MINISTER SUKKAR:
Good to be with you, Leon.
LEON BYNER:
Tell me about this issue, because there appears to be some confusion about what’s taxed and what isn’t and there are some claims that people are actually worse off. How can that happen?
SUKKAR:
Well, Leon, the $1,500 payment under JobKeeper, we’ve always made clear was subject to ordinary tax arrangements but what that means is the employer is required to withhold taxes – as they would on any salary or wages – at the marginal tax rate of that payment. So, if for example, we’ve got a person who, all they are is in receipt of is JobKeeper – so, they’ve potentially been stood down or they’re working modified hours but the only payment that they are receiving from their employer is the $1,500 a fortnight JobKeeper payment – then the employer is required to withhold tax at that marginal rate which for that payment, worked out to be $192 that they withhold so that’s the tax payable on that amount. Now, one of the issues that was raised in some of the papers over the weekend was, I suspect, employers mistakenly thinking that what they needed to do was apply the tax rate that would ordinarily apply to that person’s salary which in some cases would be a tax rate attributable to a salary much higher than $1,500 per fortnight. That’s wrong. Tax is only withheld on that $1,500.
BYNER:
That being the case, what’s the remedy? Just not to do it again or can you actually get a rebate or do you have to wait until tax time when you do your return?
SUKKAR:
Ordinarily, these things would be reconciled at tax time but in this instance, the ATO is putting in place a process or ability to try and ensure that where payments have been mistakenly withheld – and that would be the case here – that a person is made whole. That is the ordinary course of events, our tax laws are complicated and if employers make a mistake which actually happens outside of JobKeeper, quite frankly it happens quite often, the ATO does have that visibility.
BYNER:
All right just to be very clear, if you’re just getting the $1,500, the tax on that should be about $192 but if you were already getting a higher rate…interrupted.
SUKKAR:
Sorry, Leon, I should just add one other item to that and that is if you are claiming the tax-free threshold which is $18,200. Now, most people claim the tax-free threshold without even thinking about it, having said that some people may not claim the tax-free threshold for a particularly employer if were there second job for example. I doubt that that would ever be the case with JobKeeper because you can only receive it from one employer, but yes, in the ordinary course of events, $192 a fortnight is all that should be withheld.
BYNER:
So, if you were getting more but you’re not and you’re taxed at a higher rate, who do you talk to? Do you talk to your employer or do you talk to the ATO?
SUKKAR:
Well in the first instance you’d talk to your employer, it’s their obligation to withhold at the correct rate. Now if the employer at that point doesn’t seek to fix the situation, then you could speak to the ATO. What I read over the weekend, Leon, these were just genuine errors where businesses had applied the ordinary withholding rate on that employee without really thinking through that actually, an entirely different withholding rate should be applied on these payments.
BYNER:
I’m really glad that you’ve clarified this. The other question, just for the record, how many people have registered for JobKeeper?
SUKKAR:
We’re over the four million mark. At last count on Friday, it was over 4.1 million. Nearly 800,000 individual businesses have applied and that covers about 4.1 million employees. That will continue to grow and I suspect it will grow today but that was the last figure, about 4.1 million, Leon.
BYNER:
Now, the payments start when? May 6?
SUKKAR:
People are required to have been paid by their employer first. So, from the perspective of an ordinary employee, they should have already been paid and the payments that will be then made to employers are happening this week.
BYNER:
All right, so they’ll start rolling out within two days but of course, just like other payments, it won’t all happen on the same day for everybody, it will just get incrementally rolled out. Is that correct?
SUKKAR:
That’s right, although it is a pretty quick process even though that we’ve had to build a new process, to some degree. Build is probably the wrong word, we’ve had to work within existing systems but it will happen pretty quickly, it won’t be stretched out over an elongated period of time. They will start this week.
BYNER:
Michael, are there any tweaks, or changes planned for the way that JobKeeper works or is it all now set in stone?
SUKKAR:
The broad parameters of JobKeeper were set in stone in the legislation. We were conscience of the fact that we’d put together a $130 billion, entirely new payment very, very quickly in response to the urgency of coronavirus. So, what we did is we built in enough flexibility into the legislation that we’d then have the ability to what I call, troubleshoot, you know if there are specific issues, unusual business structures that might not be accommodated. So, what we have done and what we will do next week in Parliament is some further tweaks but really, they just fit within the broad parameter of the original legislation. For example, one of the tweaks that we’ve made is where you have a separate entity that employs all of these people which is a separate legal entity to the business that is actually suffering the turnover drop. We’ve made sure that that sensible change is accommodated in the legislation. But the broad parameters, the structure, who it covers, broadly speaking, those things have all been locked and I think what we’ve done over the last few weeks, Leon – and I must thank you and your listeners for a lot of the advice and the questions that you’ve been feeding through to my office, they have informed some of those tweaks that I wouldn’t say are mass changes, they are just things that we’ve made sure that we’ve dotted the I’s and crossed the T’s, within the rules, to make sure that they’re absolutely covered. For that, Leon, we are grateful because I’m sure many of your listeners know this, but you have been feeding a lot of their questions through to us for answers, which is great credit to you.
BYNER:
Well thank you for giving us a straight answer, Michael Sukkar. It’s good to have you on the show.