On 29 March 2020 and 30 March 2020 the Federal Government has released details on two more initiatives to assist businesses during the coronavirus pandemic.
JOBKEEPER PAYMENT
The Federal Government has announced a $1,500-per-fortnight JobKeeper Subsidy Payment. Please find below a summary of the announcement along with our interpretation of the provisions through a question and answer format. The information below has been taken from the factsheets made available last night. We will keep you informed as legislation is introduced or the Federal Government announces any further changes to the JobKeeper Subsidy Payment.
WHAT IS THE JOBKEEPER SUBSIDY PAYMENT?
The JobKeeper Subsidy Payment is a wage subsidy to be paid to Businesses, Sole Traders, Businesses Without Employees, Not for Profits and Charities.
To qualify for the Jobkeeper payment an employer will have to show:
- they have experienced a loss of at least 30 percent of their turnover relative to a comparable period a year ago (of at least a month).
- Employees with which they want to claim the subsidy on were on their books regardless of them being stood down, redundant or still employed as at 1 March 2020.
The payment will be made to employers at a flat rate of $1,500 per fortnight from 30 March 2020 for all employees that were employed as of March 1 2020. We see the benefits in this system as being two fold:
- It allows the employers to remain engaged with employees for a period of 6 months until their trading conditions improve by keeping them on the payroll and engaged with the business,
- The payment under the Jobkeeper system, being $1,500 per fortnight, is higher than the amount they may otherwise receive on the Jobseeker system, which is $1,100 per fortnight.
Payments under the regime will be made in arrears. Payments will be made from the first week of May backdated to 30 March and will continue for a maximum of 6 months. Businesses will be required to prove that they are using the funds to subsidise wage payments to their employees and have a legal obligation to retain the employee.
The Single Touch Payroll system (STP) will assist the ATO with data matching claims made by eligible employers.
Businesses can register their interest in applying for JobKeeper Payment via ato.gov.au website: https://www.ato.gov.au/general/gen/JobKeeper-payment
EMPLOYER OBLIGATIONS
- Register an intention to apply on the ATO website.
- Demonstrate that your business has or will experience the applicable 30% turnover decline.
- Provide information to the ATO on eligible employees engaged as at 1 March 2020 (including those stood down or rehired).
- Ensure that each eligible employee is paid at least $1,500 per fortnight (before tax).
- Notify all eligible employees that they are receiving the JobKeeper Subsidy Payment.
- Continue to provide information to the ATO on a monthly basis, including the number of eligible employees employed by the business
ELIGIBLE EMPLOYEES
Eligible employees are employees who:
- 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 qualifies provided they were 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; and are not in receipt of a JobKeeper Subsidy Payment from another employer.
SOLE TRADERS AND BUSINESSES WITHOUT EMPLOYEES
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 to the individual’s bank account.
It is unclear at this stage how the subsidy may apply to a family trust arrangement where each family member works in the business however whilst working in the business are remunerated through trust distributions rather than a wage. We will keep you posted on anything in respect to this. We would encourage you to apply for the regime regardless and seek clarification on your circumstances with the ATO.
Example
Ted Black is the director of Building Co Pty Ltd. The company has experienced a 30% decline in revenue since the outbreak of the Coronavirus. Prior to the outbreak, as at 1 March 2020 Ted’s payroll was as follows:
Before change in trading conditions Typical working week – days
| Employee | Employment Status | Hours | Earnings | Jobseeker subsidy | Total pay after subsidy | Tax | Super | Net Pay |
| Rodger Jones | Full Time | 40 | 2,560.00 | 2,560.00 | 762.00 | 243.20 | 1,798.00 | |
| Betty Smith | Part Time | 25 | 690.00 | 690.00 | 78.00 | 65.55 | 612.00 | |
| Max O’Donnell | Full Time | 40 | 1,820.00 | 1,820.00 | 588.00 | 172.90 | 1,232.00 | |
| Anne Davies | Full Time | 40 | 1,350.00 | 1,350.00 | 357.00 | 128.25 | 993.00 | |
| Ted Black | Full Time | 40 | 2,000.00 8,420.00 |
2,000.00 8,420.00 |
541.00 2,326.00 |
190.00 799.90 |
1,459.00 6,094.00 |
Prior to the Jobkeeper subsidy Ted sought to rearrange the business and his employees in the following manner:
Restructured payroll as a result of reduction in trading conditions
| Employee | Employment Status | Hours | Earnings | Jobseeker subsidy | Total pay after subsidy | Tax | Super | Net Pay |
| Rodger Jones | Full Time | 32 | 2,048.00 | 2,048.00 | 560.00 | 194.56 | 1,488.00 | |
| Betty Smith | Part Time | 25 | 690.00 | 690.00 | 78.00 | 65.55 | 612.00 | |
| Max O’Donnell | Full Time | 32 | 1,456.00 | 1,456.00 | 341.00 | 138.32 | 1,115.00 | |
| Anne Davies | Stood Down | 0 | ||||||
| Ted Black | Full Time | 40 | 2,000.00 6,194.00 |
2,000.00 6,194.00 |
541.00 1,520.00 |
190.00 588.43 |
1,459.00 4,674.00 |
Following the announcement of the Jobkeeper subsidy Ted has been able to forward the subsidy he has been paid for Annie, the employee he stood down, to her up the full amount the company has been paid. Ted will also bring Betty’s pay, currently under the thresholds for the subsidy on a weekly basis up to $750 per week. Please refer to the question and answers below for a discussion on superannuation guarantee. Ted can retain the subsidy he receives on his other employees to assist with the 30% drop in revenue.
After the application of subsidies to his employees the company’s payroll is as follows:
Revised payroll as a result of Jobkeeper payment subsidy
| Employee | Employment Status | Hours | Earnings | Jobseeker subsidy | Total pay after subsidy | Tax | Super | Net Pay |
| Pay Cycle | Weekly | |||||||
| supplement per pay cycle | $750 | |||||||
| Rodger Jones | Full Time | 32 | 2,048.00 | 2,048.00 | 560.00 | 194.56 | 1,488.00 | |
| Betty Smith | Part Time | 25 | 690.00 | 60.00 | 750.00 | 96.00 | 65.77 | 654.00 |
| Max O’Donnell | Full Time | 32 | 1,456.00 | 1,456.00 | 341.00 | 138.32 | 1,115.00 | |
| Anne Davies | Stood Down | 0 | 750.00 | 750.00 | 96.00 | 71.25 | 654.00 | |
| Ted Black | Full Time | 40 | 2,000.00 6,194.00 |
810.00 | 2,000.00 7,004.00 |
541.00 1,634.00 |
190.00 659.90 |
1,459.00 5,370.00 |
The subsidy the company receives after meeting its requirements with its employees is worked out as follows:
| Jobkeeper entitlement subsidy – employer subsidy | 5 |
| Number of employees on payroll | weekly |
| Pay cycle | 750 |
| Subsidy per pay cycle for employer | 3,750 |
| Less: | |
| Total subsidy paid to employees | 810 |
| Subsidy for employer | 2940 |
| Net employer subsidy for the entire 6 month period | 76,440 |
FREQUENTLY ASKED QUESTIONS THAT RELATE TO THE JOBKEEPER SUBSIDY PAYMENT
What if the employee has been stood down?
if the employee was employed as of 1 March 2020 the employer remains eligible to reinstate the employee and receive the payment.
What if the employee has been made redundant?
If the employee was employed as of 1 March 2020 the employer remains eligible to reinstate the employee and receive the payment. The government has noted that leave entitlements paid as part of the redundancy are yet to be worked through.
Is superannuation payable on the JobKeeper Subsidy Payment?
The government fact sheet states:
‘it will be up to the employer if they want to pay superannuation on any additional wage paid because of the Jobseeker payment’
If my employee works part time and is usually paid less than $1,500 per fortnight, does the business still receive the full $1,500 per fortnight?
The government fact sheet states:
‘for employees receiving less than [the full $1,500 per fortnight], the employer will need to top up the payment to the employee to $1,500, before tax.’
If my employee earns more than $1,500 per fortnight, does the employee receive more than what they are already earning?
The government fact sheet states:
‘For employees already receiving [$1,500 per fortnight] from their employer, then their income will not change.
We understand that to the extent that a payment is not passed on to an employee, the payment can be retained by the employer as a subsidy for retaining the employee.
Is the payment taxable in the hands of the employer and the employee?
Employers:
We understand that the payment is taxable in the hands of the employers. Any payment made to an employee will then be eligible for a deduction to offset the assessable income.
Employees:
We understand that the payment is taxable in the hands of the employee. The government has stated so far the payment wont be subject to super. We consider this payment subject to PAYGW given it is assessable in the hands of the employee.
What if the employee has already applied for support through Centrelink?
Provided the employee was employed as of 1 March 2020 they can transition back to the employer and be eligible for the payment.
Where there is scope to re-instate the employee this could provide the employee with a higher payment than they would otherwise receive through the Coronavirus and jobseeker supplement, which is $1,100 per fortnight.
Are casuals eligible for the payment?
If the casual has been employed with the employer for twelve months or more as at 1 March 2020, they will be eligible for the payment.
Are those on temporary work visas eligible?
The government has advised New Zealanders on 444 Visas are eligible for the payment. All other temporary visa holds will not be eligible at this point in time.
When does it apply?
Payments will be paid from the first week of May with payments backdated to the 30th March.
How does my business apply for the payments?
The business will need to complete a self-declaration that their revenue has reduced in line with the eligibility criteria via the ATO website. Please contact the team to assist you with this. A weblink is provided at https://www.ato.gov.au/general/gen/JobKeeper-payment/
Can an employee access both the Centrelink benefits and the JobKeeper Subsidy Payment at the same time?
No, the employee receiving the JobKeeper Subsidy Payment is not eligible to also receive the JobSeeker payment.
My employee works part time in my business and as a casual in another business. Do they receive two payments of the $1,500?
No, an employee may only receive the JobKeeper Subsidy Payment from one employer.
FREQUENTLY ASKED QUESTIONS THAT RELATE TO THE JOBKEEPER SUBSIDY PAYMENT
What if the employee has been stood down?
if the employee was employed as of 1 March 2020 the employer remains eligible to reinstate the employee and receive the payment.
What if the employee has been made redundant?
If the employee was employed as of 1 March 2020 the employer remains eligible to reinstate the employee and receive the payment. The government has noted that leave entitlements paid as part of the redundancy are yet to be worked through.
Is superannuation payable on the JobKeeper Subsidy Payment?
The government fact sheet states:
‘it will be up to the employer if they want to pay superannuation on any additional wage paid because of the Jobseeker payment’.
We believe in most instances superannuation guarantee could apply to the payment. A payment of the subsidy linked with a payment to an employee for services would ordinarily be subject to superannuation guarantee. If an employer makes an optional payment it would not be linked to the provision of services and therefore not ordinarily subject to super guarantee. However care ought to be taken if the employee is retained or re-employed, under an award scheme.
How the superannuation regime interacts with the Jobkeeper arrangements is still unclear and we await to see the legislation as passed by parliament.
If my employee works part time and is usually paid less than $1,500 per fortnight, does the business still receive the full $1,500 per fortnight?
The government fact sheet states:
‘for employees receiving less than [the full $1,500 per fortnight], the employer will need to top up the payment to the employee to $1,500, before tax.’
If my employee earns more than $1,500 per fortnight, does the employee receive more than what they are already earning?
The government fact sheet states:
‘For employees already receiving [$1,500 per fortnight] from their employer, then their income will not change.
We understand that to the extent that a payment is not passed on to an employee, the payment can be retained by the employer as a subsidy for retaining the employee.
Is the payment taxable in the hands of the employer and the employee?
Employers:
We understand that the payment is taxable in the hands of the employers. Any payment made to an employee will then be eligible for a deduction to offset the assessable income.
Employees:
We understand that the payment is taxable in the hands of the employee. The government has stated so far the payment wont be subject to super. We consider this payment subject to PAYGW given it is assessable in the hands of the employee.
What if the employee has already applied for support through Centrelink?
Provided the employee was employed as of 1 March 2020 they can transition back to the employer and be eligible for the payment.
Where there is scope to re-instate the employee this could provide the employee with a higher payment than they would otherwise receive through the Coronavirus and jobseeker supplement, which is $1,100 per fortnight.
Are casuals eligible for the payment?
If the casual has been employed with the employer for twelve months or more as at 1 March 2020, they will be eligible for the payment.
Are those on temporary work visas eligible?
The government has advised New Zealanders on 444 Visas are eligible for the payment. All other temporary visa holds will not be eligible at this point in time.
When does it apply?
Payments will be paid from the first week of May with payments backdated to the 30th March.
How does my business apply for the payments?
The business will need to complete a self-declaration that their revenue has reduced in line with the eligibility criteria via the ATO website. Please contact the team to assist you with this. A weblink is provided below:
https://www.ato.gov.au/general/gen/JobKeeper-payment/
Can an employee access both the Centrelink benefits and the JobKeeper Subsidy Payment at the same time?
No, the employee receiving the JobKeeper Subsidy Payment is not eligible to also receive the JobSeeker payment.
My employee works part time in my business and as a casual in another business. Do they receive two payments of the $1,500?
No, an employee may only receive the JobKeeper Subsidy Payment from one employer.
Cashflow forecasting and planning
We see this as a positive development for keeping businesses and employees engaged through a difficult time in the economy. This initiative also highlights the importance and benefits of
CASHFLOW FORECASTING AND PLANNING.
Please contact us if you would like to know how we can help you with this.