JobKeeper legislation provides much-needed clarity for business

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With the JobKeeper Payment legislated by Parliament, and the eligibility rules officially released by Treasury, there is some much-needed certainty about what support businesses and their employees can now access, says Peter Bembrick, tax partner at HLB Mann Judd Sydney.

The JobKeeper Payment will provide a wage subsidy to businesses impacted by Coronavirus, with the Government to provide eligible employers with $1,500 per fortnight per employee to help them retain workers throughout this period.

“This financial support will make a huge difference to many businesses, as well as to employees, and should help them to carry on during the lock-down period.

“It will also provide invaluable assistance in helping the economy get back on its feet once things return to a more normal situation,” Mr Bembrick says.

The JobKeeper Payment applies to sole traders and those who are self-employed, as well as larger businesses. It covers part time, full time, stood down employees and long-term casual workers (that is, those who have been with their employer on a regular and systematic basis for at least 12 months).

In order to be eligible for the JobKeeper Payment, eligible employers must pay eligible employees a minimum of $1,500 (before PAYG withholding) per fortnight (from 30 March 2020). If the employee has not been paid this minimum amount, a ‘top-up’ payment will be required.

If the eligible employee is paid more than $1,500 per fortnight (before PAYG withholding), the employer will only be reimbursed up to $1,500 per fortnight.

Mr Bembrick says the payment applies to employees ‘on the books’ as at 1 March 2020.

“Therefore, there is an opportunity for staff that had been terminated or stood down in the past weeks to be reinstated and become eligible. However, employees cannot be getting other benefits such as JobSeeker payments.”

He also points out that superannuation obligations need to be reviewed by employers. 

“Where an employee is usually paid more than $1,500 per fortnight and continues to be paid more than $1,500 per fortnight, the employer’s superannuation obligations will not change.

“However, if an employee’s wages are “topped-up” to meet the minimum payment requirement of $1,500 per fortnight, there is no additional superannuation obligation in respect of the “top-up” payment being made.”

Anyone intending to claim the payment must register their interest on the ATO website, and needs to consider the following:

  • Businesses will be eligible if, at the time of applying, they estimate that their turnover has fallen (or will likely fall) by at least 30% as a result of the current restrictions / COVID-19 impact relative to a comparable period in 2019
  • The period can be a month from March 2020 to September 2020 compared to the same month in 2019 or, where a quarterly period is chosen, businesses will compare projected turnover for either the June or September 2020 quarters to the same quarter in 2019
  • Businesses whose “aggregated turnover” for income tax purposes is likely to exceed $1 billion must instead show a 50% reduction in turnover. For testing whether the 50% rate applies, the turnover of certain related entities (including foreign residents) is taken into account
  • If the business was not in operation a year earlier, or the turnover a year earlier is not representative of their usual turnover (e.g. where it was impacted by the drought), the ATO has discretion to consider additional information to establish that they have been adversely impacted by COVID19, and apply an alternative methodology
  • There is a “one-in-all-in” rule where participation must be offered to all eligible employees, but the employee is not required to accept the offer
  • Payments will be available for a period of 6 months from 30 March 2020
  • Employers will need to report to the ATO on a monthly basis regarding the number of eligible employees
  • Eligible employees must complete the JobKeeper Employee Nomination Form before 30 April 2020. The forms are to be submitted to the employers for their own records (not the ATO).

When calculating the reduction, turnover is defined to be “GST turnover” as reported on Business Activity Statements. It includes all Australian taxable supplies and GST free supplies but not input taxed supplies. There are adjustments for members of GST groups, where each employing entity is tested individually, and this will pose practical difficulties in some cases.

Further, if turnover has not yet declined but it is expected to do so, a business can start claiming from a future period, although payments will not be backdated.

Consistent with GST law, it includes only Australian-based sales, so a decline in overseas operations will not be counted in the turnover test.

Sole traders

Mr Bembrick says businesses without employees, such as the self-employed, can also register their interest in applying for JobKeeper payments from 30 March 2020.

Sole traders will need to have had an ABN on or before 12 March 2020 and have either:

  • Reported an amount of assessable income in their 2019 tax return, if lodged prior to 12 March 2020; or
  • Made a supply between 1 July 2018 and 12 March 2020 and provided this information to the ATO prior to 12 March 2020.

Sole traders will need to provide an ABN and nominate an individual to receive the payment and provide that individual’s Tax File Number as well as provide a declaration as to recent business activity.

Other “self-employment” entities

Other entities carrying on a business may be able to receive the JobKeeper Payment for one (but only one) “owner” who is working in the business but not receiving their remuneration as an employee:

  • One partner in an eligible partnership can be nominated
  • One individual beneficiary can be nominated
  • One director in an eligible company can be nominated
  • One shareholder in an eligible company, receiving their remuneration for labour by way of dividends, may be nominated.

The payment process

Mr Bembrick says businesses must have paid their employees before they are entitled to receive the JobKeeper Payment.

“Employers will be reimbursed by the ATO monthly in arrears starting from 1 May 2020, backdated to 30 March 2020. The payments to employees should be made through an employer’s payroll system and reported to the ATO via Single Touch Payroll.

“The JobKeeper Payment will generally be made by the ATO directly to the employer and will not be used to offset other tax liabilities.”

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