Good Morning,
Following on from yesterday's article of the new Job Keeper scheme announced by the Federal government, I thought that based on the large response received from that email, I should go into some details as to how it may work with some real life exmaples.
However, let's do a quick recap of the basic application of the scheme :
For eligible employers who receive the JobKeeper Payment for an eligible employee, the employee will receive this payment basically as follows:
(a) If the employee ordinarily receives at least $1,500 in gross salary income per fortnight, they will continue to receive their regular income according to their prevailing workplace arrangements. In this case, the JobKeeper Payment will effectively subsidise part or all of the employee’s gross fortnightly salary income.
(b) If the employee ordinarily receives less than $1,500 in gross salary income per fortnight, their employer must pay the employee a minimum gross fortnightly salary income of $1,500 under the JobKeeper Payment scheme.
(c) If an employee has been stood down, their employer must pay the employee a minimum gross fortnightly salary income of $1,500 under the JobKeeper Payment scheme.
(d) If an employee was employed on 1 March 2020, has subsequently ceased employment with their employer, and then has been re-engaged by the same employer, the employee will receive a minimum gross fortnightly salary of $1,500 under the JobKeeper payment scheme.
An eligible employer receiving the JobKeeper Payment in respect of one or more employees will be required to notify each employee that they have been nominated as eligible employees for the employer to receive the payment.
Furthermore, an eligible employer has the option of choosing whether or not to provide superannuation guarantee support in respect of any additional salary income (to the extent that it relates to the JobKeeper Payment) paid to an eligible employee by an employer (refer to Example 1 below).
Where an employer receives the JobKeeper Payment for an eligible employee who has been receiving income support through Centrelink (or Services Australia) as a result of having been stood down or their hours being reduced, the employee will need to report the JobKeeper Payment as income, as this could affect their entitlement to such Centrelink support.
These are the basic rules of application for the scheme.
Below are 2 examples of how the new Job Keeper measures may apply:
EXAMPLE 1 – Employer affected by Covid-19 with multiple employees
Adam owns a business whose turnover has declined by more than 30% as a result of the downturn due to the Coronavirus.
The business had the following three employees as at 1 March 2020:
• Anne, who is a permanent full-time employee and who continues to work in the business earning a gross salary of $3,000 per fortnight.
• Nick, who is a permanent part-time employee and who continues to work in the business earning a gross salary of $1,000 per fortnight.
• Fred, who was recently stood down from the business without pay.
Adam is eligible to receive the JobKeeper Payment for each employee of $1,500 per fortnight (before tax), for a maximum period of six months (which would be paid monthly in arrears).
The JobKeeper Payment would provide the following benefits for the business and its employees:
(a) The business continues to pay Anne her full-time gross salary of $3,000 per fortnight, as well as superannuation guarantee support on this income. In this case, the $1,500 per fortnight JobKeeper Payment effectively partly subsidises the cost of Anne’s salary.
(b) The business continues to pay Nick his $1,000 gross fortnightly salary and an additional $500 gross amount per fortnight, resulting in a total gross fortnightly salary of $1,500.
In this case, the JobKeeper Payment fully subsidises the cost of Nick’s salary.
The business must continue to provide Nick with superannuation guarantee support on the $1,000 fortnightly salary amount, but has the option of choosing to pay superannuation on the additional $500 gross amount paid to Nick under the JobKeeper Payment scheme.
(c) The business must start paying Fred a gross salary of $1,500 per fortnight, which is fully subsidised by the JobKeeper Payment. The business has the option of choosing to pay superannuation on this amount paid to Fred under the JobKeeper Payment scheme. If Fred commenced receiving any Centrelink support (e.g., JobSeeker Payment), he will need to advise Centrelink of his JobKeeper payment.
EXAMPLE 2 – 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.
These examples provide you some insight as to how this scheme will apply in real life exmaples.
Tomorrow I am going to go some issues as to what you need to look our for, especially with regards to PAYG withholding and Superannuation.
I will also go into details with how STP will play an important role in the application of this scheme and will be the way the government will monitor employer activity to ensure compliance.
All the best and please stay safe.
Regards
George
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