Government’s 3rd Stimulus Package designed to save Australian jobs impacted as a result of COVID-19

On 30th March 2020, the Government announced a $130 billion wage subsidy to combat the impact of COVID-19 on the Australian economy. The Government has provided further support to Australian businesses and encouraged businesses to keep their workers employed by providing a “JobKeeper” payment to eligible employers for eligible employees.

JOBKEEPER PAYMENT
 
Eligible employers who have been affected by COVID-19 can apply to the Australian Taxation Office (ATO) to access a subsidy from the Government of $1,500 per fortnight for each eligible employee from 30 March 2020 for a maximum of 6 months.

Who is an eligible employer?

Eligible employers (which are not banks) relate to a business whose:
 
  • turnover has reduced by 30% or more (to a comparable period a year ago of at least one month) if their turnover is less than $1 billion; or
  • turnover has reduced by 50% or more (to a comparable period a year ago of at least one month) if their turnover is more than $1 billion.
Furthermore, eligible employers include not for profit entities, charities and self-employed individuals.

Self-employed individuals includes businesses without employees which is a welcome relief to certain businesses who may not have been entitled to the $100,000 cash flow boost (previously announced) unless they had employees. How far this will extend is not clear at this stage and we expect the law to include various anti-avoidance provisions.

 Who is an eligible employee?

Eligible employees are defined as employees who:
 
  • are currently employed by the eligible employer including those stood down or re-hired;
  • were employed by the employer at 1 March 2020;
  • are full-time, part-time, or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020);
    are at least 16 years of age;
  • are an
    • Australian citizen;
    • holder of a permanent visa;
    • 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 Special Category (Subclass 444 from NZ) Visa Holder; and
  • are not in receipt of a JobKeeper Payment from another employer.
Note, from the definition above, it appears employees who hold temporary visas may not be eligible for this payment unless they fall into one of the categories above. If you have laid off staff between 1 March – 30 March 2020, you may be entitled to receive the subsidy in relation to the employee if re-hired.

Employers will be required to ensure eligible employees will receive, at a minimum, $1,500 per fortnight before tax.  The current STP system will allow the ATO to check that the payments are made to the eligible employees.

How do you apply?
 
Employers can register their interest in applying for the payment on the ATO website from 30 March 2020 [https://www.ato.gov.au/Job-keeper-payment/]. Monthly reports will need to be provided to the ATO to continue the payments.

Businesses without employees will need to provide an ABN for their business and nominate an individual to receive the payment . People who are self-employed will need to provide a monthly update to the ATO to declare their continued eligibility for the payments. Payment will be made monthly to the individual’s bank account.
 
JobKeeper payments will commence in the first week of May 2020 but will be back-dated to 30 March 2020.  Employers will need to continue wages payments until the ATO payments are received.
 
Example
Adam owns a real estate business with two employees. The business is still operating at this stage but Adam expects that turnover will decline by more than 30 per cent in the coming months.
 
The employees are:
  • Anne, who is a permanent full-time employee on a salary of $3,000 per fortnight before tax and who continues working for the business; and
  • Nick, who is a permanent part-time employee on a salary of $1,000 per fortnight before tax and who continues working for the business.
Impact for the business on Anne’s payments
The business continues to pay Anne her full-time salary of $3,000 per fortnight before tax, and the business will receive $1,500 per fortnight from the JobKeeper Payment to subsidise the cost of Anne’s salary and will continue paying the superannuation guarantee on Anne’s income;
 
Impact for the business on Nick’s payments
The business continues to pay Nick his $1,000 per fortnight before tax salary and an additional $500 per fortnight before tax, totalling $1,500 per fortnight before tax. The business receives $1,500 per fortnight before tax from the JobKeeper Payment which will subsidise the cost of Nick’s salary. The business must continue to pay the superannuation guarantee on the $1,000 per fortnight of wages that Nick is earning. The business has the option of choosing to pay superannuation on the additional $500 (before tax) paid to Nick under the JobKeeper Payment.
 
When will this become law?

In the announcement, Scott Morrison suggested that legislation for this would be drafted soon and intended this to be legislated as soon as possible. We expect the legislation to include various intricacies including similar anti-avoidance provisions which were put in place for the $100,000 cash flow boost.

Our recommendation

We recommend employers wait to make any decisions regarding staffing until we receive further information on how the subsidy will be applied.
 
The benefits of being able to retain key team members in your business will mean that your business is business-ready when the health crisis ends.
 
Please contact your Moore Stephens advisor today if you would like further information in relation to this.