The long awaited passing of the JobKeeper legislation has occurred woo hoo. It answers some of our questions but not all as some of the requirements are going to be left to the Commissioner AKA the Australian Taxation Office (ATO). We understand this is very frustrating for everyone as Jobkeeper was supposed to be in effect from 31 March 2020 so we have summarised below for you what we do know so that you can make your own assessment as to whether you may be eligible:
- To keep people employed/engaged with their workplace & to reduce numbers at Centrelink during the COVID-19 crisis.
- To help businesses pay their employees instead of having to stand them down and/ or make redundant.
Who is eligible?
There are two levels of eligibility; for employers and employees.
Eligible employers, Sole traders and the self-employed with an ABN, and not-for-profits (including charities) who:
had an ABN on or before 12 March 2020, &
meet the decline in turnover test (detailed below) &
either reported business income in their 2018-19 in their income tax return lodged on or before 12 March 2020 (or such later time as allowed by the Commissioner), or
reported business income during the period 1 July 2018 to 12 March 2020 and provided this information to the Commissioner (via Business Activity Statements) on or before 12 March 2020 (or such later time as allowed by the Commissioner).
The intent of the JobKeeper Payment is to enable any eligible self-employed person get a wage subsidy regardless of what business structure they use, where:
the partners in a partnership only receive a share of profits – one partner can be nominated to receive it
directors of a company that only receive dividends – one director can be nominated to receive it
beneficiaries of a trust that only receive distributions – one individual beneficiary (i.e. not a corporate beneficiary) can be nominated to receive it
Employees in businesses above – including stood down
Full time, part time, long term casuals (of 12 months or more) that are not a permanent employee of another employer
Must have been employed as at 1 March 2020
Must be at least 16 years of age
Must be 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
Are not in receipt of a JobKeeper Payment from another employer
Can receive JobKeeper and other income from another employer
NOT ABN contractors they are eligible employers themselves and need to apply individually
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.
An entity will satisfy the decline in turnover test for a reporting period if the entity’s ‘projected GST turnover’ for a ‘turnover test period’ in which the fortnight occurs falls short of the entity’s ‘current GST turnover’ for a ‘relevant comparison period’ by the prescribed percentage. If you are not registered for GST then it is simply your turnover.
Turnover test period's can be as follows:
Monthly - March - September ; or
Quarterly - April - June, July - Sep 2020, and
The relevant comparison period must be the period in 2019 that corresponds to the turnover test period.
Where the Commissioner is satisfied that there is no such period in 2019 or it is not an appropriate relevant comparison period, the Commissioner may, by legislative instrument, determine an alternative decline in turnover test applies to a class of entities.
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. Here we have summarised the fortnights for you.
The Tax Commissioner will also have discretion to set out alternative tests that would establish eligibility in specific circumstances (e.g. eligibility may be established as soon as a business ceases or significantly curtails its operations). There will be some tolerance where employers, in good faith, estimate a 30 per cent or more or 50 per cent or more fall in turnover but actually experience a slightly smaller fall. The ATO will provide guidance about self-assessment of actual and anticipated falls in turnover.
Examples of application of “Turnover Test”
How you choose to project your fall in turnover is not dependent on whether you report a quarterly or monthly BAS, though you can do that if it is easier. The turnover calculation is based on GST turnover, but there are some modifications, including disregarding GST grouping (where two or more associated business entities operate as a single GST group). When calculating GST turnover for an entity that operates two or more businesses, the turnover from each business is combined.
You may use an accruals basis of accounting to calculate both the current GST turnover and projected GST turnover as both calculations require you to include sales that you have made or are likely to make without any reference to when you are paid.
However, if you prepare your activity statements on a cash basis, the ATO will allow you to calculate both the current and projected GST turnovers on a cash basis. The basis used must be the same for calculating your projected and current GST turnover.
Typically, current turnover will equal your GST exclusive sales less your input taxed supplies.
March 2020 vs March 2019 = 30% decrease in turnover
April 2020 vs April 2019 = projected 30% decrease in turnover &
April 2020 vs April 2019 = close to 30% decrease in actual turnover
May 2020 vs May 2019 = projected 30% decrease in turnover &
May 2020 vs May 2019 = close to 30% decrease in actual turnover
April – June eligibility:
April – June 2020 vs April – June 2019 = projected 30% decrease in turnover
April – June 2020 vs April – June 2019 = close to 30% decrease in actual turnover
**We do not have guidance from the ATO as yet to how they would actually like the projections calculated**
How does it work?
The employer pays the employee and then the ATO pays the employer (monthly in arrears)
Through payroll for employers– sole traders will have a separate process
Eligible employers will need to identify eligible employees for JobKeeper Payments and must provide monthly updates to the ATO within 7 days of the end of the month for the following:
Actual turnover for the month
Projected turnover for next month
Easiest way to report is STP (for everyone except sole traders, trusts reporting for beneficiary and company reporting for director not on payroll)
Pay eligible employees at least $1,500 per fortnight (before tax). If an employee normally receives $1,500 or more per fortnight before tax the employee should continue to receive their regular income.
Pay superannuation guarantee on normal salary and wages amounts paid to employees. If the employee normally receives less than $1,500 per fortnight before tax, the employer can decide whether to pay superannuation on the additional amount that is paid as a result of the JobKeeper program.
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.
Other important things to note
No partner income test like the Jobseeker
You may reengage employees who were previously made redundant
Turnover will be defined according to the current calculation for GST purposes. It includes all taxable supplies and all GST free supplies but not input taxed supplies.
Under the GST law, only Australian based sales are included and therefore, only Australian based turnover is relevant. A decline in overseas operations will not be counted in the turnover test.
Employees hourly rate cannot be reduced, only their hours can if still working and not stood down.
Register business – https://bit.ly/39wwppF
Get your books reconciled
Like our FB page www.facebook.com/twosideshq
Identify eligible employees and get them to fill in the ATO form
If an employee speak to your employer
Get your business registered for STP (excluding sole traders)
Get Xero setup if you don’t have an accounting system as you will need to report monthly
Estimate decrease in next turnover period
Register through business portal or use a tax agent - 20 April (must apply by end of April to opt in for April)
Please contact us if you would like us to process your payroll during this time.
Right click and download our handy JobKeeper vs JobSeeker comparison.
Founder & Director
Two Sides Accounting
02 9030 0269