The Federal Government proposes paying employers $1,500 per fortnight per employee, for 6 months from 30 March through 30 September 2020, to help employees keep jobs. Employers will need to be able to demonstrate that their turnovers have decreased 30%.
The Federal Government will pay qualifying businesses $1,500 per employee per fortnight from 30 March to 30 September 2020. This is designed to help employers keep people in jobs and reactivate operations quickly, without having to re-hire, once the COVID-19 crisis is over.
Employees and self-employed can therefore keep on working and earn an income, even if their hours have been cut.
Here are the 5 things you need to know:
1. Which Employers are Eligible for JobKeeper Payments?
Employers will be eligible for the subsidy if turnover has fallen by more than 30% (of at least a month) if turnover is less than $1 billion, or by more than 50% if turnover is more than $1 billion.
To establish the fall in turnover, most businesses would be expected to show turnover has fallen in the relevant month or 3 months (depending on “natural activity statement reporting period”) relative to turnover a year earlier.
- ATO will have discretion to consider additional information the business can provide to establish they have been significantly affected by Coronavirus.
- Some tolerance where employers, in good faith, estimate a greater than 30% (or 50%) fall in turnover but actually experience a slightly smaller fall.
- Not-for-profit entities, including charities, and self-employed individuals (businesses without employees) that meet the turnover tests are also eligible to apply for JobKeeper Payments.
Employers need to work out, as soon as possible, whether their turnover has, or will likely, fall by 30% or 50%.
- In some cases, this will be clear but in other cases the position may be uncertain and may depend on the proposed legislation.
- So care will need to be taken to ensure businesses are eligible and don’t miss out on claiming this generous subsidy.
- how will “turnover” be calculated for JobKeeper purposes—by reference to BAS or can you rely on the management accounts of the business?
- how does JobKeeper apply where business operations are carried on by separate entities within a group and/or workers are supplied to group entities by a central service or employment company?
Presumably, these questions will be addressed in the new legislation.
Importantly, the Government has stated that “the intent of the JobKeeper Payment is to enable any eligible self-employed person get a wage subsidy regardless of what business structure they use”, whether that be a partnership, company or trust.
2. Who is an “Employee” for These Purposes?
Eligible employees are employees who are:
- currently employed by employer (including those stood down or re-hired)
- were employed at 1 March 2020
- full-time, part-time or long-term casuals (i.e. employed on regular basis for more than 12 months as at 1 March 2020)
- at least 16 years old
- Australian citizens, holders of permanent visa, Protected Special Category Visa Holders, non-protected Special Category Visa Holders (residing continually in Australia for 10 years or more), or Special Category (Subclass 444) Visa Holders
- not in receipt of JobKeeper Payment from another employer.
Employers need to work out:
- which of their workers are “eligible employees”, as the definition extends well beyond full-time employees—there is no minimum dollar threshold of remuneration to be eligible; and thus some employees may receive more than they are currently being paid
- what steps need to be taken where a family company or trust doesn’t pay wages to owners but instead pays dividends or makes trust distributions, and
- whether foreign employees (especially backpackers and other holiday workers) hold appropriate visas.
3. How will JobKeeper Payments be Made?
Government will pay eligible employers $1,500 per fortnight per employee (monthly in arrears).
Employees must receive a minimum of $1,500 per fortnight (before tax), and employers may top-up the payment. If an employee:
- ordinarily receives $1,500 or more per fortnight, they will continue to receive their regular income (according to prevailing workplace arrangements)—JobKeeper Payment will subsidize the employer.
- ordinarily receives less than $1,500, employer must pay employee, at a minimum, $1,500 per fortnight.
- has been stood down, employer must pay employee at least $1,500 per fortnight.
- was employed on 1 March 2020, was subsequently ceased employment with employer, and was then re-engaged by same employer, the employee will receive, at a minimum, $1,500 per fortnight.
Employers need to work out which of their workers fall within the above categories and be ready to provide details to ATO to support Payments.
Before the announcement of the JobKeeper scheme on 29 March 2020—and as a result of reduced demand for goods and services and reduced revenues—many employers may have been considering standing down employees and/or reducing their hours or pay.
Despite the availability of JobKeeper Payments, some employers may still wish to reduce hours and/or pay. Especially where they would need to make up the difference between an employee’s pay and $1,500 per fortnight.
In such cases, employers must consider the implications, and potential liabilities, under the Fair Work Act and applicable awards and enterprise bargaining agreements—especially if such reductions could be treated as giving rise to a redundancy.
4. When will JobKeeper Payments Start?
From 30 March 2020, with first payments to be received by employers in first week of May.
Employers can decide whether they want to pay superannuation on any additional wages paid because of JobKeeper Payment.
While there is a clear incentive to register and claim the Payment as soon as possible, it appears that if an eligible employer has eligible employees, payments will be backdated to 30 March 2020.
Accordingly, if turnover has not immediately fallen by 30 or 50%, it may still be possible to claim the JobKeeper payment subsequently.
5. How do employers and self-employed apply for JobKeeper Payments?
Employers can register their interest for JobKeeper Payments via ATO website from 30 March 2020 and will subsequently be able to apply by online application.
- Eligible employers will need to identify eligible employees for JobKeeper Payments and must provide monthly updates to the ATO.
Businesses without employees, such as self-employed, can also register their interest via ATO website from 30 March 2020.
- Self-employed will need to provide a monthly update to ATO to declare their continued eligibility for payments.
This information is current as of 7 April 2020. The speed with which COVID-19 is spreading and the varied responses both internally within Australia and externally change on a daily basis. It is important that you regularly keep up to date with all relevant information and be prepared to respond as the landscape in which the virus is moving changes.
This Alert is intended as general information only. It does not purport to be comprehensive advice or legal advice. Readers must seek professional advice before acting in relation to these matters.