The Government has passed its JobKeeper legislation. The legislation itself does not contain the JobKeeper measure, however, it provides the Treasurer with the power to make Rules in relation to the JobKeeper measures. The Rules have now been released by Treasury.
The eligibility guidelines contained within the Rules generally remain consistent with the details we have provided in our previous emails. However, the Rules now introduce the level of detail that an employer must consider in determining their eligibility, and the practical processes that they will need to undertake in order to receive the payments.
We wanted to update you with the most current information for the JobKeeper Scheme as of 15 April 2020. The ATO has released the following operational guidelines. We are here to help you understand and navigate the tasks required over the coming weeks.
The Rules impose arduous obligations and strict timeframes in which to comply, and we anticipate that this will pose an administrative burden onto some employers, who will need to ensure they have robust systems in place, in order to meet the reporting and documentation requirements on a timely basis.
The Rules introduce a concept of a “JobKeeper fortnight”, and the payment will only be made where the conditions are met for each fortnight. There are 13 JobKeeper fortnights.
The key steps and timelines that businesses should take note of can be summarised as follows:
An employer with an aggregate annual turnover of $1 billion or less will only be eligible to receive a JobKeeper Payment in respect of an ‘eligible employee’ (refer below) if, at the time of applying for the JobKeeper payment the employer estimates that their projected GST turnover has fallen (or is likely to fall) by 30% or more.
To work out your fall in turnover for the first fortnight starting 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; or
- projected GST turnover for the quarter starting April 2020 with GST turnover for the quarter starting April 2019.
Businesses will therefore need to project their GST turnover for the month of April 2020 and check whether this meets the necessary decline when compared with actual April 2019. If there is not the necessary decline in the March or April months it will be necessary to project your GST turnover for the May and June months so as to compare the June 2020 quarter to the June 2019 quarter.
It would be prudent for businesses to start collating relevant information (e.g., interim accounts, monthly sales reports and prior year BASs) to get ready for comparison calculations. We can assist if necessary.
Where a business was not in operation a year earlier, or where the turnover of a business a year earlier was not representative of their usual or average turnover (e.g., because there was a large interim acquisition, they were newly established, or their turnover is typically highly variable), the Commissioner will have the discretion to consider additional information that the business can provide to establish it has been significantly affected by the impact of the Coronavirus. Currently, the ATO has not released any information on what factors it will take into account when considering exercising this discretion.
The Commissioner also has the discretion to set out alternative tests that would establish eligibility in specific circumstances (e.g., eligibility may be established as soon as a business has ceased or significantly curtails its operations). There will also be some tolerance where employers have, in good faith, estimated at least a 30% (or 50%, as the case may be) fall in turnover, but actually experience a slightly smaller fall.
The decline in turnover test only needs to be satisfied once.
Step 2: Identify and Contact eligible employees:
A business can only claim a JobKeeper Payment in respect of an employee who is an ‘eligible employee’.
Eligible employers will need to start communicating with their employees and identify those who are to be nominated for the JobKeeper package. Only individuals employed as at 1 March 2020 will be eligible.
The ATO requires an employer to complete a JobKeeper employee nomination notice to notify eligible employees that the employer intends to participate in the scheme, and ask the employees to agree to be nominated and receive payments from them as part of the scheme. The employee indicates on that same form whether they agree (or not) before returning the form to the employer, who must retain it for five years.
If an eligible employee has multiple employers who each send them a nomination form, they can only accept a nomination from one employer (such that only one employer is entitled to a JobKeeper Payment on their behalf).
Importantly, an employer that elects to participate in the JobKeeper Scheme is required to include all eligible employees in the scheme (unless the employee advises the employer they do not wish the employer to claim the JobKeeper Payment on their behalf).
If an employee is currently receiving an income support payment, they must notify Services Australia of their new income to avoid incurring a debt that they will have to repay.
Step 3: Payment of at least $1,500 per fortnight to eligible employees:
The JobKeeper Payment scheme requires employers to pay their eligible employees a minimum of $1,500 (before tax) in respect of each fortnight covered by the scheme. The first fortnight under the scheme commenced on Monday 30 March 2020 and ended on Sunday 12 April 2020, with the final fortnight starting on Monday 14 September 2020 and ending on Sunday 27 September 2020. Where an employer pays their staff monthly, the monthly payment must be equivalent to the fortnightly amount of $1,500 per fortnight.
The minimum $1,500 (before tax) payment requirement will operate as follows:
(a) 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 subsidise the first $1,500 of the employee’s gross fortnightly salary income.
(b) 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.
(c) 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 the employee.
(d) 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.
We note that this may raise cash flow issues, and a robust cash flow model should be used to ensure that fortnightly payments can be made.
Step 4: Election and notification to the ATO:
An employer can only be entitled to a JobKeeper Payment where they are registered under the JobKeeper Scheme before the end of any relevant JobKeeper Payment fortnight.
Notably, an exception applies for the first JobKeeper fortnight (which ended on 12 April 2020) whereby an employer is required to be registered by 26 April 2020 (rather than 12 April 2020). In other words, an employer has until the end of the second JobKeeper fortnight to register in respect of the first JobKeeper fortnight.
For example, in order to be eligible for a JobKeeper Payment in respect of the JobKeeper fortnight commencing 30 March 2020, the employer has until 26 April 2020 to register.
Whereas for the JobKeeper fortnight commencing 11 May 2020, the employer must (if they are not already registered) register by 24 May 2020.
You will be able to enrol with the ATO for the JobKeeper payment from 20 April 2020 using the Business Portal, or we can enrol on your behalf as your tax agents.
Step 5: Provide eligible employee information to the ATO:
An eligible employer or eligible business must provide information to the ATO on all eligible employees (i.e., confirming the eligible employees were engaged as at 1 March 2020 and are currently employed by the business, including those who have been stood-down or re-hired). Treasury has indicated that for most businesses, the ATO will use Single Touch Payroll (‘STP’) to pre-populate these details.
This will be available from 4 May 2020 onwards and can be accessed via the Business Portal, or we can prepare on your behalf as your tax agents.
Step 6: Provide formal notification to employees:
Within seven days of notifying the ATO as per Step 5, eligible employers must notify the nominated individual in writing.
Step 7: Ongoing reporting to ATO:
The eligible employer must continue to provide information to the ATO on a monthly basis, including the number of eligible employees employed by the business and details of its turnover.
You will need to reconfirm that your reported eligible employees have not changed through ATO online services, the Business Portal or we can report on your behalf as your tax agents. You do not need to retest your reported fall in turnover, but you will need to provide some information as to your current and projected turnover. This will be done in your monthly JobKeeper Declaration report. It will be necessary to provide this information within 7 days of after the relevant month to which the fortnightly JobKeeper payments relate.
Step 8: Payment from the ATO within 14 days:
The legislation requires the Commissioner to make payment within 14 days after the end of the relevant month in which a JobKeeper Payment period falls. The first payment (initially covering the first two fortnightly periods) will be made by 14 May 2020.
Subsequent payments must be made within 14 days of each month in which JobKeeper fortnights fall.
Step 9: Implement suitable payroll record keeping and bookkeeping. Monitor revenue:
Payments to employees should be correctly categorised within the payroll system, with the correct tax and superannuation requirements being met. We can assist you with the setup of your software.
As per Step 7, it is a requirement that eligible employee and turnover data is provided to the ATO within 7 days of the end of the month. You should ensure that your current bookkeeping system is able to provide you with this data in the time frame required.
Lastly, eligibility for the JobKeeper payments is on a continual fortnightly basis. If a business did not immediately qualify at the commencement of the scheme under the decline in the turnover test, it may still be eligible to enter the scheme between April and September 2020 as soon as they project falls in revenue. You should, therefore, monitor turnover and projected turnover.
When can a business claim the JobKeeper Payment for a business participant?
The JobKeeper Scheme also recognises that certain participants in a business have also been affected by the economic downturn caused by the Coronavirus.
Accordingly, in order to provide a benefit to such business participants, payments can also be made to an entity in respect of what is referred to as an eligible business participant (i.e., generally controlling individuals who are not employees of their business).
A ‘business participant’ is an individual who is actively engaged in the business carried on by the entity (i.e., in the operations and activities of the entity) and is either:
- a sole trader;
- an individual partner of a partnership;
- a director or individual shareholder of a company; or
- an adult beneficiary of a trust.
Importantly, however, while a business may have more than one business participant, it can only nominate one of these individuals (who becomes the ‘eligible business participant’) in respect of whom it can receive a JobKeeper Payment.
A business seeking a payment for an eligible business participant can register their interest in the JobKeeper Scheme and will need to subsequently make a formal application to the ATO. It is understood that when making a formal application, they will be required to provide their ABN, as well as a single TFN for the eligible recipient of the JobKeeper Payment, and a declaration of business activity.
The ATO currently does not have a formal application for eligible business participants.
We are able to assist you with all steps and processes involved in the JobKeeper Scheme, including the forecasting of GST turnover (and the reduction thereof), the application process, the setup in your payroll system and the respective reporting to the ATO. Please feel free to contact us should you require any further assistance.
For more information, you can email us at firstname.lastname@example.org or you can call us at 08 6165 4000.