The Federal Government yesterday passed the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 to enable the JobKeeper wage subsidy to be paid to eligible businesses. It also made amendments to the Fair Work Act 2009 to allow more flexibility to businesses who are eligible for the JobKeeper scheme to change their worker employment arrangements without the need to necessarily reach agreement with employees.
These will be welcome changes for businesses who have found it difficult to reduce their overheads and payroll while experiencing a downturn in business due to COVID-19.
There are two main aspects to the changes:
- JobKeeper wage subsidy of $1500 for eligible employees
- JobKeeper flexibility provisions – which provides increased flexibility for businesses to vary employment arrangements for workers
In this article, we discuss the JobKeeper Wage Subsidy.
JobKeeper Wage Subsidy.
The JobKeeper wage subsidy is a $1500 fortnightly payment to eligible businesses to help subsidise employee wages. To be eligible, the employer must show that their business has experienced a reduction in business as a result of COVID-19. For businesses with a turnover of less than $1b, there must be a proven revenue reduction of 30% to access the subsidy (or 50% for businesses with a turnover of $1bn or more). Other criteria can be used, at the discretion of the Commissioner of Taxation.
The subsidy will in effect be a reimbursement of $1500 towards the fortnightly wage of any eligible employees who earns over $1500 (gross). So basically, the employer continues to pay their employee’s ordinary wage and the business keeps the $1500 JobKeeper payment as a wage subsidy. For employees who ordinarily earn less than $1500 (eg part timers), the business can still apply for the subsidy and this will cover 100% of their wages. However, they must then pass on to the employee the difference between the wage subsidy of $1500 and what they were actually paid in the fortnight. For example, if an employee earns $1200 gross per fortnight, the business can keep $1200 as a wage subsidy and then needs to pay a ‘JobKeeper payment’ to the employee of $300 (ie the difference).
Treasury have indicated that businesses are eligible to apply for JobKeeper payments for any employees of the business, provided the employee:
- was employed by the business on 1 March 2020;
- is currently employed by an eligible employer (this includes employees who were stood down as at 1 March 2020, or have since been stood down);
- was 16 years or older at 1 March 2020;
- was an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder, as at 1 March 2020;
- was a resident for Australian tax purposes on 1 March 2020; and
- has not received a JobKeeper payment from another employer
- if casual, has been engaged on a systematic and regular basis by the employer for at least 12 months, as at 1 March 2020.
Treasury have also indicated that self employed people will be eligible if they also have a 30% reduction in turnover. For partnerships, the same rules apply but the wage subsidy will only be payable to one member of each partnership.
The Job Keeper wage subsidy will be available from 30 March 2020 for a period of six months – until the end of September 2020. If you become eligible in future, the JobKeeper wage subsidy will only be available from the date of eligibility and will still cease in September 2020. For example, if you do not become eligible until 1 June 2020, you can only claim JobKeeper payments from this date and back pay to 30 March 2020 (or another date) will not be paid.
Employers are able to register with the Australian Taxation Office. Currently, employers can register their interest at the ATO Job Keeper webpage.
Eligibility will largely be based on the 30% reduction in turnover rule, however, there appears to be some discretion where this is not an accurate reflection of the business’ current financial position and the impact of COVID-19.
For this reason, even if you are not sure your turnover has reduced to the requisite 30% now, but you anticipate that it will, or you have strong evidence to show that your business is experiencing a significant downturn due to COVID-19, the advice from Treasury is that you should still apply.
The following information on JobKeeper is available from Treasury:
- Fact sheet: Frequently asked questions JobKeeper and Supporting businesses
- Information for employers: Fact sheet for Employers
- Information for employees: Fact sheet for Employees
The JobKeeper scheme will be introduced by a set of rules to be made by the Treasurer, which have not yet been released. It is these rules that will set out eligibility for the scheme and deal with its operation. We can hopefully expect further details on the JobKeeper payment scheme next week. The above information has therefore been based on the information currently available from Treasury and may change as the scheme is implemented.
If you need assistance in working through how JobKeeper applies to your business, or you need some advice about any employee issues you are currently managing, please give Kayla Fristensen a call on 03 5434 6666 or 5472 1588.