JobKeeper Legislation Passed
Since the announcement of the JobKeeper package, many businesses and employees have been waiting for further information and clarification to better understand how it will apply to them. On the 8th of April, changes to the Tax Act and Fair Work Act were passed, and the Treasurer has announced rules in line with these changes.
We have put together a summary of the information at hand. It is important to note that this information is current at the time of print and may be subject to change in the future.
We strongly encourage those who wish to take advantage of the JobKeeper subsidy, and haven't already done so, to register your interest via the ATO website at the link below:Click here to register for the ATO for Job Keeper payment
Click here to register your interest with the ATO for Job Keeper payment
General Rules for JobKeeper
For those that qualify, the JobKeeper payment is available in fortnightly periods between 30 March 2020 and 27 September 2020 – a period of 26 weeks.
The ‘one in, all in’ rule
Once an employer decides to participate in the JobKeeper scheme and their eligible employees have agreed to be nominated by the employer, the employer must ensure that all of these eligible employees are covered by their participation in the scheme. This includes all eligible employees who are undertaking work for the employer or have been stood down. The employer cannot select which eligible employees will participate in the scheme.
Another key element of the scheme is that qualifying employers that decide to participate in the JobKeeper 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.
Businesses, individuals and entities that deliberately enter into contrived arrangements with the sole or dominant purpose of reducing their turnover in order to gain access to JobKeeper payments or increase the amount of JobKeeper payments they receive will not be entitled to the payment or the increased payment and the general interest charge will apply on the overpayment.
Participation in the JobKeeper scheme requires monthly reporting. An entity that is entitled to a JobKeeper payment (within the meaning of section 7 of the Rules) for a fortnight must notify the Commissioner of its current GST turnover for the reporting month; and its projected GST turnover for the following month.
Eligibility Criteria - Does my business qualify?
We have highlighted below four key points to assist employers and employees better understand the rules around eligibility requirements.
Carrying on a business
To be an eligible employer, on 1 March 2020, the employer must have either been carrying on a business in Australia or been a non-profit body pursuing its objectives principally in Australia.
Decline in turnover test – The Basic Test
The basic decline in turnover test works by comparing the actual or projected GST turnover of the entity for a period (the turnover test period) with its GST turnover as calculated for a relevant comparison period (the comparison turnover). In effect this compares a month or quarter in the period the JobKeeper scheme applies with the corresponding period in 2019.
For most businesses this will be an appropriate comparison to identify if turnover has declined significantly. A business will generally satisfy the test where the GST turnover in the turnover test period falls short of the comparison turnover and the shortfall is 30 per cent or more.
Decline in turnover test – The Alternative Test
The alternative decline in turnover test applies if there is not an appropriate relevant comparison period in 2019. This might be the case for a new business, started for example in January 2020 or a business that made a major business acquisition in 2020. In both examples, the basic test may not accurately reflect the downturn in activity that the business has suffered.
Liquidators and Bankruptcy
For the purposes of JobKeeper payment, an employer is not a qualifying employer if a liquidator or trustee in bankruptcy had been appointed.
JobKeeper - Businesses with Employees
The JobKeeper payment entitles an employer to the JobKeeper payment with respect to its eligible employees.
When is an employee eligible?
An employer is only entitled to a JobKeeper payment for a person for a fortnight if the person is an eligible employee. To be considered an eligible employee the following requirements must be satisfied:
On 1 March 2020:
the person was aged 16 years or over;
the person was an employee other than a casual employee of the employer, or was a long term casual employee of the employer; and
the person was an Australian resident, or was a resident of Australia for the purposes of the Income Tax Assessment Act 1936 and was the holder of a Subclass 444 (Special Category) visa.
At any time during the fortnight:
the person is an employee of the employer;
the person is not excluded from being an eligible employee. The exclusions relate to recipients of parental leave pay and dad and partner pay under the Paid Parental Leave Act 2010, and specified recipients of workers’ compensation.
Eligible employees have provided a notice to their employer agreeing:
to be nominated by the employer as an eligible employee under the JobKeeper scheme as the employer with which the employee will participate in the JobKeeper scheme;
that they confirm they have not agreed to be nominated by another employer; and
that they do not have permanent employment with another employer if they are employed as a casual employee with this employer.
A person who has been stood down or is on leave is considered to be an employee of their employer under the Fair Work Act 2009 and for the purposes of the JobKeeper payment.
Eligible employee test – JobKeeper fortnight requirements
The requirement that a person was an employee of the employer during a fortnight is satisfied if the person was employed at any time during that fortnight. In other words, the person does not need to be employed for the full fortnight.
This ensures that an employer is eligible to receive a JobKeeper payment for a fortnight in respect of an employee who has been rehired or terminated at a point during the fortnight, provided the other eligibility and entitlement requirements are satisfied.
The employer must satisfy the wage condition
For each JobKeeper fortnight, the employer is only entitled to a JobKeeper payment if the employer has satisfied the wage condition.
Generally, the wage condition requires that an employer pay each participating employee at least $1,500 for each JobKeeper fortnight.
The component amounts that together must equal or exceed $1,500 are:
amounts paid by the employer to the employee in the fortnight by way of salary, wages, commission, bonus or allowances (less PAYG withholding)
contributions made in the fortnight to a superannuation fund or an RSA (retirement savings account) for the benefit of the employee, if the contributions are made under a salary sacrifice arrangement
amounts that, in the fortnight, are applied or dealt with in any way where the employee has agreed for the amount to be so dealt with in return for salary and wages to be reduced – generally, this means amounts forming part of salary sacrifice arrangements.
The requirement that the component amounts be at least $1,500 applies regardless of whether the employee ordinarily receives more or less than that amount. For example if an employee:
ordinarily receives $1,500 or more in income per fortnight before PAYG withholding and other salary sacrificed amounts, and their employment arrangements do not change they will continue to receive their regular income according to their workplace arrangements. The JobKeeper payment will assist the employer to continue operating by subsidising all or part of the income of the employee;
ordinarily receives less than $1,500 in income per fortnight before PAYG withholding and other salary sacrificed amounts, the employer must pay the employee at least $1,500 per fortnight, subject to PAYG withholding and other salary sacrificed amounts to the value of $1,500;
has been stood down, the employer must pay the employee at least $1,500 per fortnight, before PAYG withholding and other salary sacrificed amounts to the value of $1,500; or
was employed on 1 March 2020, subsequently ceased employment with the employer, and then has been rehired by the same eligible employer, the employer must pay the employee at least $1,500 per fortnight, before PAYG withholding and other salary sacrificed amounts to the value of $1,500.
If an employer’s ordinary arrangement is to pay its employees less frequently than fortnightly, then the payment can be allocated between fortnights in a reasonable manner. For example, if an employer’s ordinary arrangement is to pay an employee every four weeks, it may be reasonable for the purposes of satisfying the wage condition if the employee is paid at least $3,000 for every four week period.
Changes to superannuation guarantee obligations
Further amendments will be made in respect of the superannuation guarantee rules.
1. The regulations will ensure that an employer will only need to make superannuation contributions for any amount payable to an employee in respect of their actual employment.
For example, if the work actually done by an employee over a period entitled them to be paid $1,000, but the employer instead paid them $1,500 to satisfy the wage condition for a JobKeeper fortnight, then the employer will only be required to make superannuation contributions in relation to $1,000. Similarly, any liability to superannuation guarantee charge that the employer would have for not making sufficient superannuation contributions would be calculated by reference to that $1,000 base.
2. An employer will still be required to make the same superannuation contributions for an employee whose pay exceeds the JobKeeper payment.
For example, if an employee is entitled to be paid $2,000 for their work, the employer will continue to be required to make contributions in relation to that amount, irrespective of whether they were eligible to receive the JobKeeper payment in relation to the employee.
3. An employer will not be required to make superannuation contributions for an employee who is stood down. This is because employers have no obligation to pay stood down employees. If an employer pays a stood down employee $1,500 to satisfy the wage condition for receiving the JobKeeper payment, then the entire amount will be disregarded for superannuation guarantee purposes.
The employer must elect to participate
The JobKeeper scheme requires an employer to actively seek to participate in the scheme. An employer must therefore notify the Commissioner in the approved form of the employer’s election to participate in the scheme before the employer can be entitled to a payment for a fortnight.
Once an employer has provided details of its eligible employees to the Commissioner, the employer must also notify each eligible employee within 7 days.
The employer has not withdrawn their election to participate
An employer is not entitled to the JobKeeper payment if they notify the Commissioner that they no longer wish to participate in the JobKeeper scheme. This notification must be made in the form approved by the Commissioner.
The employer must provide information about eligible employees and the wage condition
To be entitled to a JobKeeper payment for a fortnight, the employer must have provided the following information to the Commissioner in the approved form:
• the details of each eligible employee; and
• other information about their entitlement to the JobKeeper payment.
When is an employee not eligible?
Casual employees who have not been employed on this basis between 1 March 2019 and 1 March 2020 cannot be an eligible employee for the purposes of the JobKeeper scheme.
A ‘long term casual employee’ is defined as a person who has been employed by the employer on a regular and systematic basis during the period of 12 months that ended on 1 March 2020.
Recipients of workers’ compensation
Similarly, specified recipients of workers’ compensation are excluded from being an eligible employee for a particular fortnight. This applies if:
the person is totally incapacitated for work throughout the fortnight;
an amount is payable to the person under or in accordance with an Australian workers compensation law in respect of the individual’s total incapacity for work; and
the amount is payable in respect of a period that overlaps with or includes the fortnight.
Recipients of parental leave pay or dad and partner pay compensation
Exclusions relate to recipients of parental leave pay and dad and partner pay under the Paid Parental Leave Act 2010, and specified recipients of workers’ compensation.
If a person ceases to receive parental leave pay or dad and partner pay – for example, because they have received the full amount of the pay – and the person is otherwise an eligible employee of a qualifying employer, their employer may be able to receive JobKeeper payments for their employee.
This exclusion does not extend to any employer-funded paid parental leave that is outside the scope of the Paid Parental Leave scheme.
Employees already claiming the JobKeeper payment from another employer
Only one employer is entitled to JobKeeper payment for a person. An entity is not entitled to the JobKeeper payment for an individual who is an employee (or business owner) if another employer is entitled (either as an employer or as a business owner) to a JobKeeper payment for the individual.
JobKeeper - Businesses with Self Employed Owners
Entitlement to a JobKeeper payment as a business participant operates similarly to entitlement to the payment as an employer with some additional integrity rules.
The fortnight must be a JobKeeper fortnight
The business must qualify for the JobKeeper scheme on or before the end of the fortnight.
The entity must not be a non-profit body
Other Eligibility requirements include:
An entity must notify the Commissioner of its election to participate in the JobKeeper scheme and the details of the nominated individual. Also, the entity must not have notified the Commissioner that the entity no longer wishes to participate in the JobKeeper scheme. Notification of this information must be made in the approved form.
No more than one individual and one entity
A business is not entitled to a JobKeeper payment for more than one individual. If a business has more than one eligible participant, the business can only be entitled to receive the JobKeeper payment in relation to one of the individuals. It is up to the business to determine which individual is nominated as the eligible business participant.
Similarly, an individual can only create an entitlement for one entity. A business is not entitled to a JobKeeper payment for an individual if another business is also for the same individual. For example, where an individual is an eligible participant of two businesses – only one of those businesses is entitled to the JobKeeper payment in respect of that individual. Also, for example, where an individual is an eligible participant of a business and is entitled to a JobKeeper payment as an employee of another business–the business is not entitled to a JobKeeper payment in respect of the individual.
The JobKeeper payment for an entity in respect of business participants is intended to support active businesses only.
The only entities that are entitled to a JobKeeper payment for business participants are those that had an ABN on 12 March 2020, or such later time that the Commissioner allows.
In relation to an entity that has an ABN, it is additionally required that:
an amount was included in the entity’s assessable income for the 2018-19 income year in relation to it carrying on a business and the Commissioner had notice on or before 12 March 2020 (or a later time allowed by the Commissioner) that the amount should be so included; and
the entity made a taxable supply in a tax period that applied to it that started on or after 1 July 2018 and ended before 12 March 2020 and the Commissioner had notice on or before 12 March 2020 (or a later time allowed by the Commissioner) that the entity had made the taxable supply.
Eligible business participant
The individual for whom a business is entitled to the JobKeeper payment must be an individual that is an eligible business participant. An individual is considered an eligible business participant where the individual:
is not employed by the business at any time in the fortnight (that is, because the individual is the owner of the business ie a nominated business participant not an employee of the business);
satisfies the business participation requirements at any time in the fortnight;
satisfies the 1 March 2020 requirements; and
satisfies the nomination requirements.
The business participation requirements are that, at any time in the fortnight, the individual is actively engaged in the business carried on by the entity. The individual must be actively engaged in the operations and activities of the entiy. Further, depending on the type of entity the business is, the individual must have a particular role within the business. In the case of an entity that is a:
sole trader — the individual must be the entity;
partnership — the individual must be a partner in the partnership;
trust — the individual must be an adult beneficiary of the trust; and
company — either a director or shareholder in the company.
The 1 March 2020 requirements are that, on that date, the individual:
was aged 16 years or over;
satisfied the business participation requirements (described above); and
satisfied the Australian residency requirement.
The nomination requirements are that the individual has agreed to be nominated by the entity as an eligible business participant and has not agreed to be nominated by another entity.
A person is not an eligible business participant for a fortnight if parental leave pay is payable to the person, the person is paid dad and partner pay, or the person is incapacitated for work and an amount is payable to the person in accordance Australian workers’ compensation law.
Transcend Accounting - Timely advice when it matters most!
We understand that for many, the amount of new information regarding the available subsidies, and the speed at which the financial landscape is changing, can be confusing and even overwhelming. While we have provided information to help guide you in these uncertain times, we are also here to assist you in navigating these changes.
If you require assistance, please do not hesitate to get in touch.
John and the Transcend Team