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Covid 19- an overview of the JobKeeper wage subsidy scheme
Post by Damian Quail | Posted 3 months ago on Wednesday, April 29th, 2020

The core component of the Federal Government’s business support package in response to the Covid-19 pandemic is the JobKeeper scheme. This scheme is intended to help employers retain employees on their books, with the objective of ensuring money continues to circulate in the economy during these challenging times.

The JobKeeper legislation was passed by the Federal Parliament on 8 April 2020.  Rules dealing with administering the scheme were made by the Treasurer on 9 April 2020.

The JobKeeper payment is, in a nutshell, a AUD$1,500 per fortnight per employee wage subsidy paid by the Federal Government to employers until 27 September 2020. 

The estimated cost of this measure is AUD $130 billion. The Government has stated that $1,500 per fortnight is the equivalent of about 70% of the median Australian wage and represents about 100% of the median Australian wage in some of the most heavily affected sectors, such as retail, hospitality and tourism.

The scheme operates via a reimbursement system. Participating employers make wages payments to their employees and are then reimbursed in arrears $1,500 by the Government per eligible employee per fortnight. The Government does not pay employees direct. The JobKeeper payment cannot be claimed in advance. The first payments to eligible employers will commence in the first week of May 2020.The first payment is for the fortnight of 30 March - 12 April 2020 i.e. the scheme commences from that date.

Employers who wish to participate in the scheme must register their interest through the Australian Taxation Office website here by 31 May  2020.

Key Eligibility Requirements

  • The employer must be an "eligible employer"

The employer must pursue their objectives principally in Australia.

An employer is not eligible for the JobKeeper payment if any of the following apply:

  • the Major Bank Levy was imposed on the employer or a member of its consolidated group for any quarter before 1 March 2020
  • the entity is an Australian government agency (within the meaning of the Income Tax Assessment Act 1997)
  • the entity is a local governing body i.e. a local government council
  • the entity is wholly owned by an Australian government agency or local governing body
  • the entity is a sovereign entity
  • the entity is a company in liquidation
  • the entity is an individual who has entered bankruptcy.

The effect of the second and third exceptions listed above is that employees of State and local Governments are excluded from benefiting from the JobKeeper scheme.

The scheme is not limited to companies. Partnerships, trusts, not for profit organisations, sole traders and other legal entities are eligible to participate in the scheme. Special rules apply to payments to business owners and directors. 

  • Most employers will be eligible if their business turnover falls by 30% 

In order to be eligible for JobKeeper payments, the projected turnover of the employer's business must fall by 30% as compared to the same period last year. In order to register for the scheme, a business must self assess that it has had or will have the necessary decline in turnover.  

A 50% turnover decline is required for businesses with revenue of AUD$1 billion or more.

Charities need suffer only a 15% decline in order to be eligible.

    The turnover calculation is based on GST turnover, even if the employer is not registered for GST. The ATO has released detailed rules about calculations that must be made, and what documents and supporting evidence is needed.

    • Employees need to have been engaged by the employer as at 1 March 2020. This includes full-time and part-time employees. Casual employees are only eligible if they had been employed on a regular basis for at least 12 months prior to 1 March 2020.

    Eligible employees must be currently employed by the employer for the fortnights it claims for (including those employees who are stood down or re-hired). The subsidy cannot be claimed for employees who left employment before 1 March 2020.

    Employees are only eligible if they are older than 16 and were Australian residents on 1 March 2020.

    Many employers in the "gig economy" who are casual employees - including in hospitality, food services, retail and tourism - will be unable to benefit from the scheme if they are "recent hires" i.e. have been employed as casuals for less than 12 months as at 30 March 2020. 

    Key legal obligations for participating employers

    • Each employee must be paid at least AUD $1,500 per fortnight before tax.

    Each employee in respect of whom an employer receives a JobKeeper payment must be paid at least $1,500 per fortnight before tax by the employer. This is the case even if the employee would normally receive less than $1,500 per fortnight.  The employer cannot keep the difference between the JobKeeper subsidy and the employee's usual wages. In effect, the wages of employees who usually earn below $1,500 per fortnight are increased to $1,500. 

    It can be seen that for employees who earn less than $1,500 per fortnight, their continued employment through to 27 September 2020 essentially comes at no cost to the employer.

      If an employer does not continue to pay their employees for each pay period, they will cease to qualify for the JobKeeper payments. For the first two fortnights (30 March – 12 April, 13 April – 26 April) wages can be paid late, provided they are paid by the employer by the end of April 2020.

      • The JobKeeper payment can only be received by one employer for an individual

      Only one employer can claim the JobKeeper payment in respect of a person. Where a person works multiple jobs, a choice will need to be made as to which employer receives the subsidy. The employee makes the choice. An employer cannot claim the JobKeeper subsidy without an employee's consent.  

      If an employee is a long-term casual and has other permanent employment, they must choose the permanent employer.

      • An "one in, all in" principle applies

      If an employer decides to participate in the JobKeeper scheme, it must nominate all of its eligible employees. The employer cannot choose to nominate only some eligible employees. However, individual eligible employees can choose not to participate.

      • Tax must still be deducted on employee's wages

      No deduction for JobKeeper payments received is made when calculating and deducting PAYG tax payments on employee's wages.

      • Superannuation is not payable on "top up" payments 

      New rules are being introduced by the Government with the intention to not require the superannuation guarantee to be paid on additional payments that are made to employees as a result of JobKeeper payments.

      JobKeeper Enabling Directions

      The JobKeeper scheme gives eligible employers the authority to make what are described as "JobKeeper Enabling Directions" in respect of eligible employees. These directions are designed to provide greater flexibiliity to employers to manage the hours, duties and location of their workforce in the face of the significant Covid-19 related challenges.

      JobKeeper Enabling Directions available to eligible employers include: 

      • standing down employees (including reducing days and hours)
      • changing the duties performed by the employee
      • changing the employee’s location of work.

      If you need legal assistance in relation to the JobKeeper scheme, please contact Damian Quail in our office.

       

      This article is general information only, at the date it is posted.  It is not, and should not be relied upon as, legal advice.  This article might not be updated over time and therefore may not reflect changes to the law.  Please feel free to contact us for legal advice that is specific to your situation.

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