The Jobkeeper wage subsidy was announced on 30 March 2020 and the Coronavirus Economic Response Package (Payments and Benefits) Bill 2020 was passed and received Royal Assent on 9 April 2020.
The Jobkeeper scheme broadly provides as follows:
- The scheme commences on 30 March 2020 and ends on 27 September 2020;
- A business that has suffered a substantial decline in revenue can be entitled to a Jobkeeper payment of $1,500 per fortnight for each eligible employee;
- A business can be entitled to a $1,500 fortnightly Jobkeeper payment for one business participant who is actively engaged in operating the business;
- The Commissioner of Taxation administers the scheme and will make the Jobkeeper payments to entities after the end of each calendar month, for fortnights ending in that month.
Eligibility requirements for employers
To participate in the Jobkeeper scheme, an entity must notify the ATO of this election before the end of a fortnight to be eligible for a payment for that fortnight (special rules apply for the first two fortnights commencing on 30 March & 13 April 2020). The notification must be made in the approved form which will be available on the ATO website on 20 April 2020.
There are test that an employer must have satisfied on 1 March 2020 and other tests that must be satisfied during the period on which a Jobkeeper payment is claimed.
1 March 2020 tests
On 1 March 2020, the employer must
- Have carried on a business in Australia; and
- Not have been one of the big banks, a government body, a liquidator appointed to the business or a trustee in bankruptcy.
An employer that was not carrying on a business on 1 March 2020 – for instance, due to the business ceasing before 1 March 2020 or commencing after 1 March 2020 – will not be a qualifying employer for purposes of the scheme.
Post 1 March 2020 requirements and tests
There are a number of requirements and tests that an employer must satisfy for each fortnight commencing on 30 March 2020 and ending on 27 September 2020. These tests and requirements can broadly be grouped as follows:
- The ‘decline in turnover’ test;
- The ‘eligible employee’ test;
- The ‘wage condition’ test; and
- Notification requirements to the ATO and eligible employees.
Decline in turnover
There are two tests that a business can satisfy the decline in turnover test – the basic test and the alternative test:
The Basic test
The Basic Test involves comparison between the projected GST turnover for a month or quarter between March 2020 and September 2020 over its GST turnover for the equivalent period in the previous year. This test must be satisfied before a business becomes eligible for a Jobkeeper payment for the particular period. This test only needs to be satisfied once.
If the business fails the test for a particular period, it can still test its GST turnover in subsequent periods. If the test is passed in the subsequent period, the business will then be eligible for Jobkeeper payments from that period forward.
The Alternative test
This test applies if there is no appropriate relevant comparison period in 2019 for example where a start-up business. In this case the Commissioner has the discretion to set out alternative tests to establish eligibility in specific circumstances. No guidance on any alternative tests has been published yet.
What does ‘decline in GST turnover’ mean?
For an entity with aggregated turnover of less than $1 billion, the decline in turnover must have been 30% or more compared to the previous year’s turnover.
The Jobkeeper scheme requires monthly reporting to the ATO in relation to its current GST for the reporting period and its projected GST turnover for the following month. The reporting period is the month in which there was a fortnight for which the business was entitled to a Jobkeeper payment. This report must be made within 7 days at the end of the reporting month.
Who is an ‘eligible employee’?
There are different tests that need to be satisfied for eligible employees at 1 March 2020 and during a relevant Jobkeeper fortnight.
1 March 2020 test
An eligible employee is an individual who on 1 March 2020 was:
- At least 16 years old;
- A full-time or part-time employee, or a casual employee who was employed on a regular and systematic basis during the 12 months prior to that date; and
- An Australian citizen or permanent resident who resides in Australia, or an Australian resident of tax purposes and a holder of a Subclass 444 visa (i.e. a New Zealand citizen).
As the above tests are only required to be satisfied on 1 March 2020, it accommodates situations where an individual’s employment was terminated after this date and is subsequently re-hired by the employer.
Once an employer has determined that an employee has satisfied the above conditions on 1 March 2020, the employee must provide a notice in writing agreeing:
- To be nominated by the employer as an eligible employee under the Jobkeeper scheme;
- That they confirm that they have not agreed to be nominated by another employer; and
- If they are a casual employee, that they do not have permanent employment with another employer.
An employer cannot select which eligible employees will participate in the scheme and must ensure that all eligible employees are covered by their participation in the scheme.
Post 1 March 2020, the employee must have been employed by the employer during a relevant fortnight for the employer to be eligible for a Jobkeeper payment for that fortnight. This requirement will be satisfied if an employee is re-hired or terminated during a fortnight.
Employees who have nominated another employer for Jobkeeper payments or receive Government parental leave payments or workers’ compensation payments (and the employee is totally incapacitated throughout the fortnight) are not eligible for Jobkeeper payments.
The parental leave payment exclusion does not extend to any employer-funded paid parental leave that is outside the scope of the Parental Leave Act 2020.
The wage condition test
The wage condition test requires the employer to pay each eligible employee at least $1,500 per fortnight. This payment includes:
- Salary, wages, commissions, bonuses or allowances less PAYG withholding;
- Amounts withheld for PAYG withholding or a HECS loan;
- Superannuation contributions made under a salary sacrifice arrangement; and
- Other amounts dealt with under a salary sacrifice arrangement.
The effect of these provisions is that an employee will receive at least $1,500 per fortnight regardless of whether they ordinarily receive more or less than this amount.
Where an employee has ordinarily earned less than $1,500 per fortnight, the employer will need to make top-up payments to satisfy the wage condition. Superannuation contributions must be made on the employee’s normal ordinary times earnings but the employer does not have to make a superannuation contribution on any top-up payments. Superannuation contributions for employees that earn more than $1,500 per fortnight will be based on their normal ordinary times earnings regardless of the Jobkeeper subsidy.
Eligibility requirements for business participants
The Jobkeeper scheme is extended to business participants who do not pay themselves a wage. The entity tests for business participants are similar to the entity requirements for employers with some modifications. The entity:
- Cannot be a not-for-profit;
- Cannot be eligible for more than one business participant for a Jobkeeper payment;
- Had an ABN on 12 March 2020; and
- Must be ‘active’ as at 12 March 2020.
Who is a business participant?
An individual is an eligible business participant where the individual:
- Is not employed by the business at any time during the relevant fortnight;
- Satisfied the business participation requirement;
- Satisfied the 1 March 2020 requirements; and
- Satisfied the nomination requirements.
The individual must be actively engaged in the business carried on by the entity during the relevant fortnight. Only one business participant can be nominated as an eligible individual.
What are the 1 March requirements?
On 1 March 2020, the business participant must:
- Be aged 16 years or older;
- Satisfied the business participation required (as outlined above); and
- Satisfy the Australian residency requirements (as outlined above).
What are the nomination requirements?
The individual must agree to be nominated by the entity as an eligible business participant and has not agreed to be nominated by another entity. Furthermore, the individual must not be a permanent employee of any employer.
‘Active’ as at 12 March 2020
Jobkeeper payments in respect of business participants are intended for active businesses only. An ‘active’ business for purposes of these provisions is:
- An entity that derived assessable income from a business carried on in the 2019 income year and that has lodged its 2019 income tax return by 12 March 2020*; or
- An entity that has made one or more supplies from carrying on an enterprise connected with Australia during the period 1 July 2018 and 12 March 2020 and has lodged the relevant activity statements by 12 March 2020.
* The ATO has announced that it will accept lodgements after this date if a lodgement deferral has been granted (they consider that automatic lodgement extensions provided for entities with tax agents will be valid lodgement deferrals).
If you need help accessing the Jobkeeper payments or have questions relating to the Cash Flow Boost or Jobkeeper payments, please contact the office on 08 9321 4974 for a free consultation.