Shining a spotlight on the JobKeeper Scheme
The $130 billion JobKeeper Scheme is the biggest financial lifeline package in Australia's History. Here, we shine a spotlight on the latest information available.
There are lots of criteria & "if this, then that". We understand there’s a lot of information to wrap your head around, so remember we are here to help you – From completing your enrolment forms through to implementing all eligible stimulus items & tax minimization strategies.
Remember to work alongside your accountant at this time to ensure you are getting it right.
The JobKeeper Payment subsidy is paid to an employer by the government to ensure that businesses impacted by the coronavirus can continue to pay their employees.
Eligible businesses will receive a payment of $1,500 (before tax) per fortnight per eligible employee for the duration of the scheme.
The minimum $1,500 (before tax) payment requirement will operate as follows:
- If an employee was already getting paid at least $1,500 in gross salary per fortnight since 30 March 2020, they will continue to receive their regular income according to their prevailing workplace agreements. In this case, the JobKeeper payment will effectively subsidise the first $1,500 of the employees gross fortnightly income.
- 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 wage from their employer.
- From 20 April 2020 – Enrol for the JobKeeper payment
- From 4 May 2020 – Identify your employees (You have until 31 May to identify your employees for JobKeeper payment)
- By 8 May – Make sure you have paid your employees for April
- 31 May 2020 – is the final date you can enrol for JobKeeper if you intend to claim for wages paid for JobKeeper fortnights in April and May.
- Ongoing Monthly - Make a business monthly declaration
Reference: ATO Website
To be eligible for the JobKeeper payment as an employer, businesses must:
- Have a turnover of less than $1 billings – A hell of a lot of businesses!
- Have experienced a drop in income of 30 percent compared to last year (based on GST turnover)
- Able to confirm that each eligible employee is still engaged by this business.
The ATO position is that Taxpayers can satisfy the fall in turnover test in two ways:
The basic test: Businesses will generally use the basic test, which is based on GST turnover
The alternative tests: A category of tests accessible where appropriate turnover comparison periods are not available
You will satisfy the decline in turnover test at a time if your ‘projected GST turnover’ falls short of the business’s current GST turnover for a relevant comparison period by 30% (for most businesses).
The turnover test period must be:
- A calendar month that ends after 30 March 2020 [so March itself counts] and before 1 October 2020; or
- A quarter that starts on 1 April 2020 or 1 July 2020
The relevant comparison period must be the period in 2019 that corresponds to the turnover test period
Projected GST turnover means:
88‑20 Projected GST turnover
(1) Your projected GST turnover at a time during a particular month is the sum of the *values of all the supplies that you have made, or are likely to make, during that month and the next 11 months, other than:
(a) supplies that are *input taxed; or
(b) supplies that are not for *consideration (and are not *taxable supplies under section 72‑5); or
(c) supplies that are not made in connection with an *enterprise that you *carry on.
The government has released legislation outlining alternative eligibility tests for its JobKeeper wage subsidy payments. These new rules outline the scenarios in which a business might be able to apply alternative turnover tests, and what those tests will be.
The alternative test for employers are designed for situations when there is not an appropriate relevant comparison period.
Classes of entities that can apply an alternative test
Test 1: Entity commenced business after the relevant comparison period and as a result the default test cannot be used
Test 2: Entity acquired or disposed of part of their business after the relevant comparison period and those actions changed their turnover. As a result, the business today is not the same business as it was in the relevant comparison period and so an alternative is needed
Test 3: Entity has restructured part, or all of the business and the restructure changed the turnover. As a result, the current business is not the same business as it was in the comparison period and so an alternative is needed
Test 4: Entity has had a substantial increase in turnover - by 50% or more on a 12 months basis. The rapid growth indicates a change in the business and so an alternative test is required
Test 5: Entity has been affected by drought or natural disaster in the comparison period. The event or circumstances is outside the usual business setting and as a result an alternative test is required
Test 6: The entity has an irregular turnover that is not cyclical, such as can occur in building and construction. A business with such irregular but non-cyclical turnover means that the relevant 2019 period if not appropriate.
Note: This does not apply to a business with a cyclical or seasonal turnover fluctuation because the relevant comparison period is regarded as appropriate.
Test 7: Entity is a sole trader or partnership (individuals), and no employees, and the sole trader or one of the partners has been sick, injured or on leave during the comparison period. In this case the default comparison period is not appropriate and so an alternative test is required
Use of the alternative tests
- For all but Test 1 (those not in business last year), the alternative test merely provides an option IF they do not qualify under the basic decline in turnover test
- If you satisfy the original test, you do not need to satisfy the alternative test even if you are in the class of entity to which an alternative test applies
- So, an entity which satisfies the basic test, but does not satisfy an applicable alternative test, still qualifies for JobKeeper – these are either/or tests
- If you do not satisfy the basic test, and happen to be in two or more classes of entities which can use an alternative test, if you satisfy just one of them you are ok
Test 1: Business commenced after comparison period
Test 1 available to an entity which commenced business before 1 March 2020 but after the relevant comparison period it is wishing to use. It has two sub-alternative tests.
First alternative test:
- If you are using a month as your test period, use as your comparison the average monthly current GST turnover
Average monthly current GST turnover is:
If you commenced business before 1 February 2020, it is the monthly average of your actual GST turnover for each whole month after you started business and before 1 March 2020
Example: If started business on 15 November 2019, you calculate average turnover for months of December, January and February
You then compare this to turnover for either March 2020 or April 2020 to see if you have the required 30% decline
Average monthly current GST turnover is
If you started business before 1 March 2020, but on or after 1 February 2020, it is your actual turnover before 1 March divided by the number of days you were in business, multiplied by 29
So, if started business on 2 February and turnover from 2 February to 28 February was $200,000, your average turnover is $200,000/27 x 29 = $214,815
You will therefore need to show that your turnover in March or April will be 30% down – less than $150,370
- If you wish to use a quarter as a comparison, multiply the average monthly current turnover (worked out as above) by 3
- So, if want to compare to the projected turnover for the qtr. ended June, the taxpayer above would use $644,445 as the comparison base
Test 2: Business acquisition or disposal that changed turnover
This alternative is available to an entity if:
- There was an acquisition or disposal of part of their business after the relevant comparison period and before; and
- The acquisition or disposal changed the entity’s turnover [not defined – so hard to see how it would not have regardless]
The alternative test is:
- If using a month as your test period, use the GST turnover from the month immediately after the acquisition or disposal occurred as your comparison period
- If using a quarterly comparison, multiply by 3 the turnover from the month immediately after the month of the change
- If there is more than one acquisition or disposal use the month after the last one
- If there is no whole month after the last one use. the month immediately before the applicable turnover test period i.e. before the month you are using as your current test period
- This test could be used, for example, when a distribution business has acquired a new agency, or a financial planning business has bought a new book since the relevant comparison period last year
Bushfire and Drought changes:
- If the entity qualified for the Bushfire lodgement and payment deferrals, exclude months covered by those and use the nearest month before or after the acquisition or disposal as appropriate, unless the months covered by the concessions are the only months available
- If the entity qualified for the Drought Help concessions, exclude months covered by those and use the nearest month before or after the acquisition or disposal as appropriate, unless the months covered by the concessions are the only months available
Test 3: Business restructure that changed the entity’s turnover
This alternative is available to an entity if:
- There was a restructure of their business, or part thereof, after the relevant comparison period and before the applicable current turnover test period; and
- The restructure changed the entity’s turnover
Restructure is not defined – but it is referring to a restructure of businesses within a single entity – e.g. merging of divisions. It does not apply to an entity that has restructured e.g. a partnership which has moved to a company. In that case, the company needs to use Test 1
The alternative test is:
- If using a month as your test period, use the month immediately after the month in which the restructure occurred as your comparison
- If using quarterly, use above x 3
Same rules if more than one restructure (use the last one) and for Bushfire/Natural disaster relief.
Test 4: Business had substantial increase in turnover
This alternative is available to an entity if they had an increase in turnover of:
- 50% or more in the 12 months immediately before the applicable turnover test period; or
- 25% or more in the 6 months immediately before the applicable turnover test period; or
- 12.5% or more in the 3 months immediately before the applicable turnover test period
The alternative test is:
- If using a month as your test period, use as your comparison the average turnover for the 3 months before your current month
- If using quarterly, use the 3 months before your current month
Same exclusions regarding drought/natural disaster.
Test 5: Business affected by drought or natural disaster
This alternative it available to an entity if:
- The entity conducted business or some of the business in a declared drought zone, or a declared natural disaster area, during the relevant comparison period; and
- The drought or natural disaster changed the entity’s turnover [this brings in a type of subjective or causation test which it not required in the default test – but probably not hard to prove?]
The alternative test for a comparison period is: Use the actual turnover for the same period in the year immediately before the declaration of drought or natural disaster
Test 6: Business has an irregular turnover
This alternative is available to an entity if
- For the quarters ending in the 12 months before the applicable turnover test period, the entity’s lowest turnover quarter is no more than 50% of the highest turnover quarter; and
- The entity’s turnover is not cyclical [e.g. if your turnover fluctuates only because you are seasonal e.g. farmer or ski shop, you do not qualify under this test]
The alternative test is
- If using a month as the test period, use as your comparison the average monthly turnover for each whole month in the 12 months immediately before the current test month
- If using a quarter as the test period, multiply the average monthly turnover calculated above by 3
Same exclusions regarding Bushfires and Natural Disaster.
Test 7: Sole trader or partnership with sickness injury or leave
This alternative is available to an entity if
- The entity is a sole trader with no employees or a small partnership [not defined] that has no employees; and
- The sole trader or at least one of the partners did not work for all or part of the comparison period due to sickness, injury or leave [which should include maternity leave]; and
- The turnover of the sole trader or partnership was affected by the sole trader or partner not working for all or part of that period
The alternative test is:
- If using a single month as your test period, use as your comparison the month immediately after the sole trader returned to work
- If using a quarter as your test period, use 3 times the turnover of the month immediately after the individual returned to work
Same issues if in receipt of Bushfire help or Natural Disaster relief
An ‘eligible employee’ is one that satisfied the following requirements:
- The employee is currently employed by the employer (which includes an employee who has been stood down or re-hired after they had already lost their job).
- The employee was employed by the employer as at 1 March 2020.
- The employee is a full-time or part-time employee, or a long-term casual employee (i.e., one who has been employed by the employer on a regular and systematic basis for longer than 12 months as at 1 March 2020).
- The employee was at least 16 years of age on 1 March 2020.
- The employee was, on 1 March 2020, either: (A) a resident of Australia for social security purposes (e.g., an Australia citizen, a holder of a permanent visa or a holder of a protected special category visa); or (B) a resident of Australia for tax purposes and was a holder of a Subclass 444 (Special Category) visa.
- The employee has not given any other employer a nomination notice.
- If the employee is a long-term casual employee – they are not a permanent employee of any other employer.
- The employee is not in receipt of a government-funded parental leave pay or dad and partner pay and nor are they fully supported by a workers’ compensation scheme.
Enrolment, Process & Reporting
You can enrol for the JobKeeper payment from 20 April 2020 following these steps:-
- Register your interest and subscribe for JobKeeper payment updates on the ATO website.
- Assess if you are an Eligible Employer by clicking the ATO website.
- Confirm if your employee/s are Eligible Employees by clicking the ATO website.
- Continue to pay at least $1,500 to each eligible employee per JobKeeper fortnight (the first JobKeeper fortnight is the period from 30 March to 12 April).
- Notify your eligible employees that you are intending to claim the JobKeeper payment on their behalf and check they aren’t claiming JobKeeper payment through another employer or have nominated through another business and not in receipt of the JobSeeker payment from Centrelink.
- Send the JobKeeper employee nomination notice to your nominated employees to complete and return to you by the end of April if you plan to claim the JobKeeper payment for April. Keep it on file and provide a copy to your registered tax agent if you are using one.
- From 20 April 2020, you can enrol with the ATO for the JobKeeper payment using the Business Portal and authenticate with myGovID. You must do this by the end of April to claim JobKeeper payments for April. If you are not registered for a myGovID, as your tax agent we can do the enrolment for you. We would be happy to assist you through his process. When you receive your enrolment information and instructions from the ATO, please just forward the email to us and we will be in contact with the next steps.
- In the online form, provide your bank details and indicate if you are claiming an entitlement based on business participation, for example, if you are a sole trader.
- Specify the estimated number of employees who will be eligible for the first JobKeeper fortnight (30 March – 12 April) and the second JobKeeper fortnight (13 April – 26 April).
There’s a lot to consider & implement to make sure you are receiving the full benefits from these government stimulus options. We’re here to work alongside you throughout this, ensuring we are doing all we can for your business to survive.
You will be required to submit monthly reporting to track how the JobKeeper Payments have affected your business during this COVID-19 period. The ATO has recently released further information on the specific reporting requirements and how to submit them.
The key areas that you will need to report are:
- Your business’ current GST turnover;
- Your business’ projected turnover; and
- The eligible employees you are claiming the JobKeeper Payments on.
You will also need to reconfirm your contact and financial institution details for receiving JobKeeper payments each month to ensure payments are going to the correct account.
Regarding the eligible employees, you will need to ensure that each employee is paid at least $1,500 before tax for each.
How do I report?
For most of our clients, we will be doing this for you. But if you are completing on your own, you are able to report monthly by:
- Logging into your Business Portal using your myGovID;
- On the COVID-19 screen, select Step 3 – Business Monthly Declaration for JobKeeper Payment;
- Input and confirm the necessary details.
It is also recommended that you keep a PDF record of each successful JobKeeper monthly declaration, as well as your receipt number. You can generate this through the Print Friendly function.
Can I select which of my eligible employees are covered by the JobKeeper scheme?
No. Once an employer decides to participate in the JobKeeper Scheme, they must ensure that all of their eligible employees (who have agreed to be nominated for the scheme) participate in the scheme. As the scheme is operated on a ‘one in, all in’ basis, employers cannot ‘pick and choose’ which eligible employees will be able to participate in the scheme.
If I have stood down my employees after 1 March 2020, and are no longer paying them, do I need to pay them, for what period and by when?
Yes. If you want to participate in the scheme and you stood down employees after 1 March to qualify you will need to pay them a minimum of $1,500 per fortnight (before tax) between 30 March 2020 - 12 April 2020.
Does the JobKeeper payment apply to me as a business owner that does not employ staff?
Yes, as long as your business satisfies all other requirements to qualify for the JobKeeper payment. The JobKeeper scheme also recognises that certain participants in a business (such as sole traders) have also been affected by the economic downturn caused by the Coronavirus. Therefore, to provide a benefit to such businesses, payments can also be made to an entity in respect of what is referred to as an eligible business participant (generally the controlling individual who is not an employee of their business).
A ‘business participant’ is an individual who is actively engaged in the business carried on by entity and is either:
- a sole trader;
- an individual partner of a partnership;
- a director or individual shareholder of a company;
- an adult beneficiary of a trust
Of importance, however, is that while a business may have more than one business participant, it can only nominate one of these individuals and this person becomes the ‘eligible business participant’ in respect of whom can receive a JobKeeper payment.
I am a sole trader who also employs staff am I eligible for the JobKeeper payment for myself?
Yes. As long as your business has satisfied all the other requirements to qualify for the JobKeeper payment, a sole trader can qualify for the JobKeeper payment concerning their eligible employees and also qualify for the payment themselves as an ‘eligible business participant’.
If I have stood down my employees without pay after 1 March 2020 can I “back pay” them to 30 March 2020?
Yes. If you want to claim the JobKeeper payment for your employees you will need to confirm your eligible employees want to be a part of the scheme and arrange for them to be paid the minimum of $1,500 per fortnight (before tax) from 30 March 2020.
What happens if I don’t have the money to continue paying my eligible employees until the payments are made?
The JobKeeper payment is a reimbursement scheme that is paid monthly in arrears. If this presents cash flow difficulties, businesses are encouraged to speak with their bank to identify their options. Banks have said that businesses may be able to use the upcoming JobKeeper payment as a basis to seek credit to pay their employees until the scheme makes its first payment.
What is the definition of turnover?
Turnover (for the purpose of determining how much turnover has declined by) 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. This is a self-assessment and you may need to assess your qualification here on the basis of whether you report on a cash or accrual basis however we recommend talking with us to ensure the correct assessment is made for you and your business activity.
Is this turnover test related to only turnover in Australia, or does it include overseas operations as well?
Under the GST law, only Australian based sales are included and therefore, only Australian based turnover is relevant. A decline in overseas operations will not be counted in the turnover test.
It is unlikely that my turnover will decrease by 30 percent in March, can I apply later if my turnover decreases in one of the subsequent months?
If a business does not meet the turnover test for March 2020, the business can start receiving the JobKeeper payment at a later time once the turnover test has been met. In this instance though the JobKeeper payment will not be backdated to the commencement of the Scheme.
Will I have to continue to meet the decline in turnover test on an ongoing basis?
No. The decline in turnover test only needs to be satisfied once. Whilst a business must satisfy the decline in turnover test to be entitled to the JobKeeper payment, once it is satisfied, there is no requirement to retest in later JobKeeper payment fortnights. Therefore if a business can demonstrate their turnover has been adversely impacted and passes the test then it will continue to meet this requirement even if its turnover subsequently recovers in later JobKeeper fortnights.
Will the ATO use the JobKeeper payments to offset BAS debt?
The payment will generally be paid directly to the employer and not used to offset tax liabilities, as the intent is that it is a payment that enables employers to pay and retain their employees.
There are lots of criteria & "if this, then that". We understand there’s a lot of information to wrap your head around, so remember we are here to help you – From completing your enrolment forms through to implementing all eligible stimulus items & tax minimization strategies. Contact us now.