As you are probably aware, the Government have released a further $130 billion Economic Support Initiative with the main goal to keep employees on the books and engaged with their employers.
This is an exciting development for business owners and once again we have attempted to summarise the information all in one place for you.
The JobKeeper payment is a wage subsidy program introduced to support businesses significantly affected by COVID-19.
The payment is designed to help businesses cover the costs of their employees’ wages so that more employees can retain their jobs and continue to earn an income.
Eligible businesses will be able to access a wage subsidy of $1500 per fortnight before tax for eligible employees for a maximum of 6 months.
Employers must elect to participate in the scheme.
You will need to Register your Intention to apply with the ATO from 30th of March here: JobKeeper Payment Registration. Within 24 hours, you will then receive a SMS message confirming your registration. Shortly after the legislation is passed, you will be requested to complete an online application.
You also need to notify all eligible employees that they will be receiving the JobKeeper payment. Please note at this stage there is no legislation to say you must participate in the JobKeeper scheme.
Sole traders will also need to Register your Intention to apply with the ATO here JobKeeper Payment Registration
When does it start?
The subsidy applies to payments to employees from the 30th of March 2020 and the subsidy will be paid in the first week of May 2020.
How does it get paid?
The employee is still paid directly by the employer through their payroll system and employers will be reimbursed $1,500 per fortnight for each eligible employee, paid monthly in arrears.
Please refer to the examples at the end of this newsletter, but for general information this is how it will work:
If an employee ordinarily receives $1,500 or more in income per fortnight before tax, they will continue to receive their regular income. The JobKeeper payment will assist the employer by subsidising $1,500 per fortnight of the employees wage. E.g. The employee usually receives $1,800 in wages per fortnight, the JobKeeper reimbursement will be $1,500, leaving the employer out of pocket $300.
If an employee ordinarily receives less than $1,500 in income per fortnight before tax, the employer must pay their employee the full $1,500 per fortnight before tax. Essentially meaning the employee gets a higher salary than usual.
If an employee has been stood down, the employer can choose to receive and pass on the JobKeeper payments of $1,500 to their employees.
Note: we have included examples at the bottom of the newsletter.
Superannuation is to be paid based on an employee’s normal wage.
If an employee normally receives less than $1,500 the employer is only required to pay superannuation on their lower regular wage. They may choose to pay superannuation on the full $1,500 if they wish. Adjustments will need to be made to most employers payroll systems to be able to process this correctly.
As employers you must advise your employees if you are applying for the JobKeeper payments for them.
Some employees may have already applied to Centrelink for JobSeeker payments and the Coronavirus Supplement. They will need to notify Centrelink as soon as they begin to receive JobKeeper payments as they may no longer be eligible for the income support through Centrelink.
Sarah runs a Sunbury florist. She is a sole trader and does not have any employees.
Sarah’s business has been going well for a few years but due to the Coronavirus her business turnover has fallen by more than 30% compared to the same month in 2019.
Sarah will be able to apply for the JobKeeper payment and will receive $1,500 per fortnight before tax (paid on a monthly basis)
Janet worked as a permanent part time personal trainer at an Essendon gym for six months but was made redundant on the 20th of March due to the Government directive to close gyms. She was not entitled to any redundancy pay due to her short length of service.
After the JobKeeper announcement the gym decided to re-hire Janet as they will be able to resume their operations once the Coronavirus restrictions on gyms are lifted.
Janet had applied for JobSeeker payments after being made redundant and was due to receive payments of $1,124 per fortnight. If she chooses to be re-hired by the gym, she will receive $1,500 per fortnight before tax under the JobKeeper plan. She will need to advise Centrelink of this income as she may no longer be eligible to receive the JobSeeker payment and the Coronavirus supplement.
Lovonne runs a Macedon Ranges Landscaping company and employs 5 full time gardeners. She currently pays them each $1,700 per fortnight before tax but has been expecting her turnover to decline rapidly over the coming months and has been considering laying off her staff or reducing their wages.
By receiving the JobKeeper payment Lovonne will be able to keep employing all five of her gardeners and only needs to provide the $200 wage cost per fortnight before tax per employee above the $1,500 per fortnight before tax JobKeeper payment.
Carolyn works in a retail store as a permanent part time employee who earned $1,100 per fortnight before tax. She was stood down without pay due to the coronavirus impact on the business and applied for Centrelink JobSeeker payments.
Carolyn’s employer has decided to apply for the JobKeeper payments for all of their employees. This would entitle Carolyn to receive $1,500 per fortnight before tax – more than her normal wage. Her employee must advise Carolyn that she has been nominated to receive the JobKeeper payment and Carolyn must advise Centrelink as she may no longer be eligible to receive the JobSeeker payment and the Coronavirus supplement.
Lauren runs a real estate agency with two employees. While the business is still running at this stage, she expects that her turnover will decline by more than 30% in the coming months.
Her employees are:
Rhonda who is a permanent full-time employee who earns $3,000 per fortnight before tax and Sam who is a permanent part-time employee who earns $1,000 per fortnight before tax.
Lauren applies for the JobKeeper payments from the Government. She continues to pay Rhonda her $3,000 per fortnight before tax as normal while receiving $1,500 per fortnight before tax to subsidise her salary and will continue to pay her superannuation on her income.
Lauren also receives $1,500 per fortnight before tax to subsidise Sam’s salary. She continues to pay Sam his $1,000 per fortnight before tax and an additional $500 per fortnight before tax totalling the $1,500. Lauren is required to continue to pay Sam’s superannuation based on his $1,000 per fortnight salary and has the option of paying superannuation for the additional $500 before tax.
We hope that the information provided here will assist you in understanding the new JobKeeper initiative. We welcome this initiative as it will help keep the employer and employee relationship during this downturn and will also allow for businesses to resume operations quickly when the businesses are in a position to re-open. It also provides that much needed ‘life-line’ for many businesses to continue operating their business and to continue employing.
As always, please contact us if you have any questions or wish to discuss any of the above matters further. Our full team are working remotely from home at the moment and have been conducting virtual meetings all week. Our phone system is set-up so our mobile phones have replaced our office desk phones so it is business as usual for Suntax. If you need to contact us, just call our normal phone number (03 8746-7700) and we will do everything we can to help you through this unusual time.