The difference between your business making it through this or not…

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The Government has announced the third and largest economic stimulus package in response to the coronavirus pandemic as a flat $1,500 payment paid to businesses who retain their workers through this virus crisis.

The payment, which will be delivered to the ATO, will require employers to pass on the full $1,500 a fortnight, before tax, to eligible employees.

To qualify, businesses will need to self-assess a reduction in revenue of 30 per cent or more if their turnover is less than $1billion, and 50 per cent or more for businesses with turnover over $1billion.

Eligible employees will include those employed by the employer at 1 March 2020, including those who have been stood down.  Retrenched workers can be re-hired to qualify for the payment.  It will include full-time & part-time employees, as well as casual employees if they’ve been at the same employer for over a year, as well as sole traders.

This will no doubt be the difference between some businesses making through the coronavirus pandemic, or being forced to close their doors.  This measure will maintain the important connection between employer and employee, and ensure that more businesses are open on the other side of this, which will allow our economy to rebuild faster, and stronger.

The Government has costed this policy based on 6 million employees being eligible for a total cost of $130 billion.

The payments from government to business will be taxed as ordinary income to the business.

Of course, as with every new policy only recently outlined, there are many questions around the detail of its application.  So far those questions seem to be around the 30% reduction in revenue criteria.  For example; How will it be assessed and by whom? Over what time frame does the reduction need to occur? Will it need to be repaid if it is later determined that you had only a 29% reduction?  The answers to these questions will present themselves in due course.

In the meantime, please don’t hesitate to contact our office with any questions.

Eligible businesses, including not-for-profits, charities, and self-employed individuals, will need to register an intention to apply on the ATO’s website.

Treasury example:

  1. Employer with employees on different wages

Adam owns a real estate business with two employees. The business is still operating at this stage but Adam expects that turnover will decline by more than 30 per cent in the coming months. The employees are:

  • Anne, who is a permanent full-time employee on a salary of $3,000 per fortnight before tax and who continues working for the business; and
  • Nick, who is a permanent part-time employee on a salary of $1,000 per fortnight before tax and who continues working for the business.

Adam is eligible to receive the JobKeeper Payment for each employee, which would have the following benefits for the business and its employees:

  • The business continues to pay Anne her full-time salary of $3,000 per fortnight before tax, and the business will receive $1,500 per fortnight from the JobKeeper Payment to subsidise the cost of Anne’s salary and will continue paying the superannuation guarantee on Anne’s income;
  • The business continues to pay Nick his $1,000 per fortnight before tax salary and an additional $500 per fortnight before tax, totalling $1,500 per fortnight before tax. The business receives $1,500 per fortnight before tax from the JobKeeper Payment which will subsidise the cost of Nick’s salary. The business must continue to pay the superannuation guarantee on the $1,000 per fortnight of wages that Nick is earning. The business has the option of choosing to pay superannuation on the additional $500 (before tax) paid to Nick under the JobKeeper Payment.

Adam can register his initial interest in the scheme from 30 March 2020, followed subsequently by an application to ATO with details about his eligible employees. In addition, Adam is required to advise his employees that he has nominated them as eligible employees to receive the payment. Adam will provide information to the ATO on a monthly basis and receive the payment monthly in arrears.

  1. Self-employed

Melissa is a sole trader running a florist. She does not have employees. Melissa’s business has been in operation for several years. 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 per cent compared to a typical month in 2019.

Melissa will be able to apply for the JobKeeper Payment and would receive $1,500 per fortnight before tax, paid on a monthly basis.

 

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