The key component of the Federal Government's business support package in response to the Coronavirus is the JobKeeper payment.  This payment provides a $1,500 per fortnight, per employee wage subsidy to employers for a period of up to six months.  The estimated cost of this measure is $130 billion.

What are the key eligibility requirements?

  • Business turnover must fall by 30%: In order to be eligible for the payment, the turnover of the business must fall by 30% as compared to the same time last year. In order to register for the scheme, a business must self assess that it has had or will have the necessary decline in turnover.  A 50% turnover decline is required for businesses with revenue of $1 billion or more.
  • Each employee must be paid at least $1,500 per fortnight before tax: Each employee in respect of whom an employer receives the subsidy must be paid at least $1,500 per fortnight before tax. This applies even if the employee would normally receive less than $1,500 per fortnight.  In effect, the wages of such a person will increase and the wages of all employees on $1,500 per fortnight or less will be at no cost to the employer (except for on costs).
  • The payment can only be received by one employer for an individual: Only one employer can claim the JobKeeper payment in respect of a person. Where a person works multiple jobs then a choice will need to be made as to which employer receives the subsidy.
  • Employees need to have been engaged as at 1 March 2020.  Casuals need to have been engaged for 12 months: The subsidy will be available in respect of employees that were engaged on 1 March 2020.  Casual workers will be eligible provided that they are "long-term casuals" meaning that they had been employed on a regular basis for at least 12 months as at 1 March 2020.  Many employers in the accommodation, food services and retail trade industries will therefore not fully benefit from the subsidy due to a substantial number of their workers being casuals employed for less than 12 months.

Analysis

Details on the new measure are sketchy at present however there are interesting aspects where the fine print of the legislation (which has not yet been released) will be critical to determining the extent of the availability of this subsidy to employers.

Measuring your turnover decline

As noted above, a business with turnover of less than $1 billion must have its revenue decline by 30% or more to be eligible for the scheme.  The Government's release on the measure states that:

"To establish that a business has faced either a 30 (or 50) per cent fall in their turnover, most businesses would be expected to establish that their turnover has fallen in the relevant month or three months (depending on the natural activity statement reporting period of that business) relative to their turnover a year earlier."

There are three key points to note.  First, the decline in turnover is measured by reference to turnover at the same time last year rather than turnover immediately prior to the pandemic.

Secondly, the turnover decline will be measured with reference to the length of your activity statement reporting period rather than simply decline over a month (as has been widely reported).  Businesses with a turnover of less than $20 million that are not required to lodge a Business Activity Statement monthly will usually lodge quarterly meaning that the 30% decline for such businesses will need to be sustained over a three month period in order to be eligible for the scheme.

Thirdly, employers will almost always be applying for the scheme ahead of experiencing the decline in turnover that makes them eligible to receive payments under it.  Monthly reporting will be required to confirm that a business remains eligible.

Interaction with other Government benefits

Where an employer is receiving the subsidy in respect of an employee then no other employer can receive the subsidy in respect of that person.  As the registration system relies on employers nominating those employees in respect of whom it is claiming the benefit then that presents issues where more than one employer nominates the same person.

Where the subsidy is being received in respect of an employee then that person will not be eligible to receive the JobSeeker payment despite potentially being better off in doing so when other benefits attached to the JobSeeker payment are also considered.

Superannuation

The Government release states that:

"It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment."

Just what constitutes, "an additional wage paid" will need to be carefully monitored by employers given that directors can now be made personally liable for unpaid superannuation guarantee contributions.  This is likely to be an issue particularly for casual workers and for those workers whose hours are reduced such that their wage calculated on their actual hours of work is less than the $1,500 per fortnight received under the JobKeeper subsidy.

Contact us

Please contact our Commercial Team should you require assistance in respect of these changes or if you have any other queries arising from the impact of Coronavirus on your business.

 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.