19 Apr CORONAVIRUS (COVID-19) ECONOMIC STIMULUS UPDATE- 17 APRIL 2020
Last Thursday 9 April 2020, Parliament passed legislation to enact a range of stimulus measures as part of its response to the economic fallout of COVID-19 (Coronavirus). The JobKeeper payment announcements also became law as well as sought to clarify many questions people may have had about the operation of JobKeeper.
This communication to you is intended to provide some additional assistance with tips and guidance about getting your business ready.
This update is current as at 17 April 2020. We will send updates through as they are available to us.
The essential elements of JobKeeper are as follows:
- A business must qualify for JobKeeper. Understanding whether you qualify is essential as an employer must also pay employees the JobKeeper payment in order to be paid the amount.
- Eligible employees must elect their employer to receive the JobKeeper payment on their behalf.
- Entitled businesses must ensure that each eligible employee receives at least $1,500 per fortnight (before tax).
- The payments are a safety net to ensure that all employees that continue to be engaged by employers will receive a minimum payment of $1,500 per fortnight.
- Therefore where employees:
– have been stood down, the employer must pay the employee, at a minimum, $1,500 per fortnight, before tax.
– have been receiving less than this amount, the employer will need to top up the payment to $1,500 per fortnight, before tax.
– that were already receiving this amount from the employer they will continue to receive their regular income according to their prevailing workplace arrangements.
– earning more than this amount, the employer does not have to pay them more but is able to provide them with a top-up at their discretion.
- 20 April – Register using the online form
- 27 April – Make all required payments (the first payment did not need to be made by 12 April (for the period 30 March to 12 April). This is the last day of registration to receive payments for the month of April.
- 4 May – Confirm eligible employees using the business portal
Eligible employers needs to show they have been impacted by Covid-19. As mentioned previously the employer must show a reduction of 50%, 30% or 15% in turnover.
Entities that would otherwise be aggregated under the small business entity rules are consolidated for the $1 billion dollar test. It is then each entity/employer that becomes eligible in their own right by then applying the applicable turnover reduction % to their own turnover.
The aggregated annual turnover for related entities is:
- $1billion or more, the 50% or more turnover reduction test applies.
- Less than $1 billion, the 30% or more turnover reduction test applies; or
- Charities and other not for profit entities, the 15% turnover reduction test applies.
How does a business show a reduction in turnover?
The test is currently based on a measurement of either:
- GST turnover for March 2020 with GST turnover for March 2019
- Projected GST turnover for April 2020 with GST turnover for April 2019
- Projected GST turnover for the quarter starting April 2020 with GST turnover for the quarter starting April 2019
The turnover included is income from business. The definition of business income is taken based on ordinary tax concepts. Consequently, any sole trader or entity that generates personal services income (PSI) will be excluded from being able to partake in the JobKeeper scheme.
Where you are basing your eligibility on projected turnover it would be wise to prepare detailed projections of revenue including any contracts you held before the economic shutdown and after the shutdown. Your business turnover for March would already be prepared.
Consider the following when preparing your projection:
- Have you previously prepared a budget of what the businesses projected revenue would have been before COVID-19? Contracts already in place or general trading would substantiate this.
- Are you able to isolate contracts that were recognised then had been withdrawn due to the economic shutdown?
- Have you considered under which method you would use to if you were going to adopt a ‘projected basis’ of revenue’? For instance will an April projection be an appropriate measure given the number of non-working days in this month due to Easter and ANZAC day public holidays.
Additional guidance will be announced for those businesses that do not have a comparable period in the prior year to compare revenue with.
Ongoing requirements in relation to turnover
An eligible employer will only have to satisfy the turnover test once. They do not need to satisfy over an intermittent period. Once they satisfy the turnover test they will receive payments for eligible employees until the end of the term the legislation applies.
A business will also need to report their turnover on an ongoing basis to the ATO when reporting for ongoing JobKeeper payments.
The legislation introduced did not change the definition of an eligible employees. As a recap an eligible employee is an employee who:
- is currently employed by the eligible employer (including those stood down or re-hired);
- are employed by the employer at 1 March 2020;
- are full-time, part-time, or long-term casuals (a casual qualifies provided they were employed on a regular basis for longer than 12 months as at 1 March 2020);
- are at least 16 years of age;
- are an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder; and
- are not in receipt of a JobKeeper Subsidy Payment from another employer.
The employee cannot be in receipt of the following payments and be eligible for JobKeeper within a fortnight either:
- government parental leave or Dad and partner pay under the Paid Parental Leave Act 2010,
- a payment in accordance with Australian worker compensation law for an individual’s total incapacity for work.
Employee needs to elect the eligible employer
In order for the eligible employee to be included within your JobKeeper payment they need to elect for the employer to receive the payment.
Attached to this circular is a potential letter you can use to send to your eligible employees as well as the election they need to sign and return to you. These need to be completed and returned by 27 April in order to make the cut off for the first JobKeeper payment.
As a consequence of obtaining this election you are notifying each of your employees that you are applying and including them in the businesses claim for JobKeeper. An employer must include all employees in the scheme. The employee can only elect one employer to receive JobKeeper on their behalf. Casual employees must choose the employer that provides full time work.
JobKeeper v JobSeeker
There are anti-overlap provisions between the different types of support payments that have been provided for as part of the economic shutdown. There will be instances where an employee that has been stood down may be in receipt of JobSeeker payments already. In these instances the employee is not able to claim both. You will note in the JobKeeper guide, the employee has the responsibility of notifying Centrelink that they will be in receipt of JobKeeper payments. They will then be required to pay any amount received under JobSeeker back. The ATO and Centrelink will be able to follow anyone who may have double claimed through the use of STP. You may also consider only paying them from the date they remove themselves from JobSeeker payments given you are required to pay them first in order to qualify for JobKeeper.
If you are bringing any stood down employees back on to the business payroll so they are able to participate in JobKeeper, in addition to sending the attached suggested letter you may want to have a conversation with them in respect to also confirming their obligations with Centrelink.
Employers must then pay their eligible employees the JobKeeper payment within their normal payroll cycle. The legislation specifies the payroll fortnights. Some provision is made for employers that pay on a monthly basis. Weekly payers would fall within these cycles as a matter or course. In order to receive the first fortnights JobKeeper payment for an employee (30 March 2020 to 10 April 2020) the employer must have paid that employee before 10 April. There is a one-off concession for April that any fortnightly payments made in April that were missed can be made up at the end of April.
For illustration purposes the following table highlights how much an employer receives per month with the stipulated fortnights in which JobKeeper applies outlined on it as well
|Payment date||Payment amount||Fortnightly period starting|
|May||$3,000||30 March and 13 April|
|June||$3,000||27 April and 11 May|
|July||$3,000||25 May and 8 June|
|August||$3,000||22 June and 6 July|
|September||$4,500||20 July, 3 August and 17 August|
|October||$3,000||31 August and 14 September|
Employers must pay employees before the employer can receive a JobKeeper payment. The payment in arrears could create a cashflow issue if the employer has not or cannot budget for the payment in advance.
Determine the funding capacity of the business and project the impact of the timing difference on payment within your business.
Payments should be recorded through the single touch payroll system. A manual system can be applied for entities that do not use single touch payroll.
We will provide further advice as to how to process these payments through the various types of software packages. They are currently working on updates to assist businesses. Attached are a couple of handouts we have so far from Xero and MYOB which are attached to this update.
Tax treatment of JobKeeper payment
The payment is assessable to the employer, deductible when paid to the employee and assessable in the hands of the employee. Superannuation guarantee treatment is still with the ATO to provide further guidance as are the payroll tax and workers compensation requirements.
How does superannuation apply to a JobKeeper payment?
The explanatory memorandum to the legislation has outlined how superannuation is meant to apply to any JobKeeper payment made. At the time of writing the ATO has not included any information within their JobKeeper guide. It seems the Government’s intention is superannuation guarantee will only apply where there is a service connected to the payment.
The table below may assist in providing some guidance:
|Situation||Does employer pay super on the JobKeeper payment?|
|The employee is being paid over $1,500 per fortnight. The employer does not pass on any JobKeeper payment to the employee.||Super guarantee (SG) is not applicable to the JobKeeper received. SG contributions would apply to the wage payment though as would ordinarily be the case.|
|Employer is not required to advance the payment to an employee as the employee is being paid over $1,500 per fortnight. The employer does forward the JobKeeper payment as a top up in addition to the salary received.||There is no super guarantee applicable on this payment. The top up payment is at the discretion of the employer. The payment is not linked to ordinary times earnings.|
|Employee is paid $900 per fortnight. The employer is required to top up the employee to $1,500 per fortnight by paying an additional $600 per fortnight.||The additional $600 in JobKeeper (top up) is not subject to super guarantee as the top up payment is not connected to the ordinary times earnings of the employee|
|The employee is stood down. The employee does not work at all and receives the full $1,500 for not coming to work.||It is best to check the award. It is unlikely that super guarantee will apply to the payment as outlined in the explanatory memorandum.|
Business owners actively engaged in their business including sole traders
Sole traders and some other entities (such as partnerships, trusts or companies) may be entitled to the JobKeeper Payment scheme under the business participation entitlement.
A business participant entitlement allows an individual that is actively engaged in a business either personally (for sole traders or partnerships), through a company (as a shareholder or director) or via a trust (as an adult beneficiary).
The entity that conducts the business must register for JobKeeper and only one individual is entitled to a JobKeeper.
Please note the main requirement is the entity is actively engaged in business. This definition is taken from ordinary tax concepts.
Subcontractors who earn personal services income (PSI)
The issue as to when an individual is actively engaged in business raises some interesting questions about whether an individual or entity that earns PSI is able to qualify for the JobKeeper payment.
This area of law requires careful consideration of the tax act and the definition of an employee for Fair Work purposes. We strongly recommend that you seek advice from an employment lawyer in respect to whether a subcontractor applies in their own name or are added to the employers JobKeeper entitlement.
The subcontractor will not be in business in their own right if they earn PSI as JobKeeper is paid to those actively engaged in business, regardless of whether the income is earned through an entity or as an individual.
The subcontractor is not likely to be classified as an employee notwithstanding the employer may be paying on-costs on their behalf. The on-cost payments such as super, workers comp, payroll tax etc, are deemed on the employer. They are not required under the Fair Work Act. In addition to this the employer/contractor is likely to not include leave entitlements on the subcontractors behalf.
Legal advice needs to be sought if you intend to register any subcontractor that earns PSI under the JobKeeper scheme. We will watch this space for further guidance. Contact us if you would like our office if you require further information in this regard.
Registering your business
One you have determined the business will qualify for JobKeeper the business must register. Registrations will be open from 20 April where the final cut off for receiving payments for the April fortnights in 4 May.
In order to register successfully a business must:
- Have registered with the business portal,
- Have the business portal linked with an associated individual, being the director, through the director’s myGov account,
- Register the business portal account and the directors myGov through the relationship access manager (RAM).
If you have not done this already the process can be quite involved. We have attached a fact sheet we have put together to assist with resources available to do this. Unfortunately, it is not something we are able to do on your behalf.
If you do need some assistance please call your service team from our office.
What to do next
- Calculate your turnover using one of the known methods. If you do not fit within one of these methods and require further advice as to whether you should apply please contact us.
- Identify your eligible employees. Write to them and request they notify you as to whether they want to be included on your claim for JobKeeper.
- Register your intention to claim from Monday 20 April through the ATO website.
- If you have not linked your myGov to the business portal and established a RAM, then you must do so immediately.
- Back pay each employee for any JobKeeper entitlement where they have not already been paid $1500 per fortnight. Remember you are not required to pass on any amount of JobKeeper to the employee if they have already earned this amount.
If you are interested in learning more about the JobKeeper Payment please contact either Sam Cimino, Sam Marzano or any team member on (03) 8602 6100.