The JobKeeper Payment Low Down

Registrations for the Government’s JobKeeper economic stimulus payments opened Monday 20th April. Applications for registration need to be submitted by Sunday 26th April to be eligible for the first months' worth of payments. Team DSC has been fielding many queries about the new payments. The legislation is new, rapidly evolving and subject to ongoing change and legislative determination by the Commissioner (so keep up to date with any new interpretations and advice). This article is not intended to replace individual tax advice. Organisations should talk to their Tax Agents about what the changes will mean for them. But we hope this brief rundown will be useful to get your head around a few things.

Who is eligible for these payments?

Australian businesses that:

• had an ABN and were operating a business in Australia on 1 March 2020; and

• were employing eligible staff on 1 March 2020; and

• were not bankrupt or under administration; and

• either has or expects to experience a drop in turnover between March 2020 and September 2020 of

  • 15% - ACNC registered charities

  • 50% - organisations with an aggregated turnover of $1 billion dollars or more

  • 30% - everyone else

For the ease of reading this article, we refer to a 30% drop, but this should be replaced with the relevant percentage as indicated above.

The turnover referred to is what would be included in your Business Activity Statement (BAS) for that period as Total Sales (excluding GST).

An eligible employee is an Australian Citizen, Australian Resident for tax purposes or New Zealand subclass 444 Special Category visa holder who on 1 March 2020:

• was employed by the business full-time, part-time or for at least 12 months as a casual; and

• was 16 years or older; and

• was not on Workers Compensation or Paid Parental Leave (further info on this below); and

• is not registered for JobKeeper with another business.

What can we provide to demonstrate a drop in turnover?

To demonstrate a drop in turnover, you need to show that the turnover for any one of the Actual or Forecast Periods will be 30% less than for the comparative period. You do not have to be a monthly BAS submitter to use a monthly test period, nor a quarterly BAS submitter to use a quarterly test period.

You only need to demonstrate the 30% drop in any one of the periods. Once you have satisfied a test for a period, you are qualified until the end of the scheme. You do need to wait for the forecast period to arrive before registering. If you forecast a 30% drop in July now, you can only register from the beginning of the first fortnight that ends in July.

The Basic Test

There is a list of prescribed periods (called the Basic Test) which you can use to demonstrate the expected drop in revenue. The prescribed periods in the Basic Test are:

The Alternative Test

There are a range of scenarios in which the Basic Test may not be useful in demonstrating the actual drop in revenue your business is experiencing. Maybe you only started trading in the second half of 2019, there were significant changes in your operations since then (like significant growth or new acquisitions), or your organisation suffered from unusual operating conditions in the comparative 2019 period.

The legislation allows the Commissioner of Taxation to consider alternative periods or metrics to determine the 30% drop in turnover. This may be a more recent period (e.g. the December 2019 quarter) or something entirely different. Unfortunately, at the time of writing this article, the Commissioner has not released any guidance around alternative testing. If the Basic Test does not reflect the actual hardship your business is experiencing, it is worth discussing this with your Tax Agent now so that you are ready to proceed once the Alternative Test arrangements are clarified by the Australian Taxation Office (ATO).

What happens if my drop in turnover is not as much as i thought it would be?

If the ATO determines at a later date that you were ineligible, you may be required to repay the JobKeeper payments in full (potentially with interest). In its fact sheets, Treasury has mentioned a tolerance for employers who, in good faith, estimated a 30% fall but experienced a slightly smaller fall in actual turnover. To date, however, we don’t have any idea or indication of how much this tolerance would be.

If i only qualify as an employer in may or june, do i get the full six months?

No. You will only be eligible for payments from the month or quarter that you pass the test until the end of the scheme. Further, you will only receive payments for the fortnights that end on or after you register.

The applicable dates for the JobKeeper program are:

Does the cash flow boost payment through our bas count in the turnover?

No. The Cash Flow Boost payments are tax-exempt income and should not be included in the turnover calculation.

Does it apply to family trusts and sole traders as well?

Entitlement is based on having employees. As a sole trader or a trust, if you pay wages to people (including yourself if a trust or company), then the payments can apply.

A sole trader, partnership, trust or company that is eligible for JobKeeper (or would be if they had employees) may also elect one person to receive the JobKeeper payments that:

a)     is not paid wages from that business;

b)     is actively engaged in that business;

c)     is either the sole trader themselves, one of the partners, an adult beneficiary of the trust or a shareholder or director of the company.

This person is called the Eligible Business Participant and is treated as an employee for JobKeeper.

Is jobkeeper paid in advance or arrears?

The JobKeeper payments are paid to employers by the ATO in arrears by the 14th of the following month. While you will be required to make regular payments to your employees, you won’t receive the reimbursement for 2-6 weeks.

Is the jobkeeper application period really only open for 10 days?

No. Applications are open until the end of the JobKeeper scheme on the 27th September.

However – to be eligible for the full payments, applications need to be lodged with the ATO by Sunday 26th April*. You are only eligible to receive payments for fortnights that end on or after you lodge your application. So, if you apply on the 27th September, you will only be eligible to receive one fortnight’s worth of payments.

If you have difficulty lodging by April 26th, you can apply for an extension. However, there is no guarantee that it will be granted, so if you do pass any of the tests for the March or April period, you might want to apply ASAP.

*Update - Over the weekend the ATO updated their guidance regarding registering for the Jobkeeper program. Businesses now have until 31st May to register for the JobKeeper program and still be entitled for payments for the months of April and May. Note that you are still required to make the minimum $1,500 fortnightly minimum payments to employees by the end of each fortnight to be eligible for the reimbursements. https://www.ato.gov.au/General/JobKeeper-Payment/

What if an employee wasn’t earning $1,500 per fortnight? Do they get the whole thing?

Yes. The $1,500 is a minimum payment requirement and must be paid to the employee to receive the reimbursement from the ATO.

What if the worker is on worker’s compensation or paid parental leave?

Employees who are on Worker’s Compensation Leave are not eligible for the JobKeeper payments. If they return to work during a JobKeeper pay period, then you will able to claim them from that period.

Similarly, employees on paid parental leave are not eligible for JobKeeper until they return to work.

Can parts of the jobkeeper payment be salary sacrificed into super, if it was before?

Yes. Salary sacrifice amounts can be counted in the $1,500 fortnightly minimum payments to employees. Note that regular payments of super are not counted in the $1,500 minimum payments.

What does ‘one in all in’ really mean?

The one in all in rule simply means that the employer cannot decide to exclude an eligible employee. This is designed to prevent employers from using the JobKeeper payment as a means of coercing, influencing or excluding an employee unfairly.

Can i ask someone who earned less than $750 per week to work extra hours up to the new $750 payment?

Yes, provided that it is not unreasonable for the employee to perform the extra hours and that their hourly rate of pay is no less under the new arrangements (or no less than required for higher duties). Temporary changes have been made to the Fair Work Act that allows an eligible employer to make changes to an eligible employee’s:

• number of hours/days worked;

• regular duties performed; and

• location of work.

The temporary Fair Work changes also allow agreements between the employer and employees to change the day and time on which the employee performs their usual duties. The agreements also allow the employer to request the employee take annual leave at either full-pay or half-pay for twice the length of time. An employee can only refuse a request if they believe it to be unreasonable. Any queries should be directed to the Fair Work Ombudsman.

We want to reiterate that this is not intended as business or tax advice. It is a direct response to requests from organisations to pull together as much information as we can. Many organisations will be busy getting things into motion this week, make sure you seek tailored advice and keep up to date with all the new information coming out.

Further reading

https://treasury.gov.au/sites/default/files/2020-04/Fact_sheet_supporting_businesses_4.pdf

https://treasury.gov.au/sites/default/files/2020-04/JobKeeper_frequently_asked_questions_2.pdf

https://treasury.gov.au/sites/default/files/2020-04/Fact_sheet_Info_for_Employers_2.pdf

https://www.ato.gov.au/general/jobkeeper-payment/employers/eligible-employers/

https://www.ato.gov.au/General/JobKeeper-Payment/In-detail/Applying-the-turnover-test/?anchor=Alternativetest#Alternativetest

https://www.legislation.gov.au/Details/F2020L00419

https://www.legislation.gov.au/Details/F2020L00419/Explanatory%20Statement/Text

Dan Quilty is a Chartered Accountant with 20+ years experience in financial services. He has an eye for detail, an unusual affection for excel and a knack for making the complex simple.