The Australian Government has introduced the JobKeeper subsidy to enable coronavirus effected businesses to bounce back after the crisis.
From 30 March 2020, eligible sole traders and self-employed people that operate via a partnership, trust or company, can claim $1,500 per fortnight for 6 months ending 27 September 2020, with the first payments being made in the first week of May. It is the entity or business that will receive the payment into their nominated account.
JobKeeper Payments for Sole Traders and Self Employed Individuals
Sole traders and entities that do not employee anyone will be able to nominate one eligible person to receive the JobKeeper payment – the ATO is calling this individual the ‘Eligible business participant’.
Eligible Business Particpate will be eligible is if:
- They are an individual not employed by your entity
- They are actively engaged in the business
- They are one of the following:
- Sole Trader
- Partner in a partnership
- Adult beneficiary of the Trust
- Share holder or director in the company.
- They are at least 16 years of age
- They are not an employee of another employer (other than casual employee)
- are an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder at 1 March 2020
- were a resident for Australian tax purposes as of 1 March 2020
- They are not currently receiving government parental leave pay, dad and partner pay or workers compensation.
Business Entity Eligibility
Your entity is eligible if:
- Their business suffers a decline in turnover of 30% or more.
- They had an ABN on or before 12 March 2020 , and either:
- Had assessable income in relation to it carrying on a business included in the 2019 tax return lodged before 12 March 2020, or
- Made a supply between 1 July 2018 and 12 March 2020 and provided this information to the ATO before 12 March 2020 on a Business Activity Statement.
How is Turnover Measured?
To be eligible for any JobKeeper payments the business must establish that it has suffered a fall of at least 30% in its actual or projected turnover in the relevant month or quarter when compared to the actual 2019 turnover for the same period.
Turnover is defined according to the current calculation for GST purposes and includes taxable supplies and GST free supplies. It only includes Australian turnover (not overseas income).
The employer can choose a month or quarter for the test starting from March 2020 or June quarter 2020. This is not dependent on your GST reporting cycle.
The ATO will be providing more guidance about self-assessment for forecast decreases in turnover.
What if I wasn’t in business a year earlier or there have been significant changes?
Where your business does not have a reliable comparison period due to:
- being recently established
- Scaling up
- Irregular activity
The Tax Commissioner will have the discretion to consider additional information to verify that the business has been unfavourably affected by Coronavirus. The ATO is still to provide further guidance on the Alternative turnover test.
What if I estimate incorrectly?
The ATO has announced there will be some tolerance for error; (exact tolerance has not been disclosed), where the business receives the JobKeeper payment based on their projected reduction in turnover however actual turnover results in ineligibility.
There is therefore a risk that the ATO may deny a business’s eligibility and require the business to pay back the JobKeeper payment plus interest.
It is critical for businesses to document & keep all evidence about their calculation for their projected turnover.
How to apply for the JobKeeper Payment?
Providing the business and individual is eligible, you need to enrol:
- Enrol – via the online form on the ATO website. The form will be available from 20 April and will need to be completed by 26 April to participate from commencement at 30 March.
- Gather 2020 actual and forecast turnover information and 2019 comparison information.
- Document individual eligibility – Name, TFN, Employment status, length of service, age & residence / citizenship status.
- Complete a JobKeeper Nomination form – Other entity form yet to be released
- The ATO will contact registered businesses and will request evidence of turnover decline and detailed information on employees and their eligibility. At this time discuss trading less than 12 months or other extraordinary trading conditions and seek additional eligibility tests.
JobKeeper Payment for Sole Traders and Other Entities – Frequently Asked Questions
My company is in liquidation or I am individually bankrupt – can I claim?
Can more than one person be nominated as an eligible business participant?
No – this means in a business that both Mum & Dad work but they aren’t employees only one person is entitled to the JobKeeper payment.
I have two companies can I claim myself in both?
No – only one claim per individual.
I have my own ABN but also I am also a casual employee of another employer – Can I claim through my business?
Yes – an eligible business participant can be a casual employee. You can either let your employer claim the JobKeeper payment or claim as a sole trader – but not both.
Is the JobKeeper amount taxable?
Yes, the Job Keeper payment is assessable income to the business entity.
Who gets the money, the business or the nominated individual?
The payment will be made to the business bank account. There is no requirement to pay the JobKeeper payment onto the nominated individual..
Examples of the JobKeeper Payment for Sole Traders and Other Entities
Sole Trader – Eligibility for JobKeeper Payment
Angela operates an in home hair dressing business. She is an Australian resident with an ABN and has been running her business since 2018. Angela runs her business as a sole trader with no employees.
With social distancing Angela projects a fall in turnover in her business of approximately 80% in April 2020 compared with April 2019.
Angela is an eligible business participant and qualifies for the JobKeeper scheme.
Sole Trader with more than one business
John, 35 Australian, actively manages two businesses:
John’s Estimating Pty Ltd, which John provides job costing services on construction projects, as a shareholder and director through the company and
John’s Veggie Patch, which is looks after residential vegetable gardens, via a sole trader ABN.
John’s Estimating and John’s Veggie Patch have both experienced a fall in turnover as a result of coronavirus. John’s Estimating has experiences a downturn in new potential projects but continues to operate on a reduced scale. John’s Veggie Patch has transformed from a physical service to an online education platform teaching garden care and crop optimisation.
John forecasts that his turnover will fall by 55% and 45% respectively in April 2020 compared with April 2019, due to a reduction in projects and social distancing measures.
Both businesses meet the turnover requirement and John as either a sole trader or shareholder & director of John’s Estimating Pty Ltd satisfies the conditions of an eligible business participant. Therefore John would need to decide which entity would claim the Payment, John or John’s Estimating Pty Ltd as he can only nominate one entity
Partner in a Partnership – Eligibility for JobKeeper Payment
Tim, Don and Maria are individual partners in a partnership operating an Australian business, TDM Accounting. The partnership was formed in 2008 and has an ABN. As they are partners, they only each receive partnership distributions, not wages.
DSC Accounting, during April, projects a fall in turnover of approximately 20% for the quarter April to June 2020 compared to the April to June quarter of 2019. Therefore, the business currently does not qualified for the JobKeeper scheme.
During May 2020, they estimate a 40% projected fall in turnover for May 2020, when compared to May 2019. Accordingly the business meets the requirements for turnover from May onwards.
From May, only one of the partners can be nominated as the eligible business participant and this choice applies for the duration of the scheme.
Beneficiary of a trust – Eligibility for JobKeeper Payment
Brendan, a 33 years old and an Australian resident, is an exercise physiologist and operates both a clinic and an online movement program. Brendan runs his business through a discretionary trust where he is a beneficiary and receives trust distributions.
The trust was settled and acquired an ABN in 2013. Brendan actively manages the business but is not employed by his business nor elsewhere.
The clinic closed on 25 March 2020. The online personal movement program is still operating and Brendan is focusing on growing this part of his business. However as a result of the clinic closure, the trust’s turnover is expected to fall by 50% for April 2020 compared with April 2019.
Brendan is an eligible business participant and the trust qualifies under the JobKeeper scheme, with the trust receiving the JobKeeper payment.
Sue is a beneficiary of her family trust, SK Family Trust. The SK Family Trust was settled in 2008 and holds 3 properties as capital assets with the intention to generate passive rental income for Sue. This is Sue’s sole income. The properties are all managed by a local agents and the Trust has no other business activities.
The Trust projects a 66% fall in turnover for the April 2020 to June 2020 quarter compared to the corresponding 2019 quarter, due to two tenants being unable to pay rent.
However as the SK Family Trust was not carrying on a business and Sue was not actively engaged in the business operations the Trust does not qualify for the JobKeeper scheme.
How can Walsh Accountants Help?
Specialising and Entreprenurial and Business Support – we’re here to help you throughout this period of instability. This is uncharted territory for all of us but we are here to assist you with all the knowledge we have to help you adapt to the changing environment and keep your business afloat
If you are in need of our assistance, we encourage you to contact us as soon as possible. If cost is a concern to you, we can work with you.