The Government has introduced a wage subsidy program called the JobKeeper Payment to provide temporary relief for businesses who have been significantly affected by the economic impacts of Covid-19. This program is designed to assist employers retain their employees by covering or contributing to the cost of their wages. The scheme will provide eligible employers $1,500 per fortnight per eligible employee from 30 March 2020 till 27 September 2020.
It is important to note that this program is a subsidy to employers. The program applies to eligible employees of eligible employers. If an employer is not eligible to participate in the JobKeeper program and one of their employees is stood down or terminated, the employee can seek financial assistance via the JobSeeker program.
The scheme is a subsidy to employers. It is not paid to employees. However, the employer is obliged to ensure that all eligible employees are paid at least $1,500 per fortnight. For some employees who have historically earned less than $1,500 per fortnight, this will mean that they get a pay increase. Where a person is paid more than $1,500 per fortnight, the employer receives the payment to compensate them for loss of income and to encourage them to retain staff.
It is also important to note that a pre-condition of receiving the JobKeeper payment which will be paid monthly by the Australian Taxation Office is that the employer must have already paid the employee. The employers must fund the wages until the subsidy is received.
Employers, including Not-for-profits (NFP) will be eligible for the JobKeeper payment if all of the following apply
- On 1 March 2020, you carried on a business in Australia or were a not-for-profit organisation that pursued your objectives principally in Australia.
- You employed at least one eligible employee on 1 March 2020.
- Your eligible employees are currently employed by your business for the fortnights you claim for(including those who are stood down or re-hired).
- You satisfy the decline in turnover test (see below
- The entity is not:
- subject to the Major Bank Levy,
- an Australian government agency,
- a local governing body
- wholly owned by an Australian government agency or local governing body
- a sovereign entity
- a company in liquidation
- an individual who has entered bankruptcy
- You must notify the Commissioner its election to participate in the scheme including providing the required supporting information to demonstrate a downturn in their business.
Definition of Turnover
Turnover is calculated as it is for GST purposes. It includes all taxable and GST Free supplies but not input taxed supplies.
Aggregated turnover broadly includes your annual turnover, plus the annual turnover of all the entities that are connected or affiliated with you, subject to specific adjustments (for example, for transactions between you and those other entities). These connected entities or affiliates may be based in Australia or overseas.
For registered charities, turnover includes donations received or are likely to receive (including non-monetary value of gifts).
Decline in Turnover Test
To be an eligible employer, a business must show that it has faced a
- 30% fall in GST turnover (for an aggregated turnover of $1 billion or less)
- 50% fall in GST turnover (for an aggregated turnover of more than $1 billion), or
- 15% fall in GST turnover (for ACNC-registered charities other than universities and schools).
Where a business was not in operation a year earlier, or where the year earlier was not representative of their usual or average turnover, an alternate test may be used. However, this test is determined by the Tax Commissioner based on additional information that the business can provide to demonstrate that they have been adversely impacted by Covid-19.
The Test Period
In order to qualify for the first two fortnights commencing 30 March 2020, you can compare either:
- GST turnover for March 2020 with GST turnover for March 2019
- Projected GST turnover for April 2020 with GST turnover for April 2019
- Projected GST turnover for the quarter starting April 2020 with GST turnover for the quarter starting April 2019.
If you do not qualify for the first two payments, you can continue testing each fortnight. The test period must fall in the relevant fortnight and must refer to either the current month or the current quarter. So for example, for the fortnight commencing 25 May 2020 and ending 7 June 2020, you can test against the estimated or actual turnover for May 2020, the estimated turnover for June 2020 or the estimated turnover for the June 2020 quarter. Each period would be compared back to the same month or quarter in 2019 to determine if there has been the required decline in turnover.
Once a business satisfies the decline in turnover test, its turnover will not be required to be retested in later months and the business will be entitled to all future JobKeeper payments.
The Wages must be paid
The ATO has stated:
“You cannot claim the JobKeeper payment on behalf of employees who were not paid at least $1,500 before tax during each JobKeeper payment period.
You cannot claim the JobKeeper payment in advance. The JobKeeper payment is a reimbursement from us to an employer in arrears, and cannot be paid in advance in any circumstances.”
This may pose severe cash flow pressures for a business and you should discuss this with your bankers who may be willing to provide temporary facilities to assist with this.
We also note that the $1,500 to be paid to employees can be made up as follows:
- The net fortnightly salary, wage, allowances or other payments paid to the employee;
- The PAYG withholding tax in respect of the above;
- Salary sacrificed superannuation contribution amounts; and
- Other salary sacrificed amounts (i.e. fringe benefits)
Sole Traders (Self Employed)
The JobKeeper payment may also be made to people who are either sole traders or who do not take a wage from a business conducted by a company, trust or partnership that they are actively engaged in. Only one person from a company, trust or partnership is eligible and they must not be a permanent employee of another employer.
- The relevant business of the sole trader, trust, company or partnership must meet the decline in turnover test outlined above
Once it is determined that an employer is eligible to receive the JobKeeper payments, you must determine and nominate eligible employees of the employer. Eligible employees are:
- Full-time and part-time employees currently employed
- Casual employees employed on a regular and systematic basis for at least 12 months prior to 1 March 2020
- Stood down or re-hired employees that are re-engaged by a business that was their employer on 1 March 2020
- Aged 16 or older at 1 March 2020
- Australian citizen, holder of a permanent visa, or holder of a Subclass 444 visa as at 1 March 2020
- Resident for Australian tax purposes on 1 March 2020
- Not in receipt of a JobKeeper Payment from another employer (If the employee has two or more permanent part time jobs, they will need to nominate a primary employer to receive the JobKeeper Payment)
- Not in receipt of any paid parental leave by the Australian Government
- Not in receipt of a payment in accordance with Australian worker compensation law for an individual’s total incapacity for work
- Where the business is a trust, partnership or company, the business is able to nominate one eligible business participant who is actively engaged in operating the business (partner, adult beneficiary, shareholder or director) to receive the JobKeeper payment
Employees currently receiving income support who are eligible for the JobKeeper payment must notify Services Australia.
How much is the payment?
Eligible employers will be paid $1,500 before tax per fortnight for every eligible employee with the employers having the option to top up the payment.
Where employers participate in the scheme, their eligible employees will receive payment as follows:
- Employee receiving more than $1,500 per fortnight before tax will continue to receive their regular income according to their prevailing workplace arrangements. The JobKeeper Payment will serve as a subsidy for the employee’s continued employment.
- Employees receiving less than $1,500 per fortnight before tax will receive the full $1,500 per fortnight before tax.
- Employees who were stood down must receive the full $1,500 per fortnight before tax
How does it work?
Employers will first pay eligible employees as usual. The Commissioner will then pay the JobKeeper Payment to eligible employers no later than 14 days after the end of the calendar month in which the fortnight ends. The first JobKeeper payment from the Commissioner is scheduled to be received in the first week of May and then monthly in arrears and no later than the 14th of each month.
Elect to Participate
Eligible employers (excluding sole traders) must notify the Commissioner that the entity elects to participate in the jobkeeper scheme as follows:
- For an entitlement arising in the first or second jobkeeper fortnight (fortnight commencing on 30 March 2020 and 13 April 2020), the employer will need to notify the Commissioner before the end of the second JobKeeper fortnight, which is 26 April 2020.
- For an entitlement arising in any another fortnight, the employer will need to notify the Commissioner before the end of the particular fortnight
As part of the election process, employers will be required to provide details of each eligible employee including name, type of employment and residency status. Where circumstance remain unchanged, employers are not required to provide the same information to the Commissioner again. However, if there is a change of circumstance, the Commissioner must be notified prior to the end of the relevant JobKeeper fortnight.
Business participating in the JobKeeper scheme will also be required to comply with monthly reporting of information as follows:
- Current GST turnover for the reporting month
- Projected GST turnover for the following month
Provide Notifications to Employees
Employers are required to notify employees that they have been nominated to the ATO as eligible employees to receive the JobKeeper Payment within 7 days of giving the Commissioner details of the eligible employees.
Single Touch Payroll (STP)
JobKeeper payments should be made via the business’s payroll system and reported to the ATO via Single Touch Payroll (STP). The claim will be processed online when it is available. Where a business is not reporting via STP, a manual claim can be made for the JobKeeper payment.
PAYG Withholding will still be applicable on JobKeeper Payments.
Read our ‘overview of the reporting of JobKeeper Payments via Single Touch Payroll’ article here.
Employers are only required to make superannuation contributions for any amount payable in respect of the employee’s actual employment. Superannuation Guarantee payments are disregarded where additional payments are made to satisfy the condition of the JobKeeper Payment.
The Commissioner will be monitoring closely and enforcing appropriate integrity rules to prevent employers from entering into artificial schemes to get access to these JobKeeper payments. There will be serious consequences and penalties for those trying to illegally get benefits under the scheme including false and misleading statements provided by either the employer or employee.
Most of the key payroll software providers will provide tools to assist with the management of the JobKeeper payment.
In order to participate in the JobKeeper program the following actions are required:
- Register your interest if you have not already done so
- Check whether you and your employees are eligible
- Continue to pay your eligible employees at least $1,500 per fortnight
- Notify your employees that you in tend to claim the JobKeeper payment in respect of their employment and issue the JobKeeper nomination notice to them and receive this back by the end of April
- From 20 April enrol with the ATO providing the relevant details including the estimated number of eligible employees for the first and second fortnight payments
- After 4 May you will need to provide the full details of nominated employees and stay up to date with your reporting obligations
The JobKeeper Payment scheme is an important measure in response to Covid-19 to encourage employers to retain or rehire staff who were made redundant due to the pandemic. However, the legislation and the rules around the scheme are complex and require careful consideration.
The Saward Dawson team will be able to assist you with all of the required tests and administration. The timeline for the initial registration and processes is short and we can deal directly with the ATO on your behalf. Please reach out to your primary contact at Saward Dawson and we will develop an action plan that is right for you and ensures you maximise your entitlements under the scheme.
In addition we can provide advice and assistance on the other economic stimulus packages that may apply to your circumstances.