Current as at 31 March 2020
A further support package has been announced by the government on Monday 30 March to encourage businesses that are suffering a severe downturn, to retain their staff during the coronavirus pandemic. The Jobkeeper Payment is a subsidy of a flat fortnightly payment of $1,500 per eligible employee, commencing from 30 March 2020, for a maximum period of six months.
To be eligible for the subsidy, most businesses will need to have suffered a reduction in turnover of more than 30% relative to the same period (of at least a month) last year. For businesses with a turnover of $1 billion or more, turnover must have reduced by more than 50%.
Current full-time, part-time, or long-term casual employees (long term is defined as employed for more than 12 months) that were employed as at 1 March 2020, including those that have been stood down or re-hired, are eligible, provided:
- They are at least 16 years old;
- Are an Australian citizen, hold a permanent visa, or hold certain Special Category visas; and
- Are not in receipt of a JobKeeper Payment from another employer.
How does it Work
Employers that meet the eligibility criteria should register their intention to claim. This is done via the ATO’s website here. In most cases, the ATO will use data from Single Touch Payroll to pre-populate employee details for each business. Employers must also continue to provide information to the ATO on a monthly basis, to ensure that they continue to remain eligible for the incentive throughout the whole 6 months. This will presumably also be done through Single Touch Payroll and related forums with the ATO.
From 30 March, employers will need to ensure that each eligible employee receives at least $1,500 per fortnight (before tax). In some cases this will be more than the employee was earning before the JobKeeper Payment commenced. Casual employees may fall into this category. If this is the case, the employer is to pay the employee the amount in excess of their current wage level up to the balance of $1,500 per fortnight. This is funded from the new incentive received from the government. Where this is the case, employers can choose whether they want to pay superannuation on the additional wage.
The employer must notify all eligible employees (including ex employees) that they are to be receiving the JobKeeper Payment. For employees who were receiving less, this will ensure that employees understand the reason their wages differ from what they had previously received, and makes it clear that it is not a permanent change. Ex employees will also be advised of the payments so they can adjust their own affairs (including entitlement to Centrelink payments) to take into account the new extra payment.
Employers will receive the first payment from the ATO in the first week of May, but will be backdated to 30 March 2020. We expect that this will be a cash payment by direct credit to the business’s bank account rather than an offset against tax liabilities, but we await further details to be released to confirm this.
In summary, employers will receive, in early May, $1,500 per fortnight, backdated to 30 March, for all employees that were employed as at 1 March 2020, whether they are still employed now or not. For those employees not employed now, the business will be responsible to pay the $1,500 per fortnight they receive to their ex employee. This will continue while the business continues to be eligible until 30 September 2020 at the latest.
Self-employed people can also register their interest in applying for JobKeeper Payment, assuming they satisfy the turnover decreases in their own businesses as mentioned above. We assume that this will apply to self-employed people trading as sole traders, partnerships, trusts and private companies. These businesses will need to nominate an individual to receive the payment, provide their Tax File Number, and provide a declaration as to recent business activity. They will also need to provide a monthly update to the ATO to declare their continued eligibility for the payments. The same flat $1,500 per fortnight amount is applicable.
If you are still employed by your employer then the new measures will not affect you that much. You will continue to receive your wages from your employer. The new incentive will be paid to your employer to help meet the payment of your wages.
If you have been made redundant or stood down since 1 March, but were employed at 1 March, your ex employer will be receiving the $1,500 per fortnight and they will be required to pass this onto you. The timing of this is as per the above. This amount will be counted as income in your hands when working out whether you are entitled to Jobstart or similar Centrelink payments. As the JobKeeper will take around 5 weeks from now to receive, you will need to decide whether you should claim the Centrelink payment to survive now, knowing you may have to pay it back when you get paid the JobKeeper amount in May (which is backdated to 30 March). You should receive some communication from your ex employer letting you know that they have advised the ATO of your eligibility and that funds will be received by you in early May.
One thing that you should remember is that if you have been made redundant, or stood down, from a business that is not eligible for the incentive (ie they have not had turnover decrease by more than 30% from the same time last year) then you will not be eligible for the payment as an ex employee of that business.
As a Business What Should You Do Now?
- Estimate the downturn in the turnover of your business by comparing your forecast income over the next few months with the same period last year. If you expect it will be down by at least 30%, you will be an eligible employer. If you need help with this, contact your client manager at Stanley & Williamson and we’ll be happy to assist;
- If you think you are eligible, you should register your interest in the JobKeeper Payment here;
- If you’ve stood down or retrenched staff since 1 March, and you’d like to keep them on your books for when business resumes, contact them to offer to re-hire them under the JobKeeper Payment system. You might have already started to receive calls from these employees, and if not, they’re likely to call soon. You should try to be in a position to quickly advise them whether you’re eligible. Treasury have released some information for employees that you might wish to direct them to;
- If you are reinstating some of your team, take care to ensure that their new arrangement complies with the relevant workplace laws, and is appropriately documented. In particular, even though the employee may have received a redundancy, this does not stop you being able to source this incentive for them. There are some issues to be considered here and a new engagement letter for their new “rehire” may be prudent. This may need to cover the length of the rehire as the government incentive payment only lasts 6 months so you would have to ensure that you were still in a position to be able to afford them at the end of the 6 months, before you would even consider keeping them on past that date. Lots of water to go under the bridge between now and then! We encourage you to review the information on the Fair Work website, or consult with a suitably qualified professional to clarify any HR issues or Industrial Relations issues in this regard. We can refer you to one if you don’t already have one;
- Advise eligible employees that they are receiving JobKeeper Payment. You should also ask them to confirm that they are not receiving a JobKeeper Payment from any other employer, and confirm that they are Australian citizens, permanent residents, or hold an eligible Special Category visa.
In the meantime, feel free to contact us if you have specific questions.
Below we have outlined the specifics of what we know about the new JobKeeper Incentive released yesterday. It has only been released as a Press Release at the moment and we have had to put the information together based on what is on the Treasury website, and what has been discussed in various press conferences and radio interviews since. Not ideal obviously, but that is all the information we have at the moment and we wanted to get the basic details of the new Incentive out to you as soon as we could.Parliament is being recalled to debate and finalise the actual legislation to enact the law for this new Incentive. That will only happen, at the earliest, later this week or early next week. By the time the uncertainties are debated and resolved we would not expect the final clarifications on the new law till middle of next week.
There are some issues that will need to be clarified, that we have become aware of already, including:
- Is the Subsidy taxable to the employer? We think it will be as the payments it is to cover will be tax deductable (ie normal salaries);
- What happens with employees that have been paid out their full entitlement of a redundancy? Do they receive the payment going forward? The current information would suggest yes;
- What is the prudent method to “rehire” the ex employees? Do you cover with a new engagement letter? What happens at the end of being able to access the concession and you no longer receive the incentive to pass onto the ex employee? What is the process to terminate the arrangement if you cannot afford to pay them out of your own funds after that date? This could be in 6 months time when the incentive ends, or before that if the business is no longer eligible for the payment as turnover has increased above the level required to be eligible.