Complete Guide to the JobKeeper Subsidy

| Business
Complete Guide to the JobKeeper Subsidy | Munro's Accountants and Advisors

 

In response to the deteriorating economic conditions due to the novel coronavirus (COVID-19), the Australian Federal Government has introduced a “JobKeeper” payment subsidy for employers to help cover employee costs.

Herein we provide details about how employers can get the JobKeeper subsidy. For a PDF version of this guide, request your copy via this link.

Please note this content has been updated from time to time and is officially published in the PDF Version. The below content has not been updated since Version 2020.04.16.09 and should not be relied upon for assessing JobKeeper eligibility as this is an out-of-date version. To receive the most up-to-date copy of the guide please Request your copy TODAY.

Content

Scope and Limitations of Guide

How much is the JobKeeper subsidy?

Who can get the JobKeeper subsidy?

How do you calculate if your revenue is down 30%?

What if my turnover isn’t down 30% yet but might be later?

What are the alternative tests?

How many eligible employees do I have?

What if an employee was already let go?

When does an employer need to pay the employee?

What if an employee normally gets paid less than $1,500?

Do you need to tell employees about the JobKeeper subsidy?

When will you get the subsidy from the ATO?

How do you register for JobKeeper?

What lodgements are required to get the JobKeeper subsidy?

What if you don’t have the cash to pay employees before the subsidy is paid?

Are employers still subject to PAYG Withholding?

Are employers subject to compulsory superannuation?

Do leave entitlements accrue on JobKeeper supported payments?

Can the JobKeeper subsidy be used to support leave entitlements?

Will the ATO use the JobKeeper subsidy to offset tax liabilities?

Can self-employed persons receive the JobKeeper Payment?

Can a self-employed landlord receive the JobKeeper subsidy?

Is the JobKeeper subsidy assessable income?

Can you manipulate conditions to qualify?

Scope and Limitations of Guide

This guide is for the purpose of providing general educational information and as it is not tailored to your unique circumstances it is not advice. If you would like tailored advice then please contact us as soon as possible on (08) 94275200 or mail@munros.com.au or https://www.munros.com.au/contact-us.

The guide is based on Australian law in force or anticipated at the time of publication. It is your responsibility to receive tailored advice if you intend to seek/obtain the JobKeeper subsidy. We note that Australian laws are often subject to frequent change and we are not obligated to provide you with an updated guide if the law(s) or announced law(s) change.

How much is the JobKeeper subsidy?

$1,500 per fortnight per eligible employee.

HOWEVER, this is the before tax amount and is not the amount you pay employees.

An employer will need to pay the typical employee $1,308 per fortnight. This is because $1,308 is after withholding tax of $192 has been applied (you end up giving this back to the ATO just like ordinary PAYG Withholding, subject to the Cash Flow Boost). Please note that not all employees are subject to the same withholding tax rates or employment conditions and you must determine the appropriate amount to pay each employee (we can help if you need it – give us a call).

Who can get the JobKeeper subsidy?

Small and medium businesses whose revenue is down 30% or more are eligible. Not-for-profit organisations are eligible with revenue down only 15%. There are also other alternative tests (see “What are the alternative tests?”)

Businesses in liquidation or bankruptcy do not qualify. There are other conditions for larger businesses (call us if you need to know more).

How do you calculate if your revenue is down 30%?

An employer satisfies the “turnover test” of a 30%/15% reduction in revenue when their turnover for GST purposes is down as required. What does this mean?

Firstly it is extremely important to understand what constitutes “turnover” for the turnover test. The turnover test is assessed based on turnover for GST purposes, which may be different to turnover for Income Tax (Return) purposes. For instance, this could be the case if you report GST on a cash-basis (as do many small businesses) but report sales in your tax return on an accrual [invoicing] basis (as required for many businesses). Furthermore, you ignore input taxed supplies (such as interest and residential rent), there are some modifications to the usual definition of turnover for GST purposes, and it is based on projected turnover rather than actual turnover.

So, once you are able to calculate your turnover for a particular set of time (e.g. the month of April 2020 or the June 2020 quarter), you can move to the next step of assessing whether revenue is down 30%.

First compare your March 2020 monthly turnover to your March 2019 monthly turnover. If March 2020 turnover is down 30% compared to March 2019, you have satisfied the turnover test. If revenue in March 2020 is not down by 30% then move to the next step.

Next you need to estimate your April 2020 monthly turnover and compare to your actual April 2019 monthly turnover. You make an estimate of April 2020 monthly turnover rather than your actual turnover because you need to work out whether or not you qualify for JobKeeper at the beginning of April when the fortnightly payments to employees commence. The estimate needs to be as accurate as possible based on fair and reasonable assumptions. If it shows a 30% decline in revenue compared to April 2019 then you have satisfied the turnover test. If not then move to the next calculation.

If revenue is not down 30% in March or April, then estimate your turnover for the April-June 2020 quarter and compare that to turnover for the April-June 2019 quarter. Again you need to reasonably estimate your June 2020 quarter turnover because the JobKeeper supported payments to employees need to be made throughout the June 2020 quarter before you know actual turnover. If turnover is down 30% based on your estimate of the June 2020 quarter compared to actual June 2019 quarter then you have satisfied the turnover test.

If you have not yet satisfied the turnover test, then you do not qualify from April 2020. However, you can complete the same process to see if you qualify later into the scheme. For example, at the beginning of May estimate your May 2020 monthly turnover and compare to your actual May 2019 monthly turnover. If that is down 30% then you pass the turnover test from 1 May 2020 and the JobKeeper subsidy is available from the 27 April to 10 May 2020 fortnight (subject to you satisfying all the other conditions).

Since the JobKeeper payment subsidy will be paid before your actual turnover is known, you will need to very carefully estimate your upcoming revenue to determine whether you will qualify. If you think you are going to have revenue drop by at least 30% and you claim the JobKeeper subsidy, and then later it turns out that your revenue was say only down 25%, your estimate will likely be subject to scrutiny from the ATO and if the ATO believes it was not reasonable then you will likely have to repay the JobKeeper payments back to the ATO (with the possibility of penalties and interest charges) but you would be unlikely to be able to recover the monies back from employees.

What if my turnover is down 30% now but recovers later?

If you have previously satisfied the turnover test because revenue has been down 30% in an applicable period (e.g. April 2020) and then in a later period revenue is no longer down 30% (e.g. May 2020 revenue is down less than 30%) you continue to be eligible for the JobKeeper subsidy. This is because you only need to satisfy the turnover test once in order to qualify for the subsidy in all future fortnights (subject to passing all the other conditions).

What if my turnover isn’t down 30% yet but might be later?

If your revenue has not yet dropped by 30% or more but you expect it to drop 30% or more very soon, then you can self-assess that you qualify now. However, if you can’t reasonably estimate that your turnover is down 30%, then you are not presently entitled to the JobKeeper subsidy. If revenue does subsequently drop by 30% then you can register at that time and begin to claim the JobKeeper subsidy. You are not entitled to a backdated subsidy for the period where revenue had not dropped by 30%. IT IS EXTREMELY IMPORTANT TO HAVE AN ACCURATE ESTIMATE AND THE EARLIER THE BETTER. We can help – give us a call.

What are the alternative tests?

Some businesses have been severely impacted by COVID-19 but due to unique circumstances their revenue may not have fallen by 30%. It is still possible for these businesses to access the JobKeeper subsidy.

The ATO have discretion to consider additional information to ascertain how much an employer has been impacted by the novel coronavirus and therefore whether they qualify. The ATO have not yet released the specific details of the alternative tests that will be applied.

For now, it is expected that the ATO will consider such things as:

  • Taking into account businesses with highly variable sales.
  • Taking into account startup / scaleup business conditions.
  • Taking into account recent business acquisitions.
  • Taking into account how a business’ operations have been significantly curtailed.

The ATO will release guidance soon and if you require assistance with the alternative tests / ATO discretion, please urgently contact us.

How many eligible employees do I have?

The $1,500 JobKeeper subsidy is only payable for “eligible employees”. You have an eligible employee when all the following conditions apply:

  1. They are currently employed by you (includes stood down or re-hired employees).
  2. They were employed by you on 1 March 2020.
  3. They are either:
    1. A full-time employee;
    2. A part-time employee; or
    3. A casual employee who has been actively working for you since before 1 March 2019.
  4. They are at least 16 years of age (at 1 March 2020).
  5. They are an Australian citizen, holder of a permanent visa or a Special Category (subclass 444) Visa and live in Australia.
  6. They are an Australian tax resident.
  7. You are the only employer receiving the JobKeeper payment in respect to them.
  8. They are not employer by another employer, unless on a casual basis.

Even if an employee satisfies these conditions they are not an eligible employee if they are receiving Parental Leave Pay or Dad and Partner Pay from Services Australia. Employees who are not working and receiving workers compensation are also ineligible.

JobKeeper is an all-or-nothing scheme – either you enrol all eligible employees in the scheme or none.

What if an employee was already let go?

If an ex-employee is otherwise eligible but you already terminated their employment, you can re-hire them and gain access to the JobKeeper subsidy. This includes if you re-hire them only to then stand them down (put them on forced unpaid leave).

When does an employer need to pay the employee?

A JobKeeper supported payment to eligible employees must be made by employers in the following fortnights:

  • 30 March to 12 April 2020.
  • 13 April to 26 April 2020.
  • 27 April to 10 May 2020.
  • 11 May to 24 May 2020.
  • 25 May to 7 June 2020.
  • 8 June to 21 June 2020.
  • 22 June to 5 July 2020.
  • 6 July to 19 July 2020.
  • 20 July to 2 August 2020.
  • 3 August to 16 August 2020.
  • 17 August to 30 August 2020.
  • 31 August to 13 September 2020.
  • 14 September to 27 September 2020.

An employer will only receive the subsidy if they have actually paid an eligible employee at least $1,500 less withholding tax in the applicable fortnight.

For instance, if an employer pays an employee $1,500 less tax on 15 April 2020 but did not pay that employee between 30 March and 12 April 2020, then ordinarily they will not receive a subsidy for the 30 March to 12 April fortnight. Generally catch-up payments will be insufficient, although there will be some relief, particularly for the first two fortnightly periods (i.e. April subsidy). THIS IS VERY IMPORTANT TO UNDERSTAND.

The ATO will apply a concession to this treatment if employees are usually paid monthly. For example, if an employee is typically paid monthly then the employer can make a $3,250 less tax payment each month.

What if an employee normally gets paid less than $1,500?

To qualify for the JobKeeper subsidy, an employer needs to pay an eligible employee at least $1,500 less tax. This means that if an employee is working and earns less than $1,500, you need to pay them a top-up to bring their wage up to $1,500 less tax per fortnight. If the employee is not working you also need to pay them $1,500 less tax per fortnight, irrespective that if they were working you would have paid them less.

Do you need to tell employees about the JobKeeper subsidy?

Yes. You must tell each eligible employee that you are receiving the JobKeeper subsidy with respect to their employment. Your employee needs to complete the JobKeeper employee nomination notice. You do not submit this notice to the ATO, but rather you are required to keep it as part of your records.

When will you get the subsidy from the ATO?

The ATO will pay the subsidy monthly in arrears. This means the ATO will make payments where applicable in:

  • The first fortnight of May 2020.
  • The first fortnight of June 2020.
  • The first fortnight of July 2020.
  • The first fortnight of August 2020.
  • The first fortnight of September 2020
  • The first fortnight of October 2020.

Note, payment from the ATO will be subject to your lodgement obligations, and so to receive prompt payment make sure you lodge all required applications on-time. We can help with lodgements.

How do you register for JobKeeper?

Currently you can only register your intention to seek the JobKeeper subsidy. This is done at https://www.ato.gov.au/Job-keeper-payment/ You do not need to do this.

The ATO will open up a formal online application from Monday 20 April. This will be accessible through the Business Portal or through us via the Tax Agent Portal. Let us know if you would like us to register you.

If you qualify for JobKeeper in April, then you must complete the application by the end of April.

What lodgements are required to get the JobKeeper subsidy?

To receive the JobKeeper subsidy, you will be required to make a lodgement each month to self-assess that you have met the turnover test (revenue down 30%) and confirm details of eligible employees and payments made to them. Most of this information should be pre-populated by the ATO if you have been using Single Touch Payroll (STP).

What if you don’t have the cash to pay employees before the subsidy is paid?

The JobKeeper subsidy is a reimbursement payment which means you must pay eligible employees before and on-time. If you do not have the cash available to pay employees then you will not be able to claim the JobKeeper subsidy. This means that you need to adequately plan ahead to have enough cash and you may need to arrange access to a business loan. Let us know as we can help.

Are employers still subject to PAYG Withholding?

Yes. Payments made to employees need to be after withholding tax, just like an ordinary salary/wage payment. The employer then needs to report withholding tax on their Activity Statement and then they will be liable to pay this to the ATO.

However, importantly there is the PAYG Withholding Cash Flow Boost for employers which may provide some additional relief for an employer’s liability to pay the ATO. Call us if you need to know more.

Are employers subject to compulsory superannuation?

Employers remain liable to pay compulsory superannuation for employees who are working and earning their salary/wage. Superannuation guarantee is calculated like normal on their ordinary times earnings.

You do not need to pay superannuation guarantee for the amount an employee receives under the JobKeeper subsidy scheme as a top-up above their earned income.

Do leave entitlements accrue on JobKeeper supported payments?

Yes. Whilst employees are working, leave entitlements such as annual leave, sick leave and long service leave accrue as per usual. For employees subject to a stand down direction (reduced or no working hours), leave entitlements also accrue as per usual.

Can the JobKeeper subsidy be used to support leave entitlements?

Yes. The employer and employee may also negotiate for the employee to take twice as much annual leave at half their usual pay. This helps the employee reduce by half the amount of annual leave taken (one week annual leave effectively becomes two, but at the same total pay across the two weeks). Generally it is expected that the employee must agree if asked by their employer, although the employee cannot be forced to have their accrued annual leave drop below two weeks.

Will the ATO use the JobKeeper subsidy to offset tax liabilities?

No. The ATO intends to pay the JobKeeper subsidy directly to the employer without offsetting other tax liabilities.

Can self-employed persons receive the JobKeeper Payment?

If a person is self-employed (actually works in their business and doesn’t receive remuneration as an employee) and the business meets the turnover test (30% revenue reduction), then subject to eligibility criteria there is access to the JobKeeper Payment to some extent as explained below.

The eligibility criteria for a self-employer person requires that all the following conditions be satisfied:

  1. They had an ABN before 13 March 2020.
  2. Either:
    1. Have lodged their 2019FY tax return before 13 March 2020 and it included business income related to that ABN; or
    2. Have lodged a Business Activity Statement before 13 March 2020 which covers a period since 1 July 2018 and included a GST supply (taxable or GST-free).

Note, in both cases the ATO may allow extra time to satisfy the lodgement deadline.

  1. They are at least 16 years of age (at 1 March 2020).
  2. They are an Australian citizen, holder of a permanent visa or a Special Category (subclass 444) Visa and live in Australia.
  3. They are an Australian tax resident.
  4. They are not entitled to another JobKeeper Payment (e.g. they aren’t receiving the JobKeeper Payment from another employer, nor receiving it as an eligible employee of their own business under the ordinary eligible employee conditions).
  5. They are actively engaged in the business
  6. They are not employer by another employer, unless on a casual basis.

For sole-traders

The ATO will pay the JobKeeper Payment directly to their bank account.

For a Partnership

The Partnership needs to nominate one working partner to receive the JobKeeper Payment directly from the ATO. Only one working partner can receive the payment (partners cannot be an employee).

For a Trust

The Trust needs to nominate one working adult beneficiary to receive the JobKeeper Payment directly from the ATOOnly one working beneficiary can receive the payment.

For a Company

The Company needs to nominate one working director (not in their capacity as an employee) or shareholder to receive the JobKeeper Payment directly from the ATOOnly one working director or shareholder can receive the payment.

In all the above, if the self-employed person is an actual employee of their business and they meet the ordinary eligible employee criteria, then the JobKeeper subsidy may be applied under the ordinary eligible employee conditions as opposed to these self-employed person conditions.

Can a self-employed landlord receive the JobKeeper subsidy?

No. A person who owns rental properties which do not satisfy the tax definition of ‘carrying on a business’ is not considered self-employed for the purposes of the JobKeeper subsidy and therefore cannot qualify for payment.

Is the JobKeeper subsidy assessable income?

Yes. Both business employer in receipt of the subsidy and employee in receipt of their salary/wage which is supported by the subsidy will need to include their respective amount as income in their tax return. The employer will be entitled to a tax deduction for the salary/wage paid.

Can you manipulate conditions to qualify?

The Government has included integrity rules to prevent employers from accessing the JobKeeper subsidy through artificial schemes. It is noted that serious consequences including large penalties and possible imprisonment can be applied for those illegally benefiting from JobKeeper.

If you have any unanswered questions or queries, please feel welcome to contact us.

 

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