Coronavirus Economic Response Package (Payments and Benefits) Act 2020 & the JobKeeper Scheme

On 8 April, the Coronavirus Economic Response Package (Payments and Benefits) Bill 2020 (Cth) (‘the Bill’) was introduced to the House of Representatives by the Federal Treasurer, Josh Frydenberg. Due to the urgency of the matters addressed in the Bill, the Bill was passed by the House of Representatives and subsequently introduced into, and passed by, the Senate on the same day. On 9 April, the Bill received assent as Act 37 of 2020. The entirety of the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (Cth) (‘the Act’) commenced on 9 April.

Coronavirus Economic Response Payments and the JobKeeper Scheme 

Section 3 of the Act states that the object of the Act is to “provide financial support to entities directly or indirectly affected by the Coronavirus known as COVID-19”. The Act enables the Treasurer to make rules and establish a framework through which the Commissioner of Taxation (‘the Commissioner’) may administer “Coronavirus economic response payments”. The Treasurer can make rules under the Act as “required or permitted by this Act to be prescribed by the rules” or as “necessary or convenient to be prescribed for carrying out or giving effect to this Act”.

The Act substantially consists of an outline of the scope and nature of the Treasurer’s rule making power. For instance, the Treasurer may establish rules relating to the method of payment, the interest and liability of overpayment debts and the requirements of notice and reporting. However, the Treasurer is subject to certain restrictions. For instance, the Treasurer is precluded from creating rules which impose a civil penalty or create an offence, involve powers of arrest, detention, entry, search or seizure or impose a tax. 

On 9 April, the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) (‘the Rules’) was registered on the Federal Register of Legislation. The Rules are established under the Act and are intended to establish the JobKeeper Scheme. The Scheme temporarily offsets wage costs and is intended to provide businesses with the financial support required to retain staff and continue paying them during this period of economic downturn. The rest of this article outlines the administrative framework and operation of the scheme.

Preliminary Qualifications for Employers under the JobKeeper Scheme

The Rules indicate the necessary requirements for an employer to qualify under the JobKeeper scheme. According to the Rules, an employer is entitled to a JobKeeper payment for a fortnight provided they qualify for the scheme on or before the end of a fortnight which falls within the period from 30 March 2020 to 27 September 2020.  The employer, on 1 March 2020, must have carried on a business in Australia or been a non-profit body primarily pursing its objectives in Australia. 

The employer must also have satisfied the wage condition by making payments to the eligible employee equal to or greater than the amount of JobKeeper payment (less PAYG withholding and salary packaging) that the employer will receive for the employee for the fortnight ($1500). As the Explanatory Statement indicates, this is intended to reflect the “practical operation of the JobKeeper scheme in which the JobKeeper payment is essentially a reimbursement to an employer”. Moreover, the amount of $1500 is a uniform and strict standard and will apply regardless of whether the employee ordinarily receives more or less than that amount. 

Decline in Turnover Test

Furthermore, the employer must have met the “decline in turnover test” before the end of the fortnight.

The test can be satisfied in two ways. The “basic” test compares the projected GST turnover of the entity for a period (a month or a quarter which is known as ‘the turnover test period’) with its current GST turnover (‘the comparison turnover’) as calculated for a relevant comparison period. If the turnover test period falls short of the comparison turnover with a shortfall equivalent or greater than 30%, an employer will satisfy the test. If in the prior or current income year the business had or is likely to have an aggregated turnover equal to or greater than $1 billion, then the shortfall threshold will increase to 50% or more. The purpose of this provision is to recognise the greater capabilities of larger businesses to withstand the economic impacts of the global health emergency. Furthermore, ACNC-registered charities will only need to demonstrate a short fall of 15% (however this excludes public or private universities and schools). 

However, there may be circumstances where the “basic” test is insufficient. The Explanatory Statement makes reference to circumstances where a business was established in early 2020 (and therefore has no prior years of operation to use for comparison) or where a business has made a recent major business acquisition (which will not be reflected accurately in the comparative analysis). The Rules allow the Commissioner, if the Commissioner is satisfied that there is no appropriate comparison period, to establish by legislative instrument an alternative method of assessing the decline in turnover.

Exceptions

Furthermore, the Rules outline certain restrictions for the payments. An employer cannot apply for payments in the following cases:

•  Where on 1 March 2020, it had been subject to the levy imposed by the Major Bank Levy Act 2017 for any quarter ending before this date, or it was a member of a consolidated group and another member of the group had been subject to the levy,
• If it is a government body of a particular kind, or a wholly owned entity of such a body, or
• If at any time in the fortnight, a provisional liquidator or liquidator has been appointed to the business or a trustee in bankruptcy had been appointed to the individual’s property.

Employee Requirements

The Rules also indicate requirements of eligibility that apply to the employees of the applying employer. The Explanatory Statement states that these requirements are intended to reflect the purpose of the payments to act as wage subsidies. In order to be an eligible employee, a person must have been:

• 16 years old or older,
• An employee other than a casual employee or alternatively, be a long-term casual employee,
• An Australian resident or was a resident of Australia for the purposes of the Income Tax Assessment Act 1936 and was the holder of a Subclass 444 (Special Category) visa

as of 1 March 2020. The individual must also have been:

• An employee of the employer and
• Must not be excluded from being an eligible employee (these exclusions relate to recipients of parental leave pay and dad and partner pay)

any time during the fortnight.

Entitlements of Business Participants

Notably, the Rules primarily cover employer-employee relationships. However, the Rules also contain provisions for entitlements of “business participants”. The Rules state that an entity is entitled to a JobKeeper payment for an individual for a fortnight provided:

• The entity satisfies procedural and preliminary requirements (these requirements are similar to the ones outlined above for employers) 
• The entity is a non-profit body and 
• The individual is a business participant

An eligible business participant is an individual who is not employed by the entity but is actively engaged in the entity’s business by being:
-    an entity of a sole trader
-     a partner in a partnership
-    An adult beneficiary of a trust or
-    A shareholder in or a director of a company.

Operation of the JobKeeper Scheme

The Explanatory Statement indicates that the scheme operates on a ‘one in, all in’ rule, which means an employer cannot select which eligible employees will receive payments. An employer will be required to “notify all employees in writing that they have elected to participate in the scheme and that their eligible employees will all be covered by the scheme”.

Furthermore, the JobKeeper scheme has prospective operation. Eligible employers may claim payments for those JobKeeper fortnights and later fortnights in which they are registered under the scheme prior to the end of a JobKeeper fortnight. The exception to this rule is claims made for the month of April 2020. If an employer successfully registers under the scheme prior to the end of April and meets the eligibility requirements, they will receive payments for eligible employees for the two fortnights commencing on 30 March 2020.

With regards to superannuation guarantee obligations, the Rules do not provide much guidance. However, the Explanatory Statement states that regulations to be made under the Superannuation Guarantee (Administration) Act 1992 “will ensure that an employer will only need to make superannuation contributions for any amount payable to an employee in respect of their actual employment, disregarding any extra payments made by the employer to satisfy the wage condition for getting the JobKeeper payment”. In other words, employees will receive the superannuation entitled to them under their ordinary salary and not the $1500 JobKeeper payment, regardless if the JobKeeper payment is below or above their ordinary salary.

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Coronavirus Economic Response Package (Payments and Benefits) Act 2020, Coronavirus Economic Response Package (Payments and Benefits) Rules 2020, Bill and supporting documents available from TimeBase’s LawOne Service