Wage subsidy scheme explained: $1500 and 30% the magic numbers


by | Mar 31, 2020 | 0 comments

Updated 1 April 2020 following amendments issued by Treasury on 31 March 2020

Australia’s wage subsidy scheme, known as the JobKeeper Payment, is the third economic stimulus package announced by the Federal Government in its coronavirus response. Businesses can apply to the Australian Taxation Office (ATO) for financial support to keep their employees on the job. Around 6 million Australians are expected to receive a flat payment of $1,500 per fortnight (before tax) for up to six months through their employer.

The wage subsidies, estimated to cost the Australian Government $130 billion, will be released to employers from early May 2020. Employers must experience a required turnover decline to be eligible to receive wage subsidies.  

Even though a business may close its doors during the next six months, the JobKeeper Payment will pay employees to remain on the books and essentially be ready to resume their jobs when the business re-opens. It is the employer’s responsibility to pass on the wage subsidy in full.

Key points

  • Businesses with an annual turnover of less than $1 billion and their turnover has fallen by more than 30 per cent (of at least a month) are eligible.

  • Businesses with an annual turnover of $1 billion and their turnover has fallen by more than 50 per cent (of at least a month) are eligible.

  • Employees will receive $1500 per fortnight from their employer for up to six months, even if they were earning less than this amount.

  • Employees who accept JobKeeper Payments and were also applying for or receiving an income support payment must advise Services Australia.

  • Eligible employees must have been on the books on 1 March 2020.

  • Employees continue to work or continue to be paid while the business closes down temporarily.

  • The ATO will make payments available to employers from the first week of May 2020.

  • Superannuation responsibilities apply.

  • More details to be released.

How much is the JobKeeper Payment?

Every eligible employee must receive at least $1,500 per fortnight from their employer, before tax. The Australian Government has declared $1500 a full median wage replacement for workers in the accommodation, hospitality and retail sectors. The wage subsidy is 70 per cent of the national median wage.

Employees that were previously earning less than $1500 per fortnight will be topped up to the full wage subsidy.

Employers who remain in business with employees who are receiving JobKeeper Payment should use the payment to subsidise the employee’s regular income according to the prevailing workplace arrangements.

The wage subsidy will be available for up to six months.

Who is eligible for the JobKeeper Payment?

The payment will be made to employers to pass on to their employees. The following business entities are eligible if other criteria apply:

  • Companies

  • Partnerships

  • Trusts

  • Sole traders, self-employed individuals

  • Not for profits, including charities

Businesses with an annual turnover of less than $1 billion and their turnover has fallen by more than 30 per cent (of at least a month) are eligible.

Businesses with an annual turnover of $1 billion and their turnover has fallen by more than 50 per cent (of at least a month) are eligible.

The activity statement reporting system (monthly or quarterly BAS) will be used by the ATO to assess reduced turnover. In general, the ATO will be assessing reduced turnover relative to turnover in the same period (month or quarter) in the previous year.

The Tax Commissioner has the discretion to assess a business individually:

  • if the previous year is not representative of the business’ usual or average turnover;
  • if the business is newly established;
  • if turnover is typically highly variable.

In addition, the Tax Commissioner has the discretion to:

  • use other tools to assess a business’ eligibility;
  • issue JobKeeper Payment to a business that has estimated the required reduction in turnover but actually experiences a slightly smaller downturn.

Businesses subject to the Major Bank Levy are not eligible under the wage subsidy scheme.

Employees who receive the payment can be:

  • Full-time or part-time employees

  • Stood down since 1 March 2020 

  • A casual worker who has been with their employer for at least the previous 12 months  

  • Australian residents

  • New Zealand citizens in Australia who hold a subclass 444 special category visa

  • Migrants who are eligible for JobSeeker Payment or Youth Allowance (Other)

  • At least 16 years of age

An employee cannot receive the JobKeeper payment from more than one employer. A previous employee who is re-engaged through the JobKeeper Payment, must advise Services Australia if they start receiving income in addition to any income support e.g. JobSeeker Payment they are receiving.

When will the JobKeeper Payments start?

The ATO will release the first payments to eligible businesses in the first week of May as monthly arrears. Businesses will continue to be reimbursed by the ATO from the first week of May.

Affected employers will be able to claim a fortnightly payment of $1,500 per eligible employee from 30 March 2020, for a maximum period of 6 months.

How do I apply to receive wage subsidies?

Businesses are asked to apply for the payment online. The ATO is taking registrations now.  

The business must:

  • Provide the ATO with the number of eligible employees engaged as at 1 March 2020.

  • Where there are no employees e.g. self-employed, nominate an ABN and an individual to receive the payment.

  • Continue to provide monthly updates to the ATO.

  • Advise employees that they have been nominated to receive the payment.

For most businesses, the ATO will use Single Touch Payroll data to pre-populate the employee details for the business.

Superannuation and the JobKeeper Payment

Where an eligible employer continues to operate with employees receiving the JobKeeper Payment, the employer will continue paying the superannuation guarantee on the employee’s income where the employee receives their full income. If an employee receives more than their usual income via the JobKeeper Payment, the business must continue to pay the superannuation guarantee on the usual income and has the option to pay superannuation on the additional income (before tax).

Where an eligible employer has stood down employees (e.g. in the case of a beautician that was forced to shut down), the employer can choose whether to pay superannuation on the JobKeeper Payment the employees will receive.

The Australian Government is expected to release more wage subsidy details once the legislation has been passed.

Useful resources:

For more information, refer to the  Treasury’s JobKeeper Payment – Information for Employers and JobKeeper Payment – Information for Employees

Read the Australian Government’s Fact Sheet Supporting businesses to retain jobs

Register for the JobKeeper Payment on the Australian Taxation Office website

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