Author: Tony Rule, Partner, TAG Financial Services
Hope is important at any time, but is critical to get through this dynamic and fast moving crisis. However, false hope can be very dangerous and in these times could easily have a business drive off a cliff. When a business drives off a cliff, gravity brings everything down including other businesses, a lot of employees and the life-savings of a business owner. These losses will add to the pressure on already strained financial and health support systems.
The JobKeeper Payment is a moving feast, having been announced on Monday and being updated daily. As of yesterday, the status is as follows:
Should employers participate in the JobKeeper Payment?
The answer is yes – if you are eligible. Short of the business being dead and buried, the benefits are worth the administration.
Every business is in a different situation, but here are some important points to note about the JobKeeper Payment:
Is my business eligible for the JobKeeper Payment?
Most businesses are expected to establish that turnover has fallen by 30% (or 50% if more than $1b) compared to the same period last year. The “period” is now the “natural activity statement reporting period of that business” which we assume will be how often you report your GST on your BAS – this will be either monthly or quarterly. For businesses with turnover more than $20m, you should be lodging BAS’s monthly. For most businesses under $20m, your BAS will be quarterly.
Your business will then either be comparing sales to the same month last year (if monthly BAS) or the same quarter last year (if quarterly BAS). Assuming your business is quarterly, you will then need to consider what your income will be in the June and September quarters and if it is expected to be reduced by 30% (or 50%) or more, then you qualify for the payment. If you are wrong, the government note that “there will be some tolerance where employers, in good faith, estimate a greater than 30% (or 50%) fall in turnover but actually experience a slightly smaller fall”.
Where a business was not in operation a year earlier or where turnover from the previous year is not representative of “usual or average turnover”, the ATO will “have discretion to consider additional information that the business can provide to establish that they have been significantly affected” by the Coronavirus.
Whilst not defined, we expect that turnover will be sales of the business as indicated on the BAS and would not include interest earned, rent received and other non-operating income.
How much will I receive, how much will I pay and when?
You will receive $1,500 per eligible employee per fortnight for up to six months – which equates to a maximum of $19,500 per employee. This will be treated as income in your business and whilst not stated, it is expected that this income will not be exempt from tax.
You will need to pay employees at least $1,500 (before tax) per fortnight, even if they normally earn less than that amount each fortnight. It is important to factor these additional wages into your cash flow budgeting, because you cannot just assume that your wages cost will remain the same.
Employers will have the option as to whether to pay superannuation on any “additional wage” paid because of the JobKeeper Payment or not. We take additional wage to be the increase from what the employee was earning pre-Coronavirus versus the $1,500 per fortnight or more amount over the next six months.
Whilst not confirmed, we would expect that the JobKeeper payment will be treated as normal wages for all other considerations (eg. workcover remuneration, payroll tax, etc.)
Payments that will need to be paid to employees under various circumstances include:
| Employee ordinary income per fortnight | Payment to employee under JobKeeper Payment |
| $1,500 or more | Continue to receive regular income according to their “prevailing workplace arrangements” |
| Less than $1,500 | Minimum payment of $1,500 per fortnight, before tax |
| Employee stood down | Minimum payment of $1,500 per fortnight, before tax |
| Employed at 1 March, ceased and then re-engaged by the same employer | Minimum payment of $1,500 per fortnight, before tax |
It is unclear whether “prevailing workplace arrangements” represent the employees ordinary income pre-Coronavirus or an agreed remuneration in the current environment.
Regardless of whether you are a quarterly or monthly BAS business, all payments are due to be paid by the ATO to businesses monthly in arrears. This means that business will need to pay out the wages before they will receive the JobKeeper Payment from the ATO in the following month.
The Latest Information
The Government are continuing to update how the JobKeeper Payment will work.
For the latest information for employers and empoyees – please go to this link – https://treasury.gov.au/coronavirus/jobkeeper
So is it a friend or a foe?
We advise all to proceed with caution on what looks like silver and gold.
We should highlight that this initiative will do some good but please monitor your expectations – it is only and can only be a lifeline. The JobKeeper Payment is designed to assist and motivate the employer to not let their great people go and to keep pressure off a welfare systems that is already struggling. It also ensures that people stay away from the poverty line as the survival of all is the prime objective. Then when things start to get better, businesses and their teams will be able to get up and running faster.
Be aware that the JobKeeper Payment will not fund your rent or the other large fixed costs of your business through this difficult period – so you must continue your cost control and cost cutting measures where needed. As Scott Morrison advised us – we need to negotiate and we all must share the pain. Not everyone is going to understand that at this point. We had a client commence discussions with the landlord regarding rent assistance and got the feedback “pay your rent – you’ll be fine, you’ll get plenty of JobKeeper money!” One of Australia’s wealthiest men, Solomon Lew showed us with his actions last week that rents will cripple your business if they are not addressed.
The JobKeeper Payment will be administered by the ATO (if that organisation gets any bigger it will outgrow the country). After the press conference on Monday afternoon announcing the JobKeeper Payment, there were 60,000 applications received by midnight. The first of the JobKeeper payments will commence on 1 May. Let’s hope the systems don’t crash during the application process like they have before.
This is real money, flowing into real bank accounts for real businesses and real people to use and it will make a substantial difference and most importantly creates hope.
The JobKeeper Payment is definitely a new friend that you need to be a little wary of. And make sure that it’s not your only friend.
If you have any questions, please contact us on 03 9886 0800 or via email.
Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686).