JobKeeper Payment Legislation Has Passed
JobKeeper Payment - Legislation Has Now Passed But The ATO Have Let Businesses Down!
An Update For Businesses
On the evening of 8th of April 2020 legislation was passed to confirm the Governments ‘JobKeeper Payments’ wage subsidy scheme. The legislation refers back to the ATO in making a number of critical decisions in relation to a Business's eligibility for the JobKeeper payments, however as of 9am on 14th April, the ATO are yet to issue guidance. Therefore, the information presented below is based entirely on the legislation that was passed by the Government rather than the ATO.
Summary of the JobKeeper Payment
Eligible employers will receive $1,500 per fortnight for each eligible employee for up to 6 months. It is available to Full-time, part-time and long term casual workers who have worked longer than 12 months with the business.
The first reimbursement of the JobKeeper payment will be paid to Employers in the first week of May. To receive this, you have to already have been paying the minimum of $1,500 per fortnight to your employees from 30th of March 2020. Note, that the first fortnight ends on the 12th of April, which means for weekly pay runs, a top up payment may be required for some employees to ensure that employee is eligible. i.e. if an employee was paid $400 on the 4th of April. If you want that employee to receive the JobKeeper Payment you will need to ensure that employee is paid at least $1,100 in the next weekly pay run ($400 + $1,100 = $1,500 minimum paid to the employee).
It is important to know that the JobKeeper Payment is a reimbursement of wages to employees, that occurs up to five weeks after payments to the employees are made. The $1,500 per fortnight payment needs to be paid to employees before eligible employers can receive the reimbursement.
How To Determine If Your Business Is Eligible
Your business will be considered eligible if:
- You have an aggregated annual turnover of less than $1 billion and your turnover has or will be reduced by 30% for the ‘turnover test period’
- You have an annual turnover of more than $1 billion and your turnover has or will be reduced by 50% for the ‘turnover test period’
To establish if your business has faced or is likely to face the required fall in turnover, you would be expected to establish that your business turnover has fallen in the relevant month or quarter relative to their turnover in a corresponding period a year earlier.
This is where there is a huge amount of contention: From a legislative point of view: Section 8(7) of the Rules states that the ‘turnover test period’ must be a calendar month from March 2020 and before 1 October 2020, or a quarter that starts on 1 April 2020 or 1 July 2020. This means a business has the ability to choose monthly or quarterly turnover test periods.
Contrary to the legislation, the current Australian Government Treasury factsheet state that businesses must compare their turnover based on their existing BAS Reporting cycle, Ie. if you are a quarterly BAS lodger, you must compare quarters from the previous year. We disagree with this stance as it has the potential to discriminate against quarterly BAS lodgers who may be eligible based on monthly comparisons but may not know if their turnover was 30% down until July 2020 (3 months after Jobkeeper started). We have been lobbying the ATO for clarification to no avail as pay runs need to be processed this week to ensure eligibility. This is why the ATO have let most businesses down. Suntax will provide an update as soon as guidance is issued. For those businesses currently processing payroll we recommend following the legislative framework, which allows you to choose your turnover test period to be either monthly or quarterly.
The ATO will also have discretion to allow the JobKeeper Payment for Businesses when:-
- A business was not in operation a year earlier
- Their turnover 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, were scaling up, or their turnover is highly variable)
- Employers in good faith, estimate a 30% or more fall in turnover but actually experience a slightly smaller fall.
We have no ATO guidance on how to apply for this discretion at this stage.
If a business does not meet the turnover test at the start of the JobKeeper scheme (on 30 March 2020), the business
can apply at a later time. Note that the JobKeeper Payment will not be back dated in these circumstance. I.e. if your business is not
impacted by more than 30% by COVID-19 until July 2020, the business can apply in July 2020 and will receive payments from the date of
application (from July 2020).
GREAT NEWS FOR MANY BUSINESSES: JobKeeper Payment Can Also Apply To Non-Employed Business People In Sole Traders, Partnerships, Companies and Trusts
In a positive change for small businesses, the JobKeeper payment has now been expanded to include ‘eligible business participants’, who are not employed by the business but are actively engaged in an ‘active’ business that had an ABN at 12 March 2020.
The eligibility will apply as follows:-
- Sole Trader - the individual will be able to apply for JobKeeper Payments
- Partnership - one partner will be able to apply for JobKeeper Payments
- Company - only 1 director or 1 shareholder can apply for JobKeeper Payments
- Trust - only one adult beneficiary can apply for JobKeeper Payments
If your business has not already registered its intention to apply, please click on this link: JobKeeper Payment Registration
The JobKeeper payment will be paid a month in arrears and the first payment will be paid in the first week in May 2020.
Be Aware: JobKeeper Payments May Create Inequalities Between Staff
We have been working with businesses at the ‘coalface’ - working with them through pain points and potential problems and we have found that the JobKeeper Payment can have adverse effects on the equality of payments between staff. Consider a long term casual working 1 day a fortnight and a part time employee who works 7 days per fortnight. Under the JobKeeper payment, they are both eligible to receive the same $1,500 per fortnight, creating inequality in rewards for effort between staff. A business does not have to apply the JobKeeper Payment to all employees. If an employee is not paid $1,500 per fortnight, that employee is not an 'eligible employee'.
Our guidance is that discretion should be taken by employers, with an effort to have low income employees earning less than $1,500 per fortnight, to increase their working hours to align their working hours and hourly rates to equate to the $1,500 per fortnight. Otherwise, an alternate option could be to stand down these employees so they can apply for the JobSeeker Payment. We understand that these calls can be tough for business owners.
There is one great change for ‘JobKeeper Eligible Businesses’, under the new legislation, employees can provide ‘JobKeeper directions’ to perform ‘any duties’ that are within an employees skills and competencies and at different locations. This may be a great time for businesses to have their employees to take on new tasks to increase their hours, such as:
- Clean up their business premises (paint, decorate, clean up)
- Focus on marketing plans when they re-open
- Learn how to use HubDoc or Receipt Bank to upload invoices and bills into Xero
- Undertake online learning programs
- Clean up client databases or Customer Relationship Programs
- Update policies and procedures
- Redesign the businesses website or
- Create social media posts for the ‘post COVID-19' era.
The legislation also contains Integrity Measures. If the Commissioner is satisfied that the JobKeeper has become payable under a
contrived scheme for the sole and dominant purpose of receiving an increase in the JobKeeper payments, he may make a determination to
reduce the JobKeeper payment to nil.
Below Are Some Common Questions We have Received In The Past Three Weeks
What if Your Business Pays Employees Monthly?
Where an employer pays their staff monthly, the ATO will be able to reallocate payments between periods. However, overall an employee must have received the equivalent of $1,500 per fortnight.
What Employees Are Eligible?
- they were employed by you on March 1st 2020
- they are currently employed by the eligible employer including those who have been stood down or rehired
- are full time, part time or long-term casuals (employed on a regular basis for longer than 12 months as at March 1st 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
- they are not receiving a JobKeeper payment from another employer
I have just purchased the business, are my employees eligible for the JobKeeper Payment?
If a business changes ownership and the new owner continues to run the same business, the new business will be eligible in relation to the employees that were employed by the old employer as at 1 March 2020.
What if I estimated that my turnover would fall by 30% but it didn’t?
If the business has been paid JobKeeper Payments based on an estimate that the turnover would fall by more that 30%, but the actual
turnover didn’t all by that much, the business would not be entitled to the payments and the business is liable to repay the full amount of
the JobKeeper Payment back to the Commonwealth. Please note that the Commission of Taxation does have discretionary powers.
Can My Business Receive JobKeeper Payments for Employees on Annual Leave?
Yes. And more importantly, JobKeeper eligible businesses can make directions to employees to make an agreement to
reduce hours worked, location worked, take annual leave, including leave at half pay. Note, that businesses cannot direct employees to take
annual leave if their leave balance is less than 2 weeks.
Can My Business Receive JobKeeper Payments for Employees on the Government Paid Parental Leave Scheme?
No. This would essentially be double dipping.
Can My Business Receive JobKeeper Payments For Stood Down Employees?
Eligible employers who have stood down their employees before the commencement of this scheme will be able to participate. Employees
that are re-engaged by a business that was their employer on 1 March 2020 will be eligible. The stood down employee would need to receive
the $1,500 per fortnight to be eligible for the wage subsidy.
What if the Business Made an Employee Redundant because of COVID-19 after 1st of March 2020?
If the business rehires the employee and pays him/her $1,500 or more per fortnight, the employee can be eligible for the JobKeeper Payment.
Below are some simple examples of how the JobKeeper Payment Applies To Employees in three different situations:-
1. Employee is still working for the business and currently earns $4,000 per fortnight
- Business Receives $1,500 per fortnight JobKeeper Payment
- Employee continues to receive $4,000 per fortnight
- Superannuation is paid on the $4,000 per fortnight
2. Employee is still working for the business and currently earns $800 per fortnight
- Business Receives $1,500 JobKeeper Payment
- Employee now receives $1,500 per fortnight, being $800 of his/her normal salary plus $700 top up for the JobKeeper Payment
Superannuation is paid on the $800 per fortnight. It is optional for the business to pay superannuation on the $700 per fortnight
3. Employee has been stood down, is not earning any income from the business.
- Business Receives $1,500 JobKeeper Payment
- Employee receives $1,500 per fortnight JobKeeper Payment
- No Mandatory Superannuation payable, but is optional on the $1,500 per fortnight
At the moment, for those businesses that believe they may be eligible for the JobKeeper Payment, the most important step to take is to register your intention to register for the JobKeeper Payment here: JobKeeper Payment Registration
We hope you have had a Happy, Safe and Healthy Easter. Australian’s have been amazing in their self isolation efforts to start reducing the number of new infections and we hope this will continue so we can all get back to normal business operations.
In the meantime, your Suntax crew are working from home and are here to help you if you need support or guidance.
Regards Your Suntax Team