There has been constant reporting in the last two weeks about the Federal Government’s latest scheme to provide relief payments to employees where businesses have been forced to close or are severely affected by the Coronavirus pandemic.
What has been reported in the press is a very simplified version of how the scheme might work. In particular, many employers may simply not be able to afford to offer the JobKeeper payments to their employees, and the eligibility criteria around reduction in turnover will be harder to meet than many people think. A lot of businesses who thought they would qualify are likely to find out that they don’t.
Despite the fact that the government passed the JobKeeper legislation this week, the rules are not 100% clear. The laws merely provide a framework of the scheme and then gives all powers about the scheme to the Treasurer. A draft version of the ‘rules’ has been made available, however, these are subject to change before being finalised. The comments below are based on the current version of the draft rules and our understanding of the intent of the scheme.
The information below is intended as a guide only, and focuses on elements of the draft rules which we believe are not widely known or understood.
It is generic advice only based on draft rules which have not been made final, so you cannot rely on it. Each business needs to make decisions based on their own individual circumstances and to seek specific advice.
What should I, as an employer, do ‘today’?
We recommend that you do four things:
1) Register as an employer on the ATO’s website here. Even if it is subsequently determined that you are not eligible to participate, or you decide not to participate, there is no ‘downside’ in registering now;
2) If you are not registered on the Single Touch Payroll (STP) system now, then consider registering as the payments will be calculated via the STP system. If you don’t use STP, there will be a manual claim process, which will be slower;
3) Start collecting information on your employees to work out who might be eligible.
4) Start working with your Hales Douglass client manager to collect information on your forecast GST turnover for the coming six months and your actual turnover for the same periods last year.
Who receives the JobKeeper Payment?
The JobKeeper payment is made to the eligible employer rather than directly to the employees.
The payment is a ‘reimbursement scheme’ as the employer is required to make the payments to the employees before the ATO will make a payment to the employer. This has the potential to create a serious cash flow issue for many employers and may even cause many employers to decide not to participate for all or some of its eligible employees. The employer is the one who makes this decision not the employee.
Am I an ‘eligible employer’ entitled to receive the JobKeeper Payment?
The basic criteria is the business forecasted GST turnover has fallen, or will likely fall, by more than 30% as compared to the same period last year
How do I determine my ‘GST turnover’?
GST turnover will be based on turnover for GST purposes as reported on the BAS statements.
This means that if you declare GST on a cash basis (nearly everyone does) then your turnover for working out if you qualify for JobKeeper is determined on a cash basis.
How do I work out the extent of my reduction in ‘GST turnover’?
To establish that a business has faced a 30% reduction in their GST turnover, you would need to show that your turnover has fallen, or will likely fall, in the relevant month or three months (depending, we expect, on the reporting period used for their activity statements – although this needs to be clarified) relative to their turnover a year earlier.
Because nearly all taxpayers lodge their BAS’s on a quarterly basis, you will likely need to show a 30% downturn for the whole three months from April to June to be eligible. If the reduction occurs only for one month, then you might be eligible for that month or not at all. It is NOT the case that being 30% down for one month allows you to qualify for the whole six months of Jobkeeper payments.
Where a business was not operating a year earlier, or where turnover last year was different to their current usual or average turnover (e.g. because there was a business purchase, they were scaling up/growing or their turnover is typically highly variable), the ATO will have the discretion to consider ‘additional information’ that the business can provide to establish that the business has been significantly adversely affected by the impacts of Coronavirus.
ATO will also have a discretion to set alternative tests that would establish eligibility in specific circumstances (eg. as soon as a business has ceased or significantly reduced its operations). There will be some tolerance where employers, in good faith, estimate a greater than 30% reduction in turnover but actually experience a slightly smaller fall.
The rules also state that employers must submit information of turnover on a monthly basis, even if they lodge a BAS on a quarterly basis.
What is the ‘wage condition’ requirement that applies to employers in relation to payments to employees?
Employers will need to satisfy the ‘wage condition’ requirement for their eligible employees in respect of each 14-day period covered by the scheme.
The first period started on Monday 30th March and ends on Sunday 12th April. The final fortnightly period ends on 27th September.
The ‘wage condition’ requirement is that employers have already paid their eligible employees a minimum of $1,500 per fortnight in each payment period. Where an employer pays their employees on a monthly basis, the ATO will be able to reallocate payments between periods.
This requirement may jeopardise the success of the scheme as it means:
- The employer faces the cash flow issue of having to fund the payment to the employee and then wait to receive the JobKeeper Payment from the ATO; and
- The employer faces the commercial risk of, having paid the employee, being exposed to the possibility that they are not eligible, for any reason, to receive the JobKeeper Payment from the ATO.
Is the JobKeeper Payment available to self-employed persons?
I run my business through a company or trust that I control and do not pay myself a salary – can my business receive the JobKeeper Payment in respect of myself?
In these cases, it appears that you may be able to nominate one additional person as an eligible employee. The entity must carry on a business in Australia. The one person that can be nominated must be a director or shareholder of the company, a beneficiary of the trust or a partner in the partnership.
I am an eligible employer and have some employees that receive more than $1,500 and others that receive less than $1,500 per fortnight – what happens?
If you have an employee who otherwise earns, say, $2,000 per fortnight (before tax) and you continue to pay this employee, then the employer will receive a subsidy of $1,500 for that fortnight.
If the employee would otherwise receive less than $1,500 per fortnight (before tax) or has been stood down (and is not receiving any salary), then the employer will be entitled to a JobKeeper Payment of $1,500 per fortnight provided they have paid this amount to the employee. Thus, some employees may receive a ‘pay rise’ under these measures.
Do I deduct PAYG Withholding from the payments made to employees where I have received the JobKeeper Payment?
Yes. In this regard, it is noted that for most employees a payment of $1,500 per fortnight before tax will be subject to $192 of PAYG withholding – eg. the employee will receive net payment of $1,308 per fortnight.
This is just a sample of some of the lesser-known elements of the JobKeeper measures. We expect much of the finer detail to be announced in the next few weeks, and some elements of the package may differ from the above. We will continue to dissect the information as it becomes available to help clarify this scheme for our clients and our community.
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