COVID-19: breaking down the new wage subsidy
The Federal Government has announced a third economic stimulus package worth $130 billion, aimed at supporting Australian business to keep workers in jobs through the COVID-19 pandemic and beyond.
The key measure in the package is described as a “job keeper” payment, with a fortnightly subsidy of $1500 per employee extended to employers who retain their workers.
The payment will be available to employers with an annual turnover of less than $1 billion, who self-assess a reduction in revenue of 30 per cent or more, over a minimum one-month period from March 1.
Employers with an annual turnover of $1 billion or more will be required to demonstrate a reduction in revenue of 50 per cent or more to be eligible.
Today’s announcement takes the total value of economic stimulus pledges by the Federal Government and the Reserve Bank of Australia during the past three weeks to $319 billion, equivalent to more than 16 per cent of the country’s GDP.
Eligible businesses and sole traders will need to apply to the Australian Tax Office to receive the subsidy, with funds to be issued from the first week of May. Payments will be backdated to March 1 and will apply to each eligible employee who was on the books on that date and is retained or continues to be engaged by that employer.
The subsidy will apply to both full-time and part-time workers. Sole-traders and casuals who have been with their employer for 12 months will also be eligible, as will workers from New Zealand on 444 visas and migrants who are currently eligible for JobSeeker (formerly NewStart) payments or Youth Allowance.
Not-for-profit entities, partnerships and trusts can apply for the subsidy but businesses subject to the Major Bank Levy will not be eligible.
Under the stimulus, $1500 a fortnight before tax would be made available to businesses for each eligible employee, regardless of their previous wage – although this figure excludes superannuation payments. The subsidy is around 70 per cent of the national median wage, and the equivalent of the full median wage in heavily hit sectors such as retail and hospitality. It is anticipated six million Australians may qualify for the “job keeper” payment.
Parliament will be recalled to pass the legislation for the subsidy, however the Government has confirmed that legislation is likely to include a legal obligation for businesses to retain eligible employees to continue to receive the subsidy over the scheme’s six-month timeframe.
Treasurer Josh Frydenberg described the package as more generous than comparable measures in New Zealand and more inclusive than those in the United Kingdom. UK subsidies apply only to workers who have been stood down, Mr Frydenberg said.
Prime Minister Scott Morrison urged any workers who had already been stood down to “ring up their employer,” emphasising that people could not qualify for both Jobseeker and the “Job Keeper” payments.
Eligible businesses will be able to apply for the subsidy online and can register their interest via ato.gov.au
The latest stimulus package features changes to the income test for people on the JobSeeker payment allowing for their partners to earn almost $80,000 a year before they become ineligible for the payment.
On Sunday, the Federal Government also announced a much-needed $1.1 billion package to assist Medicare, mental health and domestic violence services in response to COVID-19.
The raft of stimulus measures announced in the past few weeks also includes $90 billion pledged by the Reserve Bank of Australia to fund small and medium-sized enterprises.
Jennifer Kirk is an Associate Director in Cannings Purple’s Government Relations team and spent more than seven years in Canberra working for the Commonwealth Department of Finance, the Department of the Prime Minister and Cabinet and the Commonwealth Treasury. If you need help mapping out your government engagement, contact Jennifer.
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