The final rules for the JobKeeper payment scheme were released over the Easter weekend. As many of you would be aware, the JobKeeper payment is a payment directly from the Government to eligible employers of $1,500 per fortnight, for each eligible employee. The payments apply from 30 March 2020 and will be payable up to 27 September 2020 (a period of 26 weeks).
Am I an eligible employer?
To be an eligible employer, you must be in business. Where the business has an aggregated turnover of less than $1b, then the business must have suffered a decrease in turnover (gross sales) of more than 30%, for a month between April and September 2020 or in the June or September quarters, when compared to the corresponding period in 2019.
For not for profit entities, the decrease required to be an eligible employer is 15%.
How does the decline in turnover test work?
To be eligible for any JobKeeper payments the employer must be able to show that it has suffered a decline in its projected turnover in:
• A calendar month (any of April to September 2020), or alternatively;
• In a quarter (starting 1 April or 1 July 2020).
that equals 30% or greater when compared to the actual turnover of the corresponding period in 2019.
The employer can choose a month or quarter for the test to be applied and does not appear linked to the GST reporting cycle that the employer uses. Projected turnover is an estimate of the gross revenue by the employer on the balance of probabilities. It must be based on a reasonable estimate of sales for the month ahead. It would be expected that the employer would be able to substantiate the projected turnover reported.
Once the employer has experienced a decline of projected turnover of 30% in a period compared to the actual turnover for the same period in 2019, they will qualify for the JobKeeper payment from that month, regardless of their turnover in subsequent months.
Can I deliberately defer invoices from April into May to get my turnover down to meet the test in April so I then qualify for the whole JobKeeper period?
The ATO has the power to require business that enter into artificial or contrived behaviour to qualify for, or increase their entitlement to the JobKeeper payments, to repay all of the payments plus penalties and interest.
We would recommend extreme care be taken in manipulating the turnover in a given period. As you will be reporting both your projected and actual turnover each month, the ATO will have all the data to examine unusual patterns of behaviour.
In addition, significant penalties will apply. The Rules outline that criminal offences may arise where an employer deliberately accesses the scheme through false statements.
What can I exclude or include in Projected Turnover?
Projected turnover will simply be based on the GST definition of your supplies (or gross sales) that you expect to make in the month ahead. It will be measured on a standalone basis for that employer. There is no requirement to aggregate the turnover of related businesses. GST Grouping provisions are disregarded, meaning the test is applied to the employer as a standalone entity and to take into consideration supplies made to other members of the GST group. There are issues arising from this that will need to be managed in practice.
Turnover does not include dividends, residential rent, interest and supplies that do not have the necessary connection with Australia.
Unfortunately, bad debts from an earlier period cannot be used to reduce the projected turnover for a period.
Which employees can I claim the payment for?
You can claim the payment for eligible employees that were in your employment at 1 March 2020.
An eligible employee is an employee who meets all of the following conditions:
• Currently employed by the employer (if the employee had been retrenched, they need to be re-hired);
• Be either a full time or part time employee, or a casual employee who had been employed for 12 months;
• Was over the age of 16 at 1 March 2020;
• Was an Australian tax resident on 1 March 2020;
• Was an Australian citizen, permanent visa holder or a Special Category visa (subclass 444) holder (that is Kiwis working in Australia); and
• Is not in receipt of a JobKeeper payment from another employer.
Each employer will need to get a statement (in a form to be released) that it must obtain from each employee, confirming they qualify as eligible employees. The employer will also be required to notify each employee in writing that they are receiving the JobKeeper payment for them.
What kind of reporting will I need to do to the ATO?
Each employer will need to report by the 7th of each month its projected turnover for the upcoming month and the actual turnover for the previous month together with details of the number of employees and their wages paid. We expect that the ATO will release the format of that report in coming days.
What do I have to pay employees?
We will break the classes of employees up into several groups in the table below:
Employee What you need to do with JobKeeper payment?
Continues to work and paid >$1,500/ft Continue to pay them as per normal. The JobKeeper payment is retained by the employer as a subsidy towards the employee cost.
Continues to work and paid < $1,500/ft You must pay them a minimum amount of $1,500 per fortnight to
be eligible for the JobKeeper payment.
An employee who has been stood down You must pay the employee the full payment of $1,500 per
fortnight. If that employee is also receiving Centrelink benefits (the
JobSeeker payment), then the employee will need to inform
Services Australia that they are in receipt of the JobKeeper
It is important to note that the employer must be paying the above before the JobKeeper payments will be received, as the JobKeeper payments will be made monthly in arrears.
I have stood down (not terminated) employees since 30 March and ceased their pay, or their pay has dropped to below $1,500 per fortnight because of reduced hours, what do I need to do?
To be eligible for the JobKeeper payment you will need to have paid each employee equivalent of $1,500 per fortnight from 30 March to 12 April (being the first fortnight of the JobKeeper payment). Therefore, once you are satisfied you qualify for the JobKeeper payment, you will need to start paying those employees at least $1,500 per fortnight. We would recommend not making any additional payments to employees until you are certain you will qualify for the JobKeeper payments, otherwise you run the risk of being out of pocket.
I trade through an entity and don't take a wage. What's in this for me as a business owner?
Firstly, sole traders in business will qualify for the payment for themselves, provided they meet the turnover decline condition outlined above.
Trusts, companies and partnerships in business, which also meet the turnover decline test, will also be eligible for the payment for only one individual who is not an employee, but is actively engaged in the business. That person must be:
For a Trust A beneficiary
For a Company A shareholder or a director
For a Partnership A partner
The entity must only choose one individual who meets the above, for the JobKeeper payment.
Am I required to pay PAYGW and Superannuation on the JobKeeper Payment?
You must pay a minimum of $1,500 per fortnight to your eligible employees, withholding PAYG as appropriate.
The $1,500 per fortnight per employee is a before-tax amount. Where an employee is paid more than $1,500 per fortnight, the employer's superannuation obligations will not change.
Where an employee is having their wages topped up to $1,500 per fortnight to meet the conditions for the JobKeeper payment, it will be up to the employer if they want to pay superannuation on the top-up wages paid.
What should I be DOING NOW to prepare for this?
Employers will need to notify the ATO that they elect to participate in the JobKeeper scheme by 26 April 2020. Given such a short timeframe, and pending instructions from the ATO, employers need to quickly act to:
• gather key employee and payroll data;
• establish processes to appropriately notify employees and receive nomination notices from eligible employees (specifics to come);
• assess whether in respect of the month of April 2020 or the quarter starting from 1 April 2020, it is expected that the 30% reduction in turnover can be established.
It goes without saying that predicting turnover at this point in time might be fraught with problems, but it will be necessary to review your budgets and ensuring they reflect the current market conditions. For employers that form part of the GST group, it will be necessary to calculate turnover on a stand-alone basis taking into account supplies made to other members of the GST group, as well as other entities outside the group. This would be required for both projected turnovers and the comparison turnovers.
Please contact Dickfos Dunn if you need assistance with this process.