Jobkeeper payment – how do you qualify for the largest federal rescue mission of all?
Jobkeeper Payment
The jobkeeper payment will cost us an estimated A$130 billion over the next 6 months. That is a lot of money. How do you get your fair share of it?
To find an answer, we spoke to Andrew Henshaw of Velocity Legal on Thursday afternoon 9 April 2020. Here is what we learned but please listen in as Andrew explains this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Jobkeeper Payment
The jobkeeper payment is a wage subsidy. It is to help you keep your staff through the COVID-19 crisis. So that when all this is over, you got your team ready to go. And so it is a temporary scheme to help you over the next 6 months (1 April to 30 September 2020).
The payment is $1,500 per fortnight per employee for up to 6 months.
Scope
The scope is very wide. Much wider than is the case for the cash flow bonus. The jobkeeper payment is for any business, self-employed and charity that passes the relevant conditions.
Charities must be registered with the Australian Charities and Not-For-Profit Commission (ACNC). Even non-government schools and private vocational education providers are eligible.
There are just four big exceptions – businesses in liquidation, major banks, government and any business or industry specifically excluded – none of these qualify.
A business in liquidation is on its way out. No point trying to keep its staff.
Major banks obviously don’t pass the I-am-not-a-bank test.
Government is specifically excluded. Be it Australian federal, state or local governments and their agencies, be it foreign governments and their agencies or wholly-owned corporations of these – none are eligible.
And if a specific industry – for example the airline industry – will become the subject of a specific rescue mission, then they might get excluded from the Jobkeeper Payment as well.
Eligibility
To receive the payment, both the employer and the employee need to qualify. So you might have a business where the employer qualifies but the employee doesn’t. Or the employee qualifies but the employer doesn’t. You need both to be eligible.
Employers
As an employer your business must meet two conditions at the time of applying to be eligible. Let’s call them the Turnover Test and the I-am-not-a-bank Test.
1 – The Turnover Test
Your turnover has or – by your estimate – will fall by at least a certain percentage relative to a comparable period.
This percentage is 15% for ACNC registered charities and 30% for all businesses with a turnover of $1b or less. The big guys with a consolidated turnover of more than $1b need a drop in turnover of 50% to qualify.
This test can be really easy to pass if you are in lock down. Or really hard if you are still operating but your clients or customers stopped paying.
2 – The I-Am-Not-A-Bank Test
Your business is not subject to the Major Bank Levy. This one should be easy. You are either subject to the levy or you aren’t.
Comparable Period
You compare your current turnover to the turnover of a comparable period, but what is a comparable period?
It doesn’t matter whether you are a quarterly lodger or a monthly lodger. So as a quarterly lodger, you can still compare months. And as a monthly lodger, you can compare quarters.
If last year’s period is not representative – you might be a new business or went through a big expansion or acquisition – then you can use a so-called ‘alternative test’. You need to present additional information to show how COVID-19 adversely affected your turnover.
The Tax Commissioner will have discretion to consider this information and decide whether you are eligible under your specific circumstances.
Turnover
Turnover is based on what is reported in your Business Activity Statements (BAS). So your turnover includes all taxable supplies and all GST free supplies but not input taxed supplies.
Do you use cash or accrual? It depends on how you calculate turnover for GST. If you calculate your turnover based on cash, you use cash. If you use accruals, you use accruals.
Tolerance
What happens if you get this wrong? You think your turnover will drop by 31% but then it actually just dropped by 29%. What happens then?
The Treasury’s fact sheet writes this, “There will be some tolerance where employers, in good faith, estimate a 30 per cent …or more fall in turnover but actually experience a slightly smaller fall.”
So small variations should be ok.
Employee
The employer must qualify, but that is not enough. The employee must qualify as well. To qualify an employee must meet five conditions. The employee must be – as of 1 March 2020:
1 – An Australian citizen, permanent resident or a subclass 444 visa (NZ);
2 – An Australian resident for tax purposes;
3 – At least 16 years old;
4 – Not receiving Parental Leave Pay from Services Australia;
5 – A full time, part-time or long-term casual employee.
A long-term casual employee has been with their employer on a regular and systematic basis for at least the previous 12 months as at 1 March 2020.
Employees on parental leave from their employer will be eligible.
For employees on workers compensation it all depends on whether they were working on 1 March 2020 or not. If they were working, even if just on reduced hours, they qualify. If they were not working, they don’t.
1 March 2020
It all depends on the 1 March 2020. Even if an employee was stood down after 1 March, they can still qualify as long as they meet all five conditions as of 1 March 2020.
Application
The jobkeeper payment is not an automatic payment like the cash flow boost. Instead you need to enrol, outlining how you were affected by the crisis and providing the relevant details. Enrolments open on 20 April 2020. To claim the Jobkeeper payment for April, you need to enrol by 30 April, so you just got 10 days.
What you have done so far (16 April 2020) is just an ‘expression of interest’.
Payments
You must pay at least $1,500 per fortnight for each employee you put on jobkeeper payments. PAYG withholding applies as if this was a normal wage payment.
As an eligible employer, you then receive the jobkeeper payment at the start of the following month in arrears.
So while you pay your employees fortnightly, the jobkeeper payment is paid monthly, resulting in a cash flow gap you need to fund.
No superannuation guarantee payments are required to be paid on the Jobkeeper Payment.
Timing
The subsidy will start on 30 March 2020, with the first payments to be received by employers in the first week of May.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.