09 Apr Update: How will the JobKeeper Payment Legislation work?
The JobKeeper payment scheme was passed by both houses of Parliament on 8 April 2020
The payment, which will be paid to those eligible employers with eligible employees, is:
- $750 a week (before tax)
- Paid from 1 May 2020
- Backdated to 30 March 2020
The JobKeeper Payment legislation in action
The JobKeeper Payment legislation covers:
- Business with a turnover of less than $1 billion who can demonstrate that their turnover has fallen by 30 per cent relative to a comparable month last year
- Business with a turnover of $1 billion or more who can show that their turnover has dropped by 50 per cent relative to a comparable month last year
- Charities which have lost 15 per cent of their turnover relative to a comparable month last year
- Full-time, part-time and casual employees employed in the eligible business for at least 12 months prior to 1 March 2020. This includes any employees who were stood down, even if they have not yet been re-hired since 1 March 2020
- Sole traders
Eligible workers must also fall within any of the following categories:
- Australian citizens
- Permanent visa holders
- Protected special category visa holders
- Non-protected special category visa holders who have lived in Australia for 10 years or more
- Special category (subclass 444) visa holders
What does the JobKeeper Payment legislation mean for your business?
Eligible businesses will receive $1,500 a fortnight (pre tax), per eligible employee.
Employers are required to pass on the full $1,500 payment to each eligible employee through their existing payroll systems. This could leave some employees in a better financial position than they were in before the COVID19 pandemic.
The ATO will be monitoring the payments and where appropriate, will be using a Single Touch Payroll programs to do so. Businesses which fail to pass on the payment to their employees may be fined.
The payment is made by an eligible employer to eligible employees, rather than by the government directly to the employee and the same tax rules apply to making any payment of wages to an employee. It means the payment is taxable income for the employee and the employer must withhold PAYG income tax from each payment.
Eligible businesses who have signed up to the payment should begin making the $1,500 payments to their employees as soon as possible, if the business is able to do so. The business will be back paid in arrears by the ATO on a monthly basis commencing 1 May 2020.
Under the new JobKeeper Payment legislation, as long as the business can establish that there is less work for employees due to COVID-19 and they cannot usefully be employed for the same number of hours, an employer may change their employees work hours to a lesser amount to bring their pro-rata pay down to $1,500 fortnightly during the period of the pandemic only.
Businesses may also make arrangements for employees to take paid annual leave (including at half-pay), as long as the annual leave entitlements do not fall below two (2) weeks per employee.
Important points to note
If you’re considering applying for the payment on behalf of your business, you’ll need to bear in mind that:
- The $1,500 is a minimum payment, meaning that if an employee is still working and earning a higher income, then the business is expected to pay the gap out of its own money to the employee
- Employees who are paid an income which is less than $1,500 a fortnight, are to receive the full amount of the payment
- Superannuation is only required to be paid to eligible employees by employers on any top-up amounts above the $1,500 payment
- Employees can only receive the payment from one employer.
The final word
It’s important to remember that the JobKeeper Payment legislation is emergency legislation, so there are likely to be issues and glitches. Some problems won’t become known until the Government has had a chance to see the legislation in action and the ATO starts to apply the payments.
We will provide further updates as they are known. Contact us to discuss how the JobKeeper Payments legislation affects your business.
DISCLAIMER: We accept no responsibility for any action taken after reading this article. It is intended as a guide only and is not a substitute for the expert legal advice you can get from marshalls+dent+wilmoth and other relevant experts.