• JobKeeper – Information for Employees, Sole Traders and Partnerships

A special thank you to Creative Crunchers for allowing us to share the below information on JobKeeper.

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The JobKeeper payment is set at $1,500 per fortnight per eligible employee or eligible business participant (typically business owners). The scheme runs from April to September 2020. Over the 13 fortnights the scheme is worth up to $19,500 per eligible person. JobKeeper payments that you receive are taxable income. There are strict dates for the initial application and the monthly reporting to the ATO. For employers and business participants to receive the April JobKeeper payments they originally needed to be enrolled by Thursday 30th April 2020. The ATO have just extended this date to Sunday 31st May 2020, however you must still make the minimum April wage payments to eligible employees before 30th April 2020 to qualify for April JobKeeper payments. Please note that enrolment is different to registering your interest. The ability to enrol opened on Monday 20th April 2020.

The government passed the JobKeeper legislation just prior to Easter and since then the Australian Taxation Office has been designing the application forms, the employee nomination forms and the reporting systems. Please be aware that many of the eligibility details were only clarified on Friday 17th April and some further details are still yet to be clarified by the ATO.

Employee clients:

You should check with your employer if they are eligible and if they are choosing to participate. Please note that many businesses don’t know if they are eligible yet. Some may only become eligible part way through the scheme. In this case JobKeeper payments can only be made from that point on. There is no ability to backdate JobKeeper payments aside from in April (as long as they were registered by 30th April). Please also be aware that some employers may not be able to participate if they can’t finance the wage costs as the subsidy is paid to the employer a week or two after the month.

Employees can check their eligibility using this link https://www.ato.gov.au/General/JobKeeper-Payment/Employees/Eligible-employees/

We’ve chosen to provide a link to the ATO as they are continuing to update the eligibility details and clarify certain details.

Employee note if you are also in business: The rules specify that if you have a permanent employer (a part time or full time role) you can only access JobKeeper through them. You can’t apply yourself, even if your employer isn’t applying. This rule doesn’t apply to casual roles though.

Employee tip if you have more than one employer: You can only choose JobKeeper with one employer so choose the employer that you think will likely participate for the full length or majority of the scheme. Please note that long term casual employees (i.e. those employed on a casual basis for more than 12 months) must choose a permanent employer (one they have a part time or full time role with) if they have one.

The remaining content relates to business clients so employees without businesses can finish here.

Business clients:

The scheme has two eligibility sections, one for employers and the other for business participants. As sole traders and partners in a partnership can’t be employees of their own business the owners will need to refer to the Business Participant section to determine if they are personally eligible via their own business. If they have employees they will also need to review the Employer section to determine if they can receive the JobKeeper subsidy for eligible employees.

Business client eligibility tool:

Please work through this eligibility tool in order to see if you might be able to receive JobKeeper for your staff (in the form of a subsidy) and for yourself (as a direct payment).

1)      Are you are employed in a full time or part time capacity elsewhere, regardless of whether they are claiming JobKeeper?

If no, continue to section 2.

If yes, you will need to check with your employer if they are participating. You are not eligible as a business participant.

However, if you employ staff in your business your employees may be eligible for JobKeeper payments. Read section 2 in relation to participating as a JobKeeper employer.

2)      Are you an employer?

(Note sole traders and partners in a partnership can’t be employees of their own business)

If no, continue to section 3.

If yes, refer to this link for eligibility:

https://www.ato.gov.au/general/jobkeeper-payment/employers/eligible-employers/

We’ve chosen to provide a link to the ATO as they are still updating eligibility requirements and the details in this link should update as new information is released. See below for further information and comments for JobKeeper employers.

3)      Business Participants

(A sole trader and a partner in a partnership are examples of business participants)

Refer to this link for eligibility:

https://www.ato.gov.au/General/JobKeeper-Payment/Sole-traders-and-other-entities/

Once again we’ve chosen to provide a link to the ATO as they are still updating eligibility requirements and the details in this link should update as new information is released. See below for further information and comments for Business Participants.

Partnership tip: Please note that for partnership businesses only one partner can be nominated to be the business participant (i.e. only one partner can receive the JobKeeper payment). In most cases it would be best to choose an active partner that doesn’t have a part time or full time employer and is likely to have the lowest taxable income.

Notes on eligibility for both JobKeeper employers and Business Participants

1) Test for 30% reduction in GST turnover (i.e. business income with possible adjustments)

The most complex part of eligibility is confirming a 30% reduction in ‘GST turnover’ when compared to an earlier period – either a specific month or quarter. The ATO finally released its interpretation of GST turnover along with commentary and examples on Friday 17th April 2020. Businesses (and accountants) haven’t been given much time to prepare for this and some further details still haven’t been finalised by the ATO.

Basic test:

If you have been in business since at least March 2019 refer to this link for the steps to take to determine your eligibility using the ‘Basic test’:

https://www.ato.gov.au/General/JobKeeper-Payment/In-detail/Applying-the-turnover-test/?anchor=Basictest#Basictest

Alternative test:

If your business:

–          is new and you don’t have a prior year comparative period or

–          had a significant event such as a drought that impacted your comparative period(s) or

–          had a major structural change

the ATO will be developing an ‘Alternative test’. The ATO hasn’t finalised these alternative tests yet so please check this link for updates: https://www.ato.gov.au/General/JobKeeper-Payment/In-detail/Applying-the-turnover-test/?anchor=Alternativetest#Alternativetest

Some key points on GST Turnover:

–          The term GST turnover applies even if you are not GST registered. It’s essentially your sales with adjustments.

–          For most businesses GST turnover will be your sales less GST in those sales (if GST registered) less input taxed supplies (such as bank interest and residential rent).

–          If you are GST registered and report on a cash basis you can determine your eligibility on either a cash or accruals basis. See below for an explanation of these terms.

–          If you are GST registered and report on an accruals basis you must determine your eligibility on an accruals basis.

–          If you are not GST registered it currently seems that you need to determine your eligibility on an accruals basis. However, some commentators say this matter still needs to be clarified by the ATO. Please refer to the ‘Cash or accruals basis’ heading in this link (it’s almost half way down) for any updates: https://www.ato.gov.au/General/JobKeeper-Payment/In-detail/Applying-the-turnover-test/?page=2

–          Once you qualify for the 30% reduction test you don’t need to test again. Therefore test for eligibility from the earliest point. More on this below.

2) Notes on Cash basis vs Accruals basis

–          Cash basis means you report your sales when you receive payment for the sales.

–          Accruals basis means you report your sales when you receive payment for the sales or when you invoice for the sales (whichever is first).

In most accounting software you can switch between cash and accruals based Profit and Loss reports. Run the Profit and Loss report on the month of April 2020 and compare with the previous 13 periods to check your eligibility. Print or export your report as evidence of your eligibility and retain this record.

If you use our cashbook or a manual system you may need to manually determine your ‘GST turnover’ – especially for those not GST registered. Where the accruals basis applies for your GST turnover test you will need to look at your invoice dates and the receipt date and use the earlier date. Keep records as evidence of your eligibility.

3) Periods for comparison and enrolment notes

Under the ‘Basic test’ you can choose to compare any month between March 2020 and September 2020 with the same month in the previous year. You can also choose to compare the April – June 2020 quarter or the July – September 2020 quarter with the same quarter in the previous year. Please note you can only claim the JobKeeper payment from the period you qualify and enrol (assuming you meet any other requirements).

There are some special rules up until 30th April 2020 making it easier to claim for April. In order to participate in the April JobKeeper payments you need to enrol by 30th April and be eligible – i.e. meet all requirements and determine that you have had or will likely have a 30% reduction in GST turnover. Therefore it’s ideal if you can qualify based on the actual results for March 2020 vs March 2019 as no forecasting is required. Failing that you could look at April 2020 (this will be a combination of actual sales and forecast sales to the end of the month) vs April 2019. If it looks like you won’t qualify for the month of April then compare the April – June 2020 quarter with the April – June 2019 quarter. That will involve some forecasting. There is also the risk that you may not qualify if sales improve before 30 June 2020. If you enrol in April based on the April – June 2020 quarter and you determine that you will pass the GST turnover reduction test you can claim JobKeeper from April onwards. In situations where you aren’t sure of your future sales it may be best to wait until you know if you qualify. However, be aware you can’t claim JobKeeper for past periods. Please also note that over payments of JobKeeper will need to be repaid.

As the reporting for the April month is done in the week starting from 4th May 2020 you could potentially enrol by 30th April and then wait to determine your actual April month turnover. If you find out your April month turnover didn’t meet the required reduction you should then consider whether you will pass based on the April – June quarter.

If you enrol after April you also need to be aware that you can only receive payments from the fortnight that you enrol. For example, if you determined you qualified on the 20th May but didn’t enrol until 25th May (which is the start of the next fortnight) you would only qualify for payments from the fortnight starting 25th May.

Enrolment for sole traders (and their employees) can be done through either myGov or the ATO Business Portal. The ongoing monthly reporting can also be done through either myGov or the ATO Business Portal.

Enrolment for partnerships (and their employees) must be done through the ATO Business Portal and authenticated with myGovID (this is a phone app and it is different to myGov). Allow time to get these setup as some clients have had to upgrade their mobile phone. Once you have advised the number of expected employees you can nominate yourself as the eligible business participant. The ongoing monthly reporting must also be done through ATO Business Portal.

Here are the relevant links:

myGov (for sole traders only): https://my.gov.au/LoginServices/main/login?execution=e1s1

ATO Business Portal link: https://bp.ato.gov.au/

myGovID link: https://www.mygovid.gov.au/

On Sunday 19th April the ATO gave an extension until the end of May for sole traders and other businesses to enrol and identify their employees. It seems the payment of April employee wages (at a minimum of $1,500 per fortnight or $3,000 for the month) still needs to be made by 30th April in order to claim JobKeeper payments for April. We encourage you to enrol as soon as you are eligible so the ATO can make payments to you sooner.

4) Ongoing reporting

Each month you need to confirm your ongoing eligibility and the eligible employees. You also need to report that you have paid your eligible employees at least $1,500 per fortnight. You need to provide your GST turnover for the month just finished and projected GST turnover for the following month. The following month turnover is supposed to assist the government in gauging the direction of the economy but it could be used for audit purposes so estimate carefully.

The first reporting period opens on Monday 4th May 2020.

Notes for JobKeeper employers 

(Skip to the next Business Participant section if you are not an employer)

The ATO has just released these two helpful guides:

JobKeeper guide – employers reporting through STP:

https://www.ato.gov.au/general/jobkeeper-payment/In-detail/JobKeeper-guide—employers-reporting-through-STP/

JobKeeper guide – employers not reporting through STP:

https://www.ato.gov.au/general/jobkeeper-payment/In-detail/JobKeeper-guide—employers-not-reporting-through-STP/

Once you have worked out if you are an eligible employer you then need to identify your eligible employees. Here is a link to the ATO for eligible employees:

https://www.ato.gov.au/General/JobKeeper-Payment/Employers/Your-eligible-employees/

There are several exclusions including new employees (those employed after 1st March 2020), short term casuals (less than 12 months), certain visa holders, employees receiving certain payments such as parental leave and workers compensation. Some staff may nominate another employer – they are not required to nominate their main employer or the one they claim the tax free threshold with. However, if they are long term casual (more than 12 months) and they have another employer where they work on a part time basis or full time basis they are prevented from nominating the casual employer.

There is a requirement to nominate all eligible employees – you can’t pick and choose. However, the employee could choose not to participate. Before you enrol you need to notify each eligible employee that you intend to nominate them as an eligible employee under the JobKeeper Payment scheme. You must do this by the end of April to claim JobKeeper payments for April. The employee must then agree and complete a nomination notice. Details and the form link are here: https://www.ato.gov.au/Forms/JobKeeper-payment—employee-nomination-notice/

There is a requirement to pay all eligible employees the minimum of $1,500 per fortnight, even if they normally earn less than that. If you pay an employee less than $1,500 you will not be eligible for the JobKeeper payment.

Special rule for April wages

As the first two fortnights have almost passed you are able to make two fortnightly wage payments of at least $1,500 per fortnight before the end of April, or a combined wage payment of at least $3,000 before the end of April. The first May fortnight ends on Sunday 10th May so ensure you have your systems in place to pay $1,500 (before tax) per employee as the fortnightly payment needs to occur by then.

PAYG Withholding (tax on wages)

If an employee normally earns more than $1,500 per fortnight you are required to withhold tax from the employee’s wage as normal.

If an employee’s wage has increased to $1,500 per fortnight due to JobKeeper you must withhold the relevant amount based on their TFN Declaration details for $1,500.

Here’s the link to the PAYG Withholding calculator:

https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=TWC&anchor=TWC/questions#TWC/questions

Superannuation

If an employee normally earns more than $1,500 per fortnight you are required to pay superannuation as normal.

If an employee’s wage has increased to $1,500 per fortnight due to JobKeeper you are only required to pay superannuation on their normal income (i.e. based on the hours they work in that fortnight).

If an employee ceased working for you after 1st March 2020 and you re-engaged them super would be payable depending on their level of their wages based on the two scenarios above.

If an employee was stood down after 1st March 2020 and you start to pay them $1,500 per fortnight due to JobKeeper you aren’t required to pay any super – as they don’t have any ‘ordinary times earnings’.

Comments on the fortnightly periods

The legislation notes that the first fortnight starts on Monday 30th March and ends on Sunday 12th April. Your payroll period doesn’t need to operate on these same dates. You just need to have a payroll period that ends during each of the legislated periods to qualify for that period.

If you have a monthly pay cycle

If you pay your employees on a monthly pay cycle, your employees must have received the monthly equivalent of $1,500 (before tax) per fortnight. It’s not clear if this is $3,000 or $3,321.43 (being $1,500 / 14 days x 31 days). Therefore it may be safer to go to a fortnightly pay cycle to avoid any issues. Another reason for choosing fortnightly payments is there are 13 fortnights in the 6 month period but if you pay monthly it seems there will only be 12 fortnights where you can satisfy the minimum of $1,500 per fortnight. Therefore choosing a fortnightly pay cycle could potentially provide you with $1,500 more per eligible employee over the six months. You could start the fortnightly pay cycle from May as the requirements for April are more relaxed and require that you pay at least $3,000 per eligible employee before 30th April. The first May fortnight ends on Sunday 10th May so the fortnightly payment needs to occur by then.

Notes for Business Participants

The ATO has just released this helpful guide for Sole Traders:

JobKeeper guide – sole traders:

https://www.ato.gov.au/general/jobkeeper-payment/In-detail/JobKeeper-guide—sole-traders/

There’s no need to pay yourself or withdraw $1,500 per fortnight from your business.

Sole traders can complete the nomination process through ATO online services using myGov, or in the Business Portal.

Partners in a partnership should use this link to nominate to be an eligible business participant:

https://www.ato.gov.au/Forms/JobKeeper-nomination-notice-for-eligible-business-participants—excluding-sole-traders/

Please note that this nomination is required in addition to providing business participant details at the initial enrolment.

If you become eligible for JobKeeper and are already receiving JobSeeker (previously Newstart) you will need to promptly update Services Australia (previously Centrelink).

One unfortunate part of the Business Participant legislation relates to the requirement for previous business income to be reported to the ATO. Many Business Participants may miss out on JobKeeper where they haven’t lodged their 2019 tax return showing 2019 business income by 12th March 2020 or where they haven’t lodged specific activity statements or GST returns declaring business income by 12th March 2020 (for most clients this means being GST registered and declaring sales at label G1 on any Activity Statement between Jul 2018 to Feb 2020 inclusive). This date was chosen to stop people falsely recording past business income after the JobKeeper package was announced. Unfortunately this excludes many non-GST registered businesses from claiming JobKeeper where they hadn’t lodged their 2019 tax return – which for most clients isn’t due until 15th May 2020. The ATO has discretion to allow further time to lodge after 12th March 2020, however this information hasn’t been released yet.

If you don’t satisfy the eligibility requirements for JobKeeper and you have had a loss of income you should look to apply for JobSeeker through Services Australia.

Finally, we sincerely hope everyone is keeping safe and doing all they can to keep anxiety levels down in these very uncertain times. Our phones and inboxes have been running hot and we know many of you are severely impacted. We will get through this though. Probably with some battle scars, but we will. We are certainly buoyed by consistent news that Australia is doing very well in these early suppression stages and already the conversation is turning to what the economic recovery will look like. That is bound to be a very complex issue – especially for the arts – but when has this issue ever been simple? Just look at this email. We all just have to hang in there together.

 

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