The COVID-19 pandemic has had an extraordinary impact on the Australian economy. Strict measures targeted at slowing the spread of COVID-19 has forced closures, disrupted operations and cash flows, and resulted in significant uncertainty for Australian businesses.
To combat the economic impact caused by COVID-19, the Federal Government has introduced a temporary scheme called the JobKeeper Payment to support businesses and help keep more Australian workers in jobs (JobKeeper Scheme). The initiative is complemented by changes to the Fair Work Act 2009 (Cth) (Fair Work Act) designed to support the implementation and operation of the JobKeeper Scheme.
What is the JobKeeper Scheme?
Under the JobKeeper Scheme, eligible businesses and not-for-profit organisations impacted by COVID-19 can access a subsidy from the Government so that they can continue paying their employees. Eligible employers can claim a fortnightly payment of $1,500 per eligible employee who was employed as at 1 March 2020 and who remains employed by the employer, for a maximum period of 6 months (JobKeeper Payment).
For more information about which employers and employees qualify for the JobKeeper Payment see:
- the fact sheet for employers on the Australian Treasury website – JobKeeper Payment; and
- the fact sheet for employees on the Australian Treasury website – JobKeeper Payment.
Who is an eligible employer?
Employers (including not-for-profits) and self-employed individuals will be eligible for the JobKeeper Payment if:
- their business has an aggregated turnover of less than $1 billion (for income tax purposes[1]) and they estimate their GST turnover[2] has fallen or will likely fall by 30% or more; or
- their business has an aggregated turnover of $1 billion or more (for income tax purposes) and their GST turnover has fallen or will likely fall by 50% or more; and
- the business is not subject to the Major Bank Levy.
Registered charities (other than universities and non-government schools who are subject to the standard turnover decline tests above) will be eligible for the JobKeeper Payment if they estimate their GST turnover has fallen or will likely fall by 15% or more relative to a comparable period.
How is the turnover decline test applied?
Businesses and not-for-profits must demonstrate that their turnover has or is likely to fall by the requisite amount (30% or 50%) in the relevant month or quarter (depending on their Business Activity Statement reporting period) when compared to their turnover in a comparable period a year earlier.
If a business has an aggregated turnover (i.e. the business is part of a corporate group), the relevant GST turnover test is applied to each business within that corporate group. This means that individual businesses within a corporate group may be eligible for the JobKeeper Payment while other businesses in the group may not be eligible.
The Tax Commissioner will have discretion to determine eligibility in specific circumstances including for newly established enterprises and where the turnover for a business in a prior year is not representative of their usual or average turnover. The JobKeeper Payment cannot be paid to businesses that are in liquidation.
Who is an eligible employee?
Eligible employees are employees who:
- are currently employed by an 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 and systematic basis for longer than 12 months as at 1 March 2020);
- are a permanent employee of the employer, or if a long-term casual employee, not a permanent employee of any other employer;
- are at least 16 years of age as at 1 March 2020;
- are an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder at 1 March 2020;
- were a resident for Australian tax purposes on 1 March 2020; and
- are not in receipt of a JobKeeper Payment from another employer.
Are there anti-avoidance rules that I should be aware of?
Yes, Part IVA of the Income Tax Assessment Act 1936 (Cth) (Income Tax Act) is the general anti-avoidance rules for income tax. It protects the integrity of Australia’s income tax system by ensuring that arrangements that have been contrived to obtain tax benefits will fail.
Generally, the anti-avoidance measures will only apply to an arrangement if the answer is yes to both of the following questions:
- Did you obtain a tax benefit from a scheme – a benefit that would not have been available if the scheme had not been entered into?
- Would it be objectively concluded that you or any other person entered into or carried out the scheme, or any part of it, for the sole or dominant purpose of obtaining a tax benefit?
The anti-avoidance measures would likely capture arrangements that have been entered into for the purpose of accessing the JobKeeper Scheme when in ordinary circumstances the employer would not have qualified. An example would be manipulating turnover to meet the turnover decline tests. However, the fact sheet indicates that there will be some tolerance where employers, in good faith, estimate a 30% or more or 50% or more fall in turnover but actually experience a slightly smaller fall.
What are the changes to the Fair Work Act?
The Fair Work Act has been amended to support the implementation and operation of the JobKeeper Scheme. The new provisions only apply to employers who have qualified for the JobKeeper Scheme and their eligible employees, and (in certain circumstances) enable employers to:
- make temporary and partial stand downs;
- temporarily alter employees’ usual duties and locations of work; and
- agree with employees on altering their days and times of work and use of annual leave.
Can I stand down my employees?
Yes, in certain circumstances. The new provisions allow qualifying employers to issue ‘JobKeeper enabling stand down directions’ which enable them to direct their employees to work fewer hours or days (including no hours).
What are the requirements for a JobKeeper enabling stand down direction?
Employers can only give employees JobKeeper enabling stand down directions if:
- the employee cannot be usefully employed for their normal days or hours because of changes to business attributable to the COVID-19 pandemic, or Government initiatives to slow its transmission; and
- the implementation of the JobKeeper enabling stand down direction is safe, having regard to (without limitation) the nature and spread of COVID-19.
A JobKeeper enabling stand down direction must be in writing and employers must:
- ensure that the direction is reasonable in the circumstances, including (but not limited to) considering the employee’s caring responsibilities;
- notify and consult their employees at least 3 days before issuing the direction (unless the employee genuinely agrees to a shorter timeframe); and
- keep a written record of the consultation.
What are my JobKeeper Payment obligations during the period of a JobKeeper enabling stand down direction?
When an employee is on a JobKeeper enabling stand down direction, their employer must pay them the greater of the JobKeeper Payment or their usual pay for any hours that they work. The employee’s base rate of pay cannot be reduced. Employees will continue to accrue leave and their service continues for the purposes of redundancy pay and pay in lieu of notice.
What if my employee requests to engage in secondary employment during the period of a JobKeeper enabling stand down direction?
When an employee is on a JobKeeper enabling stand down direction, they can give their employer any of the following requests:
- a request to engage in reasonable secondary employment;
- a request for training;
- a request for professional development.
The employer must consider the request and must not unreasonably refuse the request.
Can I change my employees’ usual duties or work location?
Yes, in certain circumstances. The new provisions allow qualifying employers to issue ‘JobKeeper enabling directions’ which enable them to direct their employees to change their duties and work location (including working from home or a different location).
What are the requirements for a JobKeeper enabling direction?
Employers must ensure that:
- the direction is reasonable, including considering the employee’s caring responsibilities;
- the modified duties are within the employee’s skill and competency, and the employee has the required licences or qualifications;
- the duties are safe considering the nature and spread of COVID-19;
- the duties are reasonably within scope of the business’ operations; and
- any new location is suitable for the employee’s duties and does not require the employee to travel a distance that is unreasonable in all the circumstances.
Similar to JobKeeper enabling stand down directions, a JobKeeper enabling direction must be in writing, and employers must notify and consult with their employees at least 3 days before issuing the direction (unless the employee agrees to a shorter timeframe). Employers must also keep a written record of the consultation.
Can my employees work different days and times?
Yes, provided that the employer and employee agree. The new provisions allow qualifying employers and employees to agree for the employee to perform their usual duties on different days or times than usual. Employers must ensure that the:
- performance of the duties on different days or at different times is safe considering the nature and spread of COVID-19, and is reasonably within the scope of the business’ operations; and
- employee’s usual work hours are not reduced (reducing hours would require a JobKeeper enabling stand down direction).
If a qualifying employer asks their employee to work different days and times, the employee has to reasonably consider the request, and can’t refuse it unreasonably. The Explanatory Memorandum provides an example where an employee who usually works weekends could reasonably be required to work on weekdays in a situation where their employer’s business can no longer trade on weekends as a result of the COVID-19 pandemic.
Can I direct my employees to take annual leave under the new provisions?
No. However, the new provisions enable a qualifying employer to:
- request an employee take paid annual leave (if they keep a balance of at least 2 weeks); and
- agree with their employees to the employees taking twice as much as annual leave at half their usual rate of pay.
An employee cannot unreasonably refuse a request from their employer to take leave.
ARE MY EMPLOYEES ENTITLED TO REDUNDANCY PAY AS A RESULT OF A JOBKEEPER ENABLING DIRECTION?
The giving of a JobKeeper enabling direction does not amount to a redundancy.
WHAT DOES MY BUSINESS NEED TO DO?
Employers can register their interest in applying for the JobKeeper Scheme on the ATO website from 30 March 2020. Employers will then be able to complete an online application to verify their eligibility and identify eligible employees. Approved businesses will receive the first round of payments from the ATO in the first week of May and will be required to provide monthly updates to the ATO
Participating employers will be required to ensure eligible employees receive, at a minimum, $1,500 per fortnight, before tax. This applies even in circumstances where an eligible employee normally receives less than $1,500 per fortnight, before tax. It will be up to the employer whether their want to pay superannuation on any additional wage paid because of the JobKeeper Payment.
I’M A SOLE TRADER, WHAT DO I NEED TO DO?
Self-employed persons can also register their interest in applying for the JobKeeper Scheme via the ATO website from 30 March 2020. They will need to provide an ABN for their business, nominate an owner to receive the payment and provide that owner’s Tax File Number, together with a declaration as to recent business activity.
CONTACT US
Please contact us if you would like to discuss how your business can access JobKeeper Payments and the new changes to the Fair Work Act.
[1] Aggregated turnover is an entity’s annual turnover from carrying on a business plus the annual turnover from carrying on a business of any business or individual connected with or affiliated with the entity.
[2] GST turnover is the turnover a business reports on its Business Activity Statements. GST turnover includes all taxable supplies, and all GST free supplies but not input taxed supplies.
