JobKeeper Payment – how will it work?
On 8th April 2020 Parliament passed a package of bills to implement the JobKeeper payments’ wage subsidy scheme.
Employers will receive a $1,500 per fortnight ‘job keeper payment’ before tax for each employee they keep on over the next six months
It will be available to full and part time workers, sole traders and long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020).
Employers can only claim $1,500 JobKeeper payment for eligible employees if they pay the $1,500 per fortnight (before tax) to each eligible employee, even if their regular wage per fortnight is less than $1,500.
Although there has been legislation passed, there are still many questions as the legislation offers much discretion to the Australian Taxation Office (ATO), details of which are not available as yet. Unfortunately for employers the scheme will be complicated, require up front funding of the payments to the employees before getting reimbursed later on and carry risks of having to repay the ATO if it turns out you were not eligible.
Employers with turnover less than $1billion are eligibile if their estimated ‘GST turnover’ has fallen or will likely fall by 30 per cent or more.
The employer must pay the employees at least $1,500 during each fortnight (or month if this is the regular payment cycle).
The legislation contains appropriate integrity rules to prevent employers from entering into contrived schemes in order to get inappropriate access to payments. If employers enter into or carry out a scheme for the sole or dominant purpose of obtaining a JobKeeper payment, the ATO may make a determination that they are no longer entitled to it. The scheme includes deliberate alterations to business arrangements to reduce turnover in order to allow an entity to meet the turnover requirements to receive the payment.
The decline in turnover test is based on projected GST turnover with a relevant comparative period e.g. projected turnover for April 2020 compared with April 2019 (monthly) or projected turnover for quarter 4 for 2020 compared with quarter in 2019 (quarterly). The Commissioner of Taxation has the discretion to uses alternative test to determine the reduction in turnover, however these rules have not yet been announced.
If a business does not meet the turnover test at the start of the JobKeeper scheme on 30 March 2020, the business can start receiving the JobKeeper payment at a later time once the turnover test has been met. In this case, the JobKeeper payment is not backdated to the commencement of the scheme, however businesses can only receive JobKeeper payments up to 27 September 2020.
Employers will only be able to claim the JobKeeper payment for eligible employees that were in their employment on 1 March 2020, and continue to be employed while they are claiming the JobKeeper payment.
An eligible employee is an employee who:
- is currently employed by the eligible employer (including those stood down or re-hired);
- is a full-time or part-time employee, or a casual employed on a regular and systematic basis for longer than 12 months as at 1 March 2020;
- was aged 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 at 1 March 2020;
- was a resident for Australian tax purposes on 1 March 2020; and
- is not in receipt of a JobKeeper payment from another employer.
Eligible employees include:
- employees who are retained,
- employees stood down without pay after 1 March 2020 but remain employed, and
- employees let go after 1 March 2020 and re-hired will all be eligible.
Employers that receive payments on behalf of employees that resign must notify and in some instances repay the ATO.
The JobKeeper payment is not income-tested, so employees may earn additional income without their payments being affected provided they maintain their employment (including being stood down) with their JobKeeper-eligible employer. However, they can only receive the JobKeeper payment from one employer, their primary employer.
Eligible small businesses that receive the JobKeeper payment will not be eligible for the 50 per cent wage subsidy for apprentices and trainees currently being made available as part of the Government’s COVID-19 relief from 1 April 2020 onwards.
JobKeeper payments should be made using an employer’s payroll system and reported to the ATO via Single Touch Payroll. This will support the online claim process when it is available. If employers do not report through Single Touch Payroll, they can still claim the JobKeeper payment; however there will be a manual claim process. They will be required to advise their employees whether you have nominated them as an eligible employee for the purposes of the payment.
The JobKeeper payment is a reimbursement scheme that will be paid by the ATO monthly in arrears. Employers will need to satisfy payment requirements for their eligible employees in respect of each 14 day period covered by the scheme. The first period starts on Monday 30 March 2020 and ends on Sunday 12 April 2020. The final period will start on Monday 14 September 2020 and end on Sunday 27 September 2020.
The payment requirement is that they pay their eligible employees a minimum of $1,500 per fortnight in the scheme payment periods. Where an employer pays their staff monthly, the ATO will be able to reallocate payments between periods. However, overall an employee must have received the equivalent of $1,500 per fortnight.
PAYG withholding and Superannuation
Employers must pay a minimum of $1,500 per fortnight to eligible employees, withholding income tax as appropriate. The $1,500 per fortnight per employee is a before tax amount. Where an employee is paid more than $1,500 per fortnight for hours that they are actually working, the employer’s superannuation obligations will not change.
No superannuation guarantee payments are required to be paid on any additional payment made because of the JobKeeper Payment. Where an employee is having their wages topped up to $1,500 per fortnight by the JobKeeper Payment, it will be up to the employer if they want to pay superannuation on any additional wages paid by the JobKeeper payment.
If you have any queries, please email: email@example.com.
This is a general summary only. For more information, please contact your Accountant.