as part-time that they were employed prior to March 1, and as casual, that they were employed for the previous 12 months.
Q: Can the ATO impose the payments onto an employer or is it up to each employer to register?
A: As far as we understand the employer must register so the employees can register. So, if the employer decides he/she doesn’t want the payment, or he/she wants to close the business down he/she can choose to do that.