JobKeeper – a definitive ‘how to’ guide for employers
Step 1. Determine that your business is eligible for JobKeeper
A business is eligible for JobKeeper if all of the following apply:
The business operated as at 1 March 2020 and had under its employment at least one eligible staff member and/or one active self employed owner of the business (sole trader, a partner in a partnership, a beneficiary in a trust or a director/shareholder of a company).
The eligible staff member/self employed owner remains under employment for each fortnight the business seeks to claim for from 30 March 2020 (or a later date if registration occurs later) until the scheme ends or the business ceases claiming the payment. This means employees that may have been previously stood down need to be re-engaged and paid at least the amount of the JobKeeper payment.
The business has or will suffered a 30% reduction in turnover compared to the same time last year if you are a small business or if the business is registered as a charity with the ACNC it has suffered a 15% reduction in turnover.
The period that management determines whether the business has suffered this reduction in turnover will then determine what period the JobKeeper entitlement starts (assuming the business has already registered for JobKeeper). The business turnover for JobKeeper purposes is based on its GST reporting method (ie whether you use the cash method of accruals method for GST determines which method is used for assessing turnover for this test). To be eligible from 30 March to 26 April (the first concessional period) the business must suffer this reduction in turnover in one the following periods:
The month of March 2020 – actual turnover for the month compared to actual turnover from March 2019.
The month of April 2020where projected turnover for the month is compared to actual turnover from April 2019.
The June 2020 quarter where projected turnover is compared to actual June 2019 quarter turnover.
If the business is not unable to satisfy this turnover test at the time you assess revenue because it has not suffered the required turnover reduction (30% or 15%) then you cannot register at that time. You can however continue to review this over the 6 month period the JobKeeper is applicable (30th March to 27th September) and register at that time. This means that you can review your May, June, July, August or September month projected turnover or your September quarter turnover. If you do register at a later date the business will only be eligible for JobKeeper payments from that date and these payments will not be backdated.
It is important to note that the turnover test only needs to be met once and doesn’t need to be reviewed later. This means that if the business suffers a turnover reduction of 30%/15% in one month/quarter but then does not suffer this reduction in subsequent months it does not lose JobKeeper eligibility.
If JobKeeper is paid to the employer on projected turnover that under-estimates actual turnover (eg If projected May 2020 turnover is less than 30% of May 2019 turnover but actual May 2020 turnover correlates to only a 20% reduction on May 2019) then the ATO can use its discretion to allow the business to retain the JobKeeper payments received by the ATO. If the ATO deems that the business was not in fact eligible to receive JobKeeper, the business will be required to repay the funds to the ATO. If this occurs, the employer is ineligible to claim the JobKeeper payments back from employees. Therefore it is important to seek advice if the business is seeking on claiming JobKeeper based on revenue projections.
https://www.ato.gov.au/General/JobKeeper-Payment/Employers/Eligible-employers/
Step 2. Determine your employee/s are eligible employees of the business for JobKeeper purposes
An employee will be an eligible employee as long as they:
are aged over 16
are an Australian resident
either were a permanent or part-time employee as at 1 March 2020 or were a casual employee whom has been working for the business for at least 12 months as at 1 March 2020 and are not a permanent employee of another employer.
Are not currently receiving JobSeeker payments from Centrelink or are receiving Paid Parental Leave funded by Centrelink. If an employee is receiving JobSeeker but would rather receiving JobKeeper they can advise Centrelink of this intended change and then become eligible for JobKeeper.
Employees who were stood down after 1 March 2020 and fit the criteria above are eligible for JobKeeper purposes (provided they are re-engaged).
As a sole trader, you are eligible to be considered an employee of the business.
One partner in a partnership is eligible to be considered an employee of the business.
One working beneficiary of a trust is eligible to be considered an employee of the business.
One working Director or Shareholder of a company is eligible to be considered an employee of the business.
https://www.ato.gov.au/General/JobKeeper-Payment/Employers/Your-eligible-employees/
Step 3. Notify your eligible employee
Contact your eligible employees to notify them that you intend to claim a JobKeeper payment on their behalf, provide them with the JobKeeper employee nomination notice and have them return this notice to you. The JobKeeper notification form is linked below.
https://www.ato.gov.au/assets/0/104/300/387/d1aab7f2-fbe8-44b8-9ec1-4885ded1088e.pdf
Step 4. Continue to pay your employee a minimum $1,500 per fortnight (before tax)
This is the most important aspect of JobKeeper. The JobKeeper payment is a reimbursement made to a business by the ATO based on the fact you have paid your eligible employee this minimum amount. This scheme does not work on the basis that the ATO pays you and then you pay the employee. You must pay the employee first and then submit the relevant information to the ATO to seek reimbursement. If employees have been stood down with no pay, they need to be re-engaged and paid for the business to be eligible for JobKeeper
If you normally pay your employee less than $1,500 per fortnight you need to increase their payment to $1,500 per fortnight (the business does not get to keep the difference).
If you normally pay your employee more than $1,500 per fortnight, continue to do so (unless you are reducing their hours/standing them down in which case their per fortnight pay must not be reduced below $1,500).
The ATO is providing a concession for the first two fortnights (the first fortnight covers the period 30th March to 12th April and the second fortnight covers the period 13th April to 26th April) that states as long as a minimum $3,000 (before tax) is paid to your eligible employee during this period you will be eligible for the full JobKeeper reimbursement even if the payment is made in one lump sum (and not in the individual fortnights). This means that stood down employees (who are not receiving JobSeeker in this period) would need to be ‘back-paid’ in order for the business to be eligible to claim JobKeeper for these employees.
After this initial two fortnight concession period you must ensure that your eligible employees are paid during each fortnightly period at least the minimum of $1,500 amount or else you will not be eligible for reimbursement. If staff are paid monthly, provided the pay period covers the fortnight it will be eligible even if there is no payment in the fortnight itself (because the pay period falls in the next fortnightly period).
Step 5. Register for JobKeeper with the ATO
You may have thought you have already registered your business with the ATO for JobKeeper but up until the 20th April 2020 you can only register your intent for JobKeeper on the ATO website. From the 20th April 2020 you actually need to register your business for JobKeeper online via the Business Portal (using your myGovID) or request that Bush & Campbell do this on your behalf (via our Tax Agent Portal).
If you do not have access to the Business Portal using myGovID you can set this up here:
To be eligible for the first two fortnight periods (30th March to 12th April and 13th April to 26th April) you must register with the ATO by 26 April 2020. Any applications after this date will only be eligible to receive reimbursement for future fortnights.
Once you have registered for the first two fortnight periods it is expected that the ATO will pay to the business the first two $1,500 reimbursement amounts per eligible employee in the first week of May 2020. It is important to note that the initial registration process only covers these first two periods and that you will need to report to the ATO for each subsequent period you seek reimbursement for.
Step 6. Make subsequent JobKeeper reimbursement requests to the ATO
For future fortnights you will need to complete an online JobKeeper Declaration Report via the ATO Business Portal or via Bush & Campbell (via our Tax Agent Portal) to continue to seek reimbursement for each period. This will be required to be completed within 7 days following the end of the month and will require you to:
Enter details advising the ATO of your eligible employees for the period and the amounts that have been paid to them for each fortnight. These details will need to be manually entered into the ATO report unless these wages details are already held by the ATO via Single Touch Payroll Reports from which the ATO will prefill the report for you to check and confirm.
Provide the ATO with your current turnover for the month.
Provide the ATO with your expected turnover for the month.
The ATO is expected to reimburse the business for the fortnights JobKeeper amounts within 14 days of completing this monthly report. For example for the fortnights covering 27th April to 10th May and 11th May to 24th May, you will be required to complete the JobKeeper Declaration Report by the 7th of June and then the reimbursement of the wages paid in these two fortnights is expected to be paid by the ATO by the 21st of June.
Other important things to know
The $1,500 amount you are required to pay to employees is before tax, so you need to ensure that you are deducting tax from this amount before paying it to the ATO. The wages amount is assessable income to the employee and any tax withheld needs to be paid by the business on their Business Activity Statement as normal and the employee will receive a credit for this when they prepare their 2020 tax return.
You are required to pay 9.5% superannuation on the wages paid to employees during this period. However, if you normally pay your employee less than $1,500 per fortnight, you only need to pay 9.5% superannuation on the normal pay and not the $1,500. If on the other hand you continue to pay your employees a wage above $1,500 you are required to pay superannuation on the whole amount. For example, if your employee normally receives $1,000 per fortnight you are only required to pay $95 in superannuation (9.5% of $1,000). If you continue to pay your employee $2,000 per fortnight you are required to pay $190 of superannuation (9.5% of $2,000).
The business is not able to retain any amount of the JobKeeper payment as you must pay $1,500 to each employee even if they earn less than $1,500 per fortnight.
The JobKeeper amount received by the business has no GST consequences but is assessable income for the business for tax purposes. However, since the business must pay the employees the full amount of the ATO reimbursement and will be eligible for a tax deduction on this expenditure, the net tax position should be nil to the business.
The ATO have imposed tough penalties for businesses that go out of their way to alter their turnover (and overall eligibility for JobKeeper) and manufacture a higher payment or the required turnover reduction needed to be eligible for the JobKeeper payment. It is thus important that you fully document how you have determined your projected turnover if you rely on projected turnover rather than actual turnover especially if the actual turnover is then significantly different from what has been projected.
As part of the JobKeeper legislation, temporary changes have been made to Employee Awards/Agreements/Contracts that allow JobKeeper Enabling Directions which allows the business to alter certain facets of an employees employment arrangements. You should speak with your HR expert in relation to what these changes may mean for your business and employees.