Jobkeeper – employer wage subsidy
Announced on 30 March 2020, jobkeeper is a subsidy paid to Eligible Employers as an incentive to retain Eligible Employees. It is acknowledged as the single most significant economic stimulus administered by the Australian Government with an estimated financial impact of $130 Billion. The cost of funding the stimulus packages will result in a significant debt burden for the next generation of Australians and repayment will be a concern for terms of government to come.
Legislation was enacted by Parliament on 9 April 2020 and accompanying rules were published by Treasury on the same day. It is to be noted that the legislation Coronavirus Economic Response Package (Payments and Benefits) Act 2020 provides a framework only for the rules. The rules may be subject to change – and given Parliament’s rapid delivery of the COVID-19 response package this would seem to be intentional– providing Treasury with the flexibility to change (read: potentially restrict) the rules.
Key Information
For Eligible Employers, a $1,500 subsidy per fortnight is payable per Eligible Employee and other nominated persons (no more than one Eligible Business Participant per entity).
Entitlement under the scheme may arise from the fortnight commencing on 30 March 2020 and ends on 27 September 2020.
Payments of jobkeeper are administered by the ATO and paid 14 days after the end of the month in which the fortnight ends, or 14 days after the Commissioner is satisfied of an entity’s entitlement (whichever is later).
The $1,500 payment per fortnight is a minimum amount that must be paid by the Employer per Employee. The Employer may pay an Employee more than $1,500 per fortnight.
A person may only be entitled to jobkeeper from one entity only.
Eligible Employer
Includes businesses operating through companies, trusts, partnerships and sole traders.
Businesses and non-profit bodies must satisfy the decline in turnover test.
Businesses must have been established before 1 March 2020 and have an ABN on 12 March 2020.
Entities that are ineligible for jobkeeper payments include the major banks (and other members of a consolidated group); Australian government agencies; local governments; wholly owned entities of government agencies and local governments; government entities; entities in liquidation; and, individuals where a trustee in bankruptcy has been appointed.
Decline in Turnover
Under the provisions, a decline in turnover is the percentage shortfall of an entity’s projected GST turnover against the GST turnover for the relevant comparison period. Decline in turnover thresholds apply as follows:
| For this entity: | The shortfall in turnover must equal or exceed: |
| Non-profits registered with the ACNC | 15% |
| Businesses with turnover < $1Billion, universities and non-government schools | 30% |
| Businesses with turnover >$1Billion | 50% |
Alternative Test
The rules make provision for an alternative decline in turnover test determined by the Commissioner, where there is not a relevant comparison period. From examples provided in explanatory material, this is expected to cover situations including newly established businesses, major business acquisitions, other scaling up and where business turnover is highly variable. No alternative tests have been provided at this time.
Turnover Test Period
A month or quarter chosen by the entity.
The test must be satisfied before an entity becomes eligible for the jobkeeper payment.
Once eligibility is established, there is no need to re-test. Jobkeeper payments will remain payable for the duration of the scheme.
The turnover test may be conducted by comparing the turnover of a month or a quarter against the same period in 2019.
A monthly test period must be between April 2020 and September 2020 (inclusive). Alternatively, a test quarter is either April – June 2020 or July – September 2020.
|
Turnover test period (month) |
Comparison period |
|
April 2020 |
April 2019 |
|
May 2020 |
May 2019 |
|
June 2020 |
June 2019 |
|
July 2020 |
July 2019 |
|
August 2020 |
August 2019 |
|
September 2020 |
September 2019 |
|
Alternatively, the turnover test period may be a quarter: |
|
|
1 April 2020 – 30 June 2020 |
1 April 2019 – 30 June 2019 |
|
1 July 2020 – 30 September 2020 |
1 July 2020 – 30 September 2019 |
The entity chooses the test period. It is noted that the jobkeeper payment is not payable until the entity establishes that the decline in turnover test is met, therefore it would be an advantage to opt for a monthly turnover test period, where the information available positively supports that choice – making the jobkeeper payment easier to access and minimising uncertainty associated with ineligibility. Transitional rules allow the Commissioner to make the first payment of jobkeeper as an advance - without being satisfied of the entity’s entitlement – based on the information provided by the applicant and that payment is reasonable in the circumstances.
Turnover
GST turnover, with some modifications
GST turnover is used as the yard stick for measuring decline in turnover – with some modifications.
For Deductible Gift Recipients and charities, broadly, donations are treated as part of this modified GST turnover.
Eligible Employees
One in, all in
If an employer is an Eligible Employer and a choice is made to participate in the scheme, an employer cannot choose which eligible employees will participate in the scheme. That is to say, that the scheme must be available to all employees who qualify as 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;
may be full-time, part-time, or “long-term casual employees”; casual employees must have been employed on a regular systematic basis for 12 months as at 1 March 2020;
are at least 16 years of age;
are an Australian resident, or; are a tax resident of Australia and a holder of a Special Category (Subclass 444) Visa Holder; and,
are not in receipt of a jobkeeper payment from another Employer.
Where a business has changed hands, or where employment arrangements have been reassigned within a wholly owned group, this does not prevent individuals from being considered to be Eligible Employees. This includes in situations where a business has changed hands after 1 March 2020, or during the period from 1 March 2019, for the purposes of an individual being treated as a long-term casual employee.
There is a positive obligation placed on an individual to provide a notice stating their satisfaction of the above requirements and agreeing to the nomination as an eligible employee. This provides an option for Employees who have qualified for Job Seeker support to continue payments via Services Australia. The individuals also must not otherwise excluded (by virtue of being entitled to a parental leave type payment in that fortnight; or where an individual is totally incapacitated for work and is in receipt of workers’ compensation in a fortnight.)
Eligible Business Participant
There is provision for business owners to access to jobkeeper payment scheme.
Access to sole traders, partners, adult trust beneficiaries, individual shareholders or directors.
Limit of one Eligible Business participant per entity.
Entitlement to jobkeeper is available Eligible Business Participants. These are nominated persons, even where they are not otherwise considered to be an Eligible Employee.
Additional requirements are that:
The business has an ABN on 12 March 2020, and either:
The business included an amount in assessable income for the 2019-19 income year and had lodged the 2018-19 income tax return on or before 12 March 2020; or,
The entity made a taxable supply in a tax period between 1 July 2018 and 12 March 2020 and the Commissioner had notice.
It is important to note that only one person, who must be actively engaged in the business of the entity may be nominated to receive a jobkeeper payment under this provision. A nomination is required to confirm the individual’s eligibility and agreement to be nominated to participate in the jobkeeper scheme.
Some exclusions apply: namely, an individual is not an Eligible Business Participant where they are entitled to a parental leave (type) payment in that fortnight; or where an individual is totally incapacitated for work and is in receipt of workers’ compensation in a fortnight.
Wage condition
Payments made the employer to an eligible employee must be equal to, or exceed, $1,500 per fortnight.
This includes amounts paid by salary, wage, commission or bonus, related PAYG withholding (as applicable), superannuation guarantee contributions and other salary sacrificed amounts. There is no compulsion for the employer to pay its employees according to the fortnightly pay schedule, however a “flow through” should be able to be demonstrated between the payments received by the employer and their payments to employees.
Superannuation Guarantee (SG) obligations
The SG rules are expected to change to provide that the employer will only need to make superannuation contributions for any amount payable to an employee in respect of their actual employment, disregarding any extra payments made by the employer to satisfy the wage condition.
For instance, an employer is not expected be required to make superannuation contributions for an employee who is stood down, or where the jobkeeper payment would exceed the amount payable to the employee based on ordinary time earnings.
It is important to note that clarity around any SG obligations should be confirmed prior to making any payment.
Payment of jobkeeper
Earliest payment from first week of May 2020, ongoing payments are monthly in arrears until the end of the program.
Payment is made by the ATO to the employer’s nominated bank account.
Jobkeeper is generally paid in cash to a bank account nominated by the entity. However, the Commissioner retains the power to withhold payment in circumstances, for instance, to verify an entitlement to the payment; or to credit the payment to the entity’s running balance account. To avoid payment delays it is recommended to check that an active bank account has been nominated.
Integrity Measures
Businesses that enter into contrived arrangements with the sole or dominant purpose of reducing their turnover will not be entitled to the payment.
In certain cases, another entity may be joint and severally liable for an overpayment.
Overpayments must be repaid.
General interest charge applies to overpayments (currently 7.91%).
Other sanctions may apply for criminal behaviour including imprisonment and financial penalties.
Persons and entities wishing to access the jobkeeper payment scheme should have no misapprehension that the full force of the law will apply in relation to recovery of overpaid amounts. The Commissioner’s power to recover amounts may extend to include the employee and other persons or entities involved. Criminal sanctions apply in cases involving false statements and fraud.
Should my business apply for jobkeeper?
Businesses have commercial realities to face in deciding whether hibernation, or a level of activity is appropriate. Ultimately, an Employer’s eligibility for jobkeeper payments will depend on the entity being an eligible employer and meeting the requisite turnover test. It may have made, or may prospectively make, decisions around its business operations and employment arrangements, including pay cuts and stand downs affecting some or all work duties, if, for instance, the employer is the subject of directions around its business activities (including shutdowns and restrictions).
In line with the purpose of the stimulus, to assist employers in dealing with the economic impact of the COVID-19 pandemic it is intended that access to jobkeeper scheme will enable the business to position itself for speedier recovery.
While from an economic perspective, the jobkeeper scheme provides for reimbursement of payments of $1,500 per eligible employee for a period of up to 6 months, the cash flow reality is that the business needs to sustain payment of the jobkeeper amounts to staff in addition to other operating cash flow commitments. Cash flow becomes a critical consideration in whether a business can and should participate in the jobkeeper scheme. Importantly the business should ensure that it has access to facilities to cover any expected gap against its existing financing facilities.
It is important to note that not all individuals will qualify for Job Seeker assistance administered by Services Australia (formerly Centrelink). Therefore, businesses are likely to face pressure from their employees to participate in the jobkeeper scheme, particularly where they have been stood down or made redundant.
Prudent practice would suggest that an Employer should not be making any commitment to subsidise their Employees’ pay from jobkeeper until the Employer is certain that they will meet the eligibility criteria.
Administration
Under the rules, the employer will need to register for the scheme and then seek nomination notices from each of its eligible employees and eligible business participant. For the duration of the payment scheme, monthly reporting will be required advising the current month GST turnover and projected GST turnover for the next month, within 7 days of the reporting month.
Charities and DGRs must also report donations as part of the monthly reporting regime.
The specifics of the mode of reporting are not yet known but it is expected that information will be published once the mechanics are fleshed out by the ATO.
For further advice contact:
Leanne Spiteri
We have used our best efforts to ensure the accuracy of the information contained. It is not a substitute for specific advice from a qualified advisor.
Liability is limited by a scheme approved under Professional Standards legislation.
Current as at 13 April 2020