JobKeeper Payments - Australian Government Stimulus
31 Mar 2020
The announced JobKeeper initiative is a subsidy program to support employees by providing a safety net of income support and to retain engagement with employers.
- Helps employers subsidise the cost of wages
- Ensures stood down employees and those that have been made redundant are entitled to a higher payment without accessing Centrelink
- Applies where a business has a turnover decrease of more than 30% if its turnover is below $1 billion and more than 50% if the turnover is $1 billion or more.
- Payments can be accessed by full-time, part-time and casual employees who were employed by an eligible business as of 1 March 2020
- Casual employees need to have been employed on a regular basis over the past 12 months
- Applies to sole traders
- The law is yet to be passed.
How is turnover assessed?
Turnover is assessable income and is not necessarily all amounts received. At this stage, the turnover decrease is determined by comparing the current month turnover to the turnover from a comparable period of at least one month from a year ago and needs to be monitored month by month. Information will need to be provided to the ATO demonstrating a downturn in the business.
What do I need to do to ensure my employees get JobKeeper payments?
Employers and sole traders first need to register for the scheme which they can do here. We recommend that all employers and sole traders register initially in anticipation of future turnover reductions in the coming months. A more formal registration process will follow once the changes are passed by Parliament.
Which of my employees are entitled to the payment?
Employers will receive payments for all employees that were on their books at 1 March 2020 where the employer is seen as the main employer, even if they have been subsequently stood down or let go. For employees that have been let go or stood down an employer will need to continue to engage with them.
Only one employer can be registered for an employee – being the main employer, and for employees with multiple employers this will be the one employer the employee has nominated to claim the tax-free threshold from.
Employers will need to notify the employee they have been registered. The number of registered employees will need to be reported to the ATO on a monthly basis.
How do I re-engage with employees that have been made redundant?
There has been no guidance on this at the moment. Details will hopefully be covered when we see the law.
How do I pay employees?
Employers need to continue to pay employees in pre-tax dollars as set out below. Every employee that continues to be engaged regardless of what they are earning or were previously earning will need to be paid at least the amount of the subsidy. As an example:
- Stood down – currently earning $0 – will now be paid $1,500 per fortnight (recouped by the employer from the JobKeeper payment)
- Reduced hours – currently earning $1,000 per fortnight – will now be paid $1,500 per fortnight (recouped by the employer from the JobKeeper payment)
- Retained employee – currently earning $2,000 per fortnight – will continue to be paid $2,000 per fortnight ($1,500 from the JobKeeper payment and $500 from the employer).
The employer can choose to give the employee the $1,500 payment and top up with their normal wages. This is at the employers discretion.
I am a sole trader – what do I need to do?
Sole traders will nominate an individual to receive the payments and are subject to the same turnover reduction thresholds. The sole trader will nominate a bank account and funds will be paid direct to that account.
I need to take out a loan to pay employees
The statutory priority under section 560 of the Corporations Act is a useful tool for both lenders and borrowers, especially right now. Using section 560 is a quick, easy and relatively cheap way of getting priority for advances to pay employees. Read more here.
What happens with superannuation?
The requirements for Superannuation guarantee still apply to the normal wage component of any payments made to employees. Any excess for low paid workers due to the minimum payment applying does not require Superannuation guarantee contributions to be made on that top up component.
Is the JobKeeper payment taxed?
Employers will continue to withhold tax from the payments, but those employers eligible for the cash flow boost will be able to take advantage of that concession for the PAYG withheld.
Payments will be made to the employer monthly in arrears by the ATO.
Steps to take
- Register an intention to apply on the ATO website
- Assess that the business has or will have experienced the required turnover decline using comparable turnover figures from the same period in 2019 – contact your accountant or business adviser for assistance.
- Provide information to the ATO on eligible employees – This includes information on the number of eligible employees engaged as at 1 March 2020 and those currently employed by the business (including those stood down or rehired). For most businesses, the ATO will use Single Touch Payroll data to pre-populate the employee details for the business.
- Continue to pay employees and withhold tax. Those eligible for the cash flow boost will be able to take advantage of that concession.
- Ensure that each eligible employee receives at least $1,500 per fortnight (before tax). For employees that were already receiving this amount from the employer then their income will not change. For employees that have been receiving less than this amount, the employer will need to top up the payment to the employee up to $1,500, before tax from 30 March 2020. And for those employees earning more than this amount, the employer is able to provide them with a top-up.
- Notify all eligible employees that they are receiving the JobKeeper Payment.
- Continue to provide information to the ATO on a monthly basis, including the number of eligible employees employed by the business.
Detailed information from the Australian treasury can be found at https://treasury.gov.au/coronavirus/jobkeeper