Another day, another update to the Government’s economic response to the Coronavirus Pandemic. We understand the everchanging circumstances and regular press conferences from our Prime Minister can be difficult to keep up with – especially during a stressful time when you may be struggling to keep yourself and your business afloat. Which is why, here at Hodkinson Accounting, we have made it our mission to keep you updated and informed on the latest economic response announcements (without all the confusing financial lingo).
The most recent announcement of the JobKeeper Payment has lead to a lot of Australians scratching their heads and wondering – Am I eligible? What if I have already had to let my employees go? Is the Government giving me a raise?! While we are still waiting on legislation to be passed (expected by the end of the week), let’s go through what we know so far.
What is the JobKeeper Payment?
The JobKeeper Payment is a payment made to eligible businesses and not-for-profits affected by the Coronavirus to support them in retaining employees. Within our industry, it has been referred to as “Employers acting as Centrelink”. Basically, if you are an eligible business that elects to participate, you will receive a fortnightly payment direct from the ATO of $1,500 (before tax), intended to supplement the wages of your eligible employees.
Am I eligible?
Employers (including not-for-profits) will be eligible for the subsidy if:
- their business has a turnover of less than $1 billion (and if part of a group for income tax purposes, the group has a combined turnover of less than $1 billion) and estimate their turnover has fallen or will likely fall by 30 per cent or more; or
- their business has a turnover of $1 billion or more (or if part of a group for income tax purposes, the group has a combined turnover of $1 billion or more) and estimate their turnover has fallen or will likely fall by 50 per cent or more; or
- their business is not subject to the Major Bank Levy
- your business does not meet the particular ineligible entities sector category (Australian Government agencies, etc).
Employees will be considered eligible employees if they:
- are currently on the payroll of the eligible employer (including those stood down or re-hired) as at 1 March 2020;
- are a full-time or part-time employee, or a casual employed on a regular and systematic basis for longer than 12 months as at 1 March 2020;
- were aged 16 years or older at 1 March 2020;
- were an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder at 1 March 2020;
- were a resident for Australian tax purposes on 1 March 2020; and
- are not in receipt of a JobKeeper Payment from another employer.
Am I eligible if I operate as a Sole Trader/Partnership/Trust?
People who are self-employed will be eligible for the payment provided, at the time of applying, they:
- estimate their turnover has or will fall by 30 per cent or more;
- had an ABN on or before 12 March 2020, and – either had an amount included in its assessable income for the 2018-19 year and it was included in their income tax return lodged on or before 12 March 2020 (or such later time as allowed by the Commissioner), or – made a supply during the period 1 July 2018 to 12 March 2020 and provided this information to the Commissioner on or before 12 March 2020 (i.e reported on a Business Activity Statement);
- were actively engaged in the business;
- are not entitled to another JobKeeper Payment (either a nominated business participant of another business or as an eligible employee);
- were aged at least 16 years of age as at 1 March 2020; and
- were an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder at 1 March 2020.
Only one partner can be nominated to receive a JobKeeper Payment along with any eligible employees, noting a partner cannot be an employee.
Trusts can receive JobKeeper payments for any eligible employees. Where beneficiaries of a trust only receive distributions, rather than being paid salary and wages for work done, one individual beneficiary (that is, not a corporate beneficiary) can be nominated to receive the JobKeeper Payment.
When can I apply?
The JobKeeper Payment will come into effect from 30 March 2020 and will be available until 27 September 2020. The ATO has advised these payments will be made monthly, beginning in the first week of May. These payments will be made by the ATO in arrears, meaning you won’t receive the payment until the month after you have paid wages to your employees.
If you would like to progress with participation in this program, you will need to register for updates with the ATO via their website https://www.ato.gov.au/general/gen/JobKeeper-payment/. Registering will keep you up to date on all ATO developments and provide you with information on how and when to claim this payment.
What if I earn more or less than $1,500 a fortnight?
The JobKeeper payment requires an eligible employer to pay a minimum of $1,500 per fortnight before tax to each eligible employee. Where an employee has previously been paid less than this, they will effectively receive a “top-up” payment in order to receive this minimum $1,500 fortnightly income. Meaning they will see an increase in their fortnightly wage to receive the full $1,500 before tax. If the employee earns more than this fortnightly amount, the JobKeeper payment will be used to partially supplement their wage. The employer will only receive a maximum payment of $1,500 per eligible employee.
The JobKeeper payment is intended for the employer to pass onto the employee. It is not a payment made to the employer to fund a temporary cash fund to sustain the business. It must be passed on in full to all eligible employees.
What are the tax and super consequences?
The JobKeeper payment will be received by the employer as a before tax payment. This means that before payment is made to the employee, tax must be withheld from this amount. We recommend accessing the ATO fortnightly tax tables to determine how much tax is applicable.
Superannuation Guarantee obligations for employers remain unchanged. Therefore, if a employee earns more than the $1,500 minimum payment, the employer will still be required to pay super on the ordinary time earnings. However, if the employee usually earns less than the $1,500 per fortnight and is having their wages topped up by the JobKeeper Payment, it will be up to the employer if they want to pay superannuation on any additional wages paid by the JobKeeper Payment.
These payments should be made using your payroll system and reported to the ATO via Single Touch Payroll. This will support the online claim process when it is available. If you do not report through Single Touch Payroll, you can still claim the JobKeeper payment; however there will be a manual claim process.
You will be required to advise your employees whether you have nominated them as an eligible employee for the purposes of the payment.
What if I have already let some of my staff go?
You can receive the payment if you re-hire any eligible employees you had at 1 March 2020. You can receive the payment even if you then need to immediately stand them down, so long as they remain employed.
You can claim JobKeeper for employees that were stood down after 1 March 2020. To be eligible in relation to these employees, you will need to pay them a minimum of $1,500 per fortnight (before tax) for the payment periods of the JobKeeper Scheme.
What is my annual turnover? And what if I don’t know how much it has reduced?
Turnover will be defined according to the current calculation for GST purposes and is reported on Business Activity Statements. It includes all taxable supplies and all GST free supplies but not input taxed supplies. Under the GST law, only Australian based sales are included and therefore, only Australian based turnover is relevant.
The ATO will be using a comparison method to determine the percentage of which turnover has been affected. Comparisons will be made between the relevant month/quarter relative to the turnover of the same period a year earlier. For example, your turnover included on lodgement of your Business Activity Statement for April to June 2020 will be compared to that of April to June 2019 to determine the reduction.
There are many reasons why it may be difficult for a business to calculate how much their annual turnover has been reduced in order to meet the eligibility requirements for this payment. It could be that perhaps your business did not exist this time last year or maybe your figures from last year were heavily impacted by the floods. In this case, the ATO will apply discretion to your specific circumstances in order to determine your eligibility.
Application for this payment can be made if you reasonably expect that your turnover will fall by 30% or more. However, the ATO has advised they will impose some tolerance if your estimates, in good faith, do not quite reach their reduction percentages. If you were originally eligible to receive the JobKeeker payment but after time the ATO makes a determination that you did not meet the annual turnover reductions requirements, you could be liable to repayment obligations. More information from the ATO is expected on this as the payment rolls out or as legislation is passed.
Can I manipulate my business operations to meet the eligibility requirements?
No. The purpose of this payment is to assist your business in retaining your staff. It is not intended as a cash handout to seek a financial benefit. This program will be subject to ATO compliance and audit activities. There will be a positive obligation on employers to establish their eligibility and that of their employees. In addition, the ATO will cross-check payments with Services Australia data, and data from other government agencies, and undertake activities designed to identify multiple or ineligible payments to individuals.
Have another question?
If you would like to discuss the JobKeeker payment, or any other payment included in the Government’s economic response to the Coronavirus Pandemic, please don’t hesitate to contact our office. We can assist you with determining whether you are eligible for any of these payments, how to apply them in a practical sense within your business and even provide you with handy fact sheets for more information.