COVID-19 | Financial Assistance for Employers and Employees

Many Australians have been negatively impacted by the coronavirus (COVID-19) pandemic.

For business, this has involved significant decreases in turnover, and for individuals, the loss of jobs and reductions in income.

In response to this crisis, the Australian Government has introduced a number of financial support measures, including those set out in the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (COVID Response Act) and the additional measures announced on 30 March 2020.

This update outlines some of the financial assistance which may be available to employers and employees who have been financially impacted by COVID-19, such as JobKeeper Payments, JobSeeker Payments and early access to superannuation.

These measures will no doubt be relevant to employment related decisions and communications during this crisis, such as those regarding stand downs, redundancies and pay reductions.

Jobkeeper Payments For Employers

On 30 March 2020, Prime Minister Scott Morrison announced financial support measures which include a JobKeeper Payment, aimed at assisting employers to keep people on their payroll and avoid redundancies.

The information below is based on that announcement, which may be subject to change once draft legislation is prepared and considered by Parliament.

Eligibility requirements

The Prime Minister’s announcement indicates that eligible employers will be those with annual turnover of less than $1 billion who self-assess as having a reduction in revenue of 30% or more, since 1 March 2020 over a minimum one-month period. Employers with annual turnover of $1 billion or more must demonstrate a reduction in revenue of 50% or more. Eligible employers include companies, trusts, sole traders, not-for-profits and charities.

The JobKeeper Payment is a subsidy paid to employers for each eligible person who was employed on 1 March 2020 and is retained or continues to be retained by that employer, including those who are stood down or re-hired. Eligible employees include full time and part time employees, and casuals employed for at least 12 months. This includes Australian residents, New Zealand citizens in Australia on subclass 444 visas and migrants who are eligible for JobSeeker Payments and Youth Allowances.

The JobKeeper Payment will be a flat wage subsidy of $1,500 per fortnight per eligible employee, paid on the basis that the employer pays those eligible employees at least $1,500 per fortnight (before tax). The payment represents about 70% of the national median wage and 100% for those in accommodation, hospitality and retail. This means that a person who ordinarily earns more than $1,500 a fortnight may continue to receive their normal wage (subject to any agred changes to hours or rates of pay), with the first $1,500 of their fortnightly wage being met by this payment. It also means that an employee who ordinarily earns less than $1,500 a fortnight will recdeive their ordinary wage plus a top up to bring them to $1,500 per fortnight (before tax)

Employers will still be obligated to pay the minimum superannuation guarantee entitlement of 9.5% on their employee’s ordinary income. The Government has advised that it will be up to each employer to decide whether they wish to pay superannuation on any additional wage paid because of the JobKeeper Payment, including those employees stood down without pay.

The announcement indicates that payments to employers will commence from the first week of May and be backdated to 30 March 2020.

Applying for the JobKeeper program

Eligible employers can register their interest for the JobKeeper program with the Australian Taxation Office via ato.gov.au

Conclusion

The Government is expected to make further announcements in relation to financial assistance packages and further changes will no doubt be made to relevant legislation.

Given the unprecedented rate of change, we note that the information set out in this update is intended to provide general understanding of certain financial assistance measures as of 31 March 2020 and specific advice should be obtained in relation to particular circumstances.

JobSeeker Payments And Other Benefits For Individuals

The Government has also responded to the unprecedented circumstances resulting from COVID-19 by amending the Social Security Act 1991 (Cth) and other legislation to expand the eligibility requirements for certain benefits provided through Centrelink.

Depending on an individual’s particular circumstances, benefits they may be entitled to apply for include a JobSeeker Payment (previously known as Newstart, for Australian citizens and residents aged between 22 and 66 years), a Youth Allowance (for people 21 and under) or a Parenting Payment (for the primary carer of children under 8 years). Other welfare benefits that may be relevant due to COVID-19 include Austudy, ABSTUDY, the Farm Household Allowance and the Special Benefit (for those in severe financial hardship).

Note that benefits will not be payable where an individual receives payments from an employer under the JobKeeper program.

Eligibility requirements

Eligibility for the JobSeeker Payment and Youth Allowance has been temporarily expanded to include, from 27 April 2020:

• a permanent employee who has been stood down or lost their job;
• a sole trader, self-employed, casual or contract worker whose income has reduced; or
• a person caring for someone who has COVID-19.

Asset tests have been waived for these benefits, though income testing still applies. Income tests, which effect eligibility and the amount of benefits payable, depend on an applicant’s particular circumstances, including whether they are single, have a partner, have dependent children and/or are a principal carer.

If an individual is still receiving an income, they must not be earning more than $1,075 a fortnight to be eligible for a payment. On 30 March 2020, the Government announced that the partner income threshold would be increased from $48,000 to $79,000 per annum, to enable more individuals to be eligible for payments.

If an individual who loses their job receives a lump sum pay out from their employer, such as accrued leave entitlements and a termination or redundancy payment, an income maintenance period may apply. Where this occurs, this will delay the date from which they are entitled to benefits, though they may still apply to Centrelink when they are made redundant. This period will be determined by Centrelink based on the amount received, though it can be waived in certain cases.

Centrelink have temporarily waived many other eligibility requirements, including the usual waiting period, the liquid asset test waiting period, the newly arrived residents waiting period and the seasonal work preclusion period.

For a period of six months from 27 April 2020, the mutual obligation requirements to look for work while receiving benefits are being relaxed. There are exemptions for people who must home school due to childcare or school closures, people isolating due to COVID-19 symptoms and those caring for someone with COVID-19. Other persons are still required to look for work, but this has been reduced to four job searches a month.

Economic Support Payments – from 31 March 2020

Where an individual receives Centrelink benefits before 13 April 2020, they will receive a one-off Economic Support Payment of $750, which will be paid to them between 31 March and 13 April 2020.

A second Economic Support Payment will be paid on 13 July 2020, but is not payable to those receiving the Coronavirus Supplement which commences from 27 April 2020.

Coronavirus Supplement – from 27 April 2020

Where an individual’s claim for Centrelink payments is approved, such as the JobSeeker Payment, Youth Allowance or Parenting Payment, a Coronavirus Supplement of $550 per fortnight will be added to those payments from 27 April 2020.

Importantly, this means even where an individual is still receiving some income but remains below the income threshold and receives a JobSeeker Payment or other benefits, they will receive the full $550 Coronavirus Supplement.

Individuals who do not qualify for Centrelink benefits are not entitled to the Coronavirus Supplement.

Applying for Centrelink benefits

It is recommended that individuals who wish to apply for financial assistance as a result of COVID-19, register their intention to claim via a myGov account linked to Centrelink. Where this is done, Centrelink will contact the person by telephone to verify their identity and process their claim, with any payments being backdated to the date the intention to claim was registered.

Detailed instructions for setting up a myGov account can be found at:

https://www.servicesaustralia.gov.au/individuals/online-help/create-mygov-account#mygov

Alternatively, a claim may be submitted by telephone or at a Centrelink office.

Conclusion

The Government is expected to make further announcements in relation to financial assistance packages and further changes will no doubt be made to relevant legislation.

Given the unprecedented rate of change, we note that the information set out in this update is intended to provide general understanding of certain financial assistance measures as of 31 March 2020 and specific advice should be obtained in relation to particular circumstances.

Early Access To Superannuation For Employees And Sole Traders – From Mid-April 2020

In addition to the Government benefits outlined above, the COVID Response Act has amended the Superannuation Industry (Supervision) Regulations 1994 (Cth), to allow certain people to access their superannuation early.

Eligibility requirements

An individual may apply to the Australian Taxation Office for a determination that an amount of preserved benefits, or restricted non-preserved benefits, in a specified superannuation fund be released on the ground that it is required to assist them to deal with the adverse economic effects of COVID-19 where:

• they are unemployed;
• they are eligible to receive the JobSeeker Payment, Parenting Payment or Special Benefit or Farm Household Allowance;
• they are eligible to receive a Youth Allowance (other than on the basis that the person is undertaking full-time study or is a new apprentice)
• they were made redundant, or their working hours were reduced by 20% or more on or after 1 January 2020; or
• they are a sole trader and their business was suspended or suffered a reduction in turnover of 20% or more on or after 1 January 2020.

Note that the release of moneys from a defined benefit interest is not permitted by all superannuation funds.

At this stage, it seems that an applicant will be only be required to make a declaration about the need for the funds, rather than providing proof of such need. If approved, the relevant superannuation fund will be directed to make payment as soon as practicable.

Where approved, individuals may access up to $10,000 of their superannuation for the 2019-20 financial year, and a further $10,000 in the 2020-21 financial year.  At present, if an amount of less than $10,000 is withdrawn in one payment period, there is no ability to withdraw a second amount in that same period to get up to the $10,000 maximum.

Early access payments are tax-free and will not affect any Centrelink or Veteran’s Affairs payments an individual receives.

Applying for early access

Applications may only be made up to the end of the 6 month period commencing 25 March 2020. Government Fact Sheets indicate that applications can be made from “mid-April 2020” and should be made to the Australian Taxation Office through the myGov portal.

In deciding whether to apply for early access to superannuation, it is important to note that this will reduce the balance available at retirement, given the amount withdrawn would have likely grown over time.

Conclusion

The Government is expected to make further announcements in relation to financial assistance packages and further changes will no doubt be made to relevant legislation.

Given the unprecedented rate of change, we note that the information set out in this update is intended to provide general understanding of certain financial assistance measures as of 31 March 2020 and specific advice should be obtained in relation to particular circumstances.

For details of all our COVID-19 tips and updates, visit the Gadens COVID-19 Hub.

Authored by:

Jonathon Hadley, Partner