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FURTHER UPDATE AS OF 24 APRIL…
First and foremost, the due date for enrolling for JobKeeper has been extended from 30 April to 31 May! So if you enrol by 31 May you will still be able to claim for the fortnights in April and May, provided you meet all the eligibility requirements for respective fortnights in those months.
BUT BE CAREFUL! While you don’t have to enrol until 31 May, you must have paid the full $1,500 for each fortnight in April by the 8th of May! If you fail to pay eligible employees their full $1,500 for each fortnight in April by this new due date, you will not receive JobKeeper for those fortnights.
The other big change, which we will admit caught us by surprise, is that full time students aged 16 and 17 years old who otherwise meet the basic eligibility criteria, will no longer be eligible for JobKeeper Payment unless they are financially independent. That means almost all 16 and 17 year olds living at home with their parents will not be eligible to receive JobKeeper (yes this is a back flip on the eligibility rules from just a few days ago).
FURTHER UPDATE AS OF 20 APRIL…
You would have to be living under a rock to not know, but the official JobKeeper application form was made available today. So you can, and should, start applying (if you qualify). It must be done via the ATO Online system, so if you don’t have access you will need your Tax Agent do to it for you.
The other update today is regarding how you calculate GST Turnover. The ATO say that if you lodge your Activity Statements on a Cash Basis, you can chose whether to use Accruals or Cash to determine your fall in turnover. If you don’t lodge on a Cash basis, then you must use Accruals.
FURTHER UPDATE AS OF 16 APRIL…
Today the ATO released further guidance regarding how owners of businesses may qualify for JobKeeper Payments.
In short, if your business meets the general criteria (ie relevant turnover decline, etc (more below)) you can nominate one person who is actively engaged in the operation of the business, but who is not an employee of the business, to receive the JobKeeper Payment.
FURTHER UPDATE AS OF 14 APRIL…
The ATO have today released what are obviously some very rushed information pages regarding the implementation and administration of the JobKeeper Payment program. We are attempting to digest it all as we speak and will be updating this page over the course of the day and evening, so check back regularly.
One thing we will note now however, is that it appears to definitely be the case that in order for an Employer to receive the JobKeeper Payment from the ATO, they must have FIRST paid the $1,500 to each of their eligible Employees! We see a number of problems with this requirement, not least of which is the fact there will be many small businesses that have run out of cash over the past few weeks due to having their doors closed or their turnover dry up as a result of the pandemic and the intervention measures. We are very disappointed with this requirement and can only see it impacting the program from working as we understood it was intended.
UPDATED AS OF 11 APRIL…
The JobKeeper Payment is now law (well sort of, we will explain more below).
It was passed by the Parliament after a marathon session on the 9th of April and the legislation received Royal Assent on Thursday the 10th.
Naturally enough, everyone in the CapitalQ Community is super keen to know whether they will qualify and if so when they will start to receive their money. So…
Here is everything we know (or think we know) about the JobKeeper Payment right now (Edited per latest announcements as referenced above)…
JobKeeper is Now Law, but With a Caveat!
What was brought into law is being referred to as a “Framework for the Administration of the JobKeeper Payment”.
The laws that were passed don’t contain all the details required, in fact they contain very few.
Instead the Treasurer has been granted broad powers to make up the rules as we go.
The ATO have since started issuing information regarding how the program will work, though they fully admitted there are still lots of areas where they also don’t have answers.
So unfortunately, while we are more advanced in our understanding of the program than we were, there are still a lot of gaps to be filled. This is just reality right now but of course every day more and more information will come to light and we will work with all CapitalQ Community Members in this regard as best we can in these completely unprecedented times.
DISCLAIMER: As stated, we are in unprecedented times and the Government and Legislators, along with the ATO, are doing the best they can to help the Country deal with the pandemic. It means decisions are being made on the fly and that details are being worked out after the fact and in increments each day. Prior to the legislation, all we officially had to work from were Fact Sheets from the Treasury with some additional comments from the ATO. And these Fact Sheets and ATO website content has literally been changing every day. So what it means is we are doing our best to filter and determine the facts and rules, but they are continually changing, and it will mean our advice and guidance will have to continue to change as well. Having said all that…
As an Employer, What Can I Do Right Now?
You can now formally register for JobKeeper via ATO Online if you qualify.
Most CapitalQ Community Member Employers who qualify will have done so already, or we have done so on their behalf. But if you haven’t registered, we recommend you do so promptly.
Then, if not done already there are three further steps you should take in preparation –
i) Continue to pay at least $1,500 to each eligible employee per JobKeeper fortnight (the first JobKeeper fortnight is the period from 30 March to 12 April). We will discuss this further below…
ii) Notify your eligible employees that you are intending to claim the JobKeeper payment on their behalf and check they aren’t claiming JobKeeper payment through another employer or have nominated through another business.
iii) Send a JobKeeper Employee Nomination Notice (see below) to your nominated employees to complete and return to you by the end of April at the latest (though in practice we recommend requiring it to be returned within 24 hours of receipt) and maintain a copy on file and provide a copy to us as your Registered Tax Agent (per the ATO recommendation).
Then sit tight and wait till May 4th which is when the next lodgement step occurs.
WARNING 1
Employers must “opt-in” to receive the JobKeeper Payments. If you do nothing, you will get nothing.
The Employer (ie. the Business) Must Qualify in Order for its Employees to Qualify
Employees will only get their money if their Employer qualifies to receive the JobKeeper Payments.
The idea behind it being that the Government are doing everything they can to keep Employees ‘engaged’ with their Employers. This helps reduce the load on Centrelink, it maintains the relationship and connection which will be so important when we come out the other side of this pandemic, and it helps Australia’s businesses by keeping Employees at work when they are required.
So step one if you are an Employee, talk to your Employer as to whether they will qualify.
Where an Employer does not qualify, but an Employee has suffered a loss of income, the Employee will need to seek out Centrelink to assist with living expenses.
An Employer Qualifies if it’s Turnover (Revenue) has Declined at Least 30% (even more for Big Businesses)
If you haven’t suffered, or are not expecting to suffer, a real decline in business, you will not be eligible to receive the JobKeeper Payment and therefore neither will your Employees, including ones you may have laid off just in case!
At the time you enrol in the JobKeeper payment scheme, you need to confirm that your business has had, or is likely to have, a 30% fall in turnover.
The turnover calculation is based on GST turnover. As indicated above, the ATO say that if you lodge your Activity Statements on a Cash Basis, you can chose whether to use Accruals or Cash to determine your turnover. If you don’t lodge on a Cash basis, then you must use Accruals. Whichever applies (or you chose) you must use the same method for both the current period and the comparison period (which makes complete sense of course).
To work out your fall in turnover, you can compare either:
i) Actual GST turnover for March 2020 with actual GST turnover for March 2019, or
ii) Projected GST turnover for April 2020 with actual GST turnover for April 2019, or
iii) Projected GST turnover for the quarter starting April 2020 with GST turnover for the quarter starting April 2019. (ie. Projected GST turnover for the June Quarter this year versus the actual June Quarter last year).
How you choose to project your fall in turnover is not dependent on whether you report a quarterly or monthly BAS, though we expect that is the way the majority of businesses will do it.
If you work out that you qualify for the JobKeeper payments for the first fortnight (30 March to 12 April) because your turnover has declined by at least 30% per one of the above test, the ATO advise you will remain eligible and will not need to keep testing turnover in following months. However, they say you will have ongoing monthly reporting requirements. They have advised more information will be provided soon.
For many businesses, none of these methods will be particularly practical for assessing their business’ decline for all manner of reasons (not least of which those businesses in existence for less than a year). The good news is an Alternative Test has now been released. There is a lot of detail to the Alternative Test, so if you can’t rely on the above method, please get in touch and we look to find another way for you to qualify.
WARNING 2
If you seek qualification based on estimated turnover, and you underestimate, you can be asked to pay back the payments you received. Now that sounds bad enough, but… you will have already used that money to pay your Employees as you are required to do (see below). So you will have spent the money and be asked to pay it back! So don’t do anything silly in an attempt to get access if your situation is questionable.
If you Enter a Scheme in Order to Qualify for, or Maximise, JobKeeker Payments Artificially, the ATO Say they Will Catch You and Come Down Hard
The JobKeeper Payment is here to help keep struggling small businesses survive. To keep Australians in work. To keep the entire economy from collapsing and therefore to keep our society from turning into something out of a bad (or just frightening) apocalypse movie.
It is not here to prop up business profits.
So the Government and the ATO are making it very clear, anyone who tries to take advantage will be caught and will suffer the consequences.
WARNING 3
If you try something on, chances are you will get the JobKeeper Payment in the first instance and you will think you have gotten away with it. Then, down the track, the ATO will find the time and resources to check and they will likely come calling. If they do, and you are found to be in the wrong you will need to pay back anything you received that you shouldn’t have, plus pay interest. Of course as with Warning 2 above, you will have spent the money by giving it to Employees (or otherwise), so now you will be in a real bind (not to mention the black mark against your name and the chance the ATO could take things even further if they found your actions were particularly egregious).
If the Employer Qualifies, then the Next Step is to Look at Which Employees Qualify
Eligible Employees are those who –
- Are currently employed by the eligible Employer (including those stood down or re-hired),
- Were employed by the employer at 1 March 2020 (new Employees who started after 1 March at this stage do not seem to be eligible),
- Are full-time, part-time, or long-term casuals (being a casual employed on a regular basis for longer than 12 months as at 1 March 2020) (Note: there does not appear to be a 12 month employment requirement for full time and part time Employees. Subject to the details, new (recently employed but still before 1 March) full time and part time Employees should still be eligible),
- Are at least 16 years of age (If aged 16 or 17 and are a full time student, they must also be financially independent),
- Are an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder, and
- Are not in receipt of a JobKeeper Payment from another Employer. (Note: only one payment for each individual will be made, even if they have multiple eligible Employers).
If you have Employees who do not qualify per the criteria above, you the Employer will not receive a $1,500 payment in relation to them, and you will not be required to pay anything additional to them. Of course if they continue to work, you will need to continue to pay them for work done as normal. The issues around Fair Work obligations and the idea of laying off ineligible employees in order to retain eligible Employees is beyond the scope of this article but we would advocate caution in this regard for legislative, moral and work place cultural considerations.
What About Staff That Have Been Stood-down or that Aren’t Working
Doesn’t matter, so long as they were employed by you as at 1 March, and they meet the other qualification criteria above, you will receive the JobKeeper Payment for them and must pass it on to them (subject to tax withholding, etc).
If An Employer Qualifies, All of What the Employer Receives Must Go To the Employees
Lets explain it this way –
- If an Employee is not working, you must pay them the full $1,500, you get nothing out of it from a business perspective, but your Employee gets to continue to put food on the table and stay connected with you ready for the turnaround,
- If an Employee is working but earning less than $1,500 per fortnight, you still pay them the full $1,500. You get the benefit of the work they performed, they get a little win on the difference to hopefully use to help booster the economy,
- If an Employee is working and earns more than $1,500, you pay them what they earned as normal (ie. if they work enough to earn $2,000, you pay them $2,000). You get the benefit of the work they performed as usual. They receive what they ordinarily would. But the Government will give you as the Employer the $1,500 to ‘help’ you keep them employed and to help you afford to keep paying them their full earnings. So while you have effectively paid the $1,500 to the Employee by virtue of paying them their $2,000, the $1,500 is akin to a bonus to you and your business to help get through these difficult times.
WARNING 4
Failure to pay all amounts received to Employees is a breach of the Fair Work Act plus the Employee will also have the right to recover damages from the Employer.
What About Superannuation?
Following the structure above –
- If an Employee is not working, you do not need to pay any superannuation in relation to their JobKeeper Payment.
- If an Employee is working but earns from working less than $1,500 per fortnight, you are only required to pay superannuation in relation to the work performed and the ordinary earnings to which they are entitled. So say they work and earn $1,000. But because of JobKeeper you have to pay them $1,500. You only have to pay super on the $1,000. You do not have to pay superannuation on the difference between what they earned and the $1,500 (though the Government has indicated they would like you to if you can, but this is optional and we can’t see too many Employers will be taking them up on the suggestion, good on you if you do).
- If an Employee is working and earns more than $1,500 then you pay superannuation on the full amount they earn as usual.
What About Tax (including PAYG Withholding)?
There are two sides of the equation to consider –
Employers – The JobKeeper Payments received by the Employer will be taxable income to the Employer. The Employer will effectively get a matching tax deduction for the amount paid to the Employee. The net tax result therefore will be $Nil.
Employees – The JobKeeper Payments received are taxable income to the Employee recipient.
When the Employer pays the Employee be it $1,500 or more, tax (Pay As You Go Withholding) will be taken out of the payment and only the net amount paid to the Employee as usual. The tax withheld will need to be paid to the ATO as usual by the Employer (and the good news is we expect it will count for the purposes of determining Boosting Cash Flow for Employers payments).
WARNING 5
Failure to comply with normal tax withholding obligations will mean not only is the payment to the Employee no longer tax deductible, but the amount that should have been withheld remains a debt owed to the ATO and eligibility for the Boosting Cash Flow for Employers payments could be lost.
When Will We Receive Our Money?
The latest advice from the ATO is that payments will commence from 4 May but only after they have received your completed application.
Further payments will then be made monthly in arrears.
WARNING 6
Though with nothing hard and fast regarding the confirmed payment dates, we do not recommend managing cash flow on the expectation the payments will arrive precisely as suggested. We expect many Employers will see delays in receipt of their payments. Latest news is they will be paid between 4 and 14 May.
What Period will Payments Relate to?
The first payment from the ATO to be received in May will be for the for the first two fortnights of the program being 30 March – 12 April and 13 April – 26 April.
WARNING 7
Removed.
Do I Have to Have Paid My Employees First to Qualify? And What if I Can’t Afford to Do So?
The answer now is a definitive yes!
Based on information from the ATO, you must have paid your eligible Employees FIRST, before you can receive the payment from the ATO. This in our view is very unfortunate and we can only see this causing issues for many Employers, not least of which is the fact many simply won’t be able to pay their Employees without having received the funds from the ATO in advance!
If you can’t afford to pay your employees in advance the advice form the Government and the ATO is to get a loan from a bank (yes we understand how difficult and unpalatable that sounds). But if you don’t/can’t do this, then on the face of it, it appears you will not be eligible for the JobKeeper Payments.
How Will Payments be Received?
Payments will be paid to the Employer by the Commissioner by direct payment to the bank account nominated.
The Commissioner may also direct that a payment is to be made to an entity in another way, including by crediting an amount to the ATO Running Balance account of the entity. Circumstances where the Commissioner may choose to direct that the payment is made as a credit to the ATO Running Balance account include where the Commissioner wishes to delay the payment to verify entitlement.
What if my Business Has a Tax Debt?
These payments will not be offset against tax liabilities or other amounts owing to the Commissioner, unless the Commissioner directs that a payment is to be made in a manner subject to offsetting (ie. the answer is generally no, but if the Commissioner has an axe to grind, he can withhold the amounts and use them to clear your tax debts if he deems necessary. Presumably if this occurred, you would still be obligated to make the payment to your Employees! (This would be a nightmare situation, but if your record complying with your tax obligations is that bad, it may be the price you pay.)
How Long Will Payments Continue?
The latest from the ATO is that payments will continue every subsequent fortnight until 27 September 2020.
Will I as the Business Owner Receive the JobKeeper Payment?
Generally, each business where the reduced turnover test has been met, will be able to nominate one individual who is related to the business to receive the JobKeeper Payment. This includes where there are no employees. That person will be referred to as the Eligible Business Participant.
The structure of your business (ie. Company, Trust, Partnership, etc) will generally not matter.
To be an Eligible Business Participant the individual must –
- Not be employed by entity operating the business,
- Be actively engaged in the business carried on (both as at 1 March 2020 and for each fortnight you are claiming),
- Be one of –
- the sole proprietor of the business (a sole trader)
- a partner in the partnership that operates the business
- an adult beneficiary of the trust that operates the business
- a shareholder or director of the company that operates the business.
- As at 1 March 2020, they were both –
- aged at least 16 and
- an Australian resident (within the meaning of section 7 of the Social Security Act 1991), or a resident for income tax purposes and the holder of a special category (Subclass 444) visa,
- Not receiving government parental leave pay, dad or partner pay,
- Not currently totally incapacitated for work and receiving payments under an Australian workers’ compensation law in respect of the total incapacity to work,
- Not be an employee (other than a casual employee) of another entity (NOTE: This is potentially a big exclusion, see below!),
- Have given the entity a JobKeeper nomination notice, and not given another entity a JobKeeper nomination notice.
So as you can see, there is some devil in the detail…
Potentially the biggest area of concern will be the requirement that the individual “not be an employee (other than a casual employee) of another entity”.
This will mean those who have ‘side hustles’ so to speak, will not qualify. And interestingly enough, the example the ATO provides indicates that this is still the case even if their employer does not qualify them for the JobKeeper Payment…
ATO Example – Sole trader and employee
Zora is a sole trader and actively manages her florist business, Flowers by Zora. She is also employed in another business owned by another entity on a permanent part-time basis as an administrative assistant.
The Flowers by Zora business has suffered a significant downturn due to the coronavirus. Zora’s hours at her office job have been cut as a result of the coronavirus causing a decline in the business of her employer.
Zora is an eligible employee for the purpose of the JobKeeper scheme in respect of her part time job as an administrative assistant, and her employer qualifies for a JobKeeper payment in respect of her employment.
Zora, in her capacity as a sole trader, is not eligible for the JobKeeper payment because she is an employee of another entity. This conclusion would be the same whether her employer qualifies for JobKeeper payments or not.
The fact that only one individual can be nominated per business, even those with multiple business owners, appears likely to cause difficulties when it comes to evening things up among the owners. The good news is that the business does not have to pay the JobKeeper to the individual in this case (as opposed to the situation with employees).
What are the Record Keeping Obligations?
The new laws require that Employers create and retain records substantiating all information provided to the Commissioner in relation to their JobKeeper Payment application and in relation to their ongoing eligibility and compliance with payment obligations.
There are both “prior to payment” record keeping requirements and “post-payment” record keeping requirements.
To satisfy the pre-payment record keeping obligations, the Employer must keep records to substantiate all information provided in their application for the JobKeeper Payments.
To satisfy the post-payment record keeping obligations, the Employer must keep records per the rules to be determined by the Treasurer and must keep all records (pre and post) for a minimum of five years.
WARNING 8
If an entity does not meet the record keeping requirements, the entity is taken to have never been entitled to the payment and will be required to repay anything received.