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Implications of JobKeeper and JobSeeker on personal income tax

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Seb Dosen
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Last updated:  21 May 2020

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Introduction: differences between JobSeeker and JobKeeper

In March and April 2020, the Federal Government introduced numerous programs to help Australians cope financially with the impact of the COVID-19 pandemic. Two programs to ensure individual Australians have money to continue paying their bills when things get tough are JobSeeker and JobKeeper. 

JobSeeker supports individuals suffering from financial hardship due to unemployment. On the other hand, JobKeeper is designed to keep more Australians employed. You may fall into both categories of eligibility but you cannot receive both payments. More on this below. 

Here’s a snapshot summary of each and the difference between them:

 

JobKeeper

JobSeeker

Who is eligible 

1. Eligible employees of eligible businesses that have suffered a loss of income as a result of the COVID-19 pandemic

2. Self-employed sole traders who satisfy the eligibility criteria

More about eligibility for sole traders here.

Eligible individuals who are unemployed and seeking work - but the individual’s situation does not need to be directly related to the COVID-19 pandemic. The JobSeeker program also encapsulates payments for people who are unable to work for other reasons. Read the full details here.

Who it’s paid to

For employees, the payment is made to the employer who then distributes the payment to their nominated, eligible employees or business participants. 

For sole traders, the payment is made directly to the sole trader.

The payment is made to the individual directly.

Who applies

For a business with employees, the JobKeeper payment is made to the employer as a wage subsidy in arrears for all eligible employees or business participants. Employees will continue to be paid their salary or wages by their employer. 

For sole traders, the payment is made directly to the sole trader.

The payment is made to the individual directly.

Value

$1,500 per employee, per fortnight, before tax and other deductions. See what might affect the amount you’re paid here.

$1,100 per fortnight. This comprises the $550 Coronavirus Supplement and the usual $550 per fortnight JobSeeker payment. 

Is it taxed?

Yes - see more here.

Yes - it must be declared in your tax return.

Duration of program  

Fortnightly payments available for a maximum of six months from 30 March 2020.

The additional $550 per fortnight added to the JobSeeker supplement is available until around 27 September 2020. After this time, the amount will likely reduce back to $550 per fortnight.

More details and eligibility criteria

 

10 minute tax chats 

Did you know Airtax offers free 10 minute tax chats? If you have a question relating to tax, book some time with a tax specialist to get it sorted. See the type of questions and how to book here. 

Frequently asked questions

As an employee, is my JobKeeper payment taxable?

Yes. When you complete your 2019-2020 tax return, JobKeeper will form part of your assessable income and therefore taxed in accordance with your marginal tax rate. 

Why? As an employee, you do not receive the JobKeeper payment, your employer receives it as a wage subsidy in arrears. Your employer must continue to pay you your ordinary salary or wages and continue to meet the other business eligibility requirements to receive JobKeeper. See more about employer eligibility here.

Will JobKeeper look different on my income statement at the end of the financial year (for income tax purposes?)

To receive JobKeeper, your employer must meet the business eligibility requirements and continue to pay your wages or salary. If your employer is receiving JobKeeper, your take home pay is treated no differently to pre-JobKeeper for purposes. Your employer must withhold income tax and any other amounts that are ordinarily withheld from your wage or salary. Examples of amounts withheld from salary are HECS-HELP repayments and salary sacrifice arrangements.

Will I have to manually add in JobKeeper to my tax return?

No, the wages or salary you receive are effectively no different to pre-JobKeeper. This is because JobKeeper is a wage subsidy paid to employers in arrears for paying their employees. 

Will I be more likely to get a refund if I have been stood down?

If you have been stood down without pay, there is a chance your annual taxable income will have reduced. This might result in a slightly higher refund than if you’d earned the same income through to the end of the financial year. 

Other factors, such as deductions, will impact your tax refund (or amount payable). Airtax has a feature which will allow you to compare your deductions to others in similar industries and income brackets as you. This will help understand if you’re claiming more or less than the average deductions.

Can I claim WFH expenses if I have been stood down but looking for other work?

Working from home expenses can only be claimed where they are directly linked to your employment or, if you work for yourself, how you make income. You would therefore only be able to claim working from home expenses where you are actually physically doing your role from home or at least some portion of this.

If I am earning income from a side business, will my JobKeeper payment be affected?

No, as JobKeeper is paid to and managed through your employer, your employer reports your eligibility to receive the payment each month (via manual reporting or using Single Touch Payroll). In doing so, your employer proves that they’re unable to sustain your wages themselves and requires the JobKeeper payment to supplement your wage. 

If you are earning income from a side business, this will not affect your JobKeeper payment. However you will need to declare this income in your income tax return.

Can I request that the ATO and Government deduct taxes before either the JobKeeper or JobSeeker payment is made into my bank account?

When it comes JobKeeper, the answer is no. However, as an employee, you receive normal salary and wages, which are subject to PAYG withholdings. JobKeeper is paid to your employer as a wage subsidy in arrears.

As JobSeeker is paid directly to an individual, you may request tax to be deducted. See more information here.

If I have just received Centrelink / JobSeeker payments, do I need to lodge a tax return? 

All Australian residents and citizens are required to lodge a tax return, unless they qualify for an exemption (see details here). As JobSeeker (and other government payments such as Newstart, Youth Allowance, Austudy, the age pension and Carer payments) are classed as personal income, they need to be declared on your tax return.

The majority of these payments will automatically flow through to your myGov account to be included in your tax return. You will likely have taxes taken out on some of these as well as you go. If you are under the tax free threshold for the year and have had tax taken out then you may get some of this back at the end of the year. However, you would still need to lodge a tax return. 

The additional JobSeeker supplement (top up of $550 per fortnight) will be treated the same as the regular JobSeeker payment at tax time.

 Can I do casual work if I am on JobSeeker payment?

JobSeeker is available to anyone who is either unemployed or not in full time employment and looking for work. If you are working part time or on a casual basis, you will be eligible for JobSeeker providing you meet all the other requirements. 

 Remember, if you earn over a certain amount, your JobSeeker payment may be impacted. See more about income limits here.

Can I get JobSeeker payment when overseas?

If you leave Australia permanently, your JobSeeker payments will be stopped when you depart.

If you’re taking a short trip overseas, you will need approval to continue receiving JobSeeker payments otherwise these will also be stopped when you depart. 

There are few exceptions, such as if you’re a New Zealand resident or if you’re travelling for Australian Defence Force Reserves training. See more information here.

Is superannuation paid with JobKeeper?

If your normal salary and wages are more than $1,500 per fortnight, your employer's requirement to pay superannuation does not change. If your normal salary and wages are less than $1,500 per fortnight, it is up to the discretion of your employer as to whether they pay superannuation on the top up amount, subsidised by JobKeeper. Note, at time of publishing, this is not yet legislated but the Government has advised that it will be soon.

The Government has said the JobKeeper payment will be $1,500 per fortnight, why is mine less?

To ensure your employer can continue to keep you employed, they can receive JobKeeper - to the value of $1,500 per eligible employee, as a wage subsidy in arrears. Your employer is required to pay you your normal salary and wages and to withhold normal things like income tax, HECS-HELP repayments and salary sacrifice arrangements therefore you do not receive the full $1,500.

What happens if I have a salary sacrifice arrangement in place? How will this impact my JobKeeper payments?

This can continue. JobKeeper is paid to an employer as a wage subsidy in arrears to help them continue keeping their employees on the books. From the perspective of the employee, you may continue to be paid in cash or as a fringe benefit or an extra superannuation contribution where this is agreed with your employer.

More information

Airtax will endeavour to communicate more about this initiative in due course as further information is made available by the Government. In the meantime, you can find further information via:

Need a new way to do you tax?

Take a look at Airtax - we make tax effortless for everyone. It's free to sign up and you only pay when you lodge. To complete your tax return for just $99, get started here.

This document merely provides a broad outline of the subject and is necessarily general in nature.  If you require specific advice, which is tailored to your specific circumstances, please do not hesitate to contact us (fees would apply).

 

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