15 April, 2020
$1,500 per fortnight wage subsidy for eligible employers
What you need to know
- The Government has announced a new "JobKeeper" payment (intended to last for a maximum period of six months), which is a wage subsidy for employers who keep on their employees, amounting to $1,500 per employee per fortnight.
- Eligible employers may include businesses structured through companies, partnerships, trusts and sole traders and not-for-profit entities. Self-employed individuals are also eligible.
- To be eligible, employers must show a reduction in turnover for at least one month of at least 30% (if annual turnover is less than $1b) or 50% (if annual turnover $1b or more). We are exploring with Government the possibility of alternative tests to account for businesses that are severely affected by COVID-19, but may not have suffered the required reduction in revenue.
- Every eligible employee must receive at least $1,500 per fortnight (before tax) from the employer, even if their ordinary salary or wage is less than this amount.
- The JobKeeper payment will be available for employees employed on 1 March and who remain employed. This can include employees who have been stood down, are on unpaid leave or working reduced hours, or re-hired employees who were let go after 1 March.
- The JobKeeper payment commences from 30 March 2020, with the first payment expected to be made to employers in the first week of May. Eligible employers are able to start making the payment now if they wish.
What you need to do
Employers can register their interest with the ATO now and should consider their potential eligibility for the JobKeeper payment and consider how the availability of wage subsidies may inform their strategy for managing their workforce.
We are working with our clients to consider various strategies, including:
- how to manage current and proposed stand down arrangements in a manner that facilitates access to the JobKeeper payment;
- options for re-hiring employees retrenched (or otherwise let go) since 1 March 2020;
- other measures for maintaining engagement of employees while a business is placed into "hibernation".
1. Government announcement
Yesterday, the Government announced a new "JobKeeper" payment to support employers in continuing to employ employees during the Covid-19 crisis. The JobKeeper payment is a wage subsidy paid to employers in respect of each continuing employee (even if the employee is stood down, on unpaid leave or working reduced hours) in the amount of $1,500 per employee per fortnight.
The payment (which is around 70 per cent of the median wage, and 100 per cent of the median wage in heavily hit sectors such as retail and hospitality) is intended to keep employers and employees connected during the current crisis caused by the Covid-19 pandemic so that they are ready to recommence business when it is possible to do so, as well as providing income to employees who might otherwise be reliant on Centrelink benefits and providing additional economic stimulus.
2. Eligibility and operation of the payment
In order to be eligible for the JobKeeper payment, in respect of an employee:
2.1 The employer must self-assess a reduction in turnover over a minimum one month period compared to a comparable period a year ago (of at least a month) of:
- 30%, if the employer's turnover is less than $1 billion annually; or
- 50%, if the employer's turnover is $1 billion or more annually.
2.2 The employee must have been employed on 1 March and must be currently employed (it can include employees who have been stood down, are on unpaid leave or working reduced hours, and also includes rehired employees who were let go after 1 March).
2.3 The employee must be full time, part time, or long term casual (having been a regular casual for longer than 12 months as at 1 March 2020).
2.4 The employee must be paid at least $1,500 per fortnight (before tax).
In considering the turnover requirement, most businesses will use the equivalent month or three month period (depending on the activity statement reporting period) in the preceding year to compare their current turnover with. There will be some tolerance for employers who estimate a greater than 30% or 50% reduction in turnover but actually experience a slightly smaller reduction.
The Commissioner of Taxation will also be given discretion to consider additional information provided by a business to establish that they have been significantly affected by the Covid-19 pandemic if the business is newly established or the turnover a year earlier is not representative of its usual turnover. For example, this might cover scenarios where there was a large interim acquisition or where turnover is highly variable. The Commissioner will also have the ability to set out alternative tests to establish eligibility in specific circumstances, for example if a business has ceased operations.
Employees of a business that is subject to the Major Bank Levy are not eligible. The employee must also be at least 16 years of age, be an Australian citizen or meet certain visa requirements.
The JobKeeper payment will be paid to eligible employers monthly in arrears. The wage subsidy will apply from 30 March 2020, with the first payment due in the first week in May. However, eligible employers are able to start making the payment now if they wish.
This measure is intended to apply for six months commencing on 30 March 2020.
3. How does the JobKeeper payment apply in different employment scenarios?
If an employee continues to be actively employed by the employer on a salary or wage of more than $1,500 per fortnight, the JobKeeper payment acts as a subsidy and the employee should still be paid their normal salary or wage, with superannuation contributions paid on the full amount.
If an employee continues to be actively employed by the employer on a salary or wage of less than $1,500 per fortnight, the employee must receive at least $1,500 per fortnight (before tax), but the employer is only required to make superannuation contributions in respect of their ordinary salary or wage (but could choose to make superannuation contributions on the higher amount if they wish).
If an employee has been stood down, or is on unpaid leave, they must receive at least $1,500 per fortnight (before tax). The employer is not required to make superannuation contributions in respect of this amount.
If an employee has more than one job, the JobKeeper payment is only available in respect of their main job.
4. How to apply
Employers can register their interest in receiving updates about the JobKeeper payment now via the following link: https://www.ato.gov.au/Job-keeper-payment/
This initial registration only requires basic details such as the business name, ABN, contact name, email address and mobile phone number. There is no assessment of eligibility at this stage.
Subsequently, eligible employers will complete an online application form and will need to provide monthly updates to the ATO if eligible.
5. Legislation not yet released
As the Government has not yet released the legislation to implement the JobKeeper payment, there are a number of details in relation to how it will work which are not yet known. In particular:
5.1 How will a reduction in turnover be determined?
5.2 In what circumstances will the Commissioner of Taxation exercise the discretion (refer above) to treat the turnover test as being satisfied (including what relevant additional information needs to be provided in support of the exercise of the discretion)?
- Will turnover be calculated on an associate inclusive basis?
- Will turnover be based on Australian or global operations (and relevant allocation principles for multi-nationals)?
5.3 What dates will be used for determining annual turnover?
5.4 What evidence will employers need to retain or provide of the reduction in turnover?
5.5 Will the JobKeeper payment be included in determining payroll tax and worker's compensation liabilities?
We are seeking to obtain further information on these issues from the Government.
Next steps
Employers should consider whether they might be eligible for the JobKeeper payment and register their interest with the ATO as outlined above.
We recommend that employers consider the timing of commencing paying the JobKeeper payment in their own particular financial circumstances.
The JobKeeper payment is the latest initiative announced by the Government to stimulate the economy and preserve jobs and personal income during the Covid-19 crisis. Links to our other Tax Bulletins summarising the initiatives announced to date are available at the following links:
