JobKeeper Payment - FAQs

Added on 15 April 2020 by Etairos Accounting

JobKeeper payments for Business Owners

The final rules for the JobKeeper payment scheme were released over the Easter weekend. There have been some significant updates and we have reflected these below.

As many of you would be aware, the JobKeeper payment is a payment directly from the Government to eligible employers of $1,500 per fortnight, for each eligible employee. The payments apply from 30 March 2020 and will be payable up to 27 September 2020 (a period of 26 weeks).

Am I an eligible employer ?

To be an eligible employer, you must be in business. Where the business has an aggregated turnover of less than $1b, then the business must have suffered a decrease in turnover (gross sales) of more than 30%, for a month between April and September 2020 or in the June or September quarters, when compared to the corresponding period in 2019. This test will be discussed in detail below.

For not for profit entities, the decrease required to be an eligible employer is 15%.

How does the decline in turnover test work ?

To be eligible for any JobKeeper payments the employer must be able to show that it has suffered a decline in its projected turnover in:

A calendar month (any of April to September 2020), or alternatively
In a quarter (starting 01 April or 01 July 2020).

that equals 30% or greater when compared to the actual turnover corresponding period in 2019.

The employer can choose a month or quarter for the test to be applied and it does not appear to be linked to the GST reporting cycle that the employer uses.

Projected turnover is an estimate of the gross revenue by the employer on the balance of probabilities. It must be based on a reasonable estimate of sales for the month ahead. It would be expected that the employer would be able to substantiate the projected turnover reported.

Once the employer has experienced a decline of projected turnover of 30% in a period compared to the actual turnover for the same period in 2019, they will qualify for the JobKeeper payment from that month, regardless of their turnover in subsequent months.

Example 1
It is 8 April 2020 and an employer estimates that their projected turnover for the quarter ended 30 June 2020 (being April, May and June) will be 35% less than it was for the same period in 2019. They can then apply for the JobKeeper payment.

The actual turnover for the June quarter ends up being 40% less than it was in the same period in 2019.

Therefore, the employer qualified for the first quarter and there is no requirement to meet the turnover test again. The employer will be eligible for the JobKeeper payments through to September.

Example 2
Same facts as above, but it turns out that the actual turnover for that quarter is higher than it was projected, and the actual decline was only 20%, then it is likely the ATO will require a repayment of the JobKeeper payments. The ATO will be releasing guidance on what margin of error it will accept when relying on projected turnover.

Example 3
Assume the same facts as above, except that on 8 April the employer does not think that their June 2020 quarter turnover will decline by 30%, however, it is likely that the turnover for July, August and September (September 2020 quarter) will be 30% less compared to the same period in 2019. On that basis, the employer can only apply for the JobKeeper payments from 1 July 2020. The payments will only be received from 1 July 2020 and, importantly, there is no back payment for the payments not received for the fortnights between 30 March and 30 June 2020 because the turnover decline test was not met for that quarter.

Example 4
An employer expects their April 2020 projected turnover to be 40% less than the turnover in April 2019. They apply for the JobKeeper payments and receive the first payment in early May.

Their actual April turnover is 40% less than 2019, as they estimated.

They expect their turnover for June to September to not decline compared to the same months in 2019 as their business is seasonal.

Because the employer met the decline in turnover test in April 2020 there is no need to re-test the turnover for future months. The employer will be eligible for the JobKeeper payments from April through to September 2020, regardless of the turnover in the months from May to September.

The ATO will be given some discretion to make Regulations that allow an alternative test to be used to determine if turnover has declined. We expect that this will be used for employers in high growth industries, which may not be able to show a decline in turnover compared to the year before. Refer below for further discussion on this issue.

What discretion does the ATO have in relation to the turnover test ?
If your business wasn't established 12 months ago it will not be possible to pass the decline in turnover test. The ATO has been given discretion to allow an alternative turnover test.

Example 5
A Start-Up employer was established in October 2019 and has had strong growth in turnover. Due to the Covid-19 crisis, the business turnover has dropped significantly.

It is likely that the ATO would exercise its discretion to allow a different comparison period. They might let the company compare its April 2020 turnover to the average turnover for the period from October 2019 to March 2020. If the projected April turnover had declined by more than 30% compared to the monthly average.

The ATO will also have some discretion to apply an alternative test where the prior year is not an appropriate comparison. The Treasury rules allow the ATO to establish alternative tests to a "class of entities”. There are no details on the extent of this discretion, but each business that seeks an alternative test will need to clearly show why 2019 is not a relevant comparison.

Therefore, watch this space in terms of guidance to come !

Can I deliberately defer invoices from April to May to get my turnover down to meet the test in April so I then qualify for the whole JobKeeper period ?

The ATO has the power to require business that enter into artificial or contrived behaviour to qualify for, or increase their entitlement to the JobKeeper payments, to repay all of the payments plus penalties and interest.

We would recommend extreme care be taken in manipulating the turnover in a given period. As you will be reporting both your projected and actual turnover each month, the ATO will have all the data to examine unusual patterns of behaviour.

In addition, significant penalties will apply. The Rules outline that criminal offences may arise where an employer deliberately accesses the scheme through false statements.

What can I exclude or include in Projected Turnover ?

Projected turnover will simply be based on the GST definition of your supplies (or gross sales) that you expect to make in the month ahead. It will be measured on a standalone basis for that employer. There is no requirement to aggregate the turnover of related businesses. GST Grouping provisions are disregarded, meaning the test is applied to the employer as a standalone entity and to take into consideration supplies made to other members of the GST group. There are issues arising from this that will need to be managed in practice.

Turnover does not include dividends, residential rent, interest and supplies that do not have the necessary connection with Australia.

Unfortunately, bad debts from an earlier period cannot be used to reduce the projected turnover for a period.

Which employees can I claim the payment for ?

You can claim the payment for eligible employees that were in your employment at 1 March 2020.

An eligible employee is an employee who meets all of the following conditions:

Currently employed by the employer (if the employee had been retrenched, they need to be re-hired)
Be either a full time or part time employee, or a casual employee who had been employed for 12 months
Was over the age of 16 at 1 March 2020
Was an Australian tax resident on 1 March 2020
Was an Australian citizen, permanent visa holder or a Special Category visa (subclass 444) holder (that is Kiwis working in Australia)
Is not in receipt of a JobKeeper payment from another employer.

Each employer will need to get a statement (in a form to be released) that it must obtain from each employee, confirming they qualify as eligible employees. The employer will also be required to notify each employee in writing that they are receiving the JobKeeper payment for them.

How do I get the payment ?

By now you should have registered your interest in the scheme via the ATO website. We have completed this process for many businesses that we believe will qualify. Please contact our office if you need assistance with this process.

The ATO will shortly release further information on the mechanics of the payments. The first payment will be made in early May and it will be backdated to 30 March. The payment will be made directly into the employer’s bank account. It is important that the ATO has your correct bank details, so this money does not go astray.

What kind of reporting will I need to do to the ATO ?

Each employer will need to report by the 7th of each month its projected turnover for the upcoming month and the actual turnover for the previous month. We expect that the ATO will release the format of that report in coming days, as the April report will be required the week after Easter.

What do I have to pay employees ?
We will break the classes of employees up into several groups in the table below:

It is important to note that the employer must be paying the above before the JobKeeper payments will be received, as the JobKeeper payments will be made monthly in arrears. This may place cashflow strain on the employer and, if that is the case, please contact our office.Superannuation, PAYGW and payroll tax considerations will be discussed below.

I have stood down (not terminated) employees since 30 March and ceased their pay, or their pay has dropped to below $1,500 per fortnight because of reduced hours, what do I need to do ?

To be eligible for the JobKeeper payment you will need to have paid each employee equivalent of $1,500 per fortnight from 30 March to 12 April (being the first fortnight of the JobKeeper payment). Therefore, once you are satisfied you qualify for the JobKeeper payment, you will need to start paying those employees at least $1,500 per fortnight. We would recommend not making any additional payments to employees until you are certain you will qualify for the JobKeeper payments, otherwise you run the risk of being out of pocket.

What happens if an employee resigns or is terminated ?

The employer’s entitlement to the JobKeeper payment ceases once the employee is no longer employed. The employer will be under an obligation to inform the ATO that the employee is no longer employed, so that payments will stop.

Will the ATO take my payment if I have a debt with them or a payment arrangement in place ?

No !

I trade through an entity and don't take a wage. What is in this for me as a business owner ?

Firstly, sole traders in business will qualify for the payment for themselves, provided they meet the turnover decline condition outlined above. Trusts, companies and partnerships in business, which also meet the turnover decline test, will also be eligible for the payment for only one individual who is not an employee, but is actively engaged in the business. That person must be:

For a Trust - A Beneficiary
For a Company - A Shareholder or a Director
For a Partnership - A Partner

The entity must only choose one individual who meets the above, for the JobKeeper payment.

Am I required to pay PAYG and Superannuation on the JobKeeper Payment ?

You must pay a minimum of $1,500 per fortnight to your eligible employees, withholding PAYG 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.

Where an employee is having their wages topped up to $1,500 per fortnight to meet the conditions for the JobKeeper payment, it will be up to the employer if they want to pay superannuation on the top-up wages paid.

Do you have to pay payroll tax on payments to employees that represent the pass through of the JobKeeper subsidy ?

This is presently not clear, for now, budget on yes to be safe.

We also note that there are various payroll tax concessions in each State. Please contact our office if you have any questions in this regard.

What should I be thinking of and how should I prepare for this ?

Employers will need to notify the ATO that they elect to participate in the JobKeeper scheme by 26 April 2020. Given such a short timeframe, and pending instructions from the ATO, employers need to quickly act to:

gather key employee and payroll data
establish processes to appropriately notify employees and receive nomination notices from eligible employees (specifics to come)
assess whether in respect of the month of April 2020 or the quarter starting from 1 April 2020, it is expected that the 30% reduction in turnover can be established.

It goes without saying that predicting turnover at this point in time might be fraught with problems, but it will be necessary to review your budgets and ensuring they reflect the current market conditions. For employers that form part of the GST group, it will be necessary to calculate turnover on a stand-alone basis taking into account supplies made to other members of the GST group, as well as other entities outside the group. This would be required for both projected turnovers and the comparison turnovers.

Please contact our office if you need assistance with this process.

As usual, if you have any questions regarding any of the above, please contact us for more information or to clarify how the range of offers may affect your personal circumstances
1300 55 22 30

DISCLAIMER: This article is intended to provide a general summary only and should not be relied on as a substitute for professional advice.