The JobKeeper Payment
On 9 April 2020, the JobKeeper legislation received Royal Assent and the Treasurer issued the Rules that govern eligibility for JobKeeper. This article sets out the operation of the JobKeeper scheme.
A ‘package’ of four Acts encompass the JobKeeper legislation (Legislation):
Coronavirus Economic Response Package Omnibus (Measures No. 2) Act 2020 (Omnibus Act);
Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (Payments and Benefits Act);
Appropriation Act (No. 5) 2019-2020; and
Appropriation Act (No. 6) 2019-2020.
The Legislation does not include the rules governing the eligibility for the JobKeeper Payment. Instead, the Treasurer by legislative instrument makes rules prescribing matters to give effect to the Legislation. This means the Rules include the bulk of the detail on the eligibility for JobKeeper.
The Rules and Explanatory Statement to the Rules were released on Thursday 9 April 2020 and are available here and here.
What is the JobKeeper Payment?
The JobKeeper Payment is a wage subsidy that will be paid through the tax system (i.e. it will be administered by the ATO) to eligible businesses impacted by the Coronavirus.
Under the scheme, eligible businesses will receive a payment of $1,500 per fortnight per eligible employee and/or for one eligible business participant (i.e. an eligible sole trader, partner, company director or shareholder or trust beneficiary).
The subsidy will be paid for a maximum period of six months (i.e. 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.
The JobKeeper Payment will ensure that eligible employees (and, where applicable, eligible business participants) receive a gross payment (i.e. before tax) of at least $1,500 per fortnight for the duration of the scheme.
Employer Eligibility
An employer will only be eligible to receive a JobKeeper Payment in respect of an ‘eligible employee’ (refer below) if, at the time of applying:
for employers with an aggregated annual turnover of $1 billion or less - the employer estimates that their projected GST turnover has fallen (or is likely to fall) by 30% or more; or
for employers with an aggregated annual turnover of more than $1 billion - the employer estimates that their projected GST turnover has fallen (or is likely to fall) by 50% or more; and
the employer is not specifically excluded from the scheme (e.g. one that is subject to the Major Bank Levy, one that is in liquidation, etc.).
Where an employer is a charity registered with the Australian Charities and Not-for-profit Commission (‘ACNC’), the employer will be eligible for the JobKeeper Scheme if they estimate that their turnover has fallen, or is likely to fall, by 15% or more relative to a comparable period.
However, universities and non-government schools registered as charities, remain subject to the 30% or 50% decline in turnover tests, as outlined above.
PRACTICAL WARNING – Qualifying employer: 1 March 2020 requirement
To be a qualifying employer on 1 March 2020, the employer must have carried on business in Australia or been a non-profit body pursuing its objectives principally in Australia. An employer that does not meet either of these conditions on 1 March 2020 will not qualify for the JobKeeper scheme.
PRACTICAL TIP – Gathering information on decline in turnover
One of the primary tests for determining whether a business qualifies for the JobKeeper Scheme and, hence JobKeeper Payments, is the decline in turnover test (outlined above).
Ultimately, it is up to each business to self-assess whether it satisfies this test. In most cases, businesses will be required to make a reasonable estimate of their turnover for a month or a quarter. To assist with this process, the ATO (according to Treasury) will be providing guidance in this regard shortly.
In the meantime, 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.
Importantly, eligible employers must actually elect to participate in the JobKeeper Scheme via an application to the ATO. In making such an application, an employer will also need to:
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.
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.
The ATO has available on its website an online form which can be used by employers to register their interest in the JobKeeper Payment Scheme.
On 15 April 2020, the ATO released additional information on the formal enrolment process. In particular, eligible employers, or their tax agents, will be able to enrol and apply here for the JobKeeper Payment from 20 April 2020.
PRACTICAL WARNING – Employers must register for the scheme
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.
Measuring turnover
When determining if the annual turnover of a business is $1 billion or less, for the purposes of working out whether the applicable decline in turnover threshold is 30% or 50%, it is the entity’s aggregated turnover that must be considered.
In this context, an entity’s ‘aggregated turnover’ is the same as what is used when determining if an entity is a small business entity (‘SBE’), which includes the annual turnover of an entity that is ‘connected with’ or an ‘affiliate’ of the entity. Broadly, an entity’s annual turnover is the total ordinary income derived by the entity in the ordinary course of carrying on a business, excluding dealings between the entity and its connected entities and affiliates.
Specifically, an entity will be subject to the higher decline in turnover threshold of 50% if the entity’s aggregated turnover is either:
likely to exceed $1 billion for the current income year; or
actually exceeded $1 billion in the previous income year.
Establishing projected GST turnover
In determining whether the turnover of a business has fallen (or is likely to fall) by at least 30% (or 50% as the case may be), the business would generally need to show a decline in its projected GST turnover in the current period (i.e., either a month or quarter) relative to its current GST turnover in the corresponding period in the 2019 income year.
The test period for calculation of GST turnover is either:
any month between March 2020 and September 2020 (compared with the corresponding month in 2019); or
the June 2020 or September 2020 quarter (compared with the corresponding quarter in 2019).
The entity can choose either monthly or quarterly irrespective of whether the entity accounts for GST on that basis (or if GST registered at all).
GST turnover is based on the GST Act definition with modifications under the Rules to:
allow for monthly or quarterly calculation under JobKeeper rather than annual under the GST Act;
disregard GST groups; and
for registered charities (including deductible gift recipients), to include the value of certain gifts.
GST turnover includes the GST-exclusive value of all supplies (including taxable supplies and GST-free supplies) but excludes input taxed supplies.
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 discretion to determine an alternative turnover test and 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.
PRACTICAL TIP – No need to re-test
With respect to the decline in turnover test, it is important to note that:
No re-testing of eligibility is required. That is, once the entity satisfies either the basic or the alternative decline in turnover test, it does not need to re-test its turnover in later months to ensure its continued eligibility for JobKeeper assistance. This is subject to anti-avoidance rules which require that an entity has not manipulated its turnover in such a way as to meet the decline in turnover test.
An entity can qualify in a later JobKeeper fortnight. That is, if an entity does not satisfy the decline in turnover test for April 2020, the entity can re-test in later months. Therefore, an entity can still meet the decline in turnover test partway through the six month period over which the JobKeeper scheme operates. However, such employers must still have been carrying on a business in Australia (or have been a non-profit body pursuing its objectives principally in Australia) on 1 March 2020. It is important to note, however, that in such a scenario, the JobKeeper Payment will not be backdated to the commencement of the scheme.
Employee Eligibility
A business can only claim a JobKeeper Payment in respect of an employee who is an ‘eligible employee’. 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).
An ‘eligible employee’ is an employee who satisfies 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 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
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 (refer below).
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.
Additionally, before an entitlement to the JobKeeper Payment arises, 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.
Practical Warning – Employee can only make a nomination once
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).
Wage Condition
For each JobKeeper fortnight, the employer is only entitled to a JobKeeper payment if the employer meets the wage condition. This condition requires that an employer who participates in the JobKeeper scheme must pay each participating eligible employee at least $1,500 per fortnight (i.e. the practical operation of JobKeeper is that it reimburses $1,500 of wage payments to an employee).
The following components of the employer’s payments to, or on behalf of, the employee must total at least $1,500:
Employee’s after tax income – amounts paid by way of salary, wages, commissions, bonuses or allowances (less PAYG Withholding);
PAYG Withholding and HECS/HELP - amounts withheld by the employer for income tax or a HECS/HELP loan;
Salary Sacrificed Superannuation Contributions – superannuation contributions made in the fortnight under a salary sacrifice arrangement for the employee; and,
Other Salary Sacrifice Arrangements – amounts applied or otherwise dealt with on the employees behalf, where the employee has agreed to forego salary in return
Importantly, this requirement for the employer to make payments of at least $1,500 to or for the employee applies irrespective of whether the employee typically receives more or less than this amount.
The minimum $1,500 (before tax) payment requirement will operate as follows:
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.
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.
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.
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.
PRACTICAL TIP – Satisfying the ‘wage condition’
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.
Flexibility for employers receiving the JobKeeper Payment
Amendments have also been made to the Fair Work Act 2009 to support the practical operation of the JobKeeper Scheme and to facilitate a range of flexible working arrangements designed to support the continued operation of businesses and the ongoing employment of employees.
A summary of these changes may be found here - flexibility in workplace laws during coronavirus.
Claiming for a Business Participant
The JobKeeper Scheme also recognises that certain participants in a business (such as a sole trader) 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).
Note that a non-profit body cannot receive a JobKeeper Payment in respect of an eligible business participant.
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. Obviously, no nomination is needed where the individual is a sole trader.
Furthermore, a JobKeeper Payment can only be claimed by an eligible business in respect of the nominated eligible business participant where all of the relevant conditions are satisfied, some of which include:
The business meets the decline in turnover test (broadly, where its turnover has fallen, or is likely to fall, by at least 30% or 50%, as the case may be).
The business had an ABN on or before 12 March 2020 (or such later time that the Commissioner allows) and either the business entity:
had an amount included in its assessable income for the 2019 income 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 (i.e. in a BAS that was lodged) on or before 12 March 2020 (or such later time as allowed by the Commissioner).
The relevant business participant was:
actively engaged in the business (i.e. in the operations and activities of the entity) as at 1 March 2020;
not entitled to another JobKeeper Payment, either as a nominated eligible business participant of another business (e.g. as a director or beneficiary) or as an eligible employee;
not a permanent employee of any other employer;
at least 16 years of age as at 1 March 2020; and
on 1 March 2020, either:
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
a resident of Australia for tax purposes and was a holder of a Subclass 444 (Special Category) visa.
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.
Other important points
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. This applies to all eligible employees (i.e., irrespective of whether they are still working for the employer or they have been stood down). As the scheme is operated on an ‘one in, all in’ basis, employers cannot ‘pick and choose’ which eligible employees will be able to participate in the scheme.
In the absence of any specific exemptions, the JobKeeper Payments received from the ATO by the business would be assessable income under either s6-5 of the ITAA 1997 (as ordinary income) or s.15-10 of the ITAA 1997 (as a subsidy received by a business). However, salary or wage payments made by the business to their employees are allowable deductions.
The Government’s intention is that employers will only be required to make SG contributions for amounts payable to an employee in respect of their actual employment, which would not include any extra payments made by the employer to satisfy the $1,500 JobKeeper Payment ‘wage condition’. At the time of writing, the law is yet to be amended to reflect this. For example, if an employee ordinarily earns $1,000 a fortnight and is ‘topped-up’ by $500 to $1,500 a fortnight, the employer will be required to pay SG in relation to the ‘usual’ $1,000 but may lawfully decide not to pay SG on the additional $500 payment, which is solely attributable to the JobKeeper Payment. In other words, in relation to the extra top-up amounts paid to the employee, it is up to the employer if they want to pay superannuation on these additional wages paid by the JobKeeper Payment.
Businesses will not qualify for a JobKeeper Payment in respect of workers engaged through a labour hire firm. In order to qualify for the JobKeeper Payments, the individual must either be an eligible employee or an eligible business participant.
On the basis that a sole trader’s business has satisfied all the other requirements to qualify for the JobKeeper Payment, a sole trader can qualify for the JobKeeper Payment in relation to their eligible employees and also qualify for the JobKeeper Payment themselves (i.e. in their own capacity) as an eligible business participant. In order words, a sole trader’s entitlement to the JobKeeper Payment as an eligible business participant arises independently of their entitlement to the JobKeeper Payment in respect of their employees. Therefore, whether a sole trader has any employees or not will not impact on their ability to personally qualify for the JobKeeper Payment.
Where an employer has incorrectly received a JobKeeper payment because it does not satisfy the decline in turnover test, the employer will be required to repay the JobKeeper payment. There are also potential penalties and general interest charges that may be imposed on the employer. As such, it is very important to keep written evidence to support how GST turnover was determined for both the 2020 test period and the equivalent period in 2019, and the basis on which the relevant decline in turnover threshold was satisfied. This should be approached on the assumption that the ATO will scrutinise the turnover calculations at some point in the future and will be particularly interested in cases where the actual turnover during the period of the JobKeeper scheme turns out to be significantly higher than the projected GST turnover decided upon for the test period.
Integrity & compliance
The Payments and Benefits Act includes an anti-avoidance rule that can apply to a scheme entered for the sole or dominant purpose of obtaining a JobKeeper payment (or an increased payment). Like the anti-avoidance rules in the GST Act (Division 165) and the income tax legislation (Part IVA), sole or dominant purpose is by reference to ‘eight factors’.
The ATO can make a determination that the JobKeeper anti-avoidance rule applies and that the entity is not entitled to a JobKeeper payment (or is entitled to a lesser amount). The Explanatory Statement also says that:
the ATO will undertake compliance activity relating to JobKeeper; and
additional administrative and criminal penalties can apply to parties involved in schemes to gain access to JobKeeper.
Common questions
Since the release of the Government’s JobKeeper Scheme, a host of queries have been raised, many of which are addressed by Treasury in their Fact Sheet - JobKeeper Payment Frequently Asked Questions
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