On March 30 2020 the Australian government announced further measures to deal with the coronavirus shutdowns and social isolation requirements. These measures are primarily focused on helping businesses to retain their staff during slowdown and shutdown periods, instead of having to let those staff go.
The measures will help businesses who continue to operate at a lower capacity as well as those businesses who have had to temporarily shut down.
Eligible employers can make the claim for any eligible employee who they had on the books as of March 1 2020, as long as they continue to employ these staff members. They can also rehire workers that they have laid off since March 1 2020 and start paying them under the jobkeeper package. This is an alternative to those staff members going on unemployment benefits (jobseeker) and ensures the business is able to resume operations, with the same team of employees, when possible.
Please note that the legislation for this package has not been fully worked out yet. Some details may be unknown while the government works out some of the potential complexities involved in legislating this package. We will update the blog with relevant information when and as it becomes available.
Jobkeeper Package:
The jobseeker package is a payment that is being given to employers who have lost income due to the coronavirus.
This payment is essentially a subsidy to help them cover wages over the next six months.
It is a payment to the employer that is specifically made to reimburse the cost (or part of the cost) of employee wages. This means that if a business is already paying an eligible jobkeeper employee a wage of at least $1,500 a fortnight then there is no extra wages to be paid to that employee. However, if an eligible jobkeeper employee is currently being paid wages of less than $1,500 a fortnight, then the employer will need to increase that employee’s wages to $1,500 a fortnight for as long as they are receiving the jobkeeper payments for that employee.
This applies even if the business is paying employees not to work for the duration of a business shutdown required by the coronavirus safety measures. The measure is designed to keep people in their jobs and help boost the ability of a business to resume operations, with the same staff, once the coronavirus safety measures are lifted.
It is not a cash bonus. It is a wage subsidy being offered as an alternative to having to let staff go, whereby they would need to go on Jobseeker (welfare) payments to get by.
Note that individuals cannot be paid through the jobkeeper package and go on jobseeker at the same time. They also cannot be paid the jobkeeper wages by more than one employer- only their primary employer will be eligible to pay them through the jobkeeper provisions.
You can read the government’s fact sheet on the jobkeeper package for employers here.
What is the aim of this package:
The aim of the jobkeeper package is to help businesses who have experienced a significant loss of income. By subsidising wages, it gives them a chance to keep their employees on board during the coronavirus safety measures.
For some businesses it provides an option for keeping staff on board even while they are not able to operate. This is because it includes businesses who have, or will have to, shut their doors due to the coronavirus. It means they can pay staff, even in a more limited capacity, while they stay at home. It also opens the opportunity for businesses with no income during the shutdown period to pay their regular employees to do some work from home in preparation for resuming business down the track. Ultimately, the measures help keep businesses connected to their employees instead of having to let them go.
For employers who are still operating, but with reduced levels of income, this measure will help ensure they can continue to pay their staff as normal without as much strain on their finances.
This measure will mean that many employees who were otherwise at risk of losing their jobs or relying on jobseeker (formerly Newstart) income, can now be paid a minimum of the jobkeeper payments through their employer.
While these measures will not cover everyone, it is a significant package that will help improve job security for many workers. Businesses whose income has dropped, but are still operating, will be able to use these payments to help ensure that the cost of wages does not lead to needing to lay off more staff. Businesses that have had to close down for the meantime can use these payments to support and stay connected with their employees in preparation of resuming normal business operations.
In some cases, individual long-term casual employees or part-time staff may find themselves being paid more than their usual wage. Other employees may now be getting paid less than their usual wage (for example because they were stood down after March 1), but more than they would be receiving on jobseeker (formerly newstart) benefits.
Who is eligible:
Business eligibility:
To be eligible for jobkeeper payments a business must:
- Be an Australian business. This includes non-profit organisations and charities.
- Have employed eligible staff who were on the books as of March 1 2020. This includes staff who were on the books as of March 1 but have since been let go, provided the business rehires them and has not paid out redundancies and termination packages.
- If the business’ annual turnover is under 1 billion dollars, their income must have dropped, or be expected to drop, by at least 30% due to the coronavirus safety measures. This includes businesses that have had to close their doors at this time, provided they continue to employ their staff with the intention of continuing to operate when and as they are able to.
- If a business had an annual turnover in excess of 1 billion dollars then their turnover must have dropped by at least 50% to qualify for the jobkeeper package.
- Sole traders and individuals who are self-employed are also eligible to claim the jobkeeper payments if their business turnover has sufficiently reduced.
- Businesses must not be subject to the Major Bank Levy.
It is your responsibility to self-assess eligibility due to a reduction in turnover. Turnover is compared to your business turnover over a comparable period a year ago. The period being compared must be at least one month long.
Based on the requirement to compare turnover to a year ago it would appear that only businesses that have been in operation for at least a year would be eligible to apply. We await clarity on whether businesses who have been in operation for less than a year can still qualify for the jobkeeper package.
If you run a business on the side and this business is not your primary source of income, then you will not be eligible for the jobkeeper package. Only the primary source of income (employer or self-employed business) is eligible to apply for the jobkeeper payments for each individual.
If your primary source of income is your work as a sole trader and you supplement this income with a small amount of casual work that you have held long-term, then you may be able to apply as a sole trader. In this situation your casual employer will not be able to claim for you.
Staff eligibility:
To be eligible the staff member must have been on the books as of March 1 2020
The measures include employees who are:
- Australian citizens
- At least 16 years of age
- Holders of an Australian permanent resident visa
- Special Category (Subclass 444) Visa Holders
- Protected Special Category Visa Holders
- Non-protected Special Category Visa Holders who have resided in Australia for 10 years or more
Eligible staff include:
- Full Time employees
- Part time employees
- Casual employees who have been working for your business for at least 12 months.
You can only claim employees for whom you are their primary employer. This means if you have a long-term casual employee on the books, but this is their second job, you will not be able to claim the jobseeker payments for that employee. To reiterate, an individual employee cannot receive jobkeeper payments from more than one employer. This means only their primary employer is eligible to claim jobkeeper payments for employees who have more than 1 job.
Can I still claim if my business is less than 12 months old? Are there any other conditions under which I can still claim Jobkeeper for my employees if the comparative income period from 12 months ago has not dropped by 30% (or 50%)?
The short answer is yes.
The government has clarified that startup and high growth or variable businesses that have been negatively impacted by the coronavirus shutdowns and social isolation rules are still eligible to apply provided they have suffered a drop of income of at least 30% (or 50%) due to the coronavirus.
The Commissioner has the discretion to use other tests to confirm that income has dropped by at least 30% (or 50%) on a self-assessed basis.
This will be easy to demonstrate if your business is one that has had to close its doors due to the coronavirus and you are no longer bringing in an income. You can submit a claim for the jobkeeper program if you would like to continue to employ your staff or rehire any staff that you stood down after March 1 2020.
If you are still operating your business then you can submit your application for the jobkeeper program provided you reasonably believe that your business turnover has dropped, or will drop, by at least 30% (or 50%) due to the coronavirus. The exact measures that can be used are not specified. You will initially be required to self-assess and it is likely that you will be required to submit evidence as to how you have worked this out.
The government has confirmed that applications made in good faith that experience a downturn in income that does not quite hit the 30% (or 50%) decrease, will not be penalised. To be clear, you should only apply for jobkeeper if your business has experienced, or you believe it will experience, a substantial drop in turnover of at least 30% (or 50% if your business turnover exceeds one billion dollars a year), that is not related to normal seasonal fluctuations.
Keep in mind that this allowance is at the Commissioner’s discretion, which means the Commissioner has the authority to overturn self-assessments that are not considered to be justifiable and penalties may be applied if it was believed that a claim was not made in good faith. You should consult with your accountant and stay tuned for any further clarification if you are unclear whether or not your business turnover has suffered as a result of the coronavirus.
When you are receiving the jobkeeper subsidy you will also be required to report monthly to ensure ongoing eligibility.
The updated fact sheet can be found here.
Examples of ongoing business that has lost income due to the coronavirus but not comparable to 12 months ago:
Example 1:
Your turnover for the month of March last year was $30,000. This was a relatively normal monthly turnover at the time. In July you expanded your business operations after investing in a new product and opening a new storefront. Your business started to rapidly increase and you hired more staff to meet the needs of your business. By January you were now turning over $300,000 a month.
By the time March operations commenced you were already noticing a downturn in trade and government requirements actually meant you had to close down your storefronts. You are only keeping the business going through online sales, which have dropped to $50,000 a month.
Your turnover is higher than it was in March last year, but has very clearly dropped significantly from the usual turnover levels you had been experiencing as a result of high growth and increased business presence through the year.
This business would be eligible to claim the jobkeeper package for all their eligible employees that were on the books as of March 1 2020.
Example 2:
You opened a new boot camp business in November 2019. You were starting to pick up clients and by February 2020 you were running outdoor bootcamps for large groups. In March 2020 the government regulations meant that you could no longer operate bootcamps for large groups, however you could offer one on one sessions.
It is reasonable to believe that your income levels will be reduced by at least the 30% required, from March onwards, since you can no longer provide your service to large groups of people and you are halting any monthly memberships for people who cannot participate.
Self Employed/ Sole Traders:
If you are an eligible individual whose primary income comes from your own sole trader business, and your business meets the criteria of reduced turnover, then you can apply for the jobkeeper payments for yourself.
How do the payments work:
The government will pay your business a flat rate of $1,500 a fortnight per eligible employee. This is a flat payment per eligible employee, regardless of the amount of wages they are usually paid.
Any business who receives these payments must pass them on to their employees in full. If you normally pay your employees more than $1,500 then this payment simply subsidises part of their normal wages. If you normally pay an eligible employee less than $1,500, you are required to pay them the full $1,500 per fortnight while you are receiving jobkeeper payments for them.
Normal PAYGW provisions apply to the payments being made to your staff. However, if you are paying an employee $1,500 a fortnight and this exceeds their normal salary, you can choose whether or not you pay superannuation on the additional payments being made so far, as they relate to a compulsory jobkeeper top up rather than a payment for hours worked.
Note that the jobkeeper payments are higher than the jobseeker payments. This gives incentive for workers to remain with their employers instead of moving on to welfare payments. The jobkeeper payments are not linked to any income or assets tests in relation to the individual employees. This means that many individuals who may not qualify for jobseeker payments due to, for example, their partner’s income, will now be able to continue to receive an income directly from their employer instead.
When will the payments be made:
Payments will start being rolled out from the first week of May. However, they will be backdated to March 30. Payments will continue to be made monthly in arrears. This means that to be eligible your business must be paying employees through the month, after which time you will be reimbursed $1,500 per eligible employee.
If you are an eligible business, you should start paying your eligible staff the required wages and you will be reimbursed. This means if your staff are being paid more than $1,500 a fortnight, simply continue to pay them as normal. If you need to rehire or increase an eligible employee’s wages to the jobkeeper rates, then you should do so as soon as practical.
You are able to claim jobkeeper payments for staff members who were on the books at March 1 2020 but have since been stood down. This means that you can reconsider your situation to determine if you can bring them back as employees under the jobkeeper package. To do so you will need to rehire them and be their primary employer. They will not be able to claim jobseeker payments and will have to amend their claim if they have already made one with Centrelink.
The government has indicated that the jobkeeper package will continue for a maximum of six months at this stage.
Are the jobkeeper payments taxable income?
Businesses who receive the jobkeeper payments will not be required to remit GST on the income. We cannot find a definitive statement about whether the income needs to be included in the annual income for income tax purposes, however since the payments are paid straight out as a wage expense, it seems likely that that it would count as both income and an expense for a net NIL effect on income taxes.
In the hands of the employee the jobkeeper payments are treated essentially as ordinary wages. The income comes in through the normal payroll system, is subject to normal PAYGW provisions and will be included on the annual PAYGW Summary.
How does my business register for jobkeeper payments:
It is up to the business (rather than the employees) to apply for jobkeeper payments. This is because the jobkeeper payments are given to the business to pass on to employees as wages.
Eligible employers should initially register their interest in applying for the jobkeeper package with the ATO. You can use this link to register.
Can I still get jobseeker (welfare) benefits if my employer enrols me through jobkeeper?
No. Individuals who are being paid by their employer through the jobkeeper measures will not be eligible for jobseeker (formerly Newstart) welfare benefits paid through Centrelink. This basically means that if your employer is able to keep you on the books through the jobkeeper package that this is where your income will come from. Since the jobkeeper payments are higher than jobseeker payments, it would be advantageous to remain employed where possible.
If you are unable to remain in employment then you would seek the jobseeker benefits through Centrelink instead. With the government temporarily lifting the income limits of a partner to $79,762 per annum, more people will now be eligible for jobseeker payments.
My Requirements as an Employer paying staff through Jobseeker
It is your responsibility to:
- Assess if your business is eligible for jobkeeper payments due to a decrease in turnover or an expected decrease in turnover.
- Register your interest for these payments with the ATO.
- Ensure that eligible employees are notified that you will be paying them utilising the jobkeeper package.
- Ensure that every eligible employee for whom you are receiving the jobseeker benefits is being paid wages of a minimum of $1,500 per fortnight (before tax). This means that if their wages are normally less than $1,500 a fortnight you will need to top up their payments to the jobkeeper amount.
- Continue to pay your staff through your normal payroll system and report through STP.
- Report to the ATO monthly on your eligibility to continue to receive the jobkeeper payments.
While normal PAYGW, superannuation and workers compensation requirements still apply, it is your decision as to whether or not you pay superannuation on any additional wage top ups that are paid out purely because of the jobkeeper payment.
Jobkeeper or Jobseeker
If you are an active sole trader, or a business who had employees on the books at March 1 2020 and you can continue to employ those employees, then the business can apply for jobkeeper subsidies through the ATO. You will only qualify if your income has dropped by at least 30% compared to the same period last year (or 50% if your annual turnover exceeded 1 billion dollars). Employees will then be paid a minimum of the $1,500 jobkeeper payments a fortnight, through their usual payroll system.
If you are a sole trader or a business who has to close down permanently or lay off staff, then the sole trader, or former employees, will individually need to apply for Jobseeker payments through Centrelink instead. The government has temporarily adjusted or removed certain waiting periods and testing limits to ensure that more people can qualify for assistance during this time.
If you are a casual or part time worker who is working for a business that is ineligible for the jobkeeper payments (because their turnover has not reduced enough or because you are a new casual employee) then you can also apply for the jobseeker benefits. If your income is below $1,075 a fortnight then, you may be entitled to a partial payment, as well as the government stimulus package bonuses.
