KPMG responds to passing of government’s JobKeeper legislation

On 8 April, Parliament passed the legislation to enable JobKeeper payments to flow to employers from the start of May, and the Treasurer has published Rules governing eligibility for the payments, which as of 8pm remained in draft form. This bold plan, expected to cost $130 billion over a six-month period to September 2020, will see an estimated 6.5 million workers receive a minimum payment of $1,500 per fortnight to assist them in bridging the financial challenge caused by COVID-19.

The Federal Government’s announcement of the scheme on 30 March left many questions open for employers. In particular, how would they satisfy the test of having at least a 30 percent or 50  reduction in turnover, if the comparison to the equivalent month or tax period a year ago was not a true reflection of COVID-19’s impact?  In addition, how would the turnover tests apply in the context of a corporate group?

The draft Rules, assuming no further changes occur, should answer some of these questions precisely – for example, entities in a corporate group would assess their reduction in turnover individually, rather than this being done on a consolidated group basis. However, the global aggregated turnover of the employer entity, its connected entities and affiliates would determine whether the required turnover reduction for each of its constituent entities is 30 percent or 50 percent. This would be contrary to what had been expected based on Treasury factsheets.

Some critical issues have been left to the discretion of the Commissioner of Taxation. This is reasonable in the context of the “need for speed” in both announcing the scheme and passing the legislation. Businesses who consider that the comparison to a month or tax period a year ago is not a true measure of the turnover reduction caused by COVID-19 would need to rely on this discretion in order for their JobKeeper application to be accepted.

Each employer must focus immediately on ensuring that it has a system in place for April to make sure that the employees covered by its JobKeeper application receive (in April) at least the necessary $1,500 per fortnight (or equivalent for a monthly pay cycle), backdated to 30 March. This will be a pre-requisite for receiving the subsidy (in arrears) from the Federal Government in early May.  Subsequent months will play out in similar fashion.

Changes to the Fair Work Act that form part of this legislative package will enable employers to manage their workforce more flexibly over the next six months, such that employees may stay on the books and qualify for JobKeeper, rather than being retrenched. Reaching agreement on these temporary measures is a credit to all stakeholders.

The JobKeeper scheme is progressive in that it benefits the low-paid or stood-down worker relatively more and is aligned with the notion that members of the community need to support each other along the path to physical and economic recovery.  It has a hefty price tag, but the potential to go down in history as value for money.

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