JobKeeper Incentive - What you need to know and what questions remain

Mar 31, 2020

The government has announced its third large assistance package called the JobKeeper payment. We have summarised what we know and what questions need to be answered once the legislation is released.

Employers can register there interest by clicking here and later applying for the grant. Payments will not be automatic so an application will be necessary once it becomes available.

What we know

Questions to be answered

To be eligible, if your business has turnover under $1 billion, you need to show your business or non-profit has or will have a turnover reduction of more than 30% relative to a comparable period of a year ago of at least one month

What integrity measures will be in place regarding turnover reductions?

If a business has turnover over $1 billion it needs to experience a drop in turnover of 50% before being eligible.

Does turnover need to continue to be lower after the one month test period?

What if my business started less than a year ago?

For an employee to be eligible they must have been on your books at the 1st of March 2020

Are directors receiving directors fees rather than wages eligible?

If you are a sole trader with no employees, you are eligible for the JobKeeper payment if your turnover is down more than 30%

What about sole traders who have employees? Are they still eligible personally?

Are businesses run through a partnership eligible?

Eligible employees include full time, part time and stood down employees plus casuals who have been employed for at least the previous 12 months

What happens if an employee was terminated rather than stood down. If they have had their leave paid out/redundancy paid out will they be eligible?

Will a casual employee be eligible once a 12 month period passes eg will a staff member who started in May 2019 be eligible in May 2020?

Employees that have been stood down and are re-engaged will be eligible

What date does an employee need to be reinstated and paid from to be eligible?

Employees must be either Australian citizens, Australian permanent residents, 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 444 Visa holder

Employers must notify the employee that they are receiving the JobKeeper payment

Where an employee has multiple employers, only the primary employer can claim. In most cases this will be the employer from which the tax free threshold is being claimed.

What additional measures will ensure the primary employer is the one that the employee earns the most from?

Payments can continue for up to six months

If the necessary turnover drop doesn't occur until after March, how long will payments last?

Payments throughout the scheme will be made monthly in arrears

Eligible employers will receive $1,500 per fortnight per eligible employee from 30 March but not paid until 1 May. In the meantime businesses need to somehow come up with the cash to pay the employee.

How will businesses have the cash flow to pay and what is their motivation. A closed business has no incentive to register other than to help their old employees and keep them happy. Businesses may also have to pay interest on the amounts they had to pay the employee before being paid by the ATO later. An open business or one which employs the business owners will be much better off under this scheme

If the employee ordinarily receives less than $1,500 pf, they will be paid $1,500pf by the employer and Super Guarantee is not payable on any additional wage paid because of the Jobkeeper payment

Is the additional wage excluded from Super Guarantee based on their normal wage or the entire Jobkeeper payment if they wouldn’t otherwise have been employed?

If the employee ordinarily receives more than $1,500pf, they still need to be paid according to the award. Many employers may consider converting full time workers to part time to eliminate the top up they are required to make

Any there any legal issues regarding switching full time employees to to part time

PAYG payable on the $1,500 payment will count towards the PAYG Cash Flow Boost. PAYG Withholding on $1,500 per month is $192. This may provide an additional benefit to employers depending on their individual situation

This scheme will be monitored via Single Touch Payroll and paid by the ATO. Further monthly reporting will be required.

If the employee receives JobKeeper they wont be eligible for JobSeeker which is about $400 less per fortnight than Jobkeeper.

As you can see above there are still many questions left to be answered regarding the Jobkeeper payment.

The JobKeeper payment will be very beneficial to:

  • Businesses that are still operating with reduced turnover and paying wages,
  • Businesses operating with a reduced turnover or shutdown who pay themselves a wage (rather than drawings or dividends) and
  • Eligible employees who are receiving less than $1,500 per fortnight. These employees will receive a pay rise up to $1,500 per fortnight.

The JobKeeper payment will not directly benefit:

  • Employers whose business has shut down, apart from helping them to maintain a connection with their employees. In fact the Jobkeeper payment will be detrimental to the cash flow of a shut down business as they need to pay the employee up to a month before receiving anything form the government to reimburse them.
  • Employees who are earning more than $1,500 per fortnight will not notice any change but they are more likely to be able to keep their job.

Employers also need to be wary to ensure they and their employees are eligible for the Jobkeeper payment before starting to pay their employees amounts in regards to this scheme or they may be left out of pocket.

We await legislation to be released in coming days to answer some of our questions.