We have dissected the legislation for the Coronavirus JobKeeper payment and all you need to know is below.
TL;DR JobKeeper payment legislation has been finalised. Details of eligibility, applying and maintaining compliance for the JobKeeper payments are outlined below.
Bramelle Partners can manage all aspects of the JobKeeper payment for a one off fee of $750 + GST. Please register your interest here and we will be in contact with you shortly to discuss the next steps.
What is the JobKeeper payment?
The JobKeeper payment is intended to assist businesses affected by the Coronavirus to cover the costs of wages of their employees.
A business that has suffered a substantial decline in turnover can be entitled to a JobKeeper payment of $1,500 per fortnight for each eligible employee. It is a condition of entitlement that the business has paid salary and wages of at least that amount to the employee in the fortnight.
A business can also be entitled to a JobKeeper payment of $1,500 per fortnight for one business participant who is actively engaged in operating the business (i.e. A business is entitled to a payment for a single person for a sole trader, partner in partnerships, beneficiaries of a trust, shareholder of a company where the person has not previously claimed a payment for JK.
What period does the JobKeeper payments cover?
JobKeeper payments are in respect of fortnightly periods, commencing on 30 March 2020 for a maximum of 13 fortnights (provided the employer was entitled to the payment for the fortnight commencing on 30 March 2020). This means the last fortnight in respect of which a JobKeeper payment may be paid is the fortnight commencing on 14 September 2020 and ending on 27 September 2020.
How does an employer qualify for the JobKeeper scheme?
An employer will qualify for the scheme for a particular fortnight if:
– on 1 March 2020, it carried on a business in Australia or was a non-profit body pursuing its objectives principally in Australia;
– before the end of the fortnight, it met the decline in turnover test; and
on 1 March 2020, the entity
– was not a bank
– was not a government body of a particular kind
– at any time in the fortnight, did not have liquidator or a trustee in bankruptcy appointed to the individual’s property.
Once an employer decides to participate in the JobKeeper scheme and their eligible employees have agreed to be nominated by the employer, the employer must ensure that all of these eligible employees are covered by their participation in the scheme. This includes all eligible employees who are undertaking work for the employer or have been stood down. The employer cannot select which eligible employees will participate in the scheme. This ‘one in, all in’ rule is a key feature of the scheme.
The JobKeeper scheme operates on a prospective basis only. Entitlement only arises for those JobKeeper fortnights and later fortnights in which eligible employers are registered under the scheme prior to the end of a JobKeeper fortnight. The only exception to this is for the month of April 2020. In April 2020 employers may register prior to the end of April and if they meet the eligibility rules receive JobKeeper payments for eligible employees for JobKeeper fortnights in the two JobKeeper fortnights commencing from 30 March 2020.
Another key element of the scheme is that qualifying employers that decide to participate in the JobKeeper scheme must, as a condition of entitlement, notify all employees in writing that they have elected to participate in the scheme and that their eligible employees will all be covered by the scheme.
Decline in turnover test
The decline in turnover test needs to be satisfied before an entity becomes eligible for the JobKeeper payment. Once this occurs there is no requirement to retest in later months. If an entity does not qualify for the month of April 2020 because its turnover has not been sufficiently affected, it can test in later months to determine if the test is met. This allows entities that only become affected part way through the six month period of operation of the JobKeeper scheme to continue to monitor for any decline in turnover until they qualify for the scheme in a later period.
Section 8 of the Rules establishes a decline in turnover test that must be satisfied at the end of a fortnight for an employer to qualify. The Rules specify two ways in which a business can satisfy the decline in turnover test: the basic test and the alternative test.
The basic decline in turnover test by comparing the projected GST turnover of the entity for a period (the turnover test period) with its current GST turnover as calculated for a relevant comparison period (the comparison turnover). In effect this compares a month or quarter in the period the JobKeeper scheme applies with the corresponding period in 2019. For most businesses this will be an appropriate comparison to identify if turnover has declined significantly.
A business will generally satisfy the test where the GST turnover in the turnover test period falls short of the comparison turnover and the shortfall is 30 per cent or more (or 15% for an entity which is an ACNC registered charity).
For a large business (where income is likely to have aggregated turnover of $1 billion or more in the income year or where turnover was $1 billion or more in the previous income year) to satisfy the decline in turnover test, the GST turnover in the turnover test period must fall short of the comparison turnover and the shortfall must be 50 per cent or more.
An alternative test is provided by the Commissioner where the basic test does not provide for a relevant comparison period. The Commissioner will determine an appropriate relevant test period which the business can test against or may provide its discretion that this section has been satisfied.
Who is an eligible employee?
An employer is only entitled to a JobKeeper payment for a person for a fortnight if the person is an eligible employee.
An eligible employee is a person who on 1 March 2020:
- was aged 16 years or over;
- was a full time, part time or long term (working as a casual for more than 12 months) casual employee;
- the person was an Australian resident (within the meaning of section 7 of the Social Security Act 1991), or was a resident of Australia for the purposes of the Income Tax Assessment Act 1936 and was the holder of a Subclass 444 (Special Category) visa.
All eligible employees are required to provide a notice to their employer agreeing:
- to be nominated by the employer as an eligible employee under the JobKeeper scheme as the employer with which the employee will participate in the JobKeeper scheme;
- that they confirm they have not agreed to be nominated by another employer; and
- that they do not have permanent employment with another employer if they are employed as a casual employee with this employer.
A person who has been stood down or is on leave is considered to be an employee of their employer under the Fair Work Act 2009 and for the purposes of the JobKeeper payment.
What other entitlement criteria apply?
The employer must satisfy the wage condition
Generally, the wage condition requires that an employer pay each participating employee at least $1,500 for each JobKeeper fortnight. This reflects the practical operation of the JobKeeper scheme in which the JobKeeper payment is essentially a reimbursement to an employer of $1,500 where the employer has paid a participating employee at least that amount.
The $1,500 payment comprises of the net pay paid to employees, any PAYG amounts withheld and any salary sacrificed amounts (including salary sacrificed superannuation but excluding any 9.5% superannuation guarantee charge amounts).
Where employers have employees which are eligible for the JobKeeper payment and where they are paid less than $1,500 per fortnight, employers must ensure their pay is increased to $1,500 per fortnight to satisfy
Changes to superannuation guarantee obligations
Employers are still responsible for making superannuation contributions but only for any amounts payable in respect of actual employment. Any additional amount employers receive and pass on to employees where this does not result in additional work being done are disregarded for superannuation guarantee purposes.
For example, if the work actually done by an employee over a period entitled them to be paid $1,000, but the employer instead paid them $1,500 to satisfy the wage condition for a JobKeeper fortnight, then the employer will only be required to make superannuation contributions in relation to $1,000. Similarly, any liability to superannuation guarantee charge that the employer would have for not making sufficient superannuation contributions would be calculated by reference to that $1,000 base.
An employer will still be required to make the same superannuation contributions for an employee whose pay exceeds the JobKeeper payment. For example, if an employee is entitled to be paid $2,000 for their work, the employer will continue to be required to make contributions in relation to that amount, irrespective of whether they were eligible to receive the JobKeeper payment in relation to the employee.
An employer will not be required to make superannuation contributions for an employee who is stood down. This is because employers have no obligation to pay stood down employees. If an employer pays a stood down employee $1,500 to satisfy the wage condition for receiving the JobKeeper payment, then the entire amount will be disregarded for superannuation guarantee purposes.
The employer must elect to participate
The JobKeeper scheme requires an employer to actively seek to participate in the scheme. An employer must therefore notify the Commissioner in the approved form of the employer’s election to participate in the scheme before the employer can be entitled to a payment for a fortnight.
This election generally needs to be provided to the Commissioner before the end of a JobKeeper fortnight for the employer to be entitled to a payment for that fortnight.
To be part of the first round of JobKeeper payments, employers must ensure they satisfy the eligibility requirements and notify the ATO by 26 April 2020.
For all subsequent JobKeeper fortnights, the employer will need to notify the Commissioner of the employer’s election to participate in the scheme before the end of the particular fortnight.
The employer must provide information about eligible employees and the wage condition
To be entitled to a JobKeeper payment for a fortnight, the employer must have provided the following information to the Commissioner in the approved form:
– the details of each eligible employee; and
– other information about their entitlement to the JobKeeper payment. It is anticipated that the Commissioner may require the following details for each eligible employee in the approved form:
– the name of the employee;
– the type of the employee’s employment; and
– the employee’s citizenship or residency status.
Once an employer has provided details of its eligible employees to the Commissioner, the employer must also notify each eligible employee within 7 days. This requirement is intended to keep eligible employees informed about the process.
Only one employer is entitled to JobKeeper payment for a person
An entity is not entitled to the JobKeeper payment for an individual who is an employee (or business owner) if another employer is entitled (either as an employer or as a business owner) to a JobKeeper payment for the individual.
In circumstances where an individual has more than one employer, only one employer is entitled to a JobKeeper payment in relation to that individual. In circumstances where an employer seeks the agreement of an employee to participate in the JobKeeper scheme and that employee has already agreed to participate in the scheme in relation to his or her other employer, the employee should not accept the later nomination.
When is a business owner entitled to the JobKeeper payment?
A business owner may be eligible for JobKeeper payments where they have not previously participated as an employee in their or another business. Under this section, non – profit bodies are not eligible.
An entity must notify the Commissioner of its election to participate in the JobKeeper scheme and the details of the nominated individual. Also, the entity must not have notified the Commissioner that the entity no longer wishes to participate in the JobKeeper scheme. Notification of this information must be made in the approved form.
A business is not entitled to a JobKeeper payment under Division 3 of the Rules for more than one individual. If a business has more than one eligible participant, the business can only be entitled to receive the JobKeeper payment in relation to one of the individuals. It is up to the business to determine which individual is nominated as the eligible business participant.
Similarly, an individual can only create an entitlement for one entity. A business is not entitled to a JobKeeper payment for an individual if another business is also entitled under either Division 3 or Division 2 for the same individual. For example, where an individual is an eligible participant of two businesses – only one of those businesses is entitled to the JobKeeper payment in respect of that individual. Also, for example, where an individual is an eligible participant of a business and is entitled to a JobKeeper payment as an employee of another business–the business is not entitled to a JobKeeper payment in respect of the individual.
The individual for whom a business is entitled to the JobKeeper payment must be an individual that is an eligible business participant. Under section 12, an individual is an eligible business participant where the individual:
– is not employed by the business at any time in the fortnight (that is, because the individual is the owner of the business ie a nominated business participant not an employee of the business);
– satisfies the business participation requirements at any time in the fortnight;
– satisfies the 1 March 2020 requirements; and
– satisfies the nomination the requirements.
The business participation requirements are that, at any time in the fortnight, the individual is actively engaged in the business carried on by the entity. The individual must be actively engaged in the operations and activities of the body. Further, depending on the type of entity the business is, the individual must have a particular role within the business. In the case of an entity that is a:
– sole trader—the individual must be the entity;
– partnership—the individual must be a partner in the partnership;
– trust—the individual must be an adult beneficiary of the trust; and
– company—either a director or shareholder in the company.
Payment and administration
Under section 13, if the Commissioner is satisfied of an entitlement to a JobKeeper payment, the Commissioner must pay $1,500 to the employer for each eligible employee or to the business for its participating individual. Under section 15, the Commissioner must make the payment for a fortnight no later than 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 that, while entitlement to a payment is assessed in relation to a JobKeeper fortnight and the amount is a fortnightly amount, an entitled employer or business will receive the JobKeeper payment monthly. For example, a participating employer with one eligible employee who qualifies for both fortnights in June 2020 will generally receive $3,000 by 14 July 2020.
There are additional measures to ensure compliance with and administration of the scheme, including:
– an entity that receives an overpayment of the JobKeeper payment is required to repay the overpaid amount and a general interest charge to the Commonwealth, applying from the date of the overpayment;
– pre-application record keeping requirements and post-application record keeping requirements which participating entities must comply with; and
– a prohibition on contrived schemes aimed at falsely making an entity entitled to a JobKeeper payment or to an amount of payment to which it would not otherwise be entitled.
An entity that is entitled to a JobKeeper payment (within the meaning of section 7 of the Rules) for a fortnight must notify the Commissioner of:
– its current GST turnover for the reporting month; and
– its projected GST turnover for the following month.
The reporting month is a month in which there is a fortnight for which the entity is entitled to a JobKeeper payment. The report must be made to the Commissioner in the approved form, and must be made within 7 days of the end of the reporting month.
The information provided as part of this report does not affect an entity’s eligibility, including in respect of the decline in turnover test (which only needs to be satisfied once). It is also not intended to verify whether the projection given as part of the decline in turnover test was accurate. Rather, it is intended to ensure that there is good information on which to assess the economic impact of the Coronavirus on a monthly basis across Australia.
Time limits for JobKeeper payments
JobKeeper payments are intended to only be available in respect of fortnights up to the fortnight ending on 27 September 2020, although payments may still be made in respect of those fortnights beyond this time.
The Rules provides a wage subsidy to eligible businesses calculated by reference to the period from 30 March 2020 in relation to workers employed by the business on 1 March 2020. However, payments under the scheme and all obligations apply on a prospective basis after the commencement of the Rules and accordingly, there is no retrospective application.