Good Morning,
In our 3rd instalment on the Job Keeper scheme, let’s dig a little deeper into some of the issues you may face with this scheme and what to look out for.
The 5 key areas I wish to focus on are:
- PAYG Withholding
- Superannuation
- Cash Flow
- STP – Single Touch Payroll
- Workcover & Leave entitlements
Just a quick note - we have had no direction on the below topics and so these are our initial interpretations of the scheme. This scheme is not law yet.
1. PAYG Withholding
Based on what I can fathom from the scheme, the Job Keeper payments made are gross which means that I believe that it is in the intention that part of the funds you are receiving from the $1500 be allocated for PAYG withholding back to the ATO as and when you do your monthly or quarterly BAS.
So as I understand it now, the $1500 per fortnight (or $750 per week) payment is not paid completely to the employee, rather they will receive the equivalent of the $750 gross weekly wages, which to me means that the employee will receive $654 per week net in the hand and the employer will retain $96 of PAYG withholding on the wages(based on the latest PAYG withholding tables).
This needs to be clearly communicated to your employees especially if they have the expectation of getting the full $1500 pay per fortnight.
And I have to shake my head somewhat because when you think about it.... the government is giving you you money in the form of a stimulus and then asking for a portion of it back in taxes which in no way benefits the employee.
Other considerations that may apply here is if there are outstanding HELP debts which may require additional PAYG to be withheld. I wonder if the ATO will relax the repayment thresholds for the HELP debt repayments which for the 2020 year starts at $45k. The issue is that the employee might face a tax problem when they lodge their 2020 (or 2021 tax return ) because the right amount of tax is not withheld. Food for thought and you may need to have that in the back of your mind.
Remember that we are in April and have already gone through 9 months of the year so most people with HELP debts have probably already exceeded their thresholds.
Which brings us to the next issue.
2. Superannuation
From the worked examples in the previous article and also from the releases from the Government, it is clearly stated that superannuation is still be paid on some of the examples , especially on retained employees who have not been stood down and are still receiving their wages as per before.
However , my understanding is if you are paying the $1500 per fortnight for employees who were previosly stood down , then you are not required to pay super on the Job Keeper payments .
The scenario then needs to be considered for those businesses that have had to completely close as to what is the best strategy in order to conserve cash over the 6 month period.
It would be my first instinct to consider looking at a possible scenario of standing down employees (assuming that you are not breaching fair work act laws) and then bringing them back on to receive the Job Keeper payment for the 6 months.
That way these employees can still receive some form of wages and the employer will not have to pay super on these payments.
If employees remained and continued to be paid, then super will continue to be required to be paid on their wages even if you are using the Job Keeper scheme to pay for a portion of their wages(assuming that they are receiving wages that are more than the $1500/fortnight)
Please note that these are my initial impressions of the application of the scheme and as and when I get more information on the above 2 issues of PAYG withholding and Superannuation, I will send through more updates so we can all be clear on how to administer this scheme through your books.
3. Cash Flow
I have also been asked by some clients whether they should start paying their stood down employees now or wait until they start receiving the monies in early May. I believe the issue more relates to cash flow than anything else. It would be my preference that you do not stretch yourself if possible and just communicate to your employees that they will be back paid from the date you registered your interest (which hopefully was in the last 1-2 days).
I will point out that the Treasurer has said in his statement that you should start back paying stood down employees now with the understanding that you will be paid back in the 1st week of May. The reality is though that for many businesses with no income coming through the door, this is not practical or prudent.
Right now, cash is king. If the last month is any lesson to us, it's we just don't know what to expect or what can happen in a month.
Your stood down employees should be getting or at least applying for Centrelink benefits so they should continue to receive them up until they start getting the Job Keeper payments. Once they start receiving Job Keeper payments, they will need to notify Centrelink.
4. Single Touch Payroll
The next issue that I want to discuss revolves around Single Touch Payroll.
In my mind this is the key tool that the government will use to administer this program and I will bet that no employer will be allowed to access the Job Keeper scheme unless they are utilising STP within their business.
For self employed people, I can only imagine that the ATO is now in the process of creating a new reporting platform that will in some way tie in to other reporting mechanisms (like BAS returns) but right now it is a wait and see on that. What is clear is that the ATO is gong to require monthly “updates” of some sort to track the receipt's use of funds and whether you are still eligible to receives (based on if your business has started to recover).
5. Workcover and Leave entitlements
This point is not so much a pitfall rather highlighting what might be a potential problem for employers during the period you are receving and then on-paying the Job Keeper monies to your employees.
I imagine that there will need to be some sort of direction from other the federal government or state agencies as to whether:
1. Whether Job Keeper payments made to employees should be included in Workcover premium calculations.
2. Whether leave will continue to be accrue during this period.
We are not even close to getting answers on these questions but they are issues that will need to be resolved one way or another over the coming months.
I think it's an understatement to say that the next few weeks will be very interesting. As always once we know more we will communicate this through to you.
All the best and stay safe.
George
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