The proposed JobKeeper payment has now passed law by the Federal Government, giving the go-ahead to Scott Morrison’s historic $130 billion wage subsidy scheme, allowing millions of workers to receive a fortnightly payment of $1500 if they have been affected by the coronavirus pandemic.
In our blog earlier this month, we notified you of the proposed JobKeeper payment. Since then, specific rules have been set which detail the process that every employer must follow so that the ATO can consider their eligibility. These rules come with strict timeframes and heavy administration tasks that may appear daunting to some business owners, so please remember that we are here to support you as and when you need.
Here’s a summary of what you need to do:
- Collect key employee and payroll data
- Notify employees
- Assess whether you have met the decline in turnover criteria
- Register with the ATO, prior to 26th April 2020
- Determine whether to apply for a monthly or quarterly turnover test period
- Implement revenue reporting systems to determine projected revenue and current revenue
- Notify employees in writing of JobKeeper claim. Form available at the ATO website
- Pay at least $1500 pre-tax to each eligible employee, effective of the fortnight ending 12th April 2020 and
- fortnightly thereafter
- Monitor eligibility for JobKeeper payments on a continual fortnightly basis
Employees – what you must do
As an employee, you must provide your employer with written notification to confirm that they meet them eligibility criteria. To be eligible, you must reside in Australia and be an Australian resident for tax purposes. You do not qualify if you are a temporary resident. However, special protected visa holders and New Zealanders who are in Australia on a subclass 444, may also be eligible.
If you are an Australian employee who has been temporarily working overseas for an Australian based business, you still qualify as an Australian tax resident.
Every fortnight, employers are required to notify to Commissioner that they wish to receive the JobKeeper payments. Some payroll software is updating their systems to assist with this, or chat to our payroll team at Carbon who can also do this on your behalf.
Eligible entities will need to prepare appropriate reporting of their projected turnover, by:
- Preparing cash flow projections
- Identifying the correct methodology for determining turnover
- Thoroughly documenting your position to support your claims
Different businesses may have different ways of predicting their forecasted decline in revenue. For example, is the best method for your business based on sales or services in pre-existing contracts? Or agreed billing timeframes? Or maybe work in progress? You only need to demonstrate that you meet the requirements decline once, and it won’t affect your entitlement if you end up having a small turnover decline that you originally forecast. Saying that, you must provide evidence of your forecast decline.
Ongoing turnover disclosures
Once you have submitted the original forecast, you are required to provide current and projected GST turnover information to the Commissioner on a monthly basis. This is where it becomes crucial to have an efficient revenue reporting system in place, otherwise you run the risk of opting out of the scheme due to this reporting becoming too difficult and time consuming. We can help to implement systems on your behalf if you don’t currently have one.
Note: these ongoing reporting obligations are simply used by the Government to assess the impact on the economy of the coronavirus and will not be used to test eligibility.
If your current projected turnover hasn’t sufficiently met the required decline, a retest can be done further down the track.
One in, all in
Once opted into the JobKeeper scheme, all eligible employees must agree to be part of it. An employer cannot pick and choose which eligible employees will participate.
Employer opt out rights
As mentioned above, the heavy administration requirements, on top of the initial cash flow implications, may put some business owners off opting into the scheme. The JobKeeper scheme is not mandatory, and some employers may choose not to participate. There is no obligation for the employer to notify its recently stood down employees of their decision not to participate in the scheme.
Restructure relief is currently limited to employees
Unfortunately, if there has been a recent restructure in a business, employees may not be deemed eligible as there is no continuity of employment. As such, the new entity would not have sufficient comparative data to demonstrate a decline in revenue for the turnover test. We are hopeful that this is an anomaly that may soon be addressed.
Commissioner’s discretion may be limited
We’re predicting that there will be a range of entities that do not satisfy the basic turnover test. The rules have offered an alternative decline in turnover test for cases such as these, however, this test will apply to classes of entities rather than on a case-by-case basis.
Do you need to revisit your payroll function?
Eligibility is based on a particular entity. Therefore, an entity can only be entitled to JobKeeper payment if it is the employer of the individual private. Those groups that use a centralised employment entity to employ and pay staff on behalf of other entitles are likely to not meet the required decline in turnover test.
How will the JobKeeper payment be treated for tax?
Each fortnight, employees must assess whether they have paid the $1,500 to each employee. This amount can be made up of salary and wages, commissions, bonuses and allowances. JobKeeper payment is taxable for the employee and as such, the employer must withhold PAYG income tax. It’s not known yet if the payment will be subject to payroll tax and workers’ compensation insurance purposes.
Whilst the standard rules will apply to unpaid owner-managed and family employees, the Treasury has implemented a rule for business participation that restricts the payments to participants of active businesses only.
Overpayments and entitlement
The new law provides rules for overpayments, including the application of interest and requirement to repay amounts.
Additionally, the rules state that just because the Commissioner pays an entity does not mean the entity is entitled to it. It is expected that the ATO audit activity will increase in the upcoming months to ensure compliance.
No records = repay
It is crucial for employers to keep records for the required time of five years. If a business fails to do so, they may be deemed ineligible to receive the payments and may be required to repay the amount, plus interest.
Those who carry out schemes for the purpose of obtaining the JobKeeper payment will face a range of administrative and criminal sanctions, including up to 10 years’ imprisonment.
Changes to fair work act
Changes have been made to the fair work act to facilitate the introduction of the JobKeeper payment. The changes aim to provide employers flexibility over the coming six months to help with retaining their workforce long term.
The changes protect employers within the fair work act, to modify working arrangements during the six-month period that the JobKeeper program will operate.
In summary, an employer will have the ability to:
- Reduce the number of working days and hours for an employee
- Make temporary stand down orders
- Instruct employers to perform other duties or attend work at a different location
- Request an employee to take paid annual leave, so long as it doesn’t reduce the employee’s accrued entitlements to less than two weeks.
As an employee, written notification must be given of any changes. An employee that is subject to JobKeeper stand down will still be entitled to accrue normal leave entitlements. If an employee has been given directions to stand down, they may engage in alternative employment.
As mentioned, these strict rules and time-consuming reporting and administration tasks may put some employers off participating in the scheme. If you need any assistance with any of the above, please reach out. Our team of accountants, bookkeepers and payroll experts are working with the ATO on a daily basis to ensure businesses across Australia are receiving the support they are eligible for.
Relief for commercial tenants
Those employers wishing to take advantage of the Government’s commercial rent relief measures need to note that mandatory code of conduct for commercial tenancies applies to those tenants that are eligible for the JobKeeper payment scheme.