JobKeeper (COVID-19 stimulus measures round 3)

By March 31, 2020April 16th, 2020General Business, Staff, Tax

This article is all about the JobKeeper payment that was announced on 30 March with the detail being provided here based on what’s available from Treasury. Last updated on 16 March 2020. Please note we are hosting a webinar on how to process the payment in Xero on Monday 20th April (previously Friday 17th April), link is below.

Overview

If your business loses or has already lost 30% or more of revenue compared to this time last year you’ll get $1,500 per fortnight per employee that you keep on the books for a period of six months. Each employee on the books needs to get paid at least $1,500 a fortnight before tax from your business. Sole traders are also eligible to apply for themselves as are partners, directors, beneficiaries and shareholders who work in a business but aren’t employees. The idea of the payment is to keep the employer/employee relationship in place, keep businesses afloat and keep people getting paid so that when this saga ends we can get back to business as usual. In theory.

Am I eligible?

A business will be eligible if it:

  • Satisfies the ‘decline in turnover’ test, and
  • Carries on business in Australia, and
  • Pays ‘eligible employees’.

The decline in turnover test only needs to be met once, the other two are ongoing and must be met in any given fortnight you want to receive the payment.

What is the ‘decline in turnover test’?

For businesses with turnover of under $1 billion they need to be able to demonstrate a 30% decline in turnover. This test only needs to be satisfied once meaning that if you pass this test in March, you’d be eligible to receive JobKeeper payments for all eligible employees for the full six month period, or if you don’t pass the test until June, you’d only be eligible for payroll periods past that.

‘Turnover’ is calculated in the same way as GST turnover which you can find out more about here.

There are two ways of demonstrating the decline in turnover. The ‘basic test’ looks at comparing a period this year (being 2020) with the same period from last year (being 2019). The period you choose is not related to how you report GST on the BAS so just because you report GST quarterly doesn’t mean you can’t apply this test looking at a single month instead. The relevant periods you can use for comparison are:

  • Monthly – March, April, May, June, July, August, September, or
  • Quarterly – ending 30 June, ending 30 September

You choose which period you want to make the comparison, presumably you would choose the earliest one you can demonstrate a decline, and then if you have 30% or greater decline in turnover you are eligible from that point onward. The period in 2020 you choose to make the comparison with can be based on projections, noting you’d need to be able to justify these and not just “project” a figure conveniently 30% less than the same period last year.

But what if you can’t satisfy this test because your business only just started trading, or last year was a weird one, or you’ve grown rapidly since then, or one of a million other situations? The rules allow for some ‘alternative tests’ which are yet to be outlined by the ATO, but they should cover a wide range of situations. This information should be available soon.

What is an ‘eligible employee’?

Your business must have had an employment relationship with ‘eligible employees’ at 1 March 2020 and continue to be in an employment relationship with them. Eligible employees are employees who:

  • are currently employed by the eligible employer (including those stood down or re-hired);
  • were employed by the employer at 1 March 2020;
  • are full-time, part-time, or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020);
  • are at least 16 years of age;
  • are an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder; and
  • are not in receipt of a JobKeeper Payment from another employer.

Please note that it appears that freelancers/contractors your business engages are not considered ‘eligible employees’. If your business doesn’t have employees, but you yourself trade as a sole trader then you should be personally eligible if you’ve experienced the 30% downturn in trade (see below).

And what if you had a signed contract with a new employee but they didn’t start until after 1 March 2020? This is really a legal matter, but you would need to look at the specifics of each situation, there isn’t a blanket rule here that we’re aware of. If they hadn’t started with you at 1 March they could still have been an employee of their previous employer, or employed by nobody at all. We’ll let you know if Treasury or the ATO decide to offer more guidance on this surprisingly common situation.

What are the payments for?

These payments are to keep your current employees employed with your business. You need to ensure each eligible employee is being paid at least $1,500 a fortnight before tax.

  • If the employee is already earning more than $1,500 a fortnight then you can choose to pay them a top-up payment using the $1,500 or you can simply keep it in the business to help with cash flow. If you choose to top-up their pay you do not need to make a superannuation payment on top of the top-up in pay.
  • If the employee is currently earning less than $1,500 a fortnight then you must pay them at least $1,500 a fortnight and you would use the JobKeeper payment to cash flow this. This top-up in pay to get them to $1,500 does not need to have superannuation paid on top.
  • If the employee is currently earning nothing (e.g. you let them go earlier in March and have rehired them under this scheme) then you will pay them the entire $1,500 and you will not have to make a superannuation contribution at all for that employee.

You’ll see everything revolves around a fortnight. This concept of a ‘JobKeeper fortnight’ is important because once you’ve satisfied the decline in turnover test, the payments are made for each eligible employee that you’ve had employed for any part of one of these fortnights. The fortnights started on 30 March 2020 and end after 13 fortnights on 27 September 2020. So whilst reporting is monthly (see below), the amount of the payment depends on employee activity for each fortnight.

And how do I get the payments?

If you think you’ll be eligible then you’ll need to register via the JobKeeper page on the ATO website which you can find here. To register you’ll need:

  • Your business name and ABN, and
  • A contact name, number and email address.

Failure to register by 26 April 2020 means you will miss out on JobKeeper payments for the first two fortnights. Failing to register until later than this means you won’t get payments for fortnights relating to a period before you registered, the registration is only valid for the fortnight within which you register and any future fortnights. If you’re unsure, just register anyway, it only takes a minute. Registering your interest (above) and formally registering to enter into the JobKeeper program (below) are two separate things.

Once registered you’ll need to update the ATO following the end of each month with your turnover figures for last month and projected figures for the coming month. These figures are not for determining used for eligibility (that decline in turnover test is self-assessed and is only tested once) rather they are so the government can gather accurate financial data on the impact from the crisis. Each month you’ll also report on the status of your eligible employees and the ATO will be using the data lodged via Single Touch Payroll each month to help pre-populate your employee data.

Exactly how this reporting works is unclear, but the ATO will notify registered businesses via email when the time comes on how to get it done.

An additional requirement is for each eligible employee to notify the employer, in the ATO approved form, that they are eligible and not claiming the JobKeeper payment with another employer. Then, once payment is made, the employer needs to notify the employee that payment was made.

When do I get the payments?

The payments will be paid in arrears the month after the wages are paid and reported on. The first payment will arrive in the first week of May covering the first two fortnights. After that payments will be made by the 14th of the following month, so for example, payments relating to June wages will arrive by the 14th of July assuming you have done the required reporting within 7 days of month end. The payments are currently scheduled to go on for 6 months.

And what if I’ve already let someone go?

As long as they were employed by you at 1 March 2020 you can rehire them and be eligible to pay them the $1,500 a fortnight.

What about sole traders?

If you’re a sole trader and your business has taken the 30% hit then you should register using the same process as above to apply for your $1,500 fortnightly payment.

What about company directors and shareholders, trusts and partnerships?

Businesses without employees will be eligible to receive one JobKeeper Payment, and businesses with employees can receive one payment in addition to the payments for their eligible employees. This means that:

  • where the business operates through a sole trader structure – one owner can be nominated to receive the JobKeeper Payment;
  • where the business operates through a partnership – one partner can be nominated to receive the JobKeeper Payment;
  • where the business operates through a company – one director can be nominated to receive the JobKeeper Payment;
  • where the business has shareholders who provide labour to the company and receive dividends in lieu of wages – one such shareholder can be nominated to receive the JobKeeper Payment; and
  • where the business operates through a trust – one individual beneficiary (that is, not a corporate beneficiary) can be nominated to receive the JobKeeper Payment.

The nominated individual must be at least 16 years of age and an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) visa holder and a resident for Australian tax purposes on 1 March 2020. Payments will be made to the nominated individual monthly in arrears by the ATO.

Is is unclear how these payments will be reported as income by the recipient. Presumably ATO will offer guidance on this in time, but for now what is important is that eligible businesses get registered and get the money out to the eligible parties.

Can I [insert something sneaky here]?

The legislation is very clear about what will happen if people try to game the system. Don’t do it.

So, Generate, what should I be doing now?

If you have eligible employees and if sales are down 30% on last year, or that’s looking likely in the coming months, then we recommend you register at the JobKeeper ATO site today. The ATO have said they will contact registrants with next steps shortly.

Want some help with this?

If you’re unsure about your eligibility, get in touch with your Client Manager for a chat.

If it’s your job to process payroll for your organisation and you’re unclear of how to process these payments we’ll be hosting a webinar to show you exactly what you need to do. This webinar will be hosted by our resident Xero payroll expert, Lauren Hillier, Director at Generate. Lauren will guide you through

  • Employer eligibility
  • Employee eligibility
  • The steps you need to take to register
  • How to adjust your Xero payroll settings
  • Paying employees
  • Monthly ATO reporting

What to bring / prepare

  • Copy of BAS for Apr-Jun 19 and Jul-Sep 19
  • Income projections for each month Apr-Sep 20

The webinar will be on Monday 20th at 10am and you can register here. Note this was previously scheduled for Friday 17th at 10am.

If you attend the webinar and decide you’d rather someone else handle payroll processing to ensure everything with your JobKeeper payment is smooth, then we have our skilled bookkeeping team ready to take the lead on helping our clients navigate through this tricky area. If you have already had dealings with Mandy, Trent, Tash and Jacques, you’ll know what legends they are. Experts in Xero in particular. Please get in touch via bookkeeping@generate.com.au for more information on pricing and how we work.

If you have any questions about anything else, please don’t hesitate to reach out. We’re here to help.