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Yesterday the Government announced a $130 billion wage subsidy package, called the JobKeeper Payment. This is the biggest Federal Government response to the COVID-19 outbreak to date, which is expected to affect six million Australians.

The general intent of the package is to keep employees on the books and being paid as normal. The scheme can be summarised as follows:

Where an eligible employer suffers a substantial decrease in revenue, they will receive a subsidy for their eligible employees of $1,500 per fortnight. They will continue to pay the employee at least $1,500 per fortnight, even if they have been stood down.

How the system will work

The JobKeeper payment will provide eligible businesses with a flat payment of $1,500 per fortnight per employee over the next six months regardless of the employee’s salary.

The first payment will be received by employers from the Australian Taxation Office (ATO) in the first week of May, backdated from 30 March 2020.

Eligible employers will need to identify and notify eligible employees for the JobKeeper payment and must provide monthly updates to the ATO confirming that the employer continues to be eligible.

Participating employers will be required to ensure eligible employees will receive, at a minimum, $1,500 per fortnight, before tax. Employees that are already receiving this amount per fortnight will not see their salary change. It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper payment.

The payment will be paid for employees engaged as at 1 March 2020. For most businesses the ATO will use the Single Touch Payroll data to pre-populate business and employee data.

Registration by employers

At this stage employers must register for the JobKeeper payment at the following website: www.ato.gov.au/general/gen/JobKeeper-payment

Following registration employers will be provided updates of the package’s arrangements over the coming month.

Eligible employers

Employers will be eligible for the JobKeeper payment if:

  • Their business has a turnover of less than $1 billion and their turnover has been reduced by more than 30% 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 has been reduced by more than 50% to a comparable period a year ago (of at least a month); and
  • The business is not subject to the Major Bank Levy.

Not-for-profit entities (including charities) and self-employed individuals (businesses without employees) that meet the turnover tests mentioned above are eligible to apply for the JobKeeper payment.

Employers and self-employed individuals will be required to provide information to the ATO upon registration and then provide monthly updates to the ATO.

There must be an employment relationship with eligible employees as at 1 March 2020, and the employer must confirm that each eligible employee is currently employed in order to receive the JobKeeper payment, even those that have been stood down. If the employee has been retrenched, they will have to be reinstated in order to be eligible for the JobKeeper payment.

Employee eligibility

The payment applies to full-time, part-time and casual employees who were employed by the employer on 1 March 2020. Casuals must have been employed on a regular basis for more than 12 months as at 1 March 2020.

All eligible employees must be:

  • At least 16 years of age;
  • 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
  • Not in receipt of a JobKeeper payment from another employer.

Practical Considerations

Although the details are being worked out, the ATO will administer the scheme and attend to payment of the subsidy. The Single Touch Payroll System will be an integral part of the process.

Employers are required to make the minimum $1,500 per fortnight payment to employees and will be reimbursed monthly. The first reimbursement will be in the first week of May and will be backdated to 30 March. This will create some cash flow issues for affected businesses.

We will not see the full details of the subsidy for a week or so and in the meantime we are left with press releases and ATO fact sheets. We understand the two-fold intents of the subsidy are to keep people on the payroll to the greatest extent possible (which will keep people off Centrelink benefits) and to subsidise employers to encourage them to keep their staff. It does not prevent employers from making the right commercial decision about reducing hours or if there is no work, standing people down. However, when making these decisions employers should take into account the subsidy they will receive.

To the extent that the $1,500 payment is not wages but is passing on the government subsidy, SGC is not required to be paid. This can occur when an employee is normally paid less than $1,500 per fortnight or where they have been stood down.

There will undoubtedly be anomalies with the scheme but this is a bold initiative to keep employees on the books and to ensure that a work force is ready and available to bounce back.

As always, please speak with us if you have any queries or require assistance.

Here is a link to the ATO fact sheets for employers and employees:

Fact sheet for employers:
https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet_supporting_businesses_4.pdf

Fact sheet for employees:
https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet_Info_for_Employees_0.pdf

 

Joshua Morse

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