The JobKeeper program is the cornerstone of the Government’s COVID-19 economic response measures, with an estimated cost of approximately $130 billion.
The measures have been enacted very swiftly so the rules and requirements are being updated “on-the-go”. Many startups are scratching their heads wondering if they actually qualify for the program and what do they need to do to be paid JobKeeper.
The purpose of this article is to provide insight on some of the most commonly-asked questions we have received from the tech sector over the last few weeks about how the JobKeeper measures apply to startups and scaleups.
Usual disclaimer: this article provides general information and is not tax advice. Each business has its own individual set of facts and circumstances, so customised and holistic tax advice is recommended.
How long is the JobKeeper program?
Six months from April to September 2020.
What if I qualify for JobKeeper partway through the program, will I receive 6 months of payments from the date I am eligible?
No, the six month period is fixed and ends 27 September 2020.
Can I wait to receive the JobKeeper payments before paying my employees?
No, businesses must pay employees first before receiving the JobKeeper payments, which could represent a serious cash flow hurdle. This feature of JobKeeper was specifically discussed with the Government, whose response was that businesses should seek to borrow from banks – not a realistic option for many startups and scaleups.
Do I have to include all eligible employees in the JobKeeper program?
Yes, you can’t pick and choose which eligible employees to include. Some employees may not be eligible, which they must inform you of when they complete the Employee Nomination Notice.
What if my employees are paid less than $1,500 per fortnight?
You must pay your employees at least $1,500 per fortnight to qualify for JobKeeper. Note that any amounts you have to pay to top-up your employees to the $1,500 per fortnight is not subject to compulsory super.
Can I change an employee’s hours of work or other employment conditions and still qualify for JobKeeper?
Possibly, depending on how the Fair Work Act applies to the relevant employment contract. It is critical that you discuss with your legal advisor any proposed changes to employment conditions.
Can I defer paying my employee’s super during this time?
No, the ATO views superannuation as a non-negotiable and they follow up every single tip-off they receive about unpaid super. Startups should continue meeting their super obligations.
I have employees but my startup is pre-revenue, am I eligible for JobKeeper?
Unfortunately not, it seems that pre-revenue companies miss out altogether.
What is the “basic test” for qualifying for JobKeeper?
Broadly, you will need to demonstrate at least a 30% decline in revenue between a month or quarter during the JobKeeper period this year compared to the equivalent month or quarter last year.
Does the reason for a decline in turnover need to be related to COVID-19?
No, some startups may qualify for JobKeeper even if COVID-19 has had little to no impact on their business.
My revenue isn’t down 30% compared to last year, can I still qualify?
Potentially. Businesses that don’t satisfy the basic test for a decline in turnover may still qualify under the “alternative test”. Some of the measures available under the alternative test are specifically relevant to fast-growing startups or businesses with “lumpy” revenue due to large projects or multi-year subscription payments.
We highly recommend that you look up our in-depth analysis of how the alternative test applies to startups in our article on Startup Daily – https://www.startupdaily.net/2020/04/startups-need-to-know-jobkeeper-alternative-test-qualify/.
Do I need to continue showing a 30% decline in turnover each month?
No, businesses only need to demonstrate a decline in turnover once. However, which period they choose to demonstrate JobKeeper eligibility will affect the quantum of payments received. For example, if they qualify for the month of March 2020 then they are eligible for the entire JobKeeper program, whilst a lesser entitlement will arise if they could only demonstrate eligibility for the month of May.
What if I claim JobKeeper expecting turnover to decline by 30% but it doesn’t, do I need to repay any payments I receive?
No, the ATO will accept your revenue forecasts provided they are “reasonable”. It is vital then that startups maintain detailed records of how they have calculated an anticipated decline in revenue.
I have a group of companies, how do I calculate decline in turnover?
Decline in turnover is calculated on a standalone entity basis (i.e. the entity with the employees). The only exception to this is for eligible “employment service entities”, where decline in turnover is calculated on a group basis.
I haven’t paid myself a wage, can I still claim JobKeeper?
Potentially, as an “eligible business participant”. Each business (whether it be a company, trust, sole trader or partnership) is allowed a maximum of one eligible business participant.
I have another job, can I claim JobKeeper for myself through my startup and my employer?
No, you are only entitled to one JobKeeper payment. You must nominate which employer receives the JobKeeper payment when you complete the Employee Nomination Notice.
Can I claim JobKeeper for payments to contractors?
No, it only applies to employees. But those contractors might be eligible for JobKeeper for their own business.
Are JobKeeper payments taxable?
Yes, employee wages are deductible so naturally this subsidy is taxable.
I believe I’m eligible, what do I need to do today?
If you believe you are eligible for the JobKeeper program then as a priority you should:
- Make sure you continue paying your employees $1,500 per fortnight
- Enrol for JobKeeper through the ATO website and make sure they have your current bank account details
- Send all employees the Employee Nomination Notice to complete
- Have robust revenue forecasts in place and preferably have them reviewed by your accountant
- Update your Xero file or other payroll software to include the various JobKeeper payroll categories that are required