By Darren ShoneTaxation Partner
15 April 2020
The JobKeeker support announced by the Government is by far the largest form of support for businesses that are affected by COVID-19. It is also the one that is causing the most confusion and distress. The laws are now passed and the rules and an explanatory documents have been issued.
- Not all businesses are entitled to the JobKeeper payment and it is essential that a business ensures that it is qualified before they begin to pay employees.
- Entitled businesses must ensure that each eligible employee receives at least $1,500 per fortnight (before tax).
- For employees that have been stood down, your employer must pay you, at a minimum, $1,500 per fortnight, before tax.
- For employees that have been receiving less than this amount, the employer will need to top up the payment to $1,500 per fortnight, before tax.
- For employees that were already receiving this amount from the employer they will continue to receive their regular income according to their prevailing workplace arrangements.
For employees currently being paid more than $1,500 per fortnight during the period the JobKeeper subsidy is in place, the $1,500 per fortnight JobKeeper payment received by the employer does not need to be added to their wages as a top-up i.e. someone earning $2,000 per fortnight does not automatically get topped up to $3,500 per fortnight. However, additional payments can be made at the employers discretion.
The payments are a safety net to ensure that all employees that continue to be engaged by employers will receive a minimum payment of $1,500 per fortnight.
- 20 April – Enrol using the online form
- April – Make all required payments (the first payment did not need to be made by 12 April (for the period 30 March to 12 April)
- 4 May – Confirm eligible employees using the business portal
Who is eligible?
To be eligible an employer needs to show it is impacted by Covid-19. It shows this by passing a reduction in turnover test showing that they have seen a reduction of 50%, 30% or 15% in turnover.
How do I determine which reduction percentage is applicable?
The test for determining the above percentages is a concept called aggregated annual turnover. This includes all group entities that meet a connected entity test or an affiliate entity test. The connected entity test applies at a basic level when there is 40% or more common control over entities. If the aggregated annual turnover for related entities is:
- $1billion or more, the 50% or more turnover reduction test applies.
- Less than $1 billion, the 30% or more turnover reduction test applies; or
- Charities and other not for profit entities, the 15% turnover reduction test applies.
How do I show a reduction in turnover?
The basic turnover test requires comparing your actual or projected GST turnover for a period with a corresponding period last year. You can choose the period and it is not reliant on your current GST reporting cycle. The test period can be monthly or quarterly and must be one of the following:
- If monthly – one of March, April, May, June, July or September 2020
- If quarterly – either April – June 2020 or July – September 2020
For example, to apply the basic turnover test you may assess:
- Actual GST turnover for March 2020 compared with actual GST turnover from March 2019
- Projected GST turnover for April 2020 with actual GST turnover from April 2019
- Projected GST turnover the quarter starting April 2020 with actual GST turnover for the quarter starting April 2019
The projected turnover refers to the supplies expected to be made over the next period (month or quarter). Evidence to support the projected turnover for the period will need to be kept. The lodging of BAS ongoing will provide evidence of what the actual turnover was as a comparison to the projected turnovers notified for determining the level of decline.
There is an alternative test that can be applied if the above test cannot be applied for example there is no 2019 comparable period or the basic test means it is not an appropriate comparative period (due to an acquisition etc.). The Australian Taxation Office will issue guidance on this.
How are grouped entities considered?
The Job Keeper subsidy applies at the individual employer level and not at a group level. So if there are multiple employers in the group then each one will register separately. Some may have the required turnover drop and some may not.
For grouped entities for GST the tests that ignore intra-group supplies for measuring turnover for groups are turned off. So for each entity the turnover includes the related entity service payments and other transactions that are eliminated for a group BAS.
How often do you test for turnover?
If the required level of turnover reduction test is met then the test only needs to be met once. It is not tested gain, even if the turnover reduction test is not met in the later periods.
However, if the test is not met in the first instance but a decline is felt later and the business meets the test for a later period, then testing is allowed in that later period and the Job Keeper registration can apply for that later period onwards.
Can I select which employees receive the payment?
No. Your employees need to agree to be nominated by you as their primary employer. There is a ‘one in, all in’ rule that is a key feature of the scheme.
All employees are covered by the scheme and the employer can not select which employees will participate in the scheme. (i.e. so they cannot just elect for example only eligible employees who are currently being paid more than $1,500 per fortnight and exclude those being paid less than $1,500 per fortnight).
Do I need to inform my employees that I am receiving JobKeeper payments?
Qualifying employers that decide to participate in the Job Keeper scheme must, as a condition of entitlement, notify all employees in writing that they have elected to participate in the scheme and that their eligible employees will all be covered by the scheme.
How often do employees need to be paid?
There is no requirement to change the frequency of your pay cycle. But you must ensure that the $1,500 fortnightly payment starting from Monday, 30 March is passed to the employee, whether this be in a weekly, fortnightly or monthly pay cycle. This will continue until the end of the scheme on Sunday, 27 September 2020,
Payments should be recorded through the single touch payroll system. A manual system can be applied for entities that do not use single touch payroll.
Does the Job Keeper subsidy mean an employee gets paid an extra $1,500 per fortnight on top of what they are currently being paid?
No. The Job Keeper subsidy provides a safety net so that all employees that continue to be engaged by an employer receive a minimum of $1,500 per fortnight. Those earning nil or less than $1,500 per fortnight must be paid at least $1,500 per fortnight. Those being paid above $1,500 per fortnight get paid the same amount but the employer has the option (but not the compulsion) to top up the employee remuneration. The subsidy is a flat $1,500 per fortnight per eligible employee.
Do I need to pay the employees first and then will receive the Job Keeper subsidy?
Yes the employer needs to pay the employee first and will then be reimbursed monthly in arrears. So there is a funding timing gap needs to be managed (see PKF article on Section 560 for help on this).
What about payroll tax and workers compensation requirements etc?
Payroll tax and workers compensation are State based schemes and have their own requirements. States are not taking a consistent approach here with the concessions they are providing in response to the crisis. There has been no direct announcement yet that we are aware of as to how each jurisdiction will treat the subsidy. At this stage it is expected that unless there is a specific carve out, all amounts paid to employees will still continue to be subject to these charges. Hopefully these matters will be clarified once the Federal laws are passed for the Job Keeper subsidy.
Are the Job Keeper payments taxable income?
Yes. The payments are taxable income for the employer that receives the subsidy and for employees that are paid either their wage or the full amount of the Job Keeper subsidy that has been passed on. Pay As You Go Withholding is also required for payments made to employees where withholding is required based on the amount of the payment received. However, eligible employers could take advantage of the cash flow boost concession and retain any withheld tax and not pay it on.
Do I get the Job Keeper subsidy and then use that to pay the eligible employees?
No. The employees must be paid during the month by the employer at least the minimum amount of $1,500 per fortnight and once payment is reported as being paid the government will reimburse the employer monthly in arrears for the $1,500 per fortnight per employee. Employers need to report monthly to the government to remain entitled to the Job Keeper subsidy.
Can an employee receive the Job Keeper subsidy from more than one employer?
No. Only one registration with an employer is allowed for an employee. That would be the employer they claim the tax free threshold from.
Do all employees need to have been employed for 12 months to qualify?
No. All qualifying employees need to be employed as at 1 March 2020. The 12-month requirement only applies to casual workers who were employed at 1 March 2020.
Case study examples of how the JobKeeper payment is implemented: