The proposed JobKeeper Payment

IF YOUR BUSINESS TURNOVER IS LESS THAN 1 BILLION AND YOU HAVE EMPLOYEES, YOU CAN GET WAGE SUBSIDY FROM THE GOVERNMENT.

Please read below to understand how the wage subsidy scheme works. We are not discussing here how the scheme works for business with more than a billion in turnover. The Government intends to introduce legislation into Parliament to give effect to the JobKeeper Payment measure and we will get finer details after the legislation is finally approved.

What is Wage Subsidy?

·         If there is a downturn in your business of more than 30% then

·         you can claim $1500 per fortnight per eligible employee for 6 months commencing from 30^th March 2020.

·         But you must keep the eligible employee employed and pay him minimum $1500 per fortnight (even though his actual salary was less than $1500) or his normal salary if the normal salary is more than $1500 per fortnight (This is yet to be clarified by the Government if the normal salary can be reduced or not)

Who are the eligible employees?

All those employees who:

·   Were employed by the relevant employer at 1 March 2020: and

·   Are currently employed by the employer (including those who have been stood down or re-hired); and

·  Are full time, part-time, or long-term casuals (a casual employee employed on a regular basis for 12 months as at 1 March); and

·   Are at least 16 years of age; and

· Are an Australian citizen, hold a permanent visa, are 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) Visa Holder; and

·  Are not in receipt of a JobKeeper Payment from another employer.

Will the employer be withholding tax from the Wages paid from the Wage subsidy?

Yes, this $1500 is before tax and when employer will pay wages to his employee then tax will be withheld just as on paying normal salary.

Example: If an employee is earning $1000 per fortnight and the employer received $1500 wage subsidy for that employee per fortnight then the employee will be paid $1500 less tax withheld in the normal way.

Will the employer pay superannuation on the wages paid from wage subsidy?

If employee was getting less than $1500 per fortnight (say $1000) before 30^th March 2020 but the employer is paying him $1500 per fortnight from the wage subsidy (as discussed above) then employer may choose not to pay super on any excess salary paid above the normal salary. So, in this case the employer may pay super only on $1000 per fortnight. If the employee was earning more than $1500 fortnight then employer will be paying super on the total salary paid.

What if the employer does not have enough work to keep the employee or the employer has temporarily closed the business due to COVID – 19?

Employer still need to keep the employee on the payroll and keep paying him as per the wage subsidy scheme discussed above.

When will the Wage Subsidy be paid to the Employer?

·     This subsidy will be paid by the ATO monthly in arrears and will ensure that an eligible employee receives a gross payment (i.e., before tax) of at least $1,500 per fortnight.

·         First payment will be made in the first week of May.

How will the employer apply for the wage subsidy?

You need to follow the following steps. We can help you in applying the wage subsidy:

Register

·         you should register your intent to apply for the JobKeeper subsidy with the ATO. The ATO will provide you with regular updates and advise you when you can lodge your application.

Assess turnover

·         Ensure you have an accurate record of your revenue for the 2018-19 income year and for the 2019-20 year to date

·         Ensure you keep an accurate record of revenue from March 2020 onwards

·         Compare your revenue for the whole of March 2019 with the whole of March 2020

·         Measure the % decline in your revenue and ensure it has declined by more than 30%

·         If you are not eligible in March, you may become eligible in another month

Notify Eligible Employee

·         Notify all eligible employees that they are receiving a JobKeeper payment. Employees can only be registered with one employer

Can Sole Traders and Self employer Individuals who do not have any employee register to get paid under the Wage Subsidy?

·         Yes, if they satisfy the requirement of 30% downturn in the business

·    will need to provide an ABN for the business, nominate an individual to receive the JobKeeper payment and provide that individual’s Tax File Number, as well as provide a declaration on the recent business activity (presumably, to demonstrate the downturn in the business). These businesses will also need to provide a monthly update to the ATO in order to declare their continued eligibility for the JobKeeper Payment.

·         It is expected that more information will be provided about applying for the JobKeeper Payment, for businesses with employees and for the self-employed, on the ATO’s website.

EXAMPLE – Self-employed affected by Covid-19 with no employees

·         Melissa is a sole trader running a florist without any employees.

·      The economic downturn due to the Coronavirus has adversely affected Melissa’s business and she expects that her business turnover will fall by more than 30% compared to a typical month one year ago (i.e., in 2019).

·         On this basis, Melissa will be able to apply for the JobKeeper Payment and would receive $1,500 per fortnight (before tax), which will be paid to her on a monthly basis in arrears.

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Disclaimer: Any information in this article is of general nature only. Any person should, before acting on the content, consider the appropriateness of it having regard to their own personal circumstances, and if necessary seek professional advice. J.A.P TAXATION and its employees or any related entities, do not accept any liability for any loss, damages or outgoings rising out of the use of all or any part of information provided in this article.