At the time of publication, the important emergency sitting of the Commonwealth Parliament is underway with the intention of passing a raft of legislation aimed at keeping the economy alive during the global COVID-19 pandemic. One of the central pillars of the government's plan is the introduction of the JobKeeper payment, aimed at keeping as many Australians employed as possible during the economic downturn.
Whilst the debate continues, and includes proposals from the opposition to extend the eligibility of the JobKeeper payment to casual employees with less than 12 months service at their employer, and workers on certain visas, it is predicted that the bill will pass both houses without amendment.
This Alert sets out the key features of the JobKeeper payment scheme, however we expect further detail to become available in the coming days as the government seeks to more definitively establish its framework. The rules will be particularly important in providing some of this detail. We will provide further publications on the scheme as more is known about its operation.
Who is eligible for the JobKeeper payment and how much will it be?
This will be more detailed in a set of rules that are to be made by the Treasurer. However, the Prime Minister and Treasurer have previously indicated that businesses with:
- an annual turnover of $1 billion or less, and who suffer a turnover reduction of 30% or more; or
- an annual turnover of over $1 billion, an who suffer a turnover reduction of 50% or more
will be eligible for a payment of $1,500 per fortnight for all full time and part time employees who were on their books from 1 March 2020. Casual employees with a period of service for 12 months or longer will also be eligible.
The Commissioner of Taxation (ATO) will have the administration of the program, using the administrative provisions that already exist in the Commonwealth tax legislation.
Businesses’ GST turnover calculations will be used as reported on Business Activity Statements. The Commissioner of Taxation is likely to have some discretion in relation to the turnover reduction and level of impact from COVID-19. For tax groups, only companies within the group that suffer the required level of turnover reduction will be eligible.
What do employers need to do?
Employers who wish to receive the JobKeeper payment must:
- qualify for the JobKeeper scheme; and
- continue to pay fortnightly any employee the greater of:
- the amount that they would be entitled to for the hours they worked during that particular fortnight; or
- $1,500, being the fortnightly JobKeeper payment amount.
At this point, the JobKeeper payment will be provided to the employer as a capped reimbursement for payments already made by the employer.
If the employee is entitled to more than the JobKeeper payment as a result of the hours worked then the higher amount should be paid. If the employee is entitled to something less, then the JobKeeper amount of $1,500 per fortnight should be paid.
Employers will need to find the cash flow to make these payments, before they are reimbursed. The scheme operates from 30 March 2020 so if a business qualifies and has been making wage payments during this time they will be able to make a claim for a reimbursement.
It appears, however, that if a business has already stood down its employees from 30 March 2020 and as a result, has not paid its employees, it will be required to now provide them with the appropriate payment prior to seeking the JobKeeper reimbursement. There will no doubt be a need for businesses to look for lines of credit to makes these payments.
What powers to direct will employers have?
The bill provides for three broad directions that an eligible employer may give to an employee where their business changes because of the effects of the COVID-19 pandemic. The primary aim of these directions are to ensure that employees are kept associated with their employers as much as possible during this period of uncertainty.
The most significant direction is what is described as the ”JobKeeper enabling stand down", which allows an employer to direct an employee to either:
- not work on certain days they would normally work;
- work for shorter hours on the days they would normally work; or
- work a reduced number of hours in total.
Where an employee is subject to such a direction, the employer is eligible for the JobKeeper reimbursement of $1,500 per fortnight. This is in contrast to the current stand down provisions in the Fair Work Act 2009 (Cth) (FW Act) where employees are not paid when they are stood down.
In addition, employers will also have the power to direct employees to change the job they are performing by:
- undertaking any duties for a period of time that are within their skill and competency; and
- undertaking their normal or other duties within their skill and competency at a different location.
Employers who have issued employees with a JobKeeper enabling stand down direction are eligible for the JobKeeper reimbursement for those employee and must pay those employee as outlined above.
Prior to any of the directions becoming enforceable above, the employer must give the employee written notice at least three days prior to it coming into force. In addition, employers must allow an employee or their representative an opportunity to raise any comments or concerns with them and give the consideration.
Importantly, these directions can only be issued in circumstances where the employer has qualified for the JobKeeper payment scheme. As such, employers should not utilise these provisions until they have been deemed to qualify, a process which will likely be contained in the rules to be issued by the Treasurer.
It is important that any employer seeking to utilise these directions should familiarise themselves with the amendments in the FW Act as passed, and seek legal advice where necessary, as other circumstances must also be present, the absence of which may render the direction defective and invalid. If you misuse the JobKeeper enabling directions, employers may be liable to a civil penalty of up to $126,00 for a serious contravention.
What can be agreed between employers and employees?
In addition to the above directions, employers may also request employees to:
- change the days on which their normal hours are worked, and
- take a period of accrued annual leave at either full or half pay that does not result in the employee's annual leave balance being less than two weeks.
An employee must not unreasonably refuse either of these requests when made. In circumstances where an agreement cannot be made, it is open to the employer to approach the Fair Work Commission to have the matter resolved. This will be particularly useful in industries where Enterprise Agreements and Awards provide prohibitive conditions around when employers can direct employees to take leave.
Integrity provisions
The legislation contains specific integrity provisions and the existing administrative penalties and tax and criminal offence provisions will also apply.
If anyone enters into a scheme for the sole or dominant purpose of obtaining a Coronavirus economic response payment, the Commissioner of Taxation will have the power to determine that the entity was never entitled to a payment, or to reduce the amount of the entitlement, and to do so retrospectively. The Commissioner will be able to recover any overpayments and will have the power to impose significant penalties and interest. This specific integrity provision is aimed as contrived and artificial arrangements that technically satisfy the eligibility requirements, but have been implemented for the sole or dominant purpose of accessing a Coronavirus economic response payment.
The ATO will be supported by near real-time data through STP reporting to help identify wrongdoing.
Payments
Businesses with unmanaged tax debts should be talking to the ATO immediately.
The ATO will generally make the payments directly to businesses’ bank accounts.
However, the ATO can instead credit an amount to the business’s tax running balance account, to allow the ATO to have more time to make inquiries as to the eligibility of the business. While the default position is that the payment will not be withheld to offset against existing tax liabilities of the business, the Commissioner is to be given the power to offset against existing tax liabilities, rather than pay the business. This is more likely to happen where a business has unmanaged tax debts and has not engaged with the ATO to put a plan in place.
Record-keeping obligations
Entities must create and retain records substantiating information provided to the ATO in relation to eligibility and payments unless the ATO provides otherwise. This is an eligibility criteria and failure to satisfy the record-keeping obligations will disentitle the entity from receiving payments, and the ATO will be able to claw-back payments already made as the entity will be taken to have never been entitled to the payment. The ATO will have the power to issue guidance about the form and contents of records that must be kept.