This information is based on legislation passed on 8th April 2020 coupled with rules published by the Treasurer. Always make sure you access the most recent information and get in touch if you’re in doubt.
Let’s break this down into pieces:
What is the intention of the legislation?
The legislation aims to provide roughly 6.5 million workers (‘Eligible Employees’) with a minimum of $1,500 per fortnight to address financial challenges arising from the COVID-19 pandemic.
Over what period does the plan apply?
The plan is operating now and applies through the end of September 2020, at this stage.
Who is an Eligible Employer?
An Employer is eligible if:
- GST turnover for a turnover test period of at least one month is less than the entity’s GST turnover for the corresponding period in 2019 by:
- 30% OR
- 50% – if the entity’s aggregated turnover for the previous income year exceeded $1 billion (or is likely to exceed $1 billion in the current year) OR
- 15% – for certain charities.
Note, GST turnover is as defined for GST purposes.
The turnover test period refers to a month falling between March and September 2020 OR a quarter that starts on April 1st OR July 1st, 2020.
Aggregated turnover is as defined for income tax purposes and includes the ordinary income of connected entities and affiliates (both Australian and foreign).
An Eligible Employer must conduct business in Australia as of 1 March 2020.
A sole trader, partnership, company or trust with one or more individuals actively engaged in the entity’s business (but not as an Employee) may be eligible.
Certain entities are ineligible such as a company where a liquidator is appointed, an individual where a trustee in bankruptcy has been appointed, Major Bank Levy payers, a sovereign entity, a government body or agency, and their wholly-owned subsidiaries.
Who is an Eligible Employee?
To be eligible, an Employee:
- Must be employed by the Employer in a designated fortnight AND
- As of 1st March 2020:
- Is at least 16 years old
- Is an Australian resident or a subclass 444 visa holder
- Is employed full-time or part-time
- Is employed casually PROVIDED THAT they have been with the same Employer (or an entity in the same wholly-owned group) for at least 12 months on a regular basis)
- Must provide the Employer with the required notice.
An Employee will NOT be eligible if they receive parental leave pay, Dad and partner pay, or other workers’ compensation payments in a period overlapping with the fortnight.
Note, only one Employer is entitled to payment under the plan for the same Employee.
What is the process under the JobKeeper plan?
The main steps include:
- Employers register interest in the JobKeeper payment on the ATO website and receive updates.
- Employers who want to participate from the commencement of the plan (30 March 2020), notify the Commissioner of intention to participate (in the approved form) by 26 April 2020. Or notify before the end of the first JobKeeper fortnight for which it wants to participate.
- Employers obtain a notification from each Employee, confirming the Employee’s consent to inclusion in the JobKeeper application.
- Employers provide details of Eligible Employees for each fortnight in the approved form. The ATO will use Single Touch Payroll data to assist in this process.
- Employers notify Eligible Employees within 7 days of each fortnightly claim.
- Employers report monthly to the Commissioner by the 7th of each month on its GST turnover for the previous month and its projected GST turnover for the coming month.
When do Employers receive JobKeeper payments?
Employers will receive payments from the Commissioner on or before the later of:
- 14 days after the end of the calendar month in which the fortnight ends OR
- 14 days after the Commissioner is satisfied that the Employer is eligible.
What are the obligations of the Employer?
The Employer must pay to Eligible Employees at least $1,500 (pre-tax) for each JobKeeper fortnight for which it makes a claim. The amount will be adjusted accordingly where an Employer pays monthly.
The first JobKeeper fortnight ends on 12 April 2020, and this would be the first payment due date for some Employers.
How are payments to Employees taxed?
Any payment under the JobKeeper plan is deemed taxable income and the Employer must withhold PAYG income tax. For the amount by which JobKeeper payments exceed the Employee’s actual wages, Superannuation contributions are not required.
What should Employers be doing now?
Employers should put systems in place for April so that the Eligible Employees can receive (in April) payments backdated to 30th March. In that case, Employers can receive the subsidy from the Federal Government in early May. This will be repeated for subsequent months.
How is the Fair Work Act affected?
There are changes to the Fair Work Act so that Employers can manage their workforce more flexibly over the next six months. Employers will be able to unilaterally change the working arrangements of Eligible Employees so that they will be able to stay on the books and qualify for JobKeeper, instead of being retrenched.
Important points include:
- The changes apply to Employers and Employees who have accessed the JobKeeper wage subsidy and override any Employee contract or enterprise agreement.
- Employers must meet a ‘minimum payment guarantee’ meaning that the Employer must pay the Employee’s existing pay for their normal job, or $1,500 (gross) per fortnight, whichever is the greater.
- An Employer can provide ‘JobKeeper enabling directions’ provided that:
- they are reasonable,
- the Employer reasonably believes that it is necessary to ensure continuing employment and that
- the Employer both consults and provides at least 3 days’ written notice of the direction.
- An Employer can provide ‘JobKeeper enabling stand-downs’ whereby an Eligible Employee:
- will not work on days on which the Employee would usually work;
- will work fewer hours on days that the Employee would usually work, or
- will work overall a reduced number of hours (including not work at all).
- Prerequisites include that the Eligible Employee cannot be usefully employed for their normal days or hours of work because of changes attributable to the COVID-19 pandemic AND during a JobKeeper enabling stand-down period, the Eligible Employer must meet an ‘hourly rate of pay guarantee’ by paying at least the same hourly rate that the Eligible Employee would have received, on a pro-rata basis.
- An Employer may issue ‘Non-stand down JobKeeper directions’ including:
- directions to perform duties within the Eligible Employee’s skill and competency, and
- direction to perform duties at a different location (including the Employee’s home).
- Some specific requirements apply to ensure these are safe and reasonable. An ‘hourly rate of pay guarantee’ also applies to directions to perform different duties.
- An Employer has the right to request certain changes including concerning days or times of work and taking annual leave provided that they are safe and reasonable and that an Eligible Employee requested to take annual leave must retain a balance of at least 2 weeks.
- An Eligible Employee (subject to a JobKeeper enabling stand down direction), can make certain requests such as a request secondary employment, or request to receive additional training or professional development and the Employer will not unreasonably refuse such requests.
- The Fair Work Commissioner will have arbitration powers regarding any disputes over a JobKeeper direction
- The period that a JobKeeper direction is in place will count as service and leave under the Fair Work Act and will accrue during this period
On what subjects does the ATO have discretion?
The ATO can exercise its discretion on subjects such as:
- Measuring the decline in turnover, where there is no appropriate comparison period in which case an alternative test may be applied.
- Timing of payments, where payment may be treated as having occurred in a previous fortnight, where this is reasonable.
- Non-employee workers, where a worker who is not an Employee (e.g. a sole trader), may be deemed to have held an ABN by 12 March 2020
- Transitional discretion to pay the subsidy for the first 2 fortnights, if this is reasonable in the circumstances, even if he is not yet satisfied the entity is eligible.
- Retention of overpayments, where an Employer is not required to repay an overpayment of JobKeeper already received.
- Integrity measures, where payments have occurred under a contrived scheme a new entitlement can be determined (including a nil amount).
What remains unclear under the plan?
Some factors which need clarification include:
- How to accurately demonstrate the impact of COVID-19 by comparing the current state with that in the equivalent month or tax period a year ago.
- How to apply the turnover tests to corporate groups. Should turnover assessments be made on an individual or corporate group basis?
- How will the Commissioner of Taxation exercise discretion where businesses allege that the comparison to a month or tax period a year ago is not a true measure of the turnover reduction caused by COVID-19?
- States and Territories are generally yet to finalise their positions on the extent to which JobKeeper is taken into account for payroll tax and workers’ compensation insurance purposes.