Legislation to introduce the Federal Government’s JobKeeper payment program was introduced and passed by the House of Representatives Wednesday 8 April 2020. Under the program, eligible employers will receive a subsidy of $1,500 for each eligible employee for up to six months. At the time of writing, the package is still being considered by the Senate.
The package of legislation to introduce the JobKeeper scheme was tabled in Parliament. The package contained four Bills as follows:
- the Coronavirus Economic Response Package (Payments and Benefits) Bill 2020
- the Coronavirus Economic Response Package Omnibus (Measures No 2) Bill 2020
- the Appropriation Bill (No 5) 2019-20 and
- the Appropriation Bill (No 6) 2019-20.
Copies of the bills can be accessed here.
The JobKeeper payment
The Coronavirus Economic Response Package (Payments and Benefits) Bill 2020 provides for the making of rules by the Treasurer by way of legislative instrument where the detail for the JobKeeper payment program will be set out. Setting out the detail of the program in rules rather than legislation allows for flexibility of the arrangements and to ensure the program can be “quickly introduced and revised to appropriately respond to the impacts of the Coronavirus”. The comments in this bulletin are based on a draft version of the rules, which have not yet been finalised and are subject to change.
What are the eligibility criteria for employers?
As foreshadowed in fact sheets released by Treasury over the weekend, an entity would be eligible to participate in the program if, as at 1 March 2020:
a) the entity carried on business in Australia or was a non-profit body that pursued its objectives principally in Australia;
b) the entity’s turnover has reduced by a relevant percentage.
Certain entities are precluded from participating in the JobKeeper program. These include a company where a liquidator or provisional liquidator has been appointed and a sole trader where a trustee in bankruptcy has been appointed.
Reduction in turnover test – the “bright-line” test
To satisfy this test an entity must establish that turnover has declined by:
a) 15 per cent – where the entity is a registered charity (other than certain educational institutions);
b) 30 per cent – where the employer’s aggregated turnover is less than $1 billion; or
c) 50 per cent – where the employer’s aggregated turnover is at least $1 billion.
The relevant reduction in turnover may be established by comparing the entity’s projected GST turnover with the corresponding month or three-month period in the prior financial year. For example, by comparing projected GST turnover for April 2020 with actual GST turnover for April 2019.
Eligibility is to be assessed on an on-going basis with ongoing notification requirements to be made by employers.
Commissioner’s alternative tests
Alternatively, where there is no appropriate relevant comparison period for an entity (for example where the entity was not operating in the corresponding period in the prior year or was not GST registered), the Commissioner will have a discretion to allow recourse to alternative information to establish the relevant reduction in turnover for certain classes of entities.
For purposes of the “bright-line” test, GST turnover is the sum of the value of taxable and GST-free supplies (but not input taxed supplies) in the relevant period. By definition, taxable and GST-free supplies are limited to supplies connected with Australia. That is, the turnover of an employer’s overseas operations is not included.
To be eligible to receive the JobKeeper payment, an employer must pay an eligible employee a total of $1,500 (pre-tax) in each fortnight for which the employer is claiming the entitlement. This $1,500 can include amounts salary sacrificed into superannuation as well as amounts dealt with in any other way on behalf of the employee as a substitute for their salary and wages (e.g. other salary packaging arrangements such as certain fringe benefits). Payment will then be made to the employer monthly in arrears.
What are the eligibility criteria for employees?
An individual will be eligible to benefit from JobKeeper payments if, as at 1 March 2020, the individual was
a) at least 16 years old;
b) a resident of Australia for tax purposes;
c) either an Australian citizen, the holder of a permanent visa or Special Category (Subclass 444) visa; and
d) had a relevant employment relationship with an eligible employer.
To have a relevant employment relationship the individual must be a full-time or part-time employee or a long-term casual employee on 1 March 2020.
The Payments and Benefits Bill contains a number of provisions intended to ensure the integrity of the JobKeeper program.
The first addresses schemes entered into or carried out for the sole or dominant purpose of obtaining a JobKeeper payment or an increased amount thereof. The amount inappropriately obtained as a result of the scheme is repayable and the employer is liable to general interest charge calculated from the date of receipt of the JobKeeper payment.
In addition, where the overpayment occurred because the employer relied on a statement made by a third party that was false or misleading or due to the fraudulent activity of a third party, the employer and the third party are jointly and severally liable to pay the excess and a general interest charge.
The explanatory material accompanying the Bill also notes that there is an extensive existing framework of penalties in the Criminal Code and the Taxation Administration Act that can apply where false, misleading or reckless statements are made or arrangements or assistance is provided for the purpose of defrauding the Commonwealth.
Eligible employers will be required to create and retain for five years records substantiating information provided to the Commissioner in relation to their eligibility for and ongoing entitlement to JobKeeper payments. An entity that fails to comply with these rules will be denied eligibility for JobKeeper payments.
The Coronavirus Economic Response Package Omnibus (Measures No 2) Bill 2020 contains amendments to a number of acts and Commonwealth support programs. In particular, the Bill proposes amendments to the Fair Work Act to impose what is referred to as a wage condition on eligible employers and modify obligations under that Act to assist eligible employers to deal with the economic impact of COVID-19.
The wage condition requires each eligible employer to pass on the full amount of the JobKeeper payments received to eligible employees.
Other amendments to the Fair Work Act authorise an eligible employer to give an employee:
a) a JobKeeper enabling stand down direction to an employee (including to reduce hours of work);
b) a direction about the duties to be performed by the employee; and
c) a direction about the location of the employee’s work.
The amendments also authorise an eligible employer and employee to come to an agreement in relation to the days or times of work and taking paid (including at half pay) annual leave.
What are the next steps?
It is critical that clients understand their entitlements and obligations under the JobKeeper program. As noted above, further detailed information on the JobKeeper program can be found here. Clients wishing to better understand whether, and, if so, how the JobKeeper program applies to their particular circumstances should contact their Pitcher Partners representative.