Australian Treasury's $130bn wage subsidy to counter covid-19

The Australian Federal Treasury has announced a $130bn wage subsidy to support the domestic economy through the covid-19 outbreak. This is Treasury's third and most significant response to the pandemic and follows an initial support package of $17.6bn announced on March 12, which was subsequently scaled up to $63.8bn on March 22 (see analysis on those measures here). Adding in the $130bn wage subsidy, total Commonwealth support has been boosted to $193.8bn out to 2023/24 (10.2% of annual GDP), though most of this is to impact the economy before June 30 and then into the 2020/21 financial year. Over this period, total Commonwealth support is around 20% of GDP, we estimate. 

Under the 'supporting businesses to retain jobs' measure, the intent of the wage subsidy is to allow employers that have been significantly impacted by covid-19 to reactivate trade quickly after the period of disruption eases by helping them to retain staff in the interim. Eligibility for businesses to participate is as follows; 

• Where turnover is below $1bn; turnover needs (or be expected) to fall by more than 30% over their usual activity statement reporting period (one or three months) relative to the same period a year ago 

• Where turnover is above $1bn; turnover needs (or be expected) to fall by more than 50% over their usual activity statement reporting period (one or three months) relative to the same period a year ago

Note that non-for-profit organisations can participate but the nation's 5 largest banks—that are subject to the 'Major Bank Levy'—have been excluded. Self-employed individuals can also participate in the case where they expect to sustain a 30% reduction in turnover (for at least a one-month period) relative to the same period a year ago.  

The scheme is to be administered by the ATO and will see qualifying businesses receiving wage support from the government in the form of a $1,500 'jobkeeper payment' per fortnight per each eligible employee that was on their books on March 1, including any that have since been stood down provided their former employer re-engages them, for a maximum period of 6 months. The scheme started on March 30 and payments will be made by the ATO to employers monthly in arrears from the first week of May. 

An 'eligible employee' is one who was either a full-time, part-time or long-term casual (tenure of at least 12 months) with their employer as at March 1. They must also be an Australian citizen or permanent visa holder or meet other eligibility criteria set out here.  

Where those qualifications are met, receipt of the wage subsidy requires an employer to ensure that each eligible employee receives remuneration of a minimum of $1,500 per fortnight for a maximum of 6 months. Thus, effectively;

• an employee ordinarily receiving less than $1,500 per fortnight (before tax) will have their wage topped up by the employer to meet this threshold
• an employee ordinarily receiving $1,500 per fortnight (before tax) maintains the same level of income
• an employee ordinarily receiving more than $1,500 per fortnight (before tax) has the first $1,500 of their wage subsidised, with the employer then able to top up the payment so that it remains in line with their existing arrangement

In the case where an eligible employee was on the books as at March 1 but then subsequently stood down, their previous employer can re-engage them and receive a $1,500 payment per fortnight, which they then must then ensure goes in full to the employee, before any top-up occurs. The design of the scheme provides employers with the discretion to pay superannuation on the additional component over and above their ordinary wage level. 

Supporting businesses to retain jobs fact sheet here 

Employer fact sheet here

Employee fact sheet here