On 8 April 2020 the JobKeeper Payment subsidy was enacted into law with the passing of the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 and Coronavirus Economic Response Package Omnibus (Measures No.2) Act 2020.
The rules for eligibility to access the JobKeeper Payment are contained in the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Rules) made by the Treasurer. At the date of this blog these Rules had yet to be finalised, and so the following is based on an Exposure Draft of the Rules and Treasury Fact Sheets.
What is the JobKeeper Payment?
It is a subsidy paid by the Federal Government to employers whose business has been severely affected by COVID-19 so as to maintain an employment relationship with their employees, who they will need to carry on the business once the COVID-19 crisis abates.
Under the scheme an employer who receives a JobKeeper Payment must ensure that a nominated eligible employee receives a minimum pre-tax payment of $1,500 each fortnight.
- If the employee’s wage is actually less than this amount, the employer must still pay the minimum $1,500.
- If an employee’s wage is more than the $1,500, then the employer pays that wage amount but is subsidised up to $1,500.
An employer who fails to comply with this minimum payment requirement may be punished under the civil remedy provisions of the Fair Work Act 2009 (e.g. $126,000 fine). The JobKeeper Payment is taxable income for a recipient employee and the employer is required to withhold PAYG withholding tax on it. An employer is only required to pay superannuation guarantee on the wage amount payable to an employee. An employer does not have to pay superannuation guarantee on the amount by which the JobKeeper Payment exceeds the employee’s actual wage. It is still uncertain as to how the JobKeeper Payment will be treated for the purposes of state payroll tax and workers’ compensation obligations.
What are the conditions an employer must meet to access the JobKeeper Payment?
An employer can access the JobKeeper Payment if their GST turnover has or will reduce (as compared to a corresponding period in 2019) by:
- 30% for businesses with an annual aggregated turnover of less than $1 billion;
- 50% for businesses with an annual aggregated turnover of $1 billion or more;
- 15% for certain ACNC registered charities.
Annual aggregated turnover for the $1 billion test includes the turnover of connected entities and affiliates (as defined). GST turnover for the percentage reduction test appears to be limited to the actual employer entity’s projected or actual turnover. However, it is not exactly clear how GST grouping impacts on this GST turnover.
The Commissioner of Taxation will be given a discretion to determine eligibility under these turnover tests e.g. where a business was just bought. The employer must carry on a business in Australia or be a non-profit body that pursues its objects principally in Australia as at 1 March 2020. Sole traders, partnerships, trusts or companies (e.g. SME businesses who pay no wages but instead draw profits as dividends or trust or partnership distributions) may be eligible for a JobKeeper Payment for one nominated individual who is actively involved in the business. Entities subject to the major bank levy and government entities cannot access the scheme.
What are the conditions an employee must meet to be eligible for the JobKeeper Payment?
To receive a JobKeeper Payment an employee who:
- continues to be employed by the employer (it can cover a stood down employee or an employee who is re-hired);
- on 1 March was:
- at least 16 years old;
- an Australian resident for social security purposes or a subclass 444 visa holder; and,
- employed by the employer – if they were a casual employee then they must have been employed by the employer for at least 12 months.
An employee can only receive one JobKeeper Payment. Far reaching amendments have been made to the Fair Work Act 2009 which permit an employer to issue JobKeeper enabling directions to an employee receiving the JobKeeper Payment so as to assist the employer in redeploying staff to address urgent issues raised by COVID-19. These amendments are temporary with a sunset date of 28 September 2020. For more information on those employment law changes please read our latest COVID-19 blog.
What does an employer need to do to access the JobKeeper Payment?
An employer should register their interest in the JobKeeper with the ATO at this link: https://www.ato.gov.au/general/gen/JobKeeper-payment/
If an employer wants to participate from 30 March 2020 when the scheme starts, then they need to notify the ATO (in approved form) by 26 April 2020. If an employer wants to participate in the JobKeeper Payment scheme later on, then they must notify the ATO (in approved form) before the end of the first JobKeeper fortnight for which they wish to participate. An employer needs to obtain notification from a nominated employee that they consent to receiving the JobKeeper Payment and being included in the employer’s application to the ATO.
An employer who receives a JobKeeper Payment has ongoing reporting obligations in that they must:
- provide details of eligible employees to the ATO each fortnight;
- notify eligible employees within 7 days of each fortnightly claim; and,
- report their GST turnover to the ATO monthly.
The ATO will use the Single Touch Payroll for employee reporting requirements. It is expected that the JobKeeper Payment scheme may provide the ATO with significant information on the black economy where ‘cash’ businesses sign up. The JobKeeper Payment law has anti-avoidance provisions which are aimed at preventing entities entering into schemes to inappropriately access these payments.
How long does the JobKeeper Payment run for?
The JobKeeper Payment scheme runs from 30 March 2020 to 27 September 2020. The JobKeeper Payment is a separate stimulus scheme from the Cashflow Boost scheme and entities should look to see if they are eligible for both schemes. For more information on the Cashflow Boost, read our recent COVID-19 Blog.
If you require any assistance in relation to the JobKeeper Payment, please do not hesitate to contact a lawyer in Coleman Greig’s Taxation Advice Team.