Stimulus 3 Announced…Jobkeeper

Talking points:

• “Jobkeeper” wage subsidy of $1,500 per fortnight (each) for all current or stood down employees since 1 March
• Available to all businesses with a reduction in revenues of 30% or greater since the crisis
• Payments to commence in May, but backdated to 30 March
• Some planning opportunities in Jobkeeper v Jobseeker
• Employers must register their intention with the ATO here

As it happened….

Three press conferences have been held by our Prime Minister since Sunday, starting with some early hopeful signs that public health measures are taking effect to start “flattening the curve”.

Notwithstanding this, the PM announced stricter rules for outside gatherings, more closures of public spaces and “strong advice” that people stay home unless shopping for essentials, seeking medical attention, personal exercise or work/education that cannot be undertaken remotely.

Commercially, the announcements over the past two days compliment the government’s Coronavirus “hibernation plan” – one which allows businesses to stay afloat by substantially reducing their overheads (payroll, rent, taxes etc), helping them through to the end of the crisis. The measures announced to date across government stimulus 1 & 2, ATO administration support and bank mortgage relief covered in my last email and the announcements since Sunday (covered below) were made in accordance with the hibernation plan.

Jobkeeper wage subsidy

Prime Minister Scott Morrison yesterday unveiled the largest single fiscal stimulus package in Australia’s history, “Jobkeeper”, costing $130 billion over the next six months.

Under the Jobkeeper payment, businesses significantly impacted by the Coronavirus outbreak will be able to access a subsidy from the Government to continue paying their employees. This assistance will help businesses to keep people in their jobs so they can restart swiftly when the crisis is over. For employees, this means they can keep their job and earn an income – even if their hours have been reduced or cut completely.

The wage subsidy of $1,500 per fortnight, per employee, will be paid to employers who have experienced a 30% or more decline in revenues on account of the COVID crisis. The programme will be administered by the ATO via their newly installed Single Touch Payroll system.

How is it calculated?

Jobkeeper is a flat fortnightly payment of $1,500 per employee, irrespective of the employee’s earnings. The programme will be extended to all businesses (<$1bn turnover), not-for-profit employers and to New Zealand nationals on 444 Visas.

To provide broad brush support to all affected businesses, the payments will apply to all full-time, part-time, casual and stood down employees. Casual employees need to have been with the employer for greater than 12 months.

The payments commence from “early May” but will be backdated to the announcement date (30 March), and will apply to all employees as of 1 March. This means that workers who have been stood down or even retrenched after that time will be eligible.

Employers will not have to pay the 9.5% superannuation guarantee levy on the subsidies passed through to its employees.

Allocating Jobkeeper payments – scenarios

Based on our understanding thus far, Jobkeeper payments for eligible employees need to be treated as follows:

• If an employee ordinarily receives $1,500 or more in income per fortnight before tax, they can continue to receive their regular income according to the prevailing workplace arrangements. The Jobkeeper payments do not need to be passed on to the employee and will subsidise part or all of their cost to the business.
• If an employee receives less than $1,500 in income per fortnight before tax, their income should increase to at least this level.
• If an employee has been stood down since 1 March, an employer must at a minimum pay them $1,500 per fortnight, before tax.
• If a person was employed on 1 March 2020, subsequently ceased employment and then were re-engaged by the same eligible employer, they will receive, at a minimum, $1,500 per fortnight before tax.

Jobseeker v Jobkeeper

The Prime Minister urged any workers who had already been stood down to “ring up their employer,” emphasising that people could not access both the Jobseeker (dole) and Jobkeeper payments. In my last blog, I covered the new, time-limited Coronavirus supplement of $550 per fortnight, taking average Jobseeker support to $1,150 a fortnight.

For current or stood down employees, the Jobkeeper programme may provide a better alternative to Jobseeker on the basis that Jobkeeper is not income tested, and means employers can pass on the full $1,500 fortnightly subsidy, whilst their employees pursue additional paid work.

For employers, the distinction exists to incentivise businesses to either keep staff employed at a minimum level of fortnightly pay, or stand them down ready to welcome them back following the crisis – rather than terminating staff which will result in no Jobkeeper subsidy.

Next steps?

Certain details of Jobkeeper are not clear at this stage, such as how the reduction in business revenues will be substantiated, and over what period, to gain access to the subsidy.

For now, the ATO has advised that employers should register their intention to apply on the ATO website and assess that they have, or will experience, the required turnover decline.

The Government has announced its intention to pass additional legislation to introduce this new measure over the coming week, after which time we understand the measures will become law.

Conclusion

Combined with the $105 billion from the Reserve Bank and other fiscal measures the total Coronavirus stimulus tally is now $320 billion, equating to 16.4 per cent of GDP.

This most recent effort will hopefully have a strong impact on forecasted unemployment rates and GDP reductions over the coming period, and help the most impacted industries through this unprecedented crisis.

As always we will keep you abreast of all developments as they arise. We will be reaching out to eligible clients on a proactive basis, but if you wish to have a discussion in the meantime please don’t hesitate to contact me personally.

Finally, I hope you are all keeping safe and well.