So another Stimulus. But before I explain it I am going to have a massive rant.
When Scott Morrison said there would be more coming he was not kidding. But even I did not expect 3 packages in 2 weeks.
It’s certainly keeping me busy – I have done nothing else except work on the details and identify how best this helps our clients. I think last week I spent more time on the phone than I have in the last 12 months. We have been in touch with almost all our clients. And I had to work on a Friday which more or less is like asking me to work on the Sabbath. I am not a happy bunny at the moment but when it has to be done – it has to be done.
It’s also all very depressing. We talking about handouts, when I like talking about making income, wealth and creating financial freedom.
But we are in the equivalent of a Zombie Apocalypse, which means all business models have been turned upside down. So my advice over the last few weeks has been about financial survival, not financial freedom.
Today is no different.
This package was required because the last two were designed on the back of an A4 envelope and, well, did not work. If it were a house a builder built, it would fall over.
But The Government can’t say they screwed it up.
But eventually, like all ideas on the back of an envelope and by the powers of probability you were bound to get one right.
When discussing the previous packages with clients not one told me they would keep employees they were thinking of letting go because of the $189Bn stimulus package. Why? Because there was still an expectation that businesses will continue to pay net wages to their team.
In the case of many of my medical businesses, such as Dentists, Physiotherapists and even those undertaking elective surgeries when you have no or few patients you simply cannot afford to pay wages to the team no matter how much you want to. The same is true for my café, restaurant and retail store clients.
Here’s the problem. The first two caused mass panic and mass uncertainty. And we all hate uncertainty, especially when it comes to financial and/or job security. This 3rd package should have been our first.
The government should have told all business in the beginning not to press the self-destruct button and fire employees. They should have said keep your employees and instead ‘we the government’ will pay them at least the $1,100 you get on Jobseekers. Then we should have had an immediate second package giving businesses assistance.
If done in the beginning there would have been no panic by employers to sack people, it gives certainty to both employers and employees and more importantly no Centrelink queues spreading the pandemic even more. It would have given business time to think and strategise the minefield.
But because they thought of this back to front they are asking business to re-employ employees again.
Sorry but this is a monumental screw up which will cost the country billions of dollars in wasted stimulus money going to the wrong people.
But this 3rd package might be the one that saves jobs.
It’s also flawed.
Because everyone gets $1,500 a fortnight even if they were previously earning $500 a fortnight. A small side business with turnover of $10,000 a year? Well they now get $1,500 a fortnight too. Err… can someone explain that to me?
And what about those business who are set up as trusts who do not pay themselves a wage as they take out distributions. For them there is nothing. Zero. Zilch. That simply is not fair.
Enough of my rant now. Here’s what the 3rd package means to you and your employees.
It’s called the Jobseekers Payment and as a business you have to ‘register your interest’ after which the ATO will send you ‘updates’ via the ATO. Told you this was a back of an envelope idea.
JOBKEEPER PAYMENT
In order to qualify your business must be significantly impacted by the Coronavirus. As all my business clients are small to medium I have ignored large business matters.
This payment is available to employers and sole traders.
The Government will provide $1,500 per fortnight per employee for up to 6 months. To be eligible:
- Turnover of the business must have fallen by more than 30 per cent relative to a year ago
- You must elect to participate in the scheme. You will need to make an application to the (ATO) and provide supporting information demonstrating a downturn in your business.
The link is below
https://www.ato.gov.au/general/gen/JobKeeper-payment/
- You must report the number of ‘eligible’ employees employed by the business on a monthly basis.
- You will receive the payment for each eligible employee that was on your payroll system on 1 March 2020 and continues to be engaged by you – including full-time, part-time, long-term casuals and stood down employees.
Casual employees eligible for the JobKeeper Payment are those employees who have been with you on a regular basis for at least the previous 12 months as at 1 March 2020.
To be eligible, an employee must be an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder. Please note some of your employees will not be eligible depending on their Visa.
If you have dismissed or stood down employees you will still be able to claim. If you decide to reengaged employees will be able to claim providing the employee was employed by you on 1 March
2020.
It now becomes a bit messy because where an employee is accessing support (Jobseekers Allowance) though Services Australia because they have been stood down or had their hours reduced and you the employer will be eligible for the JobKeeper Payment, the employee should advise Services Australia of their change in circumstances. They will no longer be able to claim Jobseekers Allowance and will receive JobKeeper Allowance instead.
Sole Traders will receive the JobKeeper Payment where they have suffered or expect to suffer a 30 per cent decline in turnover relative to a comparable a period a year ago.
It is not unusual for employees to have more than one job. In such cases they can only claim via one employer so you will need to have relevant discussions with your employees.
The employee also has to notify you if they believe you are their ‘primary employer’ to claim the JobKeeper Payment on their behalf.
How do you determine who is the primary employer?
The ATO guidance is that when the employee first stared working for you did they claim on their Tax File Declaration that they wanted to claim the tax free threshold? If yes, then the chances are you are a primary employer. If no then you are not.
So now you know who is gets it much mush gets paid and how you get paid?
You will be paid $1,500 per fortnight per eligible employee. Eligible employees will receive, at a minimum, $1,500 per fortnight, before tax, and you are able to top-up the payment if you wish.
If you participate in the scheme, your employees will receive this payment as follows.
- You normally pay more than $1,500 per fortnight
- If your employee normally receives $1,500 or more in income per fortnight before tax, they will continue to receive their regular income. The JobKeeper Payment will subsidise all or part of the income.
- You normally pay less than $1,500 per fortnight
If your employee normally receives less than $1,500 in income per fortnight before tax, their employer must pay their employee, at a minimum, $1,500 per fortnight, before tax. - Your employee has been Stood Down
If your employee has been stood down, you must pay you employee, at a minimum, $1,500 per fortnight, before tax. - Your re-engage an employee
Your employee was employed on 1 March 2020, but they then ceased employment with you but then you re-engaged the employee will receive, at a minimum, $1,500 per fortnight, before tax.
It would appear that the $1,500 Jobkeeper Payment does not attract Superannuation Guarantee. Any amount over this is subject to Superannuation.
You need to ensure your payroll is set up correctly otherwise the payroll could be calculated incorrectly.
Payments will be made to you monthly in arrears by the ATO which means cashflow will still be an issue as you have to pay it out before you get the assistance from the government.
The subsidy will start on 30 March 2020, with the first payments to be received by employers in the first week of May.
If you decide to retain staff you need to ensure that you can continue to pay them between now until May 2020. The amounts will be backdated but it is up to you to ensure you have enough cashflow to
pay wages until then.
We are unsure at this stage if it is acceptable to run payroll from now until May with the $1,500 payment but not physically pay it until the money is received from the government.
A Word of Warning
- These payments are before taxes which means taxes must be deducted and paid to the ATO.
- If you are a sole trader please note that any payments you receive are taxable and when your tax returns are completed for 2020 and 2021 you will have taxes to pay so please put money aside to ensure you can pay this.
- There appears to be a lot of Red Tape involved in obtaining this package. You have to
- Apply for it
- Prove income has fallen and at this stage they have not advised what they need
- Have conversations with your team to identify eligible employees
- Provide a list to the ATO who are eligible employees
- Provide an employee list every month to the ATO
- Run slightly more complex payroll
Many businesses are not set up to do this and may need to hire additional help
