Mark Molesworth, Tax Partner at BDO in Australia said the announcement is a sigh of relief for businesses, particularly sole traders who hadn’t received any mention in previous stimulus announcements.
“The wage subsidy scheme means that eligible employers - those with turnovers of under $1 billion that have taken a 30% hit and turnovers of over $1 billion that have taken a 50% hit - will receive a $1,500 per fortnight ‘job keeper payment’. This must be paid (before tax) to each employee as at 1 March who has either been stood down since that date or will be kept on over the next six months,” Mark said.
“The extension of this measure to sole traders who have an ABN will be a huge relief.
At present, few of the stimulus measures have helped this group specifically. This package will provide them with some hope of coming out the other side of this crisis.”
For an employee stood down entirely, the payment will be worth $1,308 per fortnight after tax ($1,500 less $192 PAYG withholding; assuming claim of the tax-free threshold and no HECS debt etc)
This payment will be a challenge to manage for payroll systems, particularly where there is no requirement to pay SGC in relation to part of the payment to the employee.
Three examples of this:
1. An employee currently earning $2,000 per fortnight and kept in that job by the employer. The employer gets the payment of $1,500 per fortnight and uses it to subsidise the employee’s wage. However, SGC must be paid on the full $2,000 paid to the employee.
2. An employee currently earning $1,000 per fortnight and kept in that job by the employer. The employer gets the payment of $1,500 per fortnight and must pass it on in full (ie the employee receives $1,500). SGC must continue to be paid on $1,000, but not on the additional $500.
3. An employee currently stood down earning $nil per fortnight. The employer gets the payment of $1,500 per fortnight and must pass it on in full (ie the employee receives $1,500). No SGC need be paid.
There will also be an increase to the Centrelink Partner Income Test to $79,000 (from $48,000).
For more information visit our recent article: Government announces new wage subsidy and tightens foreign investment rules in response to COVID-19