The ATO is now accepting applications from employers to participate in the scheme. It feels like everyday we are getting more guidance on how the scheme will operate and new rules on eligibility of employers. Given the volume of information and misinformation being disseminated we thought that it would be worthwhile recapping on the basic rules and provide guidance on the new alternative tests that were released yesterday which widen the net of those employers who may be eligible to nominate for the scheme.
1. Eligible Employers
You are an eligible employer if your aggregated turnover is less than $1.0b and your turnover fell by 30% or more. To determine the fall in turnover you can compare either:
- The GST turnover for March 2020 with the GST turnover for March 2019
- The projected GST turnover for April 2020 with the GST turnover for April 2019
- The projected GST turnover for the quarter starting April 2020 with the GST turnover for the quarter starting April 2019
+ Once you qualify as an eligible employer, you remain eligible to participate in the scheme and do not need to keep testing turnover in the following months.
+ If you nominate as an eligible employer then you must nominate ALL eligible employees. You cannot be selective with which employees you chose to participate. An employee may decline being nominated but you, as an employer, cannot exclude any eligible employee.
+ Alternative tests were released yesterday to widen the net on who is eligible and who is not eligible. We explain the new alternative tests later in this newsletter.
2. Eligible Employees
An employee is an eligible employee if the employee:
- was employed by you (including any person stood down or re-hired)
- was either a;
+ permanent full time or part time employee as at 1 March 2020
+ long term casual employee (i.e. employed on a regular and systematic basis for at least 12 months as at 1 March 2020 and not a permanent employee of any other employer)
- was at least 16 years old on 1 March 2020
- was an Australian resident as at 1 March 2020 (and resided in Australia as at 1 March 2020)
- was not receiving government parental leave or Dad and partner pay or a payment in accordance with Australian worker compensation laws for an individual’s total incapacity for work
- agree to be nominated by you as their employer
3. Employers paying your Eligible Employees
An eligible employer must pay all of your eligible employees at least $1,500 (before tax) per fortnight with the first fortnight period ending on 12 April 2020 and the second fortnight period ending on 26 April. All eligible employers must pay each eligible employee the equivalent of at least $3,000 (before tax) on or before 30 April. After 30 April the employer must make the payments on time. That is, if your pay cycle is weekly then you would be paying employees at least $750 before tax per week or $1,500 before tax per fortnight. If you pay your employees monthly, your employees must have received the monthly equivalent of $1,500 per fortnight.
The first fortnightly payment in May is due to be paid not later than 10 May.
4. How much does and Employer need to Pay
The JobKeeper assistance is there to provide financial support to both employers and employees. It provides support to employers by reimbursing the cost up to $1,500 per fortnight per eligible employee. It provides financial support for the employees by ensuring that an eligible employee is receiving at least $1,500 per fortnight.
If an employee currently receives less than $1,500 per fortnight then the employer must increase the fortnightly payment to that employee to ensure that he/she receives at least $1,500 before tax. Hence, the gross payment must be at least $1,500 but the employer is required to withhold PAYG Withholding at the applicable PAYG Withholding rate.
If an employee currently receives more than $1,500 per fortnight, the employer does not need to pay any more to that employee. Therefore, the employer is able to retain the JobKeeper payment that it receives for that employee.
5. Tax Consequences of the JobKeeper Payments
An employer who receives JobKeeper payments from the Government must include those payments in their assessable income when completing the business’ 2020 and 2021 income tax return. The employer will also be able to claim a deduction for the salary/wage payments it makes to its to employees.
The JobKeeper payments to employees will be included in the employee’s annual PAYG Individual Payment Summary and will therefore be reflected in the individual’s 2020 and 2021 income tax return.
6. Superannuation Guarantee Charge Implications
At the time of writing this no legislation had been introduced to deal with the Superannuation Guarantee Charge (SGC) aspects of the JobKeeper payments. However, guidance provided to date indicates that employers will be required to pay SGC (i.e. the compulsory 9.5% superannuation contribution) on the amount of salary/wages that the employer would have paid the employee had the JobKeeper payment (or top up) not been paid. For example, if an employee would normally be paid $1,000 per fortnight without the JobKeeper payment top up of an extra $500 per fortnight (to get the employee to the minimum fortnightly payment of $1,500 required under the scheme) the employer’s SGC liability on that fortnightly payment is limited to $95 (i.e. 9.5% of $1,000). Where the employee was earning $2,000 per fortnight the employer’s SGC liability would be $180 (being $9.5% of $2,000).
If an employer has stood workers down and they continue to be stood down but are receiving the JobKeeper payment then the employer would not be required to pay any SGC on behalf of those employees.
We will provide a further update once the legislation has been released.
7. Sole Traders and Business Owners (Eligible Business Participants)
Not everyone is an employee. Often business owners do not draw salaries or cannot legally be considered to be an employee so they rely on drawing profits from the business for their income. The JobKeeper scheme also sets out rules relating to business owners’ ability to access the JobKeeper payments for themselves or a family member who is actively engaged in the operation of the business. To be an Eligible Business Entity (EBE) the business must have:
+ carried on business on 1 March 2020
+ satisfied the fall in turnover test for the relevant period
+ had an ABN on 12 March 2020 AND on or before 12 March 2020 either lodged its 2019 income tax return showing that it had an amount included in its assessable income in relation to it carrying on a business OR a business activity statement or GST return for any tax period that started after 1 July 2018 and ended before 12 March 2020 showing that it made a taxable supply, a GST-free supply or an input taxed supply.
- Your non-employee individual is an eligible business participant of your entity for the fortnight if they meet all of the following:
+ the person is not employed by your entity
+ the person is actively engaged in the business carried on by your entity as at 1 March AND for the fortnight that you are claiming the payment
+ as at 1 March 2020 AND for the fortnight that you are claiming the payment the person is a sole trader, a partner in a partnership, an adult beneficiary of the trust carrying on the business or a shareholder or director in the company carrying on the business.
+ as at 1 March the person is aged at least 16 years of age AND is an Australian resident or an Australian tax resident holding a special category visa
+ the person is not currently receiving government parental leave or Dad/Partner Pay
+ the person is not currently totally incapacitated for work and receiving payments under an Australian workers’ compensation law in respect to their total incapacity to work
+ the person is not an employee of another entity (other than a casual employee)
+ the person has given your entity an (or the ATO if you are a sole trader) a JobKeeper nomination notice
+ the person has not previously given another entity (or the ATO) a JobKeeper nomination notice
Importantly, your eligible business entity cannot have more than one eligible business participant.
8. Alternative Decline in Turnover Tests
The rules around eligibility for the JobKeeper Scheme continue to evolve. Yesterday the legislation regarding the introduction of alternative decline in turnover tests was released. The legislation introduced alternative decline in turnover tests designed to accommodate the following scenarios:
- Where a business commenced before 1 March 2020 but after the relevant comparison period
- Where there was an acquisition or disposal of part of the business after the relevant comparison period and before the applicable turnover test period
- Where there was a business restructure that changed the entity’s turnover
- Where the business had a substantial increase in turnover.
We have published an newsletter specifically dealing these alternative tests. These rules are complex and rather than repeating these again here, we refer you to our newsletter headed “JobKeeper Scheme – Alternative Decline in Turnover Tests”
Should you have any queries regarding the JobKeeper Scheme, please do not hesitate to contact either our office on 03 96291433 to discuss.