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The latest announcement revealed that, commencing 30 March 2020, the government will underwrite/reimburse businesses $1,500 each fortnight per employee the business retains through the period. Businesses will be eligible if their turnover has or will be reduced by 30 per cent or more relative to a comparable period (of at least one month) a year ago.
The JobKeeper payments will be welcomed by the middle market, supporting the decision that many employers have already made to retain their people while the situation abates so businesses can recommence without the need to rehire their workforce. For employers for which it was not commercially responsible to retain employees, there is now an opportunity to reassess those decisions and re-engage with those stood down or rehire those made redundant since 1 March.
For businesses that have, or are facing, stand down of employees, the program provides a mechanism to retain connection with employees. There is no need for an immediate return to work for the impacted employees. Simply re-engage with those stood down, advise them that as an employer you wish to support them through the JobKeeper program and ensure the payments ($1500/fortnight) are made to them (provided the person was engaged as an employee as at 1 March 2020).
Pleasingly, the program also supports the many self-employed traders bearing the impact of lost commercial activity, with sole traders being able to register for the program.
Summary of support
The program will reimburse eligible businesses for $1,500 (gross) per fortnight for each employee. There is no uplift for employees earning more than $1,500 per fortnight, and no reduction for employees earning less than the threshold amount. The program allows for those employees previously earning less than the threshold to be provided a pay increase up to the threshold amount and then the employer can access the subsidy for that individual as well. The guidance states there should be no obligation on the employer to pay superannuation on the uplift in the latter case.
It is critical that businesses are aware of the short-term cash flow burden that the program will create. The reimbursements are in arrears and accordingly will only begin to be made by the government from 1 May 2020. Consequently, each business will need to fund a month of the payments to employees before there is an offsetting inflow from the program. The cash flow impact should be considered carefully and included within the weekly cashflow forecasts that most middle market businesses have developed and are scrutinising regularly. For some businesses this funding gap may not be viable.
Further, there are integrity measures that businesses should watch for when applying for the program. A key challenge is ensuring that the employees registered under the scheme are not linked to more than one business – a commonality in many sectors with a casual work force. While the ATO will support the assessment of employees through data collected through single touch payroll, there is a risk of multiple claims for an employee with numerous jobs, and it is unclear which employer may carry the subsequent ATO recovery risk.
The government has stated that the program may operate for up to six months, further reinforcing the horizon that business should be considering when planning how to navigate these uncertain times.
For employers: assessing eligibility
Employers are eligible if:
a) their business has a turnover of less than $1 billion and their turnover will be reduced by more than 30 per cent relative to a comparable period a year ago (of at least a month); or
b) their business has a turnover of $1 billion or more and their turnover will be reduced by more than 50 per cent relative to a comparable period a year ago (of at least a month); and
c) the business is not subject to the Major Bank Levy.
The employers (including not-for-profit entities) must have been in an employment relationship with eligible employees as at 1 March 2020 and confirm that each eligible employee is currently engaged in order to receive JobKeeper payments.
Self-employed individuals (businesses without employees) that meet the turnover tests that apply for businesses are eligible to apply for JobKeeper payments. They will need to provide an ABN, nominate an individual to receive the payment, provide that individual’s Tax File Number and provide a declaration as to recent business activity.
For employees: assessing eligibility
Eligible employees are those who:
a) are currently employed by the eligible employer (including those stood down or re-hired);
b) were employed (an existing employee) by the employer at 1 March 2020;
c) are full-time, part-time, or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020);
d) are at least 16 years of age;
e) are an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder; and
f) are not in receipt of a JobKeeper payment from another employer
How to register
The program will be managed through the Australian Tax Office, and initial registrations can be made here. Further data collection will be sought after registration to progress the application and prior to the first payment to the business.
a) The program is not yet legislated. It is the government’s intention to recall Parliament to legislate the program. Accordingly, the progress and form of the confirming legislation should be monitored.
b) Further guidance on the measurement of the prerequisite turnover decline is expected.
c) The $1,500 per fortnight remuneration threshold is the gross payment (before tax) due to the employee, it does not include superannuation.
d) Government has stated superannuation is not required to be paid on the pay increment made by an employer for employees requiring a remuneration uplift to qualify for the program. However, it is not yet clear how other on-costs (such as payroll tax and work cover) will apply.
e) Employees must be advised they are in receipt of the JobKeeper payment by the employer.
For more about the JobKeeper initiative, click here.
Contact Pitcher Partners for more information, or to discuss how the JobKeeper program applies to you.