The Australian Government JobKeeper Payment scheme received Royal Assent on 9 April 2020. It is intended to assist businesses affected by the Coronavirus to support their wage costs.
The first pay period of the JobKeeper Payment scheme starts on 30 March 2020 and ends on 27 September 2020 – a period of 13 fortnights. An eligible employer can expect to receive the first JobKeeper payments from the government early May 2020, provided they register prior to 26 April 2020.
A business that has suffered a substantial decline in turnover can be entitled to a JobKeeper Payment of $1,500 per fortnight for each eligible employee. It is a condition of entitlement that the business has paid salary and wages of at least that amount to the employee for each fortnight.
A business can also be entitled to a JobKeeper Payment of $1,500 per fortnight for one business participant who is actively engaged in operating the business but not receiving a wage (see later).
The JobKeeper scheme is administered by the Australian Taxation Office (ATO).
Employers who choose to participate in the JobKeeper scheme must nominate the eligible employees they want to claim the JobKeeper Payment for. All eligible employees whether working for the employer or stood down must be included under, the “one in all in” rule, unless they decline.
The ATO pays the JobKeeper Payment to entities shortly after the end of each calendar month, for fortnights ending in that month. The JobKeeper Payments received from the ATO by the business are assessable income. However, salary or wage payments made by the business to their employees are allowable deductions.
Employers are reminded that JobKeeper/ Wage Payments need to be paid to employees in advance in order to qualify for reimbursement of $1,500 per fortnight per employee under this scheme.
How to work out if your business is eligible
An employer will qualify for the scheme for a particular fortnight if it satisfies the following requirements:
- on 1 March 2020, it carried on a business in Australia or was a non‑profit body pursuing its objectives principally in Australia. A business may be an Australian resident entity or a foreign resident entity carrying on business in Australia.
- before the end of the test fortnight, it met the decline in turnover test; and
- none of the following applies:
- on 1 March 2020, it had been subject to the levy imposed by the Major Bank Levy Act 2017;
- it is a government body, or a wholly-owned entity of such a body; or
- at any time in the fortnight, a provisional liquidator or a trustee in bankruptcy had been appointed to the business.
Decline in turnover test
The decline in turnover test needs to be satisfied before an entity becomes eligible for the JobKeeper Payment. Once eligibility is established, there is no requirement to retest in later months.
For example, if an entity does not qualify for the month of April 2020 because its turnover has not been sufficiently affected, it can test in later months or quarters, to determine if the test is met. This allows entities that only become affected part way through the six-month period of operation of the JobKeeper scheme to continue to monitor for any decline in turnover until they qualify for the scheme in a later period.
A business will generally satisfy the test where its GST turnover in the turnover test period falls short of the comparison turnover and the shortfall is 30 per cent or more (ie. for businesses turning over less than $1 billion per annum). For a non-profit body, the shortfall is 15%.
The periods for the turnover test period being compared by can be periods of one month or three months, where:
- if a one-month turnover test period is being used, it must be one of the following months:
- March 2020;
- April 2020;
- May 2020;
- June 2020;
- July 2020;
- August 2020;
- September 2020; or
- if a three-month period is being used it must be one of the following periods:
- the quarter that starts on 1 April 2020 and ends 30 June 2020.
- the quarter that starts on 1 July 2020 and ends 30 September 2020.
Accordingly, for example, a business can make the comparison by comparing the whole of the month of March 2020 with March 2019, or by comparing the quarter beginning on 1 April 2020 with the quarter beginning on 1 April 2019.
These periods align with the reporting periods for which GST registered businesses submit GST returns on their business activity statement and allow the ATO to examine changes in GST turnover that is reported.
The alternative decline in turnover test applies if there is not an appropriate relevant comparison period in 2019. This might be the case for a new business. It will be necessary for the affected entity to provide appropriate evidence to the ATO that it satisfies the alternative test.
If you are concerned in determining your eligibility in meeting the decline in turnover test, we are available to assist you through this process.
An employer is only entitled to a JobKeeper payment for a person for a fortnight if the person is an eligible employee. This reflects that the payment is a wage subsidy – it is intended to help employers to continue paying their employees during this period of downturn.
An eligible employee of an employer for a JobKeeper fortnight is a person who satisfies the following requirements:
- On 1 March 2020:
- the person was aged 16 years or over;
- the person was an employee other than a casual employee of the employer, or was a long-term casual employee of the employer; and
- the person was an Australian resident, or was a resident of Australia for the purposes of the Income Tax Assessment Act 1936 and was the holder of a Subclass 444 visa.
There is also a requirement that eligible employees have provided a notice to their employer agreeing:
- to be nominated by the employer as an eligible employee under the JobKeeper scheme as the employer with which the employee will participate in the JobKeeper scheme;
- that they confirm they have not agreed to be nominated by another employer; and
- that they do not have permanent employment with another employer if they are employed as a casual employee with this employer.
Note, that where employees meet the general eligibility criteria, they are not precluded because they are:
- on personal leave; or
- on workers compensation and working a reduced load/hour – but not eligible if not working; or
- on parental leave from their employer – but not if they are being paid government parental leave or dad and partner pay.
Contractors are not employees so do not include them.
The wage condition requires that an employer pay each participating employee at least $1,500 (before tax) for each JobKeeper fortnight. This reflects the practical operation of the JobKeeper scheme in that the JobKeeper payment is essentially a reimbursement to an employer of $1,500 per fortnight where the employer has paid a participating employee at least that amount.
The minimum $1,500 per fortnight (before tax) payment requirement will operate as follows:
- if an employee has been receiving at least $1,500 in gross salary income per fortnight since 30 March 2020, they will continue to receive their regular income according to their prevailing workplace arrangements. In this case, the JobKeeper Payment will effectively subsidize the first $1,500 of the employee’s gross fortnightly salary income.
- if an employee has been receiving less than $1,500 in gross salary income per fortnight since 30 March 2020, the employer must pay the employee a ‘top-up’ payment to ensure the employee has been paid at least $1,500 per fortnight to be eligible to receive the JobKeeper Payment. This means some employees will receive more than their ordinary salary and wages derived from the employer.
- If an employee has been stood down without pay after 1 March 2020 their employer must pay the employee a minimum gross fortnightly salary income of $1,500 from 30 March 2020, to be eligible to receive the JobKeeper Payment in respect of that employee.
- If an employee was employed on 1 March 2020, has subsequently ceased employment with their employer, and then has been re-engaged by the same employer, the employer must pay the employee a minimum gross fortnightly salary of $1,500 under the JobKeeper Scheme.
Note, the minimum payment must be made by the last day of the fortnight. However, the ATO has already exercised its discretion to allow employers to make the minimum payment for the first two fortnights by the end of April 2020. Going forward, the minimum payment will need to be strictly made by the end of the relevant fortnight.
Superannuation guarantee on normal salary and wages amounts paid to employees still applies. There is no reduction in the superannuation guarantee unless the employee was earning less than the JobKeeper payment amount. If the employee normally receives less than $1,500 per fortnight before tax, the employer can decide whether to pay superannuation guarantee on the additional amount that is paid as a result of the JobKeeper Scheme.
Sole traders and Other entities
The JobKeeper Payment extends to sole traders and other owner operated entities and is intended to support active businesses that had an ABN on 12 March 2020.
Each business can only nominate one individual (Eligible Business Participant – EBP) for whom a business is entitled to the JobKeeper payment. The individual must not be employed by the business but instead derive income via dividends, trust distributions or drawings.
Depending on the type of entity the business is, the individual must be active in the business and have a particular role within the business. In the case of an entity that is a:
- sole trader—the individual must be the entity;
- partnership—the individual must be a partner in the partnership;
- trust—the individual must be an adult beneficiary of the trust;
- company—either a director or shareholder in the company.
THE ALL IMPORTANT NEXT STEP – WHAT SHOULD YOU DO ASAP
As an Employer or an Eligible Business Participant you must:
- Step 1 – Register your interest and subscribe for JobKeeper payment updates.
- Step 2 – Check you and your employees meet the eligibility requirements.
- Step 3 – Continue to pay at least $1,500 to each eligible employee per JobKeeper fortnight (the first JobKeeper fortnight is the period from 30 March to 12 April).
- Step 4 – Notify your eligible employees that you are intending to claim the JobKeeper payment on their behalf and check they aren’t claiming JobKeeper payment through another employer or have nominated through another business.
- Step 5 – Send the JobKeeper employee nomination notice to your nominated employees to complete and return to you by the end of April if you plan to claim JobKeeper payment for April. Keep it on file and provide a copy to your registered tax agent if you are using one.
- Step 6 – From 20 April 2020, you can enrol with the ATO for the JobKeeper payment using the Business Portal and authenticate with myGovID. You must do this by the end of April to claim JobKeeper payments for April.
- Step 7 – In the online form, provide your bank details and indicate if you are claiming an entitlement based on business participation, for example if you are a sole trader.
- Step 8 – Specify the estimated number of employees who will be eligible for the first JobKeeper fortnight (30 March – 12 April) and the second JobKeeper fortnight (13 April – 26 April).
If you are having trouble in participating or understanding the JobKeeper scheme we are available on (03) 9696 1788 to assist you with this process.