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Coronavirus and Employer Obligations

As a result of the Coronavirus isolation requirements, Fair Work has now released guidance on employee arrangements.

Below is a summary of situations that may arise, and the responsibility for employers and employees:

Where an employee HAS contracted Coronavirus and required to self-isolate

Employees who cannot attend work because they are sick with Coronavirus can take paid sick leave. If an employee needs to look after a family member or a member of their household who is sick with Coronavirus, or suffering an unexpected emergency, they are entitled to take paid carer’s leave.

Under the Fair Work Act, casual employees are entitled to 2 days of unpaid carer’s leave per occasion. Full-time and part-time employees can take unpaid carer’s leave if they have no paid sick or carer’s leave left.

An employee must give their employer reasonable evidence of the illness or an unexpected emergency if their employer asks for it.

Where an employee has NOT contracted Coronavirus but does not want to attend work

Where feasible, employers can provide flexible working arrangements that allow employees work from home.

If that is not possible, an employee may seek to take annual leave, long service leave or unpaid leave. However, there is no obligation for the employer to agree to paid leave. Additionally, there is no requirement for an employer to pay the employee for sick leave without the employee providing reasonable evidence (eg a doctor’s certificate)

Where an employee has NOT contracted Coronavirus but is required to self-isolate

An employee may be required to self-isolate because of factors such as returning from overseas or under other government or health officials orders. In this instance the employee is not ordinarily entitled to be paid (unless they use leave entitlements at the agreement of their employer).

The Fair Work Act does not have specific rules for these kinds of situations, so employees and employers need to come to their own arrangement. This may include:

working from home or another location (if this is a practical option), noting they should review any applicable enterprise agreement, award, employment contracts or workplace policies

taking sick leave if the employee is sick

taking annual leave

taking any other leave available to them (such as long service leave or any other leave available under an award, enterprise agreement or employment contract)

arranging any other paid or unpaid leave by agreement between the employee and the employer.

Where an employee has NOT contracted Coronavirus, but their employer has requested they do not attend work

Where an employer directs a full-time or part-time employee to stay home in line with advice, for example in line with the Australian Government’s health and quarantine advice, and the employee is not sick with Coronavirus, the employee should ordinarily be paid while the direction applies.

Where an employer has reduced workload due to deteriorating business conditions

Some employers may need to make employees’ positions redundant in response to a business downturn. If an employee’s job is made redundant their employer may have to provide redundancy pay. The Fair Work Act has requirements that employers have to meet before they can terminate an employee’s employment, such as providing notice or pay in lieu.

If an employer seeks to vary employees’ work rosters, they should review any applicable enterprise agreement, award, employment contracts or workplace policies. Particularly for full-time and part-time employees, an employer is usually required to seek employees’ agreement to change their rosters.

Under the Fair Work Act employees can only be stood down without pay in limited situations. Deteriorating business conditions due to the Coronavirus would generally not be one of these situations.

An employer should carefully review their obligations under the Fair Work Act as well as any applicable awards or agreements before dealing with any of the above situations.

economic stimulus

Coronavirus Economic Stimulus Package

The government recently announced 2 stimulus packages worth $84 billion in response to the impact the ongoing Coronavirus pandemic is having on the Australian economy. A number of the measures announced are aimed at minimising the financial impact on and supporting small and medium businesses. These measures are discussed in more detail below.

Boosting cash flow for employers

Small and medium businesses that employ workers will be eligible for tax-free payments totaling between $20,000 and $100,000. The total received by a business will depend of how much a business withholds. The payments will be made in the form of a credit to upcoming activity statements.

To be eligible businesses must have an aggregated turnover of less than $50 million (based on prior year turnover) and employ workers. There is no need to register or apply for these payments.

For businesses that withhold tax from their employees’ salary and wages, the first payment will be equal to 100% of the PAYG withheld between January 2020 and June 2020 up to a maximum of $50,000. The minimum payment is $10,000, and eligible businesses that pay salary and wages but are not required to withhold tax will still receive this minimum amount. The minimum payment will be applied to the first Activity Statement lodged. If a payment places the activity statement in a refund position, the refund will be delivered within 14 days.

The first payment will be applied to Activity Statements for the period January 2020 through June 2020 after 28th April 2020 once an activity statement is lodged. Businesses lodging on a quarterly cycle will have the first payment applied in the March 2020 and June 2020 quarters. Businesses lodging on a monthly cycle will have the payment applied in the March, April, May and June 2020 monthly Activity Statements. To ensure equal treatment between lodgement cycles, monthly lodgers will receive a payment for March equal to 300% of the PAYG tax withheld in that month.

The second payment will be made to eligible employers that received the first payment and remain active. It will be equal to the total received from the first payment and be applied to Activity Statements for the period June 2020 through September 2020. Businesses lodging on a quarterly cycle will have half of the second payment applied to the June quarter and half to the September quarter. Businesses lodging on a monthly cycle will have a quarter of the payment applied to each of the each of the June, July, August and September monthly Activity Statements.

Examples

Bob’s Construction

Bob operates a construction business and employs 10 staff. Each month Bob is required to withhold $12,000 in PAYG from his employees’ wages. Bob’s business will receive:

  • A payment of $36,000 for the March period,
  • A payment of $12,000 for the April period,
  • A payment of $2,000 for the May period (taking total payments up to the $50,000 cap),
  • A payment of $12,500 for the June period,
  • A payment of $12,500 for the July period,
  • A payment of $12,500 for the August period, and
  • A payment of $12,500 for the September period.
  • The total amount received will be $100,000 – $50,000 for each of payments 1 and 2.

Nina’s Bakery

Nina operates a bakery and employs a number of part time and casual workers. Nina is required to withhold PAYG of $6,400 in the March quarter and $8,200 in the June quarter from her employees’ wages. Nina’s business will receive:

  • A payment of $10,000 for the March quarter (being the minimum amount for payment 1), and
  • Payments of $4,600 (balance of payment 1) and $7,300 (being half of payment 2), and
  • A payment of $7,300 for the September quarter (being half of payment 2).

Leslie’s bookstore

Leslie operates a bookstore and employs 2 part-time workers. Both workers generally work only a few hours a week and as such Leslie does not withhold PAYG from the wages. However, one of the staff is required to work full-time for 4 weeks in May while Leslie is away and as a result Leslie is required to withhold $1,000 in the June quarter. Leslie’s business will receive:

  • A payment of $10,000 for the March quarter (being the minimum amount for payment 1),
  • A payment of $5,000 for the June quarter (being half of payment 2), and
  • A payment of $5,000 for the September quarter (being half of payment 2).

Leslie would need to withhold more than $10,000 in PAYG to receive any payments greater than the minimum amounts.

Supporting apprentices and trainees

Small businesses that employ apprentices or trainees may be eligible for a subsidy of 50% of wages paid to these employees. The aim of the subsidy is to help support businesses retain these workers. Where an employer is unable to retain an apprentice, the subsidy will be available to a new employer.

To be eligible a small business must be employing less than 20 full-time staff and be retaining an apprentice or trainee. The apprentice or trainee must have been in training with that business at 1 March 2020. Employers or any size as well as group training organization that re-engage an eligible our-of-trade apprentice or trainee will also be eligible for the subsidy.

The subsidy will be provided in the form of a reimbursement. The maximum subsidy will be $21,000 per apprentice and trainee ($7,000 per quarter). Final claims for the subsidy must be made by 31 December 2020.

Small businesses will need to register and apply for the subsidy which can be done from 2 April 2020. More information on how to apply will be made available as details of this measure are finalised and via Australian Apprenticeship Support Network (AASN) providers. AASN providers will also be responsible for undertaking and eligibility assessment which must be undertaken before the subsidy can be accessed.

Example

Hector’s Plumbing

Hector operates a small pluming business and employs 2 apprentices, Habib and Eliza. Habib is paid $650 per week and has been employed by Hector since 1 December 2018. Eliza is paid $500 per week and has been with Hector since 23 January 2020. Both apprentices were undertaking training at 1 March 2020. Hector’s business will receive:

  • $12,675 for Habib (being 50% of 39 weeks wage)
  • $9,000 for Eliza (being 50% of 36 weeks wage)

Increasing the instant asset write-off

For a number of years small businesses have been able to access an instant asset write-off. The concession essentially allows a business to claim full depreciation on eligible assets in the year it is purchased and ready for use. The asset cost threshold and business eligibility criteria have changed numerous times since this concession was first introduced. In its current format, the instant asset write-off is available to businesses turning over less than $50 million in aggregate and applies to assets costing under $30,000.

As part of the economic stimulus package the government has made the instant asset write-off available to businesses turning over under $500 million. It has also increased the assets eligible by increasing the cost threshold to $150,000. Importantly it continues to apply to both new and used assets.

This measure applies until 30 June 2020. Beyond this date the instant asset write-off is set to revert to a business turnover threshold of $10 million and assets costing under $1,000.

Examples

Stephanie’s Transport

Stephanie operates a transport business. The business turns over $10 million per year. The business purchases a secondhand truck for $75,000 in May 2020. Under the new measures Stephanie can claim a tax deduction in the 2019/20 year for the full purchase price of the truck. Under the existing tax arrangements Stephanie would be required to depreciate the cost of the truck over a number of years as it exceeded the $30,000 threshold.

Franco’s Farm

Franco operates a farming business. The business turns over $200 million per year. The business purchases a new mower costing $20,000 in May 2020. Under the new measures Franco can claim a tax deduction in the 2019/20 year for the full purchase price of the mower, Under the existing tax arrangements Franco would be required to depreciate the full cost of the mower over a number of years as the businesses turnover exceeded the $50 million threshold.

Backing Business Investment

Small and medium businesses will be able to accelerate the depreciation claimed on purchases of new assets. The assets must be new (not secondhand) and be purchased and installed or used in the business by 30 June 2021.

The accelerated deduction will be in the form of a 50% deduction of the cost of the asset when it is purchased and installed or first used in the business. The balance of the assets cost will be depreciated under existing depreciation rules.

Businesses must have an aggregated turnover of less than $500 million to be eligible. Most depreciating assets will be eligible, but certain assets such as buildings are excluded. Importantly the asset must be new.

Examples

Stephanie’s Transport

Stephanie operates a transport business. The business turns over $10 million per year. The business purchases a new truck for $180,000. The truck is ordered in June 2020, but it is delivered and begins being used in the business in August 2020. Under the new measures Stephanie can claim a tax deduction of $90,000 as well as claim depreciation as normal on the balance of the truck cost in the 2020/21 year. Under the existing tax arrangements Stephanie would be required to depreciate or pool the entire cost of the truck over a number of years.

Franco’s Farm

Franco operates a farming business. The business turns over $200 million per year. The business purchases a new tractor costing $200,000 in May 2020. Under the new measures Franco can claim a tax deduction of $100,000 as well as claim depreciation as normal on the balance of the tractor purchase in the 2019/20 year. Under the existing tax arrangements Franco would be required to depreciate the full cost of the tractor over a number of years.

ATO support measures for those affected by Coronavirus

In addition to the stimulus measures announced by the government, the ATO will implement a range of administrative measures to assist businesses experiencing financial difficulty as a direct result of the Coronavirus pandemic.

These measures will be tailored to each business’ situation, but may include:

  • Deferral of payment of BAS, income tax and fringe benefit obligations/
  • Variation of March PAYG income tax instalments to nil, and claiming a refund for September and December 2019 instalments already paid,
  • Remission of interest and penalties applied after 23 January 2020 on existing tax liabilities,
  • Allowing businesses to enter into low interest payment arrangements for existing and upcoming tax liabilities.

Want to find out more?

Talk to us today to find out more on these recently introduced measures and how your business can benefit from them.