JobKeeper Stimulus Payment (Updated)
The Federal Government has finally passed the legislation surrounding the JobKeeper payment. While most of the important questions have now been answered, some matters were still referred to the ATO to finalise. Their guidelines on remaining items will be crucial over the coming weeks.
Here are Holmans recommended steps to understanding and implementing JobKeeper:
- Read this guide in full. It contains eligibility information at the beginning and useful “Frequently Asked Questions” that we have been receiving over the last few weeks.
- Determine if your business is eligible?
- Register your business (if not already done) where your business is eligible, or likely to be eligible in the next BAS reporting period. https://www.ato.gov.au/general/gen/jobkeeper-payment/
- Determine who “Eligible Employees” are. Important information and guidelines here https://www.ato.gov.au/General/JobKeeper-Payment/Employers/
- Obtain a notification from each employee that they are being included in the JobKeeper for your business (they can only receive the payment once). You also need to get the employee nomination notices in place for each employee by the end of April, see link to approved form here: https://www.ato.gov.au/Forms/JobKeeper-payment—employee-nomination-notice/ You may wish to have your own additional HR measures added, which include the employee doing reasonable tasks for your business.
- Ensure you understand how and when to pay your employees?
- Start paying the minimum $1,500 per fortnight (but in line with your normal pay cycles) to all eligible employees. This may mean paying employees prior to reimbursement by the Government. It may also mean paying employees more than you normally did, as the minimum is $1,500/fortnight per eligible employee.
- Report Monthly to the ATO. The ATO guidelines are being updated regularly here https://www.ato.gov.au/General/JobKeeper-Payment/Employers/. Please regularly review this page for the further guidance.
So let’s work through all the relevant steps and some common questions below.
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You can download the information detailed on this page as a printable PDF for future reference. Click here to access the PDF document.
What is it and does my business qualify?
The JobKeeper payment is designed to maintain the connection between the employer and the employee, rather than the employee joining the Centrelink queue.
A qualifying business will eligible for reimbursement of $1,500 (before tax) of wages per fortnight per employee. This will be reimbursed monthly in arrears. The JobKeeper payments must be passed onto the employee as a salary and wage and cannot be used for covering other business expenses (i.e. Overheads).
Importantly, each employee will receive a minimum $1,500, even where their salary was previously under the $1,500 per fortnight. If you are paying an employee more than $1,500 per fortnight (i.e they are still working), than the extra is borne by the employer. If the employee is being paid less than $1,500 per fortnight, you must start paying them $1,500 per fortnight to be eligible for the JobKeeper reimbursement. The JobKeeper stimulus program is expected to be in place for up to 6 months.
For your business to qualify you simply need to meet one of the conditions below and have eligible employees (see below).
- GST Turnover less than $1 Billion – Turnover has reduced by more than 30 per cent relative to a comparable period a year ago (of at least a month, but aligned with your BAS reporting period)
- GST Turnover of $1 Billion or more – Turnover has reduced by more than 50 per cent relative to a comparable period a year ago (of at least a month, but aligned with your BAS reporting period)
- For Charities your turnover has decreased 15%.
- “Business without employees” – see the exception below – but turnover must still decrease in line with turnover limits above. This is designed to cover Sole Trader / “Mum & Dad” type businesses (including trusts, partnerships and companies), where the owners are not official employees. However, only one person will be eligible for the JobKeeper payment (not both in a couple for example). Please see the separate section below.
The general Treasury Guide is here https://treasury.gov.au/coronavirus/businesses#jobkeeper
When does the decrease in turnover start being measured and against what?
This important matter has finally been clarified, the first month is April, not March. Employers are not entitled to any reimbursement for wages paid in March.
It is a “forward” looking test and on the same basis that you lodge BASs. For example, if you lodge quarterly, do you think your quarter 1 April to 30 June will be down 30%, when compared to last year? If so, you register for the JobKeeper program and report your details monthly to the ATO for reimbursement. The same applies to Monthly BAS lodgers, but the relevant period is month by month.
The monthly figures you report to the ATO will determine if your income did actually fall by the required amount (over the relevant BAS period) and whether you are due reimbursement.
What if you weren’t trading last year, or last year was not a true guide to performance (i.e. Cyclone in North Qld last year)? The Government have said the ATO will have the right to exercise discretion in these circumstances. We have no idea what that will look like just yet, but your current turnover is likely to be compared to a “typical” month/quarter, or the prior business owners. Watch this space.
Holmans Tip – if your turnover is only likely to fall by 30%, or could be just short, there is considerable risk that you may not be reimbursed. You should be contacting your accountant to obtain more accurate estimates (forecasting) before making commitments to employees.
When is the first payment/reimbursement from the Government?
Unfortunately, the first payment will be paid in the first week of May. The payments from the Government are monthly and reimbursed in arrears, so the business must still fund the payments to the employees in the meantime if they are made more regularly. There are provisions to allow back-dated transactions for the first week of April.
Holmans Tip – Enter the payments into your payroll regularly if you have Single Touch Payroll, even if cashflow is not available for payment to the employees. Agree with your employees to pay them monthly in arrears where you receive reimbursement. Technically however, the Government expect you to pay the employees first, then seek reimbursement – they have suggested obtaining support from your bank to enable the same.
Who is an eligible employee?
Eligible employees are employees who as at 1 March 2020 were:
- aged 16 or over;
- an employee (full-time or part-time) or a long term casual employee of the entity (12 months of regular and systematic employment); and
- an Australian resident. This is determined by reference to the Social Security Act or by the ITAA 1936 where the person holds a Subclass 444 (Special Category) visa https://immi.homeaffairs.gov.au/visas/getting-a-visa/visa-listing/special-category-visa-subclass-444.
There are some specific exclusions – A person is excluded from being an eligible employee if:
- parental leave pay is payable to the individual and the individual’s PPL period overlaps with, or includes, the fortnight;
- at any time during the fortnight, the individual is paid dad and partner pay; or
- all of the following apply:
(i) the individual is totally incapacitated for work throughout the fortnight;
(ii) an amount is payable to the individual under, or in accordance with, an Australian workers’ compensation law in respect of the individual’s total incapacity for work;
(iii) the amount is payable is respect of a period that overlaps with, or includes, the fortnight.
Importantly, there are also provisions that address where businesses change hands.
The best way to gain a basic understanding of how the Government see it working is to review their example.
Employer with employees on different wages Adam owns a real estate business with two employees. The business is still operating but Adam expects that turnover will decline by more than 30 per cent in coming months.
The employees are:
- Anne, who is a permanent full-time employee on a salary of $3,000 per fortnight before tax and who continues working for the business; and
- Nick, who is a permanent part-time employee on a salary of $1,000 per fortnight before tax and who continues working for the business.
Adam is eligible to receive the JobKeeper Payment for each employee, which would have the following benefits for the business and its employees:
- The business continues to pay Anne her full-time salary of $3,000 per fortnight before tax, and the business will receive $1,500 per fortnight from the JobKeeper Payment to subsidise the cost of Anne’s salary and will continue paying the superannuation guarantee on Anne’s income;
- The business continues to pay Nick his part-time salary of $1,000 per fortnight before tax and an additional $500 per fortnight before tax, totalling $1,500 per fortnight before tax. The business receives $1,500 per fortnight from the JobKeeper Payment which will subsidise the full cost of Nick’s salary. The business must continue to pay the superannuation guarantee on the $1,000 per fortnight that Nick is earning. The business has the option of choosing to pay the superannuation guarantee on the additional $500 (before tax) paid to Nick under the JobKeeper Payment.
Adam can register his initial interest in the scheme from 30 March 2020, followed subsequently by an application to ATO with details about his eligible employees. In addition, Adam is required to advise his employees that he has nominated them as eligible employees to receive the payment. Adam will provide information to the ATO on a monthly basis and receive the payment monthly in arrears.
What about Sole Traders, Partnerships or Trusts where the owners are not employees (mum and dad businesses) – “Businesses without Employees”?
Businesses without employees, such as the self-employed, can register their interest in applying for JobKeeper Payment via ato.gov.au from 30 March 2020. Businesses without employees will need to provide an ABN for their business, nominate an individual to receive the payment and provide that individual’s Tax File Number, and provide a declaration as to recent business activity. People who are self-employed will need to provide a monthly update to the ATO to declare their continued eligibility for the payments. Payment will be made monthly to the individual’s bank account. Further details for the self-employed will be provided on ato.gov.au in the coming days.
More information is here https://treasury.gov.au/sites/default/files/2020-04/Fact_sheet-Support_for_sole_traders.pdf
Frequently Asked Questions:
- Should I do any planning with my accountant to maximise the payments/ benefit? Potentially, particularly if you believe your income will be close to 30% down, but not quite. This is a danger area and may mean you commit to paying your employees, but not receive reimbursement. If this applies to your business, it is important to speak to your accountant to clarify your position, the specifics of the tests, the reporting measures, and available options in your specific circumstances before paying employees.
- I purchased a business in the last 12 months and retained some of the employees (including Casuals) who worked for the previous owner – will they be eligible employees? Yes, if they have been associated with the “business” for a period of 12 months or more on 1 March.
- I operate my business through 2 entities, an operating entity and a service entity which houses all the employees. The service entities turnover hasn’t dropped by 30% because we have continued to reimburse it for overheads, including wages – will I be eligible? This specific question hasn’t been addressed by the ATO yet, but early indications are that these entities would be grouped similar to GST registration requirements and the “operating entity” would be the entity assessed to determine eligibility. This is an area the ATO are likely to apply their discretion.
- Is the payment taxed before passing on to the employee? Yes, it is taxed in the normal way through the payroll system.
- Is the payment taxable to the employee? Yes, the payment is taxable to the employee and part of the reason you must withhold tax on the payment.
- Is superannuation payable on the JobKeeper Payment? As pointed out in the Example above, it is optional on the JobKeeper payment above and beyond normal “earnings”. Superannuation must still be paid on “earnings” (i.e. work performed). Holmans strongly recommend you discuss your decision with the employee and document the same formally.
- What if the employee is stood down – do they need to be re-engaged? Yes, at the conclusion of the arrangement, when you are able to operate again, it is intended that you will re-engage the employee (though of course, no guarantees). However, the employee does not need to complete tasks while the business is locked down (i.e. restaurant/gym) to be eligible for the payment. Accordingly, they are eligible for the payment while in stand down phase.
- Can I make the employees do tasks for the JobKeeper payment? Yes, the Fair Work Act has been amended as part of these measures to allow you to ask employees to perform “reasonable” tasks for the payment even if outside their normal duties. The employer must consult with the employee and provide at least 3 days written notice of the directions. Importantly, the hours worked must not drop their pay under their normal contract entitlements (normal hourly rate) or breach the National Employment Standards.
- Must I nominate all eligible employees? Yes. One of the most significant changes between the proposed legislation and the final product announced, is that it now appears to be a “one in, all in” arrangement with Eligible Employees. The Fact Sheet quite clearly states “An employer that elects to participate is required to include all eligible employees in the scheme.”
- What about casual employees who haven’t had a long term relationship of at least 12 months with the business? They will need to approach Centrelink (JobSeeker payment) or be paid by the employer separately to the stimulus above. It is worth noting, that the JobSeeker payment through Centrelink is similar to the JobKeeper payment in cashflow (untaxed at about $1,100), and they may also eligible for rent assistance and other Government measures (provided they qualify for JobSeeker (Centrelink)).
- An employee laid off, already receives JobSeeker Support through Centrelink – what should they do? They need to notify Centrelink/Services Australia, as you are only eligible to receive one or the other. They should wait until they have received the JobKeeper payment/notification from the business confirming they are eligible. Those on JobSeeker (Centrelink) will need to report their earnings regularly, so it should automatically be notified to Centrelink by the employee or your Single Touch Payroll reporting.
- Can I use the JobKeeper payment to pay employees Annual Leave? Yes. The reimbursement is for any wage “payment” that normally goes through your payroll. Importantly though, new rules have been introduced to ensure you can’t force employees to take annual leave where it will reduce their overall balance to under 2 weeks. It would appear that employees can voluntarily agree to take annual leave beyond that, but you should seek HR advice and document the same. Where the employee uses annual leave to receive full wages, then the employer must top-up the JobKeeper payment to the normal amount.
- Are employees on Stand-Down still accruing leave entitlements and public holiday payments? You should seek Human Resources (HR) advice on your available options, as Holmans are not authorised to give HR advice. However, our understanding is that employees Stood-Down accrue their normal annual leave and public holiday pay entitlements in accordance with their normal hours worked (so only Full-time and Part-Time employees) before the stand-down.
- What if my monthly income was down by 30%, but then the next month it is not? The important part here is understanding your BAS reporting period. If you are quarterly reporting, the eligible period is the quarter. So month to month is less relevant. If you report monthly, then technically you would qualify for reimbursement one month and not the next. For this reason, is vital that you understand how your business is tracking (up to date business records – weekly recommended) and are tracking how the business is performing compared to the prior year.
- My turnover is fine at the moment, but I expect it will be down in future – Will I qualify then? Yes, you simply register as soon as it is foreseeable your income will fall by 30% or more. As soon as you meet the conditions, you will qualify for the JobKeeper support.
- What if employees work at two employers and are nominated by both? The intention is the employee only receives one payment – hence nominating whether they are an eligible employee. The employee will need to choose the applicable employer.
- What if I didn’t have turnover last year? We are not 100% sure yet how the ATO will apply their discretion. We think they will allow you to nominate a typical trading period, such as an average monthly turnover from early in the year pre COVID19. You should contact your accountant to assist you.
- Should I delay invoicing? Again, we are not 100% sure about the integrity measures and what monthly reporting will be required by the ATO. It will depend on final rules published by the ATO which are still not available. Cashflow is king, so be mindful of delaying too much income. If you are discounting fees to retain customers, that may be appropriate.
More Government Questions and Answers are here and we would strongly recommend you review the same – https://treasury.gov.au/sites/default/files/2020-04/JobKeeper_frequently_asked_questions_0.pdf
Resources for HR Advice:
The devil is often in the detail and they haven’t issued all the detail yet, nor have we seen how they will apply their “discretion”. When in doubt, you should seek instructions from Holmans. The cost of getting it wrong could be tens of thousands in lost stimulus and/or repaying Government benefits received.
Of course, we will be continually reviewing the information as it is published and provide regular updates as they come to hand.
These stimulus programs and Government announcements are fast moving, with the legislation and guidelines are regularly changed. You should contact your accountant to discuss how this applies to you before implementing any specific strategies.
This Fact Sheet should be used as a guide only.
Download a printable version
You can download the information detailed on this page as a printable PDF for future reference. Click here to access the PDF document.