Tax Bulletin – JobKeeper Payment

Legislation and Rules have been passed to implement the JobKeeper payment scheme. Eligible employers will receive $1,500 per fortnight per eligible employee from 30 March to 27 September 2020.

EMPLOYER ELIGIBILITY FOR JOBKEEPER PAYMENTS

An entitlement to a payment will arise for an employee for each fortnight where:
– The entity carried on business in Australia on 1 March 2020 or is a non-profit carrying on its objectives principally in Australia
– The employer has met the ‘decline in turnover test’ by the end of that fortnight
– The employee is an eligible employee for that fortnight
– The employer makes payments to the employee, or on the employee’s behalf, of at least $1,500 (‘wage condition’)
– The employer has elected to participate by the end of the relevant fortnight (with two weeks grace for the first fortnight) and has given certain information to the ATO

An entity is ineligible if it is subject to the Major Bank Levy, is a Government body, in liquidation, or a trustee in bankruptcy has been appointed.

An employer will therefore not be eligible for any fortnight before they have met the decline in turnover test. However, this can continue to be assessed and an employer can become eligible at any time during the period of the scheme.

Once the decline in turnover test has been met, the Rules and Explanatory Statement indicate that the employer continues to be eligible for future periods regardless of whether their turnover would meet this test in a subsequent period. For example, if they satisfy the decline in turnover test on 10 April they will be eligible for the entire period of the scheme, even if the turnover does not meet this test in a subsequent period.

Decline in Turnover Test

The ‘Decline in Turnover’ test is satisfies either the ‘basic test’ or the ‘alternative test’. The ‘basic test’ requires:
– If the entity has an aggregated turnover < $1 billion, projected GST turnover is at least 30% less than the current GST turnover for the relevant comparison period.
– If the entity has an aggregated turnover > $1 billion, projected GST turnover is at least 50% less than the current GST turnover for the relevant comparison period.
– If the entity is a registered charity (excluding certain education providers), projected GST turnover is at least 15% less than the current GST turnover for the relevant comparison period.

The test period for calculating ‘projected GST turnover’ (i.e. estimated GST turnover) can be any month from March to September 2020, or quarter ending June 2020 or September 2020. Entities can satisfy either of these test periods, regardless of their GST reporting period. For example, if testing eligibility for the fortnight ending 10 April, the business can estimate turnover for either April or for the June quarter. 

The ‘relevant comparison period’ for calculating ‘current GST turnover’ (i.e. the actual GST turnover) is the corresponding period in 2019.

Turnover is based on the GST turnover rules (with some modifications) and so will include taxable and GST-free supplies but not input taxed supplies.

As eligibility is based on project GST turnover, employers should be careful in their estimates, as getting eligibility wrong may mean repayment of the JobKeeper payments to the ATO. The Fact Sheet indicates there will be some tolerance if a fall in turnover is estimated in good faith but the actual fall is slightly less.

The Commissioner will have discretion to set out an alternative ‘decline in turnover’ test to apply to a class of entities, if satisfied that there is not an appropriate relevant comparison period. This may apply to businesses that have started within the last 12 months, a business that has made a major business acquisition, or a business that had unusual trading conditions in the last 12 months (e.g. due to a drought).

Wage Condition

An employer satisfies the wage condition in respect of an individual for a fortnight if the sum of the following amounts equals or exceeds $1,500:
– Amounts paid by way of salary, wages, commission, bonus or allowances;
– PAYG withholding;
– Superannuation contributions; and
– Other amounts that, in the fortnight, are applied or dealt with in any way agreed to by the individual (eg. fringe benefits or salary sacrificed amounts).

If the employer’s pay cycle is longer than a fortnight, payments are to be allocated to a fortnight or fortnights in a reasonable manner.

For employees that have been receiving less than $1,500 per fortnight the employer will now need to pay them at least $1,500 to make them eligible (noting the JobKeeper payment is in arrears). Superannuation regulations will be made so that superannuation does not need to be paid on the increased payment amount.

Although the Rules are intended to apply on an ‘all-in’ basis, there is uncertainty as to whether an employer can in fact choose not to include an employee for the scheme who is currently receiving less than $1,500 per fortnight or who has been stood down, as well as the interaction with the changes to the Fair Work Act. It is hoped that further clarification is provided from the ATO on these issues.

EMPLOYEE ELIGIBILITY

An employee will only be eligible if they:
– Are currently employed by the eligible employer (including those stood down or re-hired);
– Were employed by the employer at 1 March 2020;
– Are full-time, part-time, or long-term casuals;
– Are at least 16 years of age at 1 March 2020;
– Are an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder at 1 March 2020;
– Were a resident for Australian tax purposes on 1 March 2020; and
– Are not in receipt of a JobKeeper Payment from another employer.

Long-term casuals must be employed by the employer on a regular and systematic basis for longer than 12 months as at 1 March 2020. An entity that employs a casual employee will be deemed to have employed them for longer than 12 months if they were employed by either:
– Another entity within the same wholly-owned group; or
– Another entity that carried on the same business (i.e. where the business has changed hands).

Employees will be ineligible if they are receiving:
– Government funded parental leave pay or dad and partner pay; or
– Workers compensation and are not working any hours.

The employee must give the employer a nomination notice in the approved form that they satisfy all of these requirements, agree to be nominated as an eligible employee and have not agreed to be nominated by any other employer.

Once an employee has nominated an employer, and the employer has received JobKeeper payments and paid the employee, they cannot nominate a different employer. If the employment relationship ends, the employee will not be able to have another employer qualify for the JobKeeper payments in respect of their new employment.

SELF-EMPLOYED AND BUSINESS OWNERS

Self-employed individuals, including sole-traders and those who operate through certain business structures will be also eligible for the JobKeeper payment where:
– The business entity meets the relevant turnover decline test; and
– The entity nominates an individual who is not an employee but who otherwise meets the same tests as set out for eligible employees, is actively engaged in the business, and is not employed by any other entity (other than as a casual employee).

Additional eligibility conditions apply to self-employed and business owners:
– The entity must have had an ABN on 12 March 2020 (or a later time allowed by the Commissioner);
– An amount was included in their assessable income for the 2019 income year in relation to carrying on a business, or the entity made a taxable supply for a tax period that ends between 1 July 2018 and 12 March 2020; and
– The Commissioner had notice by 12 March 2020 (or a later time allowed by Commissioner discretion) that the amount should be included (e.g. lodgement of income tax return or BAS).

The business participation requirements provide that:
– Sole trader – the individual can be nominated
– Business operating through a partnership – one individual partner can be nominated
– Business operating through a company – one individual director or shareholder can be nominated
– Business operates through a trust – one individual adult beneficiary can be nominated

Therefore, only certain business structures are eligible, noting a business operating through a partnership of trusts, or a unit trust owned by discretionary trusts, will not be eligible.

The individual must give a nomination notice to the business entity or, in the case of a sole trader, to the ATO.

PAYMENT AND ADMINISTRATION OF JOBKEEPER PAYMENTS

ATO Administration and Payment

The ATO must make the JobKeeper payments if they are satisfied the employer is entitled. The ATO may accept statements made by the employer in the approved form in determining this. However, for the first two payment periods it will be sufficient if the Commissioner is satisfied that it is reasonable to make the payments. If the Commissioner later assesses that the entity was not eligible, the overpayment will need to be repaid with interest.

The ATO must make the payment for a fortnight by the later of:
– 14 days after the end of the calendar month in which the fortnight ends; and
– 14 days after the Commissioner is satisfied that the employer or business is entitled to the payment for the fortnight.

This means payments will be monthly payments in arrears. It is expected that payments will start being made in the first week of May.

Business Administration

The employer or business must notify the ATO of its election into the JobKeeper scheme, together with details of the nominated individual. It is expected that for most businesses the ATO will be able to use Single Touch Payroll data to pre-populate the employee details.

The entity will need to report to the Commissioner within 7 days of the end of the reporting month their current GST turnover for that month and their projected GST turnover for the following month.

Registration and Other Processes

The ATO are currently updating their website for the JobKeeper payment and has stated further information will be available soon. It is expected that details in regard to registration etc will be available then.

ANTI-AVOIDANCE RULES

The legislation includes an anti-avoidance provision which can apply to a scheme for the sole or dominant purpose of obtaining a Coronavirus economic response payment, or an increased amount, for an entity. In this case the Commissioner can determine that the entity is not entitled to the payment.

The Commissioner can take into account a number of factors in making the determination, including:
– any result in relation to the operation of the Coronavirus payment framework that, but for this provision, would be achieved by the scheme; and
– any change in the financial position of any entity that has, or has had, any connection (whether of a business, family or other nature) with the recipient.

Actions that may raise queries could include:
– Commencing to pay wages to the owner(s) of the business who have not previously drawn wages.
– Employing family members in the business for the first time.
– Deliberately altering business arrangements to reduce turnover.

Practitioners should also be careful of their obligations under the Tax Agent Services Act 2009 and promoter penalty rules if raising options that fall within the anti-avoidance rules. The Explanatory Statement has also noted that there is an extensive existing framework of penalties in the Criminal Code and the Tax Administration Act 1953 that can apply in circumstances where individuals and entities make false, misleading or reckless statements to the Commonwealth or engage in arrangements or assist others to defraud the Commonwealth.

OTHER CONSIDERATIONS 

Treatment of Payments

JobKeeper payments are taxable to both the employer and the employee. There is a legislative provision allowing the payment to be made ‘non-assessable non-exempt’ income but this has not been implemented at this stage.  Businesses will receive the corresponding deduction for wages paid.

The payments will be included as income for the purposes of eligibility of an employee for the JobSeeker payment.

An entity that receives an overpayment of the JobKeeper payment is required to repay the overpaid amount and a general interest charge.

Continual Monitoring

The JobKeeper Rules will be monitored and the Treasurer has the ability to make changes during the relevant period (e.g. variation or revocation of eligibility).

Fair Work Act

Legislation has also been introduced to provide businesses with flexibility to change worker’s roles and hours during the payment period, together with other changes to the Fair Work Act.

CONTACT US

For further information on any of these updates, or for general assistance, please contact our Directors, Jacci Mandersloot or Natalie Claughton.

The information contained in this bulletin is intended to  provide  general information only and is not intended to serve as tax advice. Specific advice should always be sought regarding a taxpayers’ particular circumstances. Please contact MC Tax Advisors if you would like assistance with the issues identified in this bulletin.