The Australian Government has introduced the JobKeeper payment to enable coronavirus effected businesses to retain staff and help them keep their businesses open; and bounce back after the crisis.
From 30 March 2020, eligible employers can claim $1,500 per fortnight per eligible employee for 6 months ending 27 September 2020, with the first payments being made to employers in the first week of May.
Who is eligible for the JobKeeper Payment?
A business is an eligible employer if:
- It carries on business in Australia on 1 March 2020, and
- It suffered a decline in turnover of 30% compared to the same month or quarter in 2019.
There are different criteria for charities or businesses with over $1 billion in turnover. For information on these entities please contact our office.
How is the decline in turnover for JobKeeper measured?
To be eligible for any JobKeeper payments the employer must demonstrate that it has suffered a fall of at least 30% in its actual or projected turnover in:
- A calendar month (any month March ā September 2020), or alternatively;
- In a quarter (April ā June 2020 or July ā September 2020).
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 to be applied and at this stage it does not appear linked to the employer’s GST reporting cycle.
Once eligibility has been determined there is no requirement to reapply, irrespective of turnover in subsequent months, however it will be a requirement to report monthly actual and projected turnover figures.
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?
The Tax Commissioner will have the discretion to consider additional information to verify that the business has been unfavorably affected by Coronavirus. The ATO is still to provide further guidance on the alternative turnover test.
What if I estimate the decline in my income for JobKeeper application 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 with no recourse over the employees.
It is critical for businesses to document & keep all evidence about their calculation for their projected turnover.
Do all businesses have to apply for the JobKeeper Payment?
There is no requirement for participating in the JobKeeper scheme. If the subsidy is not affordable or not in the best interest of the business or the employees than the business is not required to apply.
Are all Employees eligible for the JobKeeper payment?
No, there are eligibility criteria for employees.
An employee is eligible if they were employed by the employer during the fortnight and as at 1 March 2020, and:
- are at least 16 years of age
- are an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder
- were a resident for Australian tax purposes
- are full-time, part-time, or long-term casuals ā including those stood down or re-hired (a casual employed on a regular and systemic basis for longer than 12 months )
- are not in receipt of a JobKeeper Payment from another employer
If an employee is on paid or unpaid leave; annual or long service leave, they are still an employee and therefore meet the eligibility requirement.
An employee is not eligible if they receive:
- Government parental leave,
- Dad and partner pay,
- Workers compensation and performing no duties,
- The JobKeeper payment from another employer, or if they are a
- Casual with less than 12 months service.
There are some concessions for casuals that have been with current employer for less than 12 months due to business restructure, business sale or transfer of employees within a corporate group.
Those ineligible should seek advice from Services Australia about other supplement such as the Job Seeker payment, which currently includes a bonus for the Coronavirus crisis. For more information on payments available to individuals, please refer to our article Stimulus Packages for Individuals
What if employees have been terminated / made redundant?
If an employee was terminated after 1 March 2020 they can be re-hired and they will be the eligibility criteria.
The rehire will be on a new employment contract and as such the business has no entitlement to recover any redundancy payout.
How and when will the JobKeeper subsidy payments be made?
You can only claim the JobKeeper payment if you first pay the $1,500 per fortnight payment to each eligible employee. These payments should be made via your payroll system (with relevant tax withheld) and will be reported to the ATO through Single Touch Payroll.
For the first two fortnights (30 March -12 April, 13 April -26 April, the ATO has allowed that these payments can be made late – provided it is paid by you in full by the end of April.
Payments will be made to the eligible employer by the ATO monthly in arrears starting in May 2020.
What if the business cannot afford the payment?
If you cannot afford to make the payments upfront, you may apply to your bank or state government about accessing funding to cover the wages as soon as possible.
Alternatively you are not required to apply for the JobKeeper payment.
How much of the JobKeeper payment do I need to pay the employee?
All eligible employees must be paid a minimum of $1,500 before tax per fortnight, even if their regular wage is lower. Failure to pay the full payment will result in severe penalties.
If their regular wage is higher & they have not been stood down ā the JobKeeper payment will help subside part of the wage cost.
Do I need to withhold and do I need to pay Super on the JobKeeper payment to Employees?
Withhold Tax
Yes ā you need to withhold tax as appropriate based on the employee’s fortnightly wage.
Superannuation
The requirement for superannuation will depend if the employee has been stood down or not.
- Stood down
- Earns less than $1,500 / fortnight ā You are not required to pay superannuation on the $1,500, but can choose to pay super if you wish.
- Earns more than $1,500 / fortnight ā You are not required to top up the subsidy to meet their usual wage. You are not required to pay superannuation on the $1,500 subsidy or any top up but can if you wish.
- Working
- Earns less than $1,500 / fortnight – Superannuation is required to be paid on their normal wage. Super is not required to be paid on the surplus subsidy paid to the employee.
- Earns more than $1,500 / fortnight ā superannuation is required to be paid on their normal wage.
Will Employees Accrue Entitlements?
Employee entitlements will continue to accrue for those receiving JobKeeper payments, even if they have been stood down.
What if I don’t pay my Employees their JobKeeper payment?
If you fail to pay the full $1,500 JobKeeper payment, you will be in breach of the Fair Work Act and could face penalties for each contravention of $12,600 for individuals and $126,000 for companies. Other penalties may also be applied under the Commonwealth Criminal Code.
How do I apply for the JobKeeper Scheme?
- Register for interest in the JobKeeper Scheme ā https://www.ato.gov.au/Job-keeper-payment/
- An online form will be provided which will need to be completed by 26 April to participate from commencement at 30 March. This form will be available from 20 April.
- Gather 2020 actual and forecast turnover information and 2019 comparison information.
- Review staff for eligibility – Name, TFN, Employment status, length of service, age & residence / citizenship status.
- Inform employees of eligibility for JobKeeper payment via the JobKeeper Employee Nomination Notice – https://www.ato.gov.au/Forms/JobKeeper-paymentāemployee-nomination-notice/
- Receive employee acknowledgement on the above form and keep it on file and provide a copy to your tax agent.
- 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.
- Once assessed and approved by the ATO
- Pay employees via usual payroll – ATO are yet to confirm if this is to be allocated as an allowance
- Report eligibility of employees monthly to ATO – likely thought ATO Business Portal via single touch payroll
- Receive the subsidy from the ATO – May 2020.
JobKeeper Examples
We realise that the JobKeeper payment scheme can be hard to understand. To assist you, we have prepared some examples to explain common scenarios
JobKeeper Payment ā Employer Eligibility
Example 1 – Projected & Actual Decline greater than 30%
An eligible employer projects their turnover for the quarter ended 30 June 2020 will be $300,000, the corresponding period in 2019’s turnover was $500,000.
The turnover decline meets the required downturn of 30% and therefore they apply for the JobKeeper payment.
The actual turnover for the June 2020 quarter was $350,000.
The actual turnover decline (-30%) still meets the eligibility requirement and therefore the employer remains eligible for the JobKeeper payments through to September.
Example 2 – Projected Decline greater than 30%. & Actual Decline less than 30%
An eligible employer projects their turnover for the quarter ended 30 June 2020 will be $300,000, the corresponding 2019 period’s turnover was $500,000.
The projected turnover decline meets the required downturn of 30% and therefore the employer may apply for the JobKeeper payment.
However the business performed better than previously projected and the actual turnover for the June 2020 quarter was $400,000.
The actual turnover decline (-20%) no longer meets the eligibility requirement and therefore the employer is likely to be required to repay the JobKeeper payments to the ATO. This is a significant risk.
The ATO will be accepting a margin of error between projection and actual turnover however this information is yet to be finalised.
Example 3 – No eligible decline for June Quarter but decline in September Quarter
An eligible employer projects their turnover for the quarter ended 30 June 2020 will stable compared to the corresponding 2019 period. However it is predicting a significant decline in the September 2020 quarter.
June decline does not meet the required downturn and therefore they do not apply immediately.
The employer is eligible to apply for the JobKeeper payment from 1 July 2020. The employer will only receive payments for 1 July 2020 to 27 September 2020. There is no back payment.
Example 4 – Eligible decline for June Quarter but no decline in September Quarter
An eligible employer projects their turnover for the June 2020 to meet the eligibility criteria and as such applies and the actual results match the projections.
However due to the nature of the employer’s business they forecast the September 2020 quarter to be stronger.
As the employer met the turnover test in June 2020 quarter there is no requirement to re-test in future periods. As such the employer will be eligible for the JobKeeper payment for the full period – April – September 2020.
This may be subject to change as the ATO has yet to finalise their position.
JobKeeper Payment ā Paying Employees
Example 1 – Employee earns less than $1,500 per fortnight & is still working
An employer who receives the JobKeeper subsidy must pay their employee the full JobKeeper payment of $1,500 per fortnight, before tax.
Therefore is an employee whilst working usually earns $1,000 per fortnight.
The employer must pay:
- Their normal wage $1,000 plus super
- The surplus JobKeeper subsidy to meet the minimum ā $500
There is no requirement to pay super on the surplus subsidy.
Example 2 – Employee earns less than $1,500 per fortnight & is stood down
An employer who receives the JobKeeper subsidy must pay their employee the full JobKeeper payment of $1,500 per fortnight, before tax.
Therefore is an employee who is currently stood down.
The employer must pay:
- Their normal wage is nil as currently stood down
- The full JobKeeper subsidy to meet the minimum ā $1,500
There is no requirement to pay super on the JobKeeper payment.
Example 3 – Employee earns more than $1,500 per fortnight & is still working
An employer who receives the JobKeeper subsidy must pay their employee the full JobKeeper payment of $1,500 per fortnight, before tax.
Therefore is an employee whilst working usually earns $3,000 per fortnight.
The employer must pay:
- Their normal wage $3,000 plus super
The JobKeeper payment is retained by the employer to subsidise the employees wage during the coronavirus downturn.
Example 4 – Employee earns more than $1,500 per fortnight & is stood down
An employer who receives the JobKeeper subsidy must pay their employee the full JobKeeper payment of $1,500 per fortnight, before tax.
Therefore is an employee who is currently stood down
The employer must pay:
- Their normal wage is nil as currently stood down
- The full JobKeeper subsidy to meet the minimum ā $1,500
There is no requirement to pay super on the JobKeeper payment.
The employer is not required to ‘top up’ the subsidy to the employee’s usual wage – but can under their discretion.
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.
