Updated 17 April 2020
The JobKeeper Payment, as everyone knows by now, is a wage subsidy that will be paid via the ATO to eligible businesses impacted by the Coronavirus.
The subsidy will be paid for a maximum period of six months – from 30 March 2020 up until 27 September 2020. It will be paid to eligible businesses, monthly in arrears, with the first payments to employers commencing from the first week of May 2020.
In a special episode of our podcast, Small Business All Figured Out, we break down exactly how the JobKeeper Payment works for Employers, Sole Traders, Directors and Shareholders of companies, beneficiaries of Trusts, and partners of partnerships. We also talk about the specific eligiblity requirements of employers, businesses and employees.
To listen, click play below. Or you can listen to our podcast wherever you normally listen to podcasts:
|Date||· From 30 March 2020 to 27 September 2020.|
· For employees employed at and from 1 March 2020
· First payments paid in first week of May 2020
|Applies to||Based on comparable periods:|
Employers <$1 bn that have experienced a downturn of 30% or more (this will be relevant to MOST business owners and employers).
Employers >$1bn that have experienced a downturn of 50% or more
ACNC-registered charities that have experienced a drop in turnover of 15% or more
A subsidy of $1,500 per fortnight per employee, administered by the ATO, will be paid in arrears to businesses that have experienced a downturn of 30% or more (50% for businesses with turnover of $1bn or more). A 15% threshold will be used for ACNC-registered charities.
To be a part of the subsidy, employers will need to ensure that their employees receive at least $1,500 per fortnight (before tax).
To be eligible to receive JobKeeper payments for April:
An employer qualifies to receive a JobKeeper payment if:
- Eligible employer: The employer is an eligible employer (see Employer eligibility below); and
- Eligible Employee: The payment is for an eligible employee of the employer (see Employee eligibility below); and
- Wage condition: The employer has paid at least $1,500 to the eligible employee for the relevant fortnight. That is, the employer has satisfied the wage condition by making the payment to the eligible employee equal to or greater than the amount of the JobKeeper payment (less PAYG withholding and salary packaging) that the employer will receive for the employee for the fortnight.
- Notification: Employers must:
- Register themselves and their eligible employees for JobKeeper before the end of the relevant fortnight with the ATO (opens 20 April).
- Employers must confirm each employee’s registration for JobKeeper payments within 7 days.
Here’s how to work out if your business is an eligible employer:
- On 1 March 2020, carried on a business in Australia or was a non‑profit body pursuing its objectives principally in Australia*; and
- before the end of the fortnight, it met the decline in turnover test:
- >15% for an ACNC-registered charity (excluding universities, or schools within the meaning of the GST Act – these entities need to meet the basic turnover test)
- > 50% for large businesses:
- aggregated turnover for the test period is likely to be $1 billion or more, or aggregated turnover for the previous year to the test period was $1 billion or more (a small business that forms part of a group that is a large business must have a >50% decline in turnover to satisfy the test).
- >30% for all other qualifying entities.
- And, was not:
- on 1 March 2020, subject to Major Bank Levy for any quarter ending before this date, a member of a consolidated group and another member of the group had been subject to the levy; or
- a government body of a particular kind, or a wholly-owned entity of such a body; or
- at any time in the fortnight, a provisional liquidator or liquidator has been appointed to the business or a trustee in bankruptcy had been appointed to the individual’s property.
- before the end of the fortnight, it met the decline in turnover test:
1 March 2020 is an absolute date. An employer that had ceased trading, commenced after 1 March 2020, or was not pursuing its objectives in Australia at that date, is not eligible.
*For sole traders, directors or shareholders of a company, an individual who is a beneficiary of a trust, or a partner in a partnership, only one eligible business participant per entity is eligible for JobKeeper payments unless you can argue you are a genuine employee of the business. See Business owners below.
The decline in turnover test is a once only test. Once it has been met, there is no need to keep passing the test. If you do not meet the test now, you might be able to access the scheme at a later date but you can only claim payments from the time you register, i.e., there are no retrospective payments.
There are two decline in turnover tests you can use:
- the basic test, and
- the alternative test.
The basic decline in turnover test
To access the April 2020 JobKeeper payments, the basic decline in turnover test requires you to compare any of the following to calculate your fall in turnover:
- 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.
If you are not registered for GST, the ATO has not as yet provided guidance but we recommend using your turnover for income tax purposes – what you report to the ATO.
If your business is part of a group, for the decline in turnover test you only take into account the turnover of the employer, not the other members of the group. Talk to us if you have a service entity connected to the trading business that is the employer.
ABC Co Pty Ltd operates a search business that specialises in servicing the legal profession – 95% of their clients are practising solicitors. They are an SME business and would need to suffer a 30% reduction in revenue to be eligible for the JobKeeper payment.
ABC lodges its Business Activity Statements on a quarterly basis. 2019 GST Turnover data included:
Whilst the March 2020 BAS has not yet been completed, ABC know that their March quarter GST Turnover was $1,710,000.
ABC know that business was affected by COVID 19 in March. There was a material contraction in activity during the month and sales were down 50% in the second half of March. First half April sales have continued at this reduced level. Whilst ABC have all of their staff working remotely, this does not impede their ability to complete work or receive orders – all of which come in electronically or by phone.
The June quarter is normally their busiest quarter of the year. However, most of their solicitor customers have closed their offices and are working remotely. They do not expect this to change until sometime in June, at the earliest. Present activity level suggests that April sales will be in the range of $400,000 to $450,000. By comparison, sales for April 2019 were $672,000.
Forecast sales for May and June are similar to April, unless offices re-open in June and in which case there could be a late increase in business. On present information this appears to be unlikely.
ABC have not reviewed their GST Turnover for March 2019, however they conclude that, on best present estimate, their turnover for April 2020 will be less than April 2019 by more than 30% and further that the June 2020 quarter GST Turnover will be more than 30% less than the 2019 quarter. On this basis they register for the JobKeeper scheme.
The alternative decline in turnover test applies where the business does not have a relevant comparison period, for example, the business might have started in January 2020 or the business made a major acquisition. In these cases, the business will need to provide appropriate evidence to the Commissioner to show that the alternative test is satisfied.
Camille’s Farms carries on a farming business and retail flower sales in Australia. It was subject to a severe drought from 2018 until September 2019 that reduced the amount of flowers it could grow. It returned to normal crop output in January 2020. Its retail flower sales became significantly affected in March 2020.
It assesses its eligibility for JobKeeper payments on 3 July 2020 based on a projected GST turnover from its farming activities for the quarter beginning on 1 July 2020 of $2,000,000. The corresponding period is the quarter beginning on 1 July 2019 – a period in which Camille’s Farms was severely affected by drought. Because of the effects of the drought, Camille’s Farms had a much lower than usual current (2019) GST turnover of $2,500,000. The July 2020 quarter turnover falls short of the July 2019 quarter turnover by $500,000, which is 25% of the July 2019 quarter turnover. This does not exceed the specified percentage of 30%, so the decline in turnover test is not satisfied.
In the quarter beginning on 1 July 2017, Camille’s Farms had a current GST turnover of $4,000,000. This represents a shortfall of 50% when compared to its projected GST turnover for the quarter beginning on 1 July 2020. This exceeds the specified percentage of 30%, so the alternative decline in turnover test is satisfied.
Explanatory Memorandum: Coronavirus Economic Response Package (Payments and Benefits) Rules 2020, Example 3
Seb Tech is a start-up technology company that began carrying on a business on 1 October 2019 selling its product to a range of businesses including cafes and restaurants. Despite strong initial sales, its sales declined substantially from March 2020. It assesses its eligibility for JobKeeper payments on 15 April 2020 based on a projected GST turnover for April 2020 of $15,000 from its technology business. However, because Seb Tech did not begin to carry on a business until 1 October 2019, there is no corresponding period in 2019 that applies.
As there is no corresponding comparison period in 2019, the Commissioner determines an alternative test under which the relevant comparison period is the average of the actual GST turnover in all of the months in which the business was being carried on prior to the turnover test period.
In October 2019 to March 2020, Seb Tech had an average monthly current GST turnover of $30,000. This represents a shortfall of 50% when compared to its projected GST turnover for April 2020 of $15,000. This exceeds the specified percentage of 30%, so the alternative decline in turnover test is satisfied.
Explanatory Memorandum: Coronavirus Economic Response Package (Payments and Benefits) Rules 2020, Example 4
An eligible employee is an employee who:
On 1 March 2020:
- Was aged 16 years and over; and
- Is an employee other than a casual, or a long-term casual*; and
- Was an Australian resident (under the meaning of the Social Security Act 1991), or a resident for tax purposes and held a Subclass 444 (Special category) visa**
And, at any point during the JobKeeper fortnight:
- Was an employee of the employer; and
- Was not an excluded employee:
- An employee receiving parental leave pay or dad and partner pay; or
- An employee receiving workers compensation payments in relation to total incapacity.
And, has provided the JobKeeper Payment Employee Nomination form to the employer:
- Agreeing to be nominated by the employer as an eligible employee under the JobKeeper scheme; and
- Confirming that they have not agreed to be nominated by another employer; and
- If they are a long-term casual, they do not have permanent employment with another employer.
*A ‘long term casual employee’ is a person who has been employed by the business on a regular and systematic basis during the period of 12 months that ended on 1 March 2020 (1 March 2019 to 1 March 2020). These are likely to be employees with a recurring work schedule or a reasonable expectation of ongoing work.
** The person is a resident for JobKeeper purposes if: the person was an Australian resident within the meaning of the Social Security Act 1991, i.e., the person’s usual place of residence was in Australia and the person was either an Australian citizen, the holder of a permanent visa, or the holder of a protected special category visa; or the person was a resident of Australia for the purposes of the ITAA 1936 and was the holder of a Subclass 444 (Special Category) visa. The inclusion of Subclass 444 (Special Category) visa is intended to apply to New Zealand citizens who have an established long-term employment relationship with an Australian employer on 1 March 2020.
Employees on leave, stood down or rehired
Employees that have been stood down (as opposed to having their employment terminated), are eligible if the other criteria are met. Employees can be stood down without pay under the Fair Work Act if they can’t be usefully employed because of a stoppage of work for any cause for which the employer can’t reasonably be held responsible. See the Fair Work Ombudsman’s website.
Employees on paid an unpaid leave (other than parental leave and dad and partner pay) are eligible to receive JobKeeper payments.
If an employee’s employment was terminated after 1 March 2020, they can be rehired and qualify for JobKeeper payments.
- sole traders and the self-employed with an ABN, and
- one partner in a partnership, beneficiary of a trust, director or shareholder who works in the business (i.e., only one person in a partnership, one beneficiary of a trust, or one director / shareholder are eligible for JobKeeper payments).
will be eligible for the payment if the following conditions are met:
- The entity carried on a business on 1 March 2020 and is not a not-for-profit entity; and
- Had an ABN on 12 March 2020; and
- Had some business income in the 2018-19 income year included in a tax return that was lodged by 12 March 2020; or made some supplies connected with Australia in a tax period that started on or after 1 July 2018 and ended before 12 March 2020 and recorded this on an activity statement lodged with the ATO by 12 March 2020. The Commissioner can potentially extend the deadline for holding an ABN, lodging the 2019 tax return or lodging a relevant activity statement.
- Passed the decline in turnover test; and
- The individual was not:
- employed by the business at any time in the relevant fortnight; or
- a permanent employee of another entity at the time the individual gives the nomination notice (i.e., they do not hold a full time or part time role with another employer); or
- a nominated JobKeeper employee of any other business; or
- entitled to parental leave pay or dad and partner pay or workers’ compensation payments for being totally incapacitated for work.
As at 1 March 2020, the individual satisfied all of the following:
- Aged 16 years or over; and
- Actively engaged in the business;and
- An Australian resident under the Social Security Act or an Australian tax resident who holds a special category visa **
If the criteria have been met, the individual is eligible if they were actively engaged in the business in the fortnight of the JobKeeper payment, and they agreed to be nominated for JobKeeper payments and confirmed they pass the eligibility criteria.
If more than one director wants to access JobKeeper payments, they need to meet the eligibility criteria of an employee (see 2. Eligible employee). To be an employee a director would have received salary/wages and this has been reported as salary/wages on activity statements, payment summaries, tax returns etc. If a director merely receives a distribution from the business then they are unlikely to be an employee.
To be eligible to receive JobKeeper payments, the employer must meet a wage condition. That is, employers must have paid the eligible employee:
- A minimum of $1,500 (before tax) for the relevant fortnight; or
- The amount payable to the employee for the performance of work during that fortnight if it is more than $1,500.
An employer who claims the JobKeeper payment and fails to pay the minimum $1,500 to employees or deliberately misuses the payment may incur penalties of up to $126,00.
As the ATO will pay employers the JobKeeper payment monthly in arrears, it is essential that you ensure your employees continually meet the eligibility criteria. The payment is intended to reimburse the employer for amounts that have already been paid to employees.
To receive JobKeeper payments for April, eligible employees will need to have received at least $3,000 on or before end of April ($1,500 for 30 March– 12 April 2020, and $1,500 for the fortnight 13 April – 26 April 2020). If your team are not currently receiving at least this amount, do not pay this amount until you have first ensured that all the eligibility criteria have been met and they have given you the signed nomination form.
The first fortnight for a JobKeeper payment is 30 March 2020 to 12 April 2020. The last fortnight for a JobKeeper payment is 14 September to 27 September 2020. Any payments the employer has made prior to or after these fortnights, are not generally eligible for payment.
The business will continue to receive the payments for eligible employees while they are eligible for the payments. While the program runs until 27 September 2020, payments will stop if the employee is no longer employed by the relevant employer.
Adam owns a real estate business with two employees. The business is still operating at this stage but Adam expects that turnover will decline by more than 30% in the coming months. The employees are:
Both Anne and Nick are still working in the business.
Adam registers his interest in the JobKeeper scheme (from 30 March 2020), then applies to the ATO providing details of his eligible employees. Adam also advises Anne and Nick that he has nominated them as eligible employees to receive the payment. Adam will provide information to the ATO on a monthly basis and receive the payment monthly in arrears.
Adam’s business is eligible to receive the JobKeeper Payment for each employee.
For Anne, the business will:
For Nick, the business will:
JobKeeper payments might also be available in relation to Adam.
Adapted from Treasury fact sheet: JobKeeper payment — information for employers
An employer will need to make superannuation contributions for any amount payable to an employee in respect of their actual employment, disregarding any extra payments made by the employer to satisfy the wage condition for getting the JobKeeper payment. For example, if the work actually done by an employee over a period entitled them to be paid $1,000, but the employer paid them $1,500 to satisfy the wage condition for a JobKeeper fortnight, then the employer will only be required to make superannuation contributions in relation to $1,000. Employers can choose to pay superannuation guarantee on the full amount.
If the Commissioner is satisfied that the employer is entitled to the JobKeeper payment, the Commissioner must pay $1,500 to the employer for each eligible employee (or business participant) by the later of:
- 14 days after the end of the calendar month in which the fortnight ends; and
- 14 days after the Commissioner is satisfied that the employer or business is entitled to the payment for the fortnight.
Payments will be made monthly by the ATO. That is, an eligible employer with three eligible employees that qualify for both fortnights in June 2020, would generally receive $9,000 by 14 July 2020.
The payment of an amount by the Commissioner to an entity does not affect whether the entity is actually entitled to the amount.
Each month, businesses participating in the JobKeeper scheme will need to report to the Commissioner their:
- Current GST turnover for the reporting month; and
- Projected GST turnover for the following month.
within 7 days of the end of the month.
- Elect to participate in the JobKeeper scheme before the end of the JobKeeper fortnight; and
- For April 2020, the employer will need to register by 26 April 2020 unless the ATO accepts a later date.
- Complete and hold on file the JobKeeper employee nomination form for eligible employees – completed by both employees and employers; and
- Notify the ATO of an eligible employee’s:
- Type of employment
- Residency status
- And, notify employees that they are nominated employee within 7 days of notifying the ATO.
An employer will also need to notify the ATO if they no longer wish to participate in the JobKeeper scheme.
Amendments have been made to the Fair Work Act to support the practical operation of the JobKeeper scheme.
In addition to the requirement that at least the full $1,500 per fortnight is paid to the nominated employee, employers eligible for the scheme are able to request employees to change:
- The days or times when the employee is to perform work;
- Annual leave arrangements, including at half pay (annual leave balances cannot fall below 2 weeks).
The amendments allow employers to redirect resources by giving a direction (JobKeeper enabling direction) to:
- Change the hours of work including standing down an employee (where they cannot be usefully employed because of changes to business attributable to the Coronavirus pandemic or government initiatives to slow Coronavirus transmission), through the JobKeeper enabling stand down direction;
- Not work on a day or days on which the employee would usually work;
- Work for a lesser period than the period which the employee would ordinarily work on a particular day or days;
- Work a reduced number of hours (compared with the employee’s ordinary hours of work), including reducing hours to nil;
- Give staff different types of work to do; or
- Work from different locations.
The employer cannot unreasonably refuse a request by an employee to engage in secondary employment, or undertake additional training or professional development.
The direction must not be unreasonable, the employer must provide three days notice (or a lesser period by agreement), and the direction must be necessary to continue the employment of one or more employees.
Employers cannot reduce the hourly rate of pay paid to an employee.
All directions from employers that change an employee’s conditions must be in writing.
The employer will also need to prove that they have satisfied the conditions. For example, an employee who usually works weekends could reasonably be required to work on weekdays in a situation where their employer’s business can no longer trade on weekends as a result of the Coronavirus pandemic.
Where an employer makes a direction to change an employee’s conditions, leave, redundancy pay and pay in lieu of notice of termination accrue as if the direction had not been made. That is, if an employer requires an employee to reduce their ordinary hours of work, their leave accrues as if the employee worked their ordinary hours – leave accrues as if nothing has changed.
These amendments to the Fair Work Act only apply to employers within the JobKeeper scheme.
Any disputes will be mediated by the Fair Work Commission.
Rachel works as an administrator for a manufacturing business. The businesses retail operations have moved online as a result of significantly reduced shopfront demand. Turnover has reduced by 30% following the Coronavirus outbreak.
Rachel’s employer qualifies for the JobKeeper scheme for Rachel. Her employer reduces her ordinary hours of work from 38 to 32 hours per week, giving her at least 3 days notice in writing (under a stand down direction).
Rachel’s contractual base pay rate is $30 per hour. Her base rate cannot be reduced for her hours of work, regardless of how many hours she is directed to work. Rachel’s fortnightly pay has now reduced from $2,280 ($30/hr x 76 hours worked in a fortnight) to $1,920 ($30/hr x 64 hours worked in a fortnight).
Rachel must be paid for the hours she worked, and as her reduced fortnightly pay is still higher than the value of the fortnightly JobKeeper payment ($1500), she must be paid that higher amount.
Rachel’s employer can apply the value of the JobKeeper payment towards her fortnightly pay.
Adapted from the Explanatory Memorandum
If you claim the JobKeeper subsidy and whether you or the employee was not eligible, the Tax Commissioner can claw back any ineligible payments made. In addition, general interest charges apply.
If you have paid employees the $1,500 amount only to find you or they are not eligible, there is no recourse to claw back these payments to employees.
Please contact our Melton Accountants on 03 9746 6479 for any questions you have about the JobKeeper Payment and stimulus measures.
We recommend that you please don’t act on the basis of this guide. The measures will apply differently and it’s important that you understand how your specific circumstances are impacted. Always seek personalised, professional accounting advice.
Stay informed by listening our Podcast called Small Business All Figured Out. You can listen to our podcast wherever you nornally listen to podcasts: