As we know the Federal government has announced further measures to support businesses and their employees through JobKeeper payment. We have summarised the information below focusing on small business entities in the event that you need to take advantage of this support.
What is the JobKeeper Payment?
- A subsidy to the employers with employees.
- A subsidy to the active business owners without employees, such as sole traders, partnerships or trading trusts.
- It is a fortnightly payment of $1,500 per eligible employee or per eligible business without employees from 30 March 2020 for a maximum of 6 months.
Which Employers are Eligible?
Employers will be eligible for JobKeeper, if:
- On 1 March, you carried on business in Australia;
- Your business has faced a minimum 30% decline in turnover;
- Your eligible employees have signed the JoyKeeper Employee Nomination Notice;
- Enrol for the JobKeeper scheme between 20 April and 30 April and advise your employees in writing that you have registered them for the JobKeeper payments.
- Pay your eligible employees at least $1,500 per fortnight from 30 March or a minimum of $3,000 per employee by 30 April.
1 March 2020 is an absolute date. An employer that had ceased trading, commenced after 1 March 2020, or was not pursuing its objectives in Australia at that date, is not eligible.
The decline in turnover test is a once-only test. Once it has been met, there is no need to keep passing the test. If you do not meet the test now, you might be able to access the scheme at a later date but you can only claim payments from the time you register, i.e. there are no retrospective payments.
Projected GST turnover and current GST turnover excludes the following:
- GST you included in sales
- sales that are input taxed sales (e.g. bank interest, sale of shares, residential rental income)
- sales not connected with an enterprise that you carry on (e.g. sale of private car)
- sales that are not made for payment
- payments for no supply (e.g. JobKeeper payments)
- gifts and donations.
- sales not connected with Australia.
There are two decline in turnover tests you can use:
- the basic test, and
- the alternative test.
The Basic Test
To access the April 2020 JobKeeper payments, the basic decline in turnover test requires you to compare any of the following to calculate your fall in turnover:
- 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.
You can choose to test your decline in turnover on either a monthly or quarterly basis, regardless whether you report Activity Statements on a quarterly or monthly GST basis.
To work out how to account for turnover, you may use the accruals basis. However, if you prepare your activity statements on a cash basis, the ATO will also allow you to calculate both the current or projected GST turnovers on a cash basis. The basis used must be the same for calculating your projected and current GST turnover.
The Alternative Test
The alternative decline in turnover test applies where the business does not have a relevant comparison period, for example, the business might have started in January 2020 or the business made a major acquisition. In these cases, the business will need to provide appropriate evidence to the Commissioner to show that the alternative test is satisfied. The Commissioner’s discretion may be required in the special circumstances.
Which Employees are Eligible?
Your employees are eligible if they are employed by you;
- Were part-time, full-time or long-term casual on a regular and systematic basis for at least 12 months, including those stood down or re-hired as at 1 March 2020.
- Were at least 16 years of age as at 1 March 2020.
- Were an Australian citizen, or the holder of a permanent visa, or a Australian tax resident who holds a special category visa (Subclass 444) as at 1 March 2020.
- Are not in receipt of these payments during the JobKeeper fortnight:
- Parental leave or Dad and partner pay through Services Australia(Centrelink); or
- Payment in accordance with Australian worker compensation law for an individual’s total incapacity for work;
- Are not in receipt of a JobKeeper Payment from another employer.
- Agree to be nominated by you.
You cannot claim for any employees who:
- were first employed by you after 1 March 2020, or
- left your employment before 1 March 2020, or
- have been, or have agreed to be, nominated by another employer.
What about the directors who work in the business?
If more than one director wants to access JobKeeper payments, they need to meet the eligibility criteria of an employee. To be an employee, a director would have received salary/wages and this has been reported as salary/wages on activity statements, payment summaries, tax returns etc. If a director merely receives a distribution from the business, then they are unlikely to be an employee.
An employer will need to make superannuation contributions for any amount payable to an employee in respect of their actual employment, disregarding any top-up made by the employer. For example, if the work actually done by an employee over a period entitled them to be paid $1,100, but the employer 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 $1,100. Employers can choose to pay superannuation guarantee on the full amount.
Which Business Owners (without employees) are Eligible?
Business owners are those:
- sole traders and the self-employed with an ABN, and
- one partner in a partnership, beneficiary of a trust, director or shareholder who works in the business (i.e. only one person in a partnership, one beneficiary of a trust, or one director / shareholder are eligible).
Conditions to be met for business owners:
- The entity carried on a business and had an ABN on 12 March 2020; and
- Had some business income in the 2018-19 income year included in a tax return that was lodged by 12 March 2020; or made some supplies connected with Australia in a tax period that started on or after 1 July 2018 and ended before 12 March 2020 and recorded this on an activity statement lodged with the ATO by 12 March 2020. The Commissioner can potentially extend the deadline for holding an ABN, lodging the 2019 tax return or lodging a relevant activity statement.
- Passed the decline in turnover test; and
- The individual was not
- a permanent employee of another entity at the time the individual gives the nomination notice (i.e. they do not hold a full time or part time role with another employer); or
- a nominated JobKeeper employee of any other business; or
- entitled to parental leave pay or dad and partner pay from Centrelink or workers’ compensation payments for being totally incapacitated for work.
As at 1 March 2020, the individual satisfied all of the following:
- Aged 16 years or over; and
- Actively engaged in the business; and
- An Australian citizen, or the holder of a permanent visa, or a Australian tax resident who holds a special category visa (Subclass 444).
If the criteria have been met, the individual is eligible if they were actively engaged in the business in the fortnight of the JobKeeper payment, and they agreed to be nominated for JobKeeper payments and confirmed they pass the eligibility criteria.
Lodgement of Application
You will need to ensure you have completed the registration process between the 20th April and 30th April and hold on files the JobKeeper Employee Nomination for eligible employees if you are employers.
Monthly Reporting obligations
Once application is completed, you will need to re-confirm each month that your reported eligible employees have not changed. This will ensure you will continue to receive the JobKeeper payments from the ATO. 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.
When and how are payments made by the ATO?
Payments will be made monthly by the ATO within 14 days after the end of the calendar month in which the fortnight ends. Payments are for the payroll periods from 30 March to 27 September 2020.
What happens if I get it wrong?
If you claim the JobKeeper subsidy and whether you or the employee was not eligible, the Tax Commissioner can claw back any ineligible payments made. In addition, general interest charges apply.
If you have paid employees the $1,500 amount only to find you or they are not eligible, there is no recourse to claw back these payments to employees.
If your business is impacted by COVID-19, please contact us for assistance. It only takes less than half an hour and could save you thousands.
Contact Beyond Taxation for some help today on 1300 552 993 or email Joy@beyondtaxatin.com.au
General Advice Warning
The information contained in this communication has been provided as general advice only and was prepared while the information was available at the time of writing.