The JobKeeper scheme is the most significant measure to assist businesses during the COVID-19 crisis – even if it is going to cost a lot less than initially thought.
Fall in turnover – basic test
JobKeeper is available to employers and other “business participants” (eg sole traders, partnerships, beneficiaries of a trust and shareholders) that anticipate a significant fall in turnover – at least a 30% fall if annual turnover is $1bn or less (otherwise at least 50% or, for most registered charities, at least 15%).
GST turnover is used to measure the fall in turnover, but the test is modified in certain circumstances – e.g. if a business entity is part of a GST group, GST turnover is calculated as if it wasn’t part of the group.
The ATO expects entities to use the GST accounting method (cash or accruals) they usually use in working out turnover.
The fall in turnover is measured by comparing anticipated GST turnover for a month or quarter in this year (the test period) with actual GST turnover for the same period in 2019 (the comparison period), e.g. June 2020 with June 2019 or the July-September 2020 quarter with the same quarter in 2019.
Most non-profit organisations that are registered charities have to show a 15% fall in turnover.
Alternative fall in turnover tests
There is an alternative fall in turnover test where it is not appropriate to compare the test period with the comparison period. This includes where:
- you did not commence business until after the comparison period;
- the business is not the same now as in the comparison period, e.g. because of a business restructure, acquisition or disposal;
- your turnover for the comparison period was unusually low (e.g. because of drought) – and not because of cyclical or regular seasonal variance; or
- turnover has increased significantly in the period before the test period (e.g. by 25% or more if looking at the 6-month period immediately before the test period).
There is also an alternative fall in turnover test where a special purpose service entity provides employee labour to other members of a group and the service entity does not satisfy the basic fall in turnover test.
Employers – eligible employees
An employer can only JobKeeper for eligible employees only. They must be employed for each fortnight for which you claim JobKeeper (including those who are stood down or re-hired).
An employee is an eligible employee is they are full-time, part-time or fixed term, or a long-term casual (someone employed on a regular and systematic basis for at least the previous 12 months). They must 18 or older and an Australian citizen or the holder of a specified class of visa (working holiday makers are not eligible employees).
If a person has more than one job, only one of their employers can claim JobKeeper for that person.
If you decide to participate in the JobKeeper scheme, you should nominate all eligible employees who have chosen to participate.
Sole traders etc
If you are a sole trader or other business participant (e.g. a company director or a partner), you cannot claim JobKeeper unless you are actively engaged in operating a business. You cannot be an employee of the particular business entity or a permanent employee of any other entity.
In addition, you must be 16 or older at 1 March 2020 (18 or older if a beneficiary of a trust) and either an Australian citizen or the holder of a specified class of visa.
The relevant business entity must:
- have had an ABN on 12 March 2020; and
- have disclosed either assessable business income in the 2018-19 tax return or a supply in a BAS or GST return for any tax period between 1 July 2018 and 12 March 2020. The supply can be a GST-free or input taxed supply.
In limited circumstances, the ATO has a discretion to treat those 2 requirements as being satisfied even if they are not.
Only one payment per entity can be claimed. For example, in the case of a partnership, only one partner can claim JobKeeper.
Amount of JobKeeper
The amount of the JobKeeper payment is $1,500 a fortnight for each eligible employee or business participant. Employers must pay each eligible employee at least $1,500 per fortnight before tax.
The 2 fortnightly periods beginning in June are 8 June to 21 June and 22 June to 5 July. The last fortnightly period will be from 14 September to 27 September (this year).
If you usually pay your employees less frequently than fortnightly, the payment can be allocated between fortnights in a reasonable manner. For example, if you pay your employees on a monthly pay cycle, your employees must have received the monthly equivalent of $1,500 per fortnight ($1,500 x 26/12 = $3,250).
You may lose the JobKeeper payment if you enter into a scheme designed to create an entitlement to JobKeeper or to increase the amount paid. The ATO has issued guidelines on how it may apply this rule in certain situations – e.g. where a business uses a service entity to employ workers.
You have to enrol with the ATO to participate in the JobKeeper scheme. You can do this online. You had to enrol by 31 May 2020 if claiming for payments in April and May 2020.
If you are an employer, the process differs depending on whether you report through Single Touch Payroll.
You have to identify each person for whom you will claim the JobKeeper payment. You only need to identify eligible employees or the eligible business participant once.
If you are an employer, you have to notify all eligible employees they are receiving JobKeeper.
You will have to provide a monthly declaration to the ATO – this can be done from the 1st to the 14th day of each month, to receive reimbursements for the payments you have made to your employees in the previous month.
The declaration requires you to reconfirm your eligible employees and provide information on your current and projected GST turnover. You will also need to notify the ATO if your eligible employees change or leave your employment.
JobKeeper payments form part of the business entity’s assessable income. Of course, an employer can claim a deduction for wages paid to employees even if subsidised by JobKeeper.
Tip! The JobKeeper scheme is complicated, so talk to your tax adviser to see if you qualify. Your tax adviser can also enrol you for JobKeeper on your behalf.
Read our complete June 2020 Taxwise Business Newsletter here