JobKeeper payment explained - March 2020

On 30 March 2020 the Government announced the JobKeeper payment as part of the next stage of the stimulus package.

Note: At the time of the announcement, legislation had not been drafted. Therefore, we expect more detail to become available on this support measure when legislation is introduced to Parliament to give effect to this measure. We will provide more information to you once the Bill is available. The Government has indicated that it is working with the Opposition to recall Parliament to facilitate the introduction of legislation to support this measure at which time further details will be available. The Government’s fact sheet is available with the current information.

What is JobKeeper?

The JobKeeper payment is intended to provide wage subsidies to businesses that are significantly affected by COVID-19 so that they can continue to employ and pay their staff.

The JobKeeper payments will be a flat rate of $1,500 (gross) per fortnight per eligible employee, paid to the employer to pass on to their staff. This amount is equivalent to around 70% of the Australian median wage. In the accommodation, hospitality and retail industries, it is equivalent to the full median wage.

This assistance will help businesses to keep people in their jobs and re-start when the crisis is over. For employees, this means they can keep their job and earn an income – even if their hours have been cut.

Eligible employers will start receiving payments from the beginning of May and payments will be backdated to 30 March 2020. The payments will be available for a maximum of six months and there is no cap on the number of employees who can receive the payment at a business level.

What if the employee’s income was or is ordinarily less than $1,500 per fortnight?

The full amount of JobKeeper payments must be paid to eligible employees.

This means that if the person’s ordinary gross fortnightly earnings are less than this amount, they will start to receive increased fortnightly payments from their employer. Alternatively, where an employee’s ordinary gross fortnightly income was more than $1,500, the employer can provide a top up.

For example, if the employee earns $1,000 per fortnight and the employer receives the JobKeeper payment, the employee should receive their usual salary of $1,000 plus an additional $500. However, if an employee was earning more than the JobKeeper payment, this amount assists in meeting part of the employee’s salary, as this payment is aimed at subsidising the employee’s salary.

Who is an eligible employee?

The payment will be available for each employee who was on the books as at 1 March 2020 and who is retained or continues to be employed. This includes those who have been stood down after 1 March and have subsequently been rehired, but not those who have been made redundant.

Other eligibility criteria:

Age: at least 16 years of age
Residency status: an Australian citizen, holder of permanent visa; holder of a Protected Special Category Visa, a nonprotected Special Category Visa Holder who has been residing continuously in Australia for 10 years or more, or a Subclass 444 Visa Holder (the Government has indicated other groups may be included); •
Employment terms: Available to full-time and part-time workers, as well as casuals who had been employed on a regular basis for at least 12 months;
Other: Not in receipt of JobKeeper from another employer.

Who is an eligible employer?

An employer is eligible if the business has turnover of:

less than $1 billion which has reduced by more than 30% compared to a comparable period a year ago (of at least a month); or
$1 billion or more and turnover has reduced by more than 50% compared to a comparable period a year ago (of at least a month);
However, the business cannot subject to the Major Bank Levy (i.e. excludes banks).

Eligible employers include not-for-profit and self-employed individuals (businesses without employees) that meet the turnover tests are eligible to apply.

In relation to self-employed individuals, no details have been provided relating to the structure of the business (e.g. sole trader, company or trust).

How does an eligible employer apply?

Eligible employers, including self-employed individuals, can register their interest in applying for the JobKeeper payment via the ATO website.

It has not been confirmed when formal applications will be available. Employers with employees will be able to apply online and identify eligible employees.

On a monthly basis updates will need to be provided to the ATO but the details of these updated is not yet known.

The employer will receive the payment and be responsible for ensuring eligible employees receive the JobKeeper payment of $1,500 per fortnight (before tax).

How will the payments be made?

Payments will be made to businesses by the ATO, monthly in arrears.

The first payments will be received by businesses in the first week of May.

What does a business without employees (e.g. sole trader) need to do?

Employers without employees will need to provide the business’ ABN, provide a declaration on recent business activity, nominate who will receive the payment and that person’s tax file number.

Payments will be directed to that person’s bank account.

On a monthly basis, the employer will need to make a statement to the ATO that they are still eligible to receive the payment.

Owner-managed and family businesses

Some business owners and family members of closely held businesses receive income in the form of dividends or distributions rather than a salary or wages. Businesses that are operating under an owner managed partnership, trust or company structure are also now eligible to apply for JobKeeper payments as follows:

Partnerships

Only one partner can be nominated to receive a JobKeeper payment along with any eligible employees, noting a partner cannot be an employee.

Trusts

Trusts can receive JobKeeper payments for any eligible employees.

Where beneficiaries of a trust only receive distributions, rather than being paid salary and wages for work done, one individual beneficiary (that is, not a corporate beneficiary) can be nominated to receive the JobKeeper Payment.

Companies

An eligible business can nominate one director to receive the payment, as well as any eligible employees. Only one person in a director capacity may receive the payment and that individual may not receive the payment as an employee.

An eligible business that pays shareholders that provide labour in the form of dividends will be able to nominate one shareholder to receive the JobKeeper Payment.

Is super guarantee payable on JobKeeper payments?

Super guarantee is not payable on JobKeeper payments.

This means if an employee is receiving more than their usual salary because of the JobKeeper payment, SG will only be payable on the employee’s ordinary salary amount.

On the other hand, where the employee’s salary is only partially subsidised by the JobKeeper payment, the employer is still liable to pay superannuation guarantee on the full salary.

It has not yet been determined how this will apply to eligible casual workers whose fortnightly hours were subject to fluctuation.

How is the payment treated for social security and tax purposes?

JobKeeper payment is treated as income for social security purposes and may impact eligibility for income support. It is expected that this payment is taxable income of the employee, however, this has not been clarified.

Can an employee be receiving both JobKeeper and the JobSeeker Payment from Centrelink?

Because the JobKeeper payment is assessable for social security purposes, individuals who start to receive JobKeeper will need to report any change in their income to Services Australia (formally Department of Human Services).

The current income test cut off point for JobSeeker payment is $1,086.50 pf for a single person with no dependants. This means that a single person receiving JobKeeper is effectively ineligible for JobSeeker payment due to the income test.

For more information on the income test cut off points for JobSeeker, see the Services Australia website, or speak to a member of our advisory team.

Disclaimer: TWD Australia believes that the information contained in this report has been obtained from sources that are accurate at the time of issue, but it has not independently checked or verified that information and as such does not warrant its accuracy or reliability. TWD Australia accepts no liability or responsibility for any direct or indirect loss or damage caused by any error in, or omission from, this report. You should make and rely on your own independent inquiries via ato.gov.au

JobKeeper payment explained – March 2020