COVID-19 | JobKeeper Payment for Employers FAQs

• The JobKeeper Payment is made to ‘eligible employers’ (see comments below) rather than directly to the employees.The JobKeeper Payment is described by the Government as a subsidy for employers. However, as discussed below, we consider that the scheme should more properly be described as a ‘reimbursement scheme’ as the employer is required to make the payments to the employees before the ATO will make a payment to the employer (see below for comments in relation to this ‘wage condition’). We consider that this has the potential to create a serious cash flow issue for many employers and may even cause many employers to decide that it is not commercially feasible to participate.

Employers (including not-for-profit entities, but excluding those employers subject to the Major Bank Levy) that carried on a business on 1 March 2020, will be eligible for the subsidy if:

• Their business has an ‘aggregated turnover’ (as defined in the income tax law – see below) of less than $1 billion and they have a decline in turnover (tested under the basic test or the alternative test – see below) of at least 30%; or
• Their business has an ‘aggregated turnover’ of $1 billion or more and they have a decline in turnover (tested under the basic test or the alternative test) of at least 50%; or
• They are ACNC-registered (with some exceptions including schools) and they have a decline in turnover (under the basic test or the alternative test) of at least 15%. In this regard, donations are deemed to form part of the entity’s turnover. Please also note that special rules apply to charities that receive government funding. Please contact your William Buck advisor if this applies to you.

These percentage reductions in turnover are referred to as the ‘decline in turnover test’ (see additional comments below).

Additionally, a company that is in liquidation (or entities in bankruptcy) will not be eligible for the subsidy.

Importantly, the 50% reduction precondition will apply where the employer has an ‘aggregated turnover’ of $1 billion or more for either the income year in which the JobKeeper Payment is sought or in the immediately preceding income year. In this regard, the ‘income year’ is the Australian tax year of the employer. Thus, for example, a company with a 31 December year end may have an aggregated turnover of $1.2 billion for the year ended 31 December 2019 and is forecasted to have an aggregated turnover of $0.7 billion in 2020. In this case, the prescribed turnover of the Australian company must fall by 50% for the employer to eligible for the scheme as one of the two ‘test years’ has an aggregated turnover of at least $1 billion.

Thus, ‘30 June year end’ groups may have a different position over a ‘31 December year end’ groups, as the 30 June group will have some months impacted by COVID-19 in both ‘income years’ relevant for the scheme. In contrast, a 31 December group will have the entire year ended 31 December 2019 that has not been impacted. This could be a positive or negative in terms of access to the JobKeeper payment depending on the circumstances of the business.

The ‘aggregated turnover’ of the employer (other than charities) determines whether reduction in turnover under the decline in turnover test needs to be 30% or 50%.

The Rules prescribe that ‘aggregated turnover’ will include the worldwide turnover of the entity plus the worldwide turnover of its connected entities and affiliates – including non-Australian entities. This means, for example, that a small Australian subsidiary of a large multinational group may need to have a reduction in ‘GST turnover’ of at least 50% in order to participate in the scheme.

A core concept of the decline in turnover test are the defined terms of ‘projected GST turnover’ and ‘current GST turnover’. These are defined in the GST legislation and will apply to you even if you are not registered for GST.  These terms are calculated on a ‘stand- alone’ basis – i.e. they are not determined on a consolidated group basis.

For businesses that are part of a GST group, their ‘GST turnover’ will need to be disaggregated from the GST turnover reported in the group’s BAS, including the re-instatement of intra-group transactions. Care needs to be taken where transactions are undertaken between members of the same GST group for no consideration.

The ATO have issued a comprehensive ruling on how to calculate ‘projected GST turnover’ and ‘current GST turnover’ for the purposes of the decline in turnover test. See LCR 2020/1 – a copy is attached here. Please contact your William Buck advisor to work through this ruling.

The ruling also addresses whether you should use a ‘cash’ or accruals’ basis to calculate your projected GST turnover and current GST turnover. Your William Buck advisor can help you on this issue.

To establish that a business has faced either a 30% (or 50% or 15%) reduction in their projected ‘GST turnover’, most businesses would be expected to establish that their turnover has fallen, or will likely fall, for a ’Turnover Test Period’ (see below) relative to their turnover for the same period a year earlier (referred to as the ‘current GST turnover’). This is referred to as the ‘basic test’.

The term ‘projected GST turnover’ is defined in the GST legislation and refers to income from ‘supplies’ that you are ‘likely’ to have for a period. Treasury have stated that a supply is ‘likely’ to be made where, on the balance of probabilities, it can be predicted that the supply is more likely than not to be made. The likelihood of a supply being made must be considered in the context of the facts and circumstances of a particular business. This test will be important in relation to the ‘integrity measures’ associated with the JobKeeper scheme (see below).

A business can also satisfy the decline in turnover test where it passes the one of the ‘Alternative Tests’. The ability to access the decline in turnover requirement via an application of the ‘alternative test’ is limited to seven prescribed circumstances – i.e. it is not an ‘open ended’ discretion available to the ATO. These measures are complex, and you should seek specific advice on this issue from your William Buck advisor. Details of the seven prescribed circumstances where the alternative test may be used can be found here.

The ATO have indicated that there will be some tolerance where employers, in good faith, estimate that they will have a decline in turnover of at least 30% (or 50% or 15%) but actually experience a slightly smaller decline. However, employers need to be aware that this discretion was not codified in the Rules.

The decline in turnover is determined on a stand-alone basis. Thus, some businesses in the economic group may be eligible for the JobKeeper Payment while others may not. It also seems that if, for example, a single company has two divisions, then the decline in turnover test will be applied to both divisions on a combined basis. This may mean that a single company with two divisions will have a different outcome compared to two companies each with a single division.

See additional comments below in relation to ‘service entities’ – i.e. where the employees are employed by a different entity to the one that conducts the business.

Special rules have been introduced in respect of ‘service entities’ – i.e. where the employees are employed by a different entity to the one that conducts the business. Please contact your William Buck advisor if your business involves the use of a service entity.

When applying the basic test, you can choose the Turnover Test Period to be:

• Any month that you choose from March 2020 to September 2020 inclusive – i.e. a choice of seven months; or
• The quarter ended 30 June 2020; or
• The quarter ended 30 September 2020

Importantly, the Rules do not require an alignment of your selection of the Turnover Test Period with the reporting period used in your BAS (i.e. monthly or quarterly). Thus a ‘quarterly BAS reporter’ could use a single month as the Turnover Test Period and vice versa.

The only restrictions on the choice of Turnover Test Period are that:

1. You cannot use projected GST turnover for the quarter ended 30 September 2020 to determine an entitlement to the JobKeeper Payment for the period 30 March 2020 to 30 June 2020; and
2. You cannot use a projected GST turnover for a month in advance of a particular month for which you are seeking to claim an entitlement to the JobKeeper Payment. Thus, for example, you could not use a projected reduction of turnover in May 2020 to claim an entitlement to the JobKeeper payment in April 2020.

The Rules operate such that if, for example, you selected April 2020 as your Turnover Test Period, and (under the basic test method) the reduction as compared to April 2019 satisfies the required threshold (i.e. 15%, 30% or 50%), then you can use this ‘reduction’ to satisfy the ‘reduction test’ for all months of April to September 2020 inclusive and there is no requirement to ‘retest’ this ‘reduction test’ for future months.

Thus, you will not ‘drop in and drop out’ of the scheme over the six-month period – i.e. once you are ‘in’ you should remain eligible for the remaining period of the scheme. Treasury have also indicated that they will not use the monthly turnover data, that you will be required to provide, to test the accuracy of your ‘projected GST turnover’ made in previous periods.

If, as another example, you do not qualify for the JobKeeper payment scheme for the month of April 2020, because your turnover has not been sufficiently affected, you can reconsider your turnover in a latter month to determine if the test has been met. This allows employers that only become affected part way through the six-month period of operation to participate. In this case, however, the entitlement is not backdated to the commencement of the scheme. Your entitlement will still cease on 27 September 2020 – i.e., you will not receive six months of entitlement from when you first qualify.

An employee is an ‘eligible employee’ at a particular time if the individual:

• Is currently employed by the eligible employer (including those stood down or re-hired);
• On 1 March 2020 were 18 years of age or older (if they were 16 or 17 they can also qualify for fortnights before 11 May 2020, and continue to qualify after that if they are independent or not undertaking full time study);
• Was employed by the employer at 1 March 2020 as a full-time employee, a part time employee, or a ‘long-term casual’. The term ‘long-term casual’ is defined as being an individual who was a casual employee as at 1 March 2020 and had been employed by the employer seeking the JobKeeper Payment on a regular and systematic basis during the period of 12 months ended on 1 March 2020. The rules provide measures to accommodate continuity of service where a change of employers occurs in relation to the sale of a business;
• Was an Australian resident (within the meaning of section 7 of the Social Security Act, 1991), or was a resident of Australia Australian tax purposes and was the holder of a Subclass 444 (Special Category) visa;
• Was not in receipt of a JobKeeper Payment from another employer; and
• Has agreed to be nominated by you as an employer by completing the attached form.

Employees receiving Parental Leave Pay or Dad and Partner Pay from Services Australia are not eligible. However, employees on parental leave from their employer will be eligible. Employees receiving workers compensation will be eligible if they are working, for example on reduced hours, but will generally not be eligible if they are not working. Please contact your William Buck advisor for details of the interaction of the JobKeeper payment Scheme and the grants and subsidies available in respect of apprentices and how to maximise your claim.

You are required to notify your eligible employees that you intend to make a claim for the JobKeeper Payment in respect of their employment with you. There are strict timelines as to when this notification must be provided (see Rules 6(3) and 10A). Contact your William Buck advisor for more details.

The rules were amended on 1 May 2020 to clarify that employers must ensure that all of their eligible employees are covered by their participation in the scheme. The employer cannot select which eligible employees will participate in the scheme. That is to say, employers are not permitted to ‘cherry pick’ which employees will be the subject of a JobKeeper Payment ‘claim’. Treasury have stated “this one in, all in rule is a key feature of the scheme”.

In other words, if you decide to participate in the JobKeeper Payment scheme, you must nominate all your eligible employees. You cannot choose to nominate only some employees. However, individual eligible employees can choose not to participate.

One issue which is not entirely clear is what the consequences will be if, for example, an employer with five eligible employees pays the $1,500 per fortnight to only four of the employees. That is to say, we need further guidance as to whether this will impugn the employer’s entire claim for the JobKeeper Payment or only the claim in respect of that one employee. At this stage, it appears that the latter outcome will apply.

In addition, employers need to be aware of, and seek legal advice as appropriate, in relation to sections 789GD and 789GDA of the Fair Work Act 2009 which are set below. These two provisions, which are both civil remedy provisions, seem to have been introduced as a deterrent for those employers that may seek to achieve a ‘quasi cherry picking’ outcome – i.e. whereby, continuing from the example from above, the employer has five eligible employees (under the one in, all in principle), but simply ‘chooses’ not to pay one of the eligible employees the minimum amount of $1,500 per fortnight.

789GD Obligation of employer to satisfy the wage condition

If:

1. An employer qualifies for the JobKeeper scheme; and
2. The employer would be entitled to JobKeeper Payment for an employee for a fortnight if (among other things) the employer satisfied the wage condition in respect of the employee for the fortnight;

the employer must ensure that the wage condition has been satisfied in respect of the employee by the end of the fortnight.

789GDA Minimum payment guarantee

1. For the purposes of this Part, the minimum payment guarantee consists of the rule set out in subsection (2).
2. If a JobKeeper Payment is payable to an employer for an employee of the employer for a fortnight, the employer must ensure that the total amount payable to the employee in respect of the fortnight is not less than the greater of the following:

1. 1. The amount of JobKeeper Payment payable to the employer for the employee for the fortnight;
   2. The amounts payable to the employee in relation to the performance of work during the fortnight.

You can identify your eligible employees, and notify the ATO of the relevant details, in one of the following ways:

1. 1. Directly into your payroll software, providing your software has been updated with JobKeeper functionality
   2. Through the Business Portal – 200 employees or less
   3. Through the Business Portal – more than 200 employees

i. Directly into your payroll software 

If you use STP enabled payroll software updated with JobKeeper functionality:

• Update each eligible employee in your payroll software and lodge via your payroll software. Speak to your software provider to find out how.
• Log in to the Business Portal to register the details of the eligible business participant and provide a start period, if required.
• Future changes to JobKeeper employee eligibility and changes to employees are actioned in your software.

ii. Through the Business Portal – 200 employees or less
If you use STP enabled payroll software that does not offer JobKeeper functionality, and you have 200 employees or less:

• Log into the Business Portal from 4 May 2020.
• If you are a partnership, trust or company, you can register the details of the eligible business participant and provide a start period.
• Identify eligible employees for each JobKeeper fortnight:
  • Select eligible employees from a list of employees prefilled from your STP pay reports.
  • Add up to 40 employees that are potentially eligible but not prefilled, if required.

iii. Through the Business Portal – more than 200 employees

If you use STP enabled payroll software that does not offer JobKeeper functionality, and you have more than 200 employees:

• Log into the Business Portal from 4 May 2020.
• If you are a partnership, trust or company, you can register the details of the eligible business participant and provide a start period.
• Manually create a JobKeeper allowance in your STP enabled payroll software (refer to your payroll software provider for details) and lodge a pay report to the ATO via your software.

Alternatively, you can use the JobKeeper Payment Guide sample payload files available on the ATO website or produce your own JobKeeper report and provide it back to the ATO by uploading via the Business Portal Transfer file function.

Additional reporting methods are available if you do not use STP.

The JobKeeper Payment scheme will apply only to employees. Thus, genuine contractors will be excluded. However, such contractors may be eligible for the JobKeeper Payment in their own right.

Yes – the JobKeeper Payments will be available to self-employed businesses. No details are available at this stage in relation to the interaction with the personal services income rules.

Employers will need to satisfy the ‘wage condition’ requirement for their eligible employees in respect of each 14-day period covered by the scheme.

The ‘wage condition’ requirement is that employers have already paid their eligible employees a minimum of $1,500 per fortnight in the scheme fortnight payment period. Where an employer pays their employees on a monthly basis, the ATO will be able to reallocate payments between periods, However, overall an employee must have already received the equivalent of $1,500 per fortnight before the employer becomes entitled to the JobKeeper Payment. In elaboration, and having regard, to when the relevant fortnight periods end, an employer must make monthly payments of $3,000 per month for each month except August where $4,500 must be paid (as three fortnights fall within that month).

We consider this requirement may jeopardise the success of the scheme as it means:

1. The employer faces the cash flow issue of having to fund the payment to the employee (of at least $1,500 per fortnight, even if this exceeds the usual payment that would have been made) and then wait to receive the JobKeeper Payment from the ATO. This ‘waiting period’ may be more then 30 days (see below). This issue may mean that employers will need to obtain temporary cash flow support from their banks to cover the timing difference between payment to employees and receipt of the JobKeeper Payment from the ATO; and
2. The employer faces the commercial risk of, having paid the employee, being exposed to the possibility that they are not eligible, for any reason, to receive the JobKeeper Payment from the ATO. Thus, the employer will be exposed to the risk of funding a ‘non-subsidised’ cost. This commercial risk may also impact the willingness of banks to fund the timing difference.

In our view these risks (cash flow and commercial) have the potential to discourage employers from participating in the scheme, especially in light of the position that the ‘one in, all in principle’ applies to eligible employees.

The ATO have stated that in terms of satisfying the ‘wage condition’ for the first two fortnights (30 March – 12 April, 13 April – 26 April), the ATO will accept the minimum $1,500 payment for each fortnight has been paid by you even if it has been paid late, provided it is paid by you on or before 8 May 2020. This means that you can make two fortnightly payments of at least $1,500 per fortnight, or a combined payment of at least $3,000 on or before 8 May 2020.

On 24 April 2020, Treasury released the following a statement stating that:

“The banks have also agreed to setup special hotlines to help businesses who need finance to bridge the gap until the first JobKeeper payments are made. The banks have also agreed to bring JobKeeper-related applications to the front of the queue and work with the ATO to accelerate the finance assessment process”.

The scheme operates on a fortnight to fortnight basis. The first fortnight period will be 30 March 2020 to 12 April 2020. The last fortnight period for which the entitlement may accrue will be the period 14 September 2020 to 27 September 2020.

The first payments to be employers will be made from the first week of May 2020 with entitlements backdated to the fortnight ended 12 April 2020.

Thereafter, the ATO will make payments to employers, 14 days after the end of the calendar month in which the fortnight ends. Thus, for example, for the fortnight ending on 10 May 2020, the employer will need to wait until 14 June 2020 for ‘reimbursement’.

The rules state that the ATO cannot offset an entitlement to a JobKeeper Payment against other debts that the employer may have with the ATO.

Refer to comments under the heading ‘How do I work out the extent of my reduction in turnover?’

In these cases, you may be able to nominate one additional ‘principal’ as an eligible employee. The relevant entity must carry on a business in Australia.  The one principal that can be nominated must be the sole trader per se, a director or shareholder of the company, a beneficiary of the trust or a partner in the partnership.

Importantly, there is no requirement for the business to have paid the principal $1,500 per fortnight in advance of seeking to claim the JobKeeper Payment. That is to say, there is no need to satisfy the ‘wage condition’ for the principal.

Finally, in order for the business to be eligible to claim the JobKeeper Payment in respect of the principal, the business must as at 12 March 2020 (unless the ATO exercises its discretion and allows you further time), (i) have an ABN and (ii) have lodged a 2018-19 income tax return or a ‘GST return’ which demonstrates that the business had made a taxable, GST-fee or input taxed supply during the period 1 July 2018 to 12 March 2020.

The relevant individual (other than sole trader) is required to provide the business with a notification form. Please contact William Buck if you require this form. Sole traders notify the ATO of their ‘participation’ via the online enrolment process.

The scheme applies to various classes of employees including, employees who have been ’stood down’. This is a legal term applied for the purposes of, inter alia, section 524 of the Fair Work Act, 2009. This term has a very different meaning to the term ‘redundant’. It is critical that you discuss the difference with your legal advisor and be clear as to the status of your employees.

If you made an employee reductant before 1 March 2020, then you will not be entitled to receive any amount of JobKeeper Payment in respect of that employee. This will also be the case if you have made an employee redundant on or after 1 March 2020 and have not re-hired that employee.

If the employee was employed on 1 March 2020 (and is otherwise an ’eligible employee’) and that employee has been made redundant after that date and you re-hire that employee, then you will be entitled to receive any amount of JobKeeper Payment in respect of that employee for the period commencing from the date the employee was re-hired.

Yes. Of course, the other conditions must be satisfied, including the ‘wage condition’ referred to above.

The legislation enabling the JobKeeper Payment also makes significant amendments to the Fair Work Act, 2009.  The amendments include measures allowing for variation in hours or work, work duties and other employment conditions.  It is critical that you discuss with your legal advisor any proposed changes to employment conditions.

If you have an employee who otherwise earns, say, $2,500 per fortnight (before tax) and you continue to pay this employee, then the employer will receive a subsidy of $1,500 for that fortnight.

If the employee would otherwise receive less than $1,500 per fortnight (before tax) or has been stood down (and is not receiving any salary), then the employer will be entitled to a JobKeeper Payment of $1,500 per fortnight provided they have paid this to the employee. Thus, some employees may receive a ‘pay rise’ under these measures.

No. However only one employer can receive JobKeeper Payment amount in respect of an individual.

Yes. In this regard, it is noted that for most employees a payment of $1,500 per fortnight before tax will be subject to $192 of PAYG withholding – i.e. the employee will receive net payment of $1,308 per fortnight. However, the actual amount of PAYG withholding will depend on the particular circumstances of the employee.

This issue is best explained by way of two examples:

1. If an employer pays an employee $4,000 per fortnight (before tax) and receives a JobKeeper Payment of $1,500 per fortnight, then superannuation is payable on the entire $4,000.
2. If an employee continues to work for an employer and receives $1,000 per fortnight (before tax), then the employee will receive the ‘usual’ $1,000 plus an additional top-up payment of $500. The employer will receive a JobKeeper Payment of $1,500. The employer must pay superannuation on the $1,000 and has an option to pay superannuation on the additional $500.

As an extension of (2), if an employee has been stood down and is receiving no salary, they will receive a ‘top-up’ payment of the full $1,500 per month from their employer. The employer has an option of paying no superannuation on the entire $1,500.

As at 7 May 2020, Queensland, Victoria, South Australia, Western Australia and Tasmania had all released announcements regarding the payroll tax implications of the JobKeeper Payment Scheme. Details of the announcements can be found in the ‘State-by-State’ measures here.

We need to wait for details on this issue from the relevant States and Territories.

The JobKeeper Payment received by an employer will be assessable income of the employer. The usual rules for deductibility apply in respect of the amounts you pay to your employees.

The payments made to the employee would be assessable income of the employee.

No. The JobKeeper Payment is not subject to GST.

Each month, you must reconfirm your reported eligible employees. This can be done through the Business Portal or via your registered tax or BAS agent. The online form became available from 4 May 2020.

If your eligible employees change or leave your employment, you will need to notify us through the business monthly declaration report.

You must also provide information as to your current and projected GST turnover. This is not a retest of your eligibility, but rather an indication of how your business is progressing under the JobKeeper Payment scheme.

Yes – if you have received JobKeeper payments relating to employee wages that qualify for the R&D tax incentive, then a portion of those wages are considered not “at-risk” and will not be eligible for the incentive. The amount of the expenditure not eligible for the R&D tax incentive will depend on the portion of the employee’s time spent on eligible R&D activities during the JobKeeper fortnight.

No adjustment is required for JobKeeper payments received relating to “business participants” as those payments do not relate to any expenditure that qualifies for the R&D tax incentive.

Yes – there are comprehensive and severe penalties for anti-avoidance and contrived schemes. The anti-avoidance rules are based on Part IVA of the Income Tax Assessment Act 1936 and would capture any arrangements that could objectively be considered to have been entered into with intention of accessing the JobKeeper Payment when in ordinary circumstances the employer (or employee) would not have qualified.  An example would be manipulating turnover to meeting the 30% (or 15% or 50%) reduction test. Further guidance from the ATO on these integrity measures can be found here.

A critical aspect of the scheme is the forecasting of your GST turnover and comparing this to a prior period. William Buck can assist you in collating the relevant historical date, disaggregating GST groups and preparing reasonable forecasts of turnover for coming months.

William Buck can also assist you in developing a supportable position as to why ‘last year’ may not be the relevant comparison period and managing how this is presented to the ATO including, where appropriate, adopting the alternative tests.

The ‘wage condition’ will give rise to cash flow issues for employers. William Buck can assist you to manage these issues and, where required, discussion this matter with your banks to seek temporary cash flow support.

William Buck can assist with reviewing the eligibility of employees.

The scheme also has a myriad of reporting requirements. Failure to adhere to any one of these requirements will jeopardise your entitlement to the JobKeeper Payment. William Buck can ensure you satisfy these requirements.