A shout out to all my accounting brother and sisters out there, the last week or so have been INSANE! For those who aren’t aware, your tax professionals have been working incredibly hard to get their heads around the new JobKeeper payment rules, whilst being smashed by a mountain of client questions. It’s really a learning curve for everyone!
I thought I’d put this blog together as a quick rundown of the JobKeeper rules as I know some people are finding it difficult to understand or they don’t want to read pages and pages of information that just makes them more confused!
The ATO and Treasury websites are the most reliable sources to find details of this stimulus package. As things change, they update their website so it’s really important to check these regularly, so I’ll think them below.
As mentioned I’ll be running through the very basics of this stimulus package. So if you have any specific questions, check out the ATO and Treasury websites. Their real-life examples and most frequently asked questions fact sheets help to get your head around different scenarios. If you are still confused, speak to your BAS or tax agent. Every business is different, so the determination of eligibility for JobKeeper will be different.
This blog will be discussed from the employer’s point of view and be specific to the application as a small business.
What is the JobKeeper payment?
You’ve probably seen the government TV ads mentioning the JobKeeper payment being $1,500 per fortnight gross wages for ‘eligible employees’. It will commence for a period of 6 months, 30 March 2020 to 27 September 2020. You, as a business owner, need to determine if you are in fact an ‘eligible business’ and if you have eligible employees’.
Is my business eligible?
Basically, your will qualify as an eligible business if:
- You’ve carried on a business on 1 March 2020
- You had an ‘eligible employee’ (more details on this)
- You still currently employ these ‘eligible employees’ (more details on this)
- You can prove a turnover reduction of 30% or more due to impacts of COVID-19
Now, you might be savvy enough to work out your own turnover figures or you might need some professional help. I won’t run through this in detail as I could be talking for hours, but if you are unsure please do speak with a BAS or tax agent.
For some business this turnover test is going to be very simple to apply. For example, the businesses who have been forced to closed and currently aren’t trading like gyms and beauty salons, they go from X turnover in one period to nil. For other businesses, they might see a drop in income, but it might not be enough to meet the eligibility criteria. It’s really important to get this step right.
Are my employees eligible?
As mentioned, you need to have ‘eligible employees’. Eligible employees briefing speaking are:
- Currently employed (including stood down or re-hired)
- Part-time and full-time employees at 1 March 2020
- Long term casuals, which by definition means have been working with the business for at least 12 months on a regular and systematic basis
- 16 years or older
There is a ‘one in, all in’ rule. This means that if you, as a business, are eligible for JobKeeper, ALL employees have to be applied and you can’t pick and choose. Again, I could be speaking about this for hours, so it’s important to review each employee individually and consider if they fit in this category. It may also be appropriate to speak with Fair Work or a HR professional where there are HR specific questions your tax professional can’t answer. For example, employees who are stood down or questions regarding formal termination.
What if I don’t pay myself a wage, but am a business owner?
The ATO has confirmed the following individuals will be eligible for JobKeeper where you:
- Aren’t currently ‘employed’ by the business
- Are actively engaged in the business
- Are a sole trader, partner in a partnership, beneficiary in a trust, shareholder or director of a company
Unfortunately, the ATO has applied a limit to partnerships, trusts and companies being that only 1 eligible business participant may qualify. For example, only 1 partner of a 2 person partnership will be eligible.
At the time of writing this blog the ATO is still yet to provide details on the application process for business owners who fit into this category. So please check the ATO website in the link below to see if they update these details after you’ve finished reading this blog.
When will the first JobKeeper payment be made & how often?
In relation to eligible employees, the first JobKeeper payment is due to be made in the first week of May. It is a payment to be in arrears, so businesses are going to have to cashflow employees for the month of April to be able to get this reimbursed after the month end.
This is a constant conversation I am having with my clients where it can be very difficult when they are not trading or have the cash available to pay their employees upfront. Essentially you have to pay the minimum wage to get the JobKeeper payment reimbursed. For some employees that are earning more than the $1,500 gross, the payment will help subsidise this wage cost. For employees earning less than this, there will be a top up payment (which is somewhat viewed as a pay rise).
As the payment is via wages, tax will be applied as normal on the $1,500 per fortnight. So employees will the net wage in their hand after tax. For example, a weekly gross wage of $750 will result in net wage of $654 with $96 tax withheld by the employer.
Superannuation also needs to be considered as super on the top up portion of the JobKeeper payment is discretionary. Please speak to a tax professional around this. Other things to consider include changes in your payroll system to ensure super and leave entitlements are being applied correctly.
Steps (as outlined on the ATO website)
The ATO has outlined the step by step process in applying for the JobKeeper payment. Basically it’s:
- Register your interest on the ATO website
- Check you and your employees meet the eligibility requirements
- Continue to pay eligible employees at minimum $1,500 gross wage per fortnight for through April 2020
- Speak with your eligible employees around your intent to claim the JobKeeper payment and ensure they can’t claiming through another business
- Provide them with an employee nomination notice to complete
- From 20 April 2020, enrol for the JobKeeper payment which you as a business owner can do through the Business Portal or work with your BAS or tax agent to complete
The ATO website also runs through the process of confirming the actual JobKeeper payment after 4 May 2020, but I won’t run through this now as this blog focuses on eligibility requirements. Just check out the ATO website for those specific steps if you want to know more.
Enrol for the JobKeeper payment (from 20 April onwards)
You or a registered tax professional can enrol for the JobKeeper payment:
- Step 1 – Register your interest and subscribe for JobKeeper payment updates.
- Step 2 – Check you and your employees meet the eligibility requirements.
- Step 3 – Continue to pay at least $1,500 to each eligible employee per JobKeeper fortnight (the first JobKeeper fortnight is the period from 30 March to 12 April).
- Step 4 – Notify your eligible employees that you are intending to claim the JobKeeper payment on their behalf and check they aren’t claiming JobKeeper payment through another employer or have nominated through another business.
- Step 5 – Send the JobKeeper employee nomination notice to your nominated employees to complete and return to you by the end of April if you plan to claim JobKeeper payment for April. Keep it on file and provide a copy to your registered tax agent if you are using one.
- Step 6 – From 20 April 2020, you can enrol with us for the JobKeeper payment using the Business Portal and authenticate with myGovID. You must do this by the end of April to claim JobKeeper payments for April.
- Step 7 – In the online form, provide your bank details and indicate if you are claiming an entitlement based on business participation, for example if you are a sole trader.
- Step 8 – Specify the estimated number of employees who will be eligible for the first JobKeeper fortnight (30 March – 12 April) and the second JobKeeper fortnight (13 April – 26 April).
Confirmation of eligible employees you will claim JobKeeper Payment for (available from 4 May 2020 onwards)
You or a registered tax agent can apply for the JobKeeper payment for your eligible employees:
- Step 1 – Apply to claim the JobKeeper payment by logging in to the ATO Business PortalExternal Link
- Step 2 – Ensure you have paid each eligible employee a minimum of $1,500 per JobKeeper fortnight before tax.
- Step 3 – Identify your eligible employees in the application form by
- selecting employee details that are prefilled from your STP pay reports if you report payroll information through an STP enabled payroll solution, or
- manually entering employee details in ATO online services or the Business Portal if you do not use an STP enabled payroll solution, or
- using a registered tax agent who will submit a report on your behalf through Online services for agents.
- Step 4 – Submit the confirmation of your eligible employees online and wait for your confirmation email or SMS showing it has been received.
- Step 5 – Notify your eligible employees you have nominated them.
- Step 6 – We will pay you the JobKeeper payment for all eligible employees after receiving your application.
- Step 7 – Each month, you will need to reconfirm that your reported eligible employees have not changed through ATO online services, the Business Portal or via your registered tax agent. This will ensure you will continue to receive the JobKeeper payments from us. You do not need to retest your reported fall in turnover, but you will need to provide some information as to your current and projected turnover. This will be done in your monthly JobKeeper Declaration report.
- Step 8 – If your eligible employees change or leave your employment, you will need to notify us through your monthly JobKeeper Declaration report.
What NOT to do!
Don’t be DODGY! That’s it. Don’t cook up schemes. Don’t change employee employment status. Don’t change turnover figures. Don’t make false statements or anything else that makes it ‘look’ like you are eligible when in fact you are NOT! Just don’t do it.
There is a special taskforce set up to ensure that business owners are doing the right thing and catch out the crooks. There are severe penalties that could be faced for claiming the JobKeeper payment when you are NOT entitled to it.
Things like Single Touch Payroll (STP) reporting and the like are going to make it very easy for the ATO to data match information. So if something flags in their system it’s more like an issue of guilty until you can prove yourself innocent.
Unfortunately, I wasn’t able to cover all the details off about the JobKeeper payment in this blog as it’s quite a long and complicated piece of legislation. But hope this information did help you to understand it a bit better.
Employee nomination notice
Treasury integrity rules