Guide to the JobKeeper Payment scheme

Legislation to establish the framework for providing financial support to businesses and employees, through wage subsidies such as the JobKeeper Payments, has passed Parliament and received assent. The Coronavirus Economic Response Package (Payments and Benefits) Bill 2020 and the Coronavirus Economic Response Package Omnibus (Measures No 2) Bill 2020 also amend the Fair Work Act 2009 to support the practical operation of the JobKeeper Payments scheme, as well as other measures including the guarantee of lending to small and medium enterprises, and consequential amendments.

Key Features of the Scheme

• Eligible employees of eligible employers will receive $1500 per fortnight from the Australian government
• Qualifying businesses must demonstrate a 30% decline in actual or forecasted turnover (or alternative test at the discretion of the ATO)
• Qualifying employees are:
  i. permanent full-time or part-time who were employed as at 01 March 2020; or
  ii. long-term casual employee (employed on a regular and systematic basis for at least 12 months) as at 1 March 2020 and not a permanent employee of any other employer.

• The Scheme will commence 30 March 2020 and end 27 September 2020.
• The JobKeeper Payment is a reimbursement scheme with an employer paying its employees and the ATO reimbursing at the completion of the relevant month in arrears.

This guide provides more detail on the various issues covered by the JobKeeper Payment scheme.

Please note that this guide is current as at 15 April 2020.

Decline in Turnover Test considerations

• • At the time you enrol in the JobKeeper payment scheme, you need to confirm that your business in a relevant period has had, or is likely to have, a:

• 30% fall in turnover (for an aggregated turnover of $1 billion or less)
• 50% fall in turnover (for an aggregated turnover of more than $1 billion), or
• 15% fall in turnover (for ACNC-registered charities other than universities and schools).

There will be some tolerance where employers, in good faith, estimate a greater than 30% (or 50% or 15%) reduction in turnover but actually experience a slightly smaller fall. However, employers need to be aware that this discretion was not codified in the Rules and is expected to one of the items addressed via the ATO Guidelines (current as at 14 April 2020).

• • The Commissioner of Taxation has the discretion to uses alternative test to determine the reduction in turnover, however these rules have not yet been announced.

The alternative test is to apply in circumstances where the primary decline in turnover test is not appropriate such as; where a business was not in operation a year earlier, or where their turnover a year earlier was not representative of their ‘present day’ usual or average turnover (e.g. because there was a material acquisition over the last year, they were scaling up or their turnover is typically highly variable).

• • The actual decline in turnover is to be determined according to the current calculation for GST purposes and is reported on Business Activity Statements. It includes all taxable supplies and all GST free supplies but not input taxed supplies.
  • The projected decline in turnover is based on projected GST turnover with a relevant comparative period e.g. projected turnover for April 2020 compared with April 2019 (monthly) or projected turnover for quarter 4 for 2020 compared with quarter 4 in 2019 (quarterly).

The term ‘projected GST turnover’ is defined in the GST legislation and refers to income from ‘supplies’ that you are ‘likely’ to have for a period. Treasury has stated that a supply is ‘likely’ to be made where, on the balance of probabilities, it can be predicted that the supply is more likely than not to be made. The likelihood of a supply being made must be considered in the context of the facts and circumstances of a particular business.

• • In calculating GST turnover where businesses are part of a GST group, you must also include intra-group transactions that are ordinarily excluded from GST reporting. That is, you must re-instate these transactions to an adjusted GST turnover figure.

• A decline in overseas operations will not be counted in the turnover test. Under the GST law, only Australian based sales are included and therefore, only Australian based turnover is relevant.

 

 Turnover Test Period considerations

• According to the Exposure Draft, you can choose the Turnover Test Period to be:
• Any month that you choose from March 2020 to September 2020 inclusive – i.e. a choice of seven months; or
• The quarter ended 30 June 2020; or
• The quarter ended 30 September 2020

That said, previous commentary released by Treasury stated that “the ATO will provide guidance about self-assessment of actual and anticipated falls in turnover”. At this point, we will be guided by the information contained in the ED.

• • The Rules do not seem to require an alignment of your selection of the Turnover Test Period with the reporting period used in your BAS (i.e. monthly or quarterly). Thus a ‘quarterly BAS reporter’ could use a single month as the Turnover Test Period and vice versa.

• The only restrictions on the choice of Turnover Test Period appear to be that:   – You cannot use projected GST turnover for the quarter ended 30 September 2020 to determine an entitlement to the JobKeeper Payment for the period 30 March 2020 to 30 June 2020; and                                        – You cannot use a projected GST turnover for a month in advance of a particular month for which you are seeking to claim an entitlement to the JobKeeper Payment. Thus, for example, you could not use a projected reduction of turnover in May 2020 to claim an entitlement to the JobKeeper payment in April 2020.
• Once you satisfy the reduction test, you do not need to satisfy (or retest) this condition in later months. That is, once a business qualifies it will remain eligible for the remaining period of the scheme (regardless of subsequent economic performance of the business).

For example, if you selected April 2020 as your Turnover Test Period, and the reduction as compared to April 2019 satisfies the required threshold, you can use this ‘reduction’ to satisfy the ‘reduction test’ for all months of April to September 2020 inclusive and there is no requirement to ‘retest’ this ‘reduction test’ for future months.

• If initially you do not qualify for the JobKeeper payment scheme ie March & April, you can reconsider your turnover in a later month to determine if the test has been met. This allows employers that only become affected part way through the six-month period of operation to participate. In this case, however, the entitlement is not backdated to the commencement of the scheme. Your entitlement will still cease on 27 September 2020 – i.e., you will not receive six months of entitlement from when you first qualify.

Employee Considerations

• Employers that receive payments on behalf of employees that resign must notify – and in some instances – repay the ATO.
• The JobKeeper payment is not income-tested, so employees may earn additional income without their payments being affected provided they maintain their employment (including being stood down) with their JobKeeper-eligible employer. However, they can only receive the JobKeeper payment from one employer, their primary employer.
• Eligible small businesses that receive the JobKeeper payment will not be eligible for the 50 per cent wage subsidy for apprentices and trainees currently being made available as part of the Government’s COVID-19 relief from 1 April 2020 onwards.
• Treasury have stated that employers must ensure that all of their eligible employees are covered by their participation in the scheme. The employer cannot select which eligible employees will participate in the scheme. Treasury has stated “this one in, all in rule is a key feature of the scheme”.
• Employees receiving Parental Leave Pay or Dad and Partner Pay from Services Australia are not eligible. However, employees on unpaid parental leave from their employer will be eligible.
• Employees receiving workers compensation will be eligible if they are working on reduced hours, but will generally not be eligible if they are not working.
• If you were stood down after 1 March 2020, your employer will be able to claim the JobKeeper payment on your behalf if you both meet the eligibility criteria including that your employer starts paying you a minimum of $1,500 per fortnight before tax.
• If you were terminated after 1 March 2020, your employer may choose to re-engage you and claim the JobKeeper payment on your behalf if you both meet the eligibility criteria.

Access to JobKeeper for Nominated Eligible Business Participants

The JobKeeper Payment Scheme also applies to those business owners who receive income other than as a salary or wage, whether they be operating as sole traders or through partnerships, companies or trusts.

• The eligible business participant meets the following conditions:

– The participant is an individual that is actively engaged in the business carried on by the entity.

– The participant is aged 16 years and over.

– The individual is not an employee (other than as a casual employee) of another entity.

• • Application of the eligible business participant test for various entities is as follows –
    • For sole traders: The Act provides for payments to sole traders as long as they do not receive JobKeeper from another source.
    • For partnerships: The Act provides for payments to a single nominated partner in the partnership.
    • For trusts: The Act provides for payments to a single nominated beneficiary of a trust.
    • For companies: The Act provides for payments to a single director or shareholder of a company to receive JobKeeper.
  • Businesses that receive the JobKeeper Payment for an eligible participant are also able to receive payments for their eligible employees.
  • There can only be one participant nominated for a business throughout the entire JobKeeper Payment period. That is, the participant can’t change each fortnight.

• An entity is not entitled to a JobKeeper Payment under this section unless the entity had an ABN on 12 March 2020 and met lodgment and/or taxable supply requirements from 1 July 2018.

Essentially this requirement is satisfied if:

– An amount was included in an entity’s tax return and this return was lodged on or before 12 March 2020

– The entity made a taxable supply (ie generated income) between 1 July 2018 and 12 March 2020 and this supply was reported in a lodged Business Activity Statement by March 12

ATO discretion does also apply to vary these eligibility requirements.

This disqualifies entities that are created after 12 March or entities that have not lodged a BAS since 1 July 2018 or have not lodged its 2019 income tax return.

PAYG Wages Tax Withholding/Superannuation Considerations

• • Employers must pay a minimum of $1,500 per fortnight to eligible employees, withholding income tax as appropriate. The $1,500 per fortnight per employee is a before tax amount.

• Where an employee is paid more than $1,500 per fortnight, the employer’s superannuation obligations will not change.
• No superannuation guarantee payments are required to be paid on any additional payment made because of the JobKeeper Payment. It will be up to the employer if they want to pay superannuation on any additional wages paid by the JobKeeper payment.

This issue is best explained by way of the following examples:

1. If an employer pays an employee $4,000 per fortnight (before tax) and receives a JobKeeper Payment of $1,500 per fortnight, then superannuation is payable on the entire $4,000.
2. If an employer pays an employee $1,000 per fortnight (before tax), then the employee will receive the ‘usual’ $1,000 plus an additional top-up payment of $500. The employer will receive a JobKeeper Payment of $1,500. The employer must pay superannuation on the $1,000 and has an option to pay superannuation on the additional $500.
3. If an employee has been stood down and is receiving no salary, they will receive a ‘top-up’ payment of the full $1,500 per fortnight from their employer. The employer has an option of paying no superannuation of the entire $1,500.

Payroll tax

We need to wait for details on this issue from the relevant States and Territories to see if the JobKeeper Payments is subject to payroll tax.

Administration

• The JobKeeper payment will be administered by the ATO. Eligible employers need to determine if they want to participate in this program by electing into it.
• You will be able to enrol in the JobKeeper scheme from 20 April 2020 using an online form on the ATO website. Steps to enrol are found here. 
• After you enrol, you will later identify your specific eligible employees and submit the information to the ATO (forms available from 4 May 2020 onwards).
• While an employer only needs to qualify once for the JKP scheme, it will be required to report monthly to the ATO. More guidance is to be provided.

Treasury has also indicated that they will not use the monthly turnover data, that you will be required to provide, to test the accuracy of your ‘projected GST turnover’ made in previous periods.

• An entitlement to JobKeeper Payment may be cancelled, revoked, terminated, varied or made subject to conditions by or under later legislation.
• JobKeeper payments should be made using an employer’s payroll system and reported to the ATO via Single Touch Payroll. This will support the online claim process when it is available. If employers do not report through Single Touch Payroll, they can still claim the JobKeeper payment; however there will be a manual claim process which will be a slower process.

If you are not registered on a Single Touch Payroll (STP) compliant payroll system now, then consider registering as the primary means to determine entitlement will be via the STP system.

• The JobKeeper payment is a reimbursement scheme that will be paid by the ATO monthly in arrears.
• However, assessment of payments will be made on a fortnightly basis. The first fortnight period will be 30 March 2020 to 12 April 2020. The last fortnight period for which the entitlement may accrue will be the period 14 September 2020 to 27 September 2020.
• The first payments to the employers will be made from the first week of May 2020 with entitlements backdated to the fortnight ended 12 April 2020. Thereafter, the ATO will make payments to employers, 14 days after the end of the calendar month in which the fortnight ends. Thus, for example, for the fortnight ending on 10 May 2020, the employer will need to wait until 14 June 2020 for ‘reimbursement’.
• The rules state that the ATOcannot offset an entitlement to a JobKeeper Payment against other debts that the employer may have with the ATO.
• The payment requirement is that businesses pay their eligible employees a minimum of $1,500 per fortnight in the scheme payment periods. Where an employer pays their staff monthly, the ATO will be able to reallocate payments between periods. However, overall an employee must have received the equivalent of $1,500 per fortnight.
• You should pay your employees for each JobKeeper fortnight you plan to claim for. The first fortnight is from 30 March – 12 April and each JobKeeper fortnight follows after that.
• For the first two fortnights (30 March – 12 April, 13 April – 26 April), the ATO will accept the minimum $1,500 payment for each fortnight has been paid by you even if it has been paid late, provided it is paid by you by the end of April. This means that you can make two fortnightly payments of at least $1,500 per fortnight before the end of April, or a combined payment of at least $3,000 before the end of April.
• An entity that has qualified for the JobKeeper scheme must notify the Tax Commissioner within seven days of the end of a calendar month (the reporting month) if the entity is entitled to a JobKeeper payment for a fortnight that ends in the month.
• An employer must notify an eligible employee or eligible business participant in writing within seven days of notifying the Tax Commissioner of their details. Such an individual must agree to be nominated by the employer or business.

Labour hire arrangements

Where employees are employed by a labour hire company but actually work in other businesses it is the labour hire company that is treated as the employer.  It appears this would also apply to group employers where one company in a group of related entities employs all the employees who work in the businesses of the related entities.  If some of the businesses in these groups have a reduction of turnover of more than 30% but there is not a 30% reduction in the group employer’s turnover it appears none of the businesses in the group would be entitled to the JobKeeper payments. The group employer could however receive the JobKeeper payments if the Commissioner of Taxation agrees to exercise discretion to consider additional information that the business can provide to establish that they have been adversely affected by the impacts of COVID-19. The Group employer would have to apply for this discretion.

Transfer of employees within entities in a wholly owned group

If a business changes ownership since 1 March 2020 and the new owner continues to run the same business, the new employer will be eligible in relation to the employees that were employed by the old employer as at 1 March 2020.

Where there is a transfer of employees between members of the same wholly owned group after 1 March 2020 (whether or not there was a transfer of the business), the new employer will be treated as being the employer at 1 March 2020 in relation to the JobKeeper payments for the employees after the transfer.

Fair Work Act Considerations

The new provisions of the Fair Work Act provides for employers to give what are known as “JobKeeper enabling directions”.

• There will be a civil remedy provision under the Fair Work Act if an employer receives a JobKeeper payment and does not pass it on (either as wages, or top up payments) to the eligible employee in the relevant fortnight. In such an instance, employees will have a right to sue for compensation.
  
• These new provisions of the Fair Work Act allow an employer who qualifies for JobKeeper when the direction is given/request is made to (subject to certain criteria):

 (i) Direct an employee, where reasonable, to (JobKeeper Enabling Directions):

– work less ordinary hours, work less hours on a day and/or work less days (assuming they cannot be usefully employed for their normal hours due to changes to the business attributable to COVID-19) (Stand Down Direction);

– perform different duties (assuming the employer reasonably believes this is necessary to continue the employment of employee/s) (Different Duties Direction); and/or

– work at a different location.

(ii) Request that an employee (JobKeeper Flexibility Agreements):

– work on different days or at different times (without reduction to hours); and/or

– take paid annual leave including at half pay (provided they retain a balance of at least 2 weeks).

An employee cannot unreasonably refuse an employer’s request.

• Employers issuing JobKeeper Enabling Directions must:

– consult with affected employees (and keep records of this in writing);

– issue an intention notification (in the prescribed form, at least 3 days’ prior to the   direction taking effect, unless agreed otherwise); and

– issue the direction in writing.

• If there is a dispute about any aspect of the JobKeeper system, the Fair Work Commission can deal with those disputes in any way it sees fit (including by arbitration).

 Information on changes to the Fair Work Act and employment arrangements in this guide is not to be construed or relied upon as legal advice. If you would like to further discuss the legal requirements under the Act, we can refer you to a specialist employment law firm.

 

The ATO is set to release further guidelines shortly and we will update you accordingly once this occurs.

If you require assistance in applying for the JobKeeper Payment scheme, please reach out to your contact at Myssy + Co.

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