On 8 April 2020, the Australian Federal Government released and passed legislation relating to the JobKeeper payments and other support measures relating to the COVID-19 (Coronavirus) lockdowns.
The JobKeeper payments legislation establishes a framework for the implementation of the JobKeeper payments. Under this framework, the Treasurer is able to make rules to provide for payments administered by the Commissioner of Taxation. This allows for flexibility of the payment arrangements to adapt, as required, to respond to the impacts of COVID-19. The Australian Taxation Office (ATO) is also expected to release guidance on the operation of the rules.
With the legislation now approved, we can provide more detail on the operation of the JobKeeper package. This includes further clarity on how modified GST principles will be used to determine the decline in turnover test, and an amendment which potentially changes the method of testing for significant global entities compared to earlier announcements (see table below). In addition, other changes from the original announcement now includes a limited expansion of the package to certain businesses that have no employees.
Importantly, eligible employers will need to do the following by 24 April (two weeks’ time) to make sure they receive their full entitlement:
- 1. Have a robust income/cash flow projection model which can reasonably accurately satisfy the ATO you have met the required turnover reduction. (We note this will likely be a complex entity-by-entity test for your group.)
- 2. Identify and contact your eligible employees to tell them you are including them in your scheme. This may involve rehiring people and dealing with the associated employment law issues. You will also need to communicate what this means to them in relation to their ongoing wages and employment obligations
- 3. Revise your payroll systems to ensure that correct entitlements are paid to employees through the current single touch payment mechanisms and you withhold correct tax amounts, and
- 4. Prepare and lodge the approved form electing to participate in the JobKeeper scheme with the ATO .
JobKeeper payments of $1,500 per fortnight will be made for each eligible employee employed by an eligible employer who passes this payment on to the employees. The draft legislation introduces the concept of a ‘JobKeeper fortnight’, and the payment will only be made where the conditions are met for each fortnight.
Based on the new legislation and rules, the first JobKeeper payment is due to be made by the Commissioner by 14 May 2020, representing the first two fortnightly JobKeeper payments of $1,500 per eligible employee per fortnight.
Eligible employers and businesses will be required to comply with a number of strict reporting deadlines prior to 14 May 2020, in order to qualify for the first two fortnightly payments.
The key steps and timelines that businesses should take note of can be summarised as follows:
- Undertake projections – Businesses and other eligible entities will need to project their GST turnover for the month of April 2020 and check whether this meets the necessary decline of either 15%, 30% or 50% when compared with actual April 2019. For most businesses, the relevant decline percentage will be 30%, unless worldwide group turnover is over $1 billion where the percentage is 50%, or they are an ACNC registered charity (subject to certain exceptions) where it is 15%.
- Contact employees – Eligible employers will need to start communicating with their employees and identify those who are to be nominated for the JobKeeper package, and obtain relevant employee declarations to confirm eligibility. Only individuals employed as at 1 March 2020 will be eligible.
- Payment to employees – Prior to receiving JobKeeper payments, employers will need to ensure that nominated employees are paid at least their $1,500 per fortnight in order to be eligible. We note this may raise cash flow issues where the employee is paid less than $1,500 per fortnight for certain employers.
- Election and notification to the ATO – In respect of the first two JobKeeper fortnightly payments, the employer or eligible business must notify the ATO in the approved form that they elect to participate in the JobKeeper scheme by the end of the second JobKeeper fortnightly period, that is on or before 24 April 2020. (If eligible at a later time, subsequent election notifications must be made by the end of the relevant fortnight to which the business become eligible.)
- Provide employee information to the ATO – An eligible employer or eligible business must provide to the Commissioner information about their entitlement, including detail of the eligible individuals, in the approved form.
- Formal notification to employees – Employers must then notify the nominated individual in writing within seven days of notifying the Commissioner per above.
- Ongoing reporting to ATO – The business must also report its GST turnover for the month and an estimate of its projected turnover for the next month to the ATO in an approved form within seven days after the end of the month.
- Payment within 14 days – The legislation requires the Commissioner to make payment with 14 days after the end of the relevant month in which a JobKeeper Payment period falls. The first payment (initially covering the first two fortnightly periods) will be made by 14 May 2020. Subsequent payments must be made within 14 days of each month in which Jobkeeper fortnights fall.
Below is a brief summary of some of the key concepts and reporting requirements noted to date.
|1. CONDITIONS AND TIMING OF PAYMENTS
|JobKeeper payments of $1,500 per eligible employee per fortnight to be paid monthly after the end of the relevant month to which the fortnight relates
|First fortnight beginning on 30 March 2020 and last fortnight ending on 27 September 2020. Each relevant fortnight is referred to as a “JobKeeper Fortnight”.
The business must have “eligible employees”, “long term casual employees” or have an “eligible business participant” (see 2 and 3 below)
Has met the Decline in Turnover Test (see 4 below)
|Payment must be made by the Commissioner within 14 days after the end of the relevant month
|2. ELIGIBLE EMPLOYEES AND LONG TERM CASUAL EMPLOYEES
|An “eligible employee” is one who was an employee (other than a casual employee) on 1 March 2020
A “long term casual employee” is also eligible and is one who was employed on a “regular” or “systematic” basis during the 12 months up to 1 March 2020
|A nomination form is required to be given by the employee to the employer confirming that the employee satisfies the relevant conditions
|Employees who are on paid parental leave or dad and partner pay for a relevant fortnight are not eligible for that fortnightly period.
Other employees not eligible include those that are incapacitated or receiving workers compensation insurance as a result of inability to work
|3. ELIGIBLE BUSINESS PARTICIPANT
|An ‘eligible business participant’ of an entity is either a sole trader, partner in a partnership, an adult beneficiary of a trust,
|4. DECLINE IN TURNOVER The test is satisfied where the projected GST turnover for the current month is less than the comparable month in 2019 by the required percentage.
The decline in turnover requirement is either a minimum of 15%, 30% or 50% depending on entity type and level of aggregated turnover15% decline – for ACNC registered charities (subject to certain exclusions such as private schools which will need to meet the general rules).
30% decline – where aggregated turnover is $1 billion or less.
50% decline – where aggregated turnover exceeds $1 billion.
Where there is no comparison period, the Commissioner may consider an alternative test by way of legislative instrumentExample – If a small business employer projects its turnover to be $600k for April 2020 and its turnover for April 2019 where turnover was $1m, it would meet the 30% decline in turnover test as the projected decline would be 40%.
There will be six monthly testing periods being April, May, June, July, August and September.
Alternatively, the testing periods can be on a quarterly basis with the comparable periods being the 3 months to 30 June and 30 September 2020
|5. ENTITIES THAT DO NOT QUALIFY
|Entities that do not qualify include companies in liquidation, government bodies, major banks and sovereign entities
|6. OTHER – ADMINISTRATION
|Entities that qualify must continually provide turnover information to the Commissioner in the approved form within 7 days after the relevant month to which the fortnightly JobKeeper payments relate
|The matters notified must include the GST projected turnover and the entity’s current GST turnover for the reporting month
|Businesses will need to ensure that they are in a position to provide timely historical information and projections to the ATO.
The Commissioner is not required to apply certain verification requirements for the first two JobKeeper payments