A special one-day sitting of Parliament has now approved the Coronavirus Economic Response Package (Payments and Benefits) Bill 2020, giving rise to the centrepiece of the government’s $214 billion economic stimulus package.
These rules, which set out the eligibility criteria and reporting obligations, were initially released by Treasury in the form of an exposure draft but has since been pulled down as of Wednesday evening. It remains to be seen when Treasury will make the rules available on its website.
The legislation also provides the Treasurer to give extensive powers to the Commissioner in order to provide flexibility to the program in the face of rapidly changing circumstances. One particular area of discretion for the Commissioner will be the application of an alternative turnover test for businesses that demonstrate there is no appropriate comparison period for the decline in turnover test.
The legislation also makes clear that anyone who enters into or carries out a scheme for the sole or dominant purpose of obtaining a coronavirus economic response payment will face a wide range of administrative and criminal sanctions, including up to 10 years’ imprisonment!
All that aside, let us explain the rules to date.
What is the Jobkeeper payment?
Under the JobKeeper Payment, businesses or not-for-profits impacted by the Coronavirus will be able to access a subsidy from the Government to continue paying their employees. Affected employers will be able to claim a payment of $1,500 per fortnight per eligible employee from 30 March 2020, for a maximum period of 6 months.
Who is Eligible?
Employers (including non-for-profits) will be eligible for the subsidy if:
- their business has an annual turnover of less than $1 billion and they estimate their turnover has or will likely fall by 30 per cent or more; or
- their business has an annual turnover of $1 billion or more (or is part of a consolidated group for income tax purposes with turnover of $1 billion or more) and they estimate their turnover has or will likely fall by 50 per cent or more; and
- their business is not subject to the Major Bank Levy.
Self-employed individuals (businesses without employees) will be eligible to receive the JobKeeper Payment where they meet the relevant turnover test outlined above.
For charities registered with the Australian Charities and Not-For-Profit Commission (ACNC), they will be eligible for the subsidy if they estimate their turnover has or will likely fall by 15 per cent or more relative to a comparable period.
The Australian government and its agencies, State and Territory governments and their agencies, foreign governments and their agencies, local governments and wholly-owned corporations of these bodies are not eligible for the JobKeeper payment. Non-government schools and private vocational education providers are eligible.
How is eligibility determined?
To establish that a business or not-for-profit has, or is likely to, face the relevant fall in their turnover, most would be expected to establish that their turnover has or will likely fall in the relevant month or quarter (depending on their Business Activity Statement reporting period) relative to their turnover in a corresponding period a year earlier. Turnover is calculated as it is for GST purposes, and is reported on Business Activity Statements. It includes all taxable supplies and all GST free supplies but not input taxed supplies.
Where a business or not-for-profit was not in operation a year earlier, or where their turnover a year earlier was not representative of their usual or average turnover, (e.g. because there was a large interim acquisition, they were newly established or their turnover is typically highly variable) the Tax Commissioner will have discretion to consider additional information that the business or not-for-profit can provide to establish that they have been significantly affected by the impacts of the Coronavirus. The payment cannot be paid to businesses that are in liquidation.
The Tax Commissioner will also have discretion to set out alternative tests that would establish eligibility in specific circumstances (e.g. eligibility may be established as soon as a business has ceased or significantly curtails its operations). There will be some tolerance where employers, in good faith, estimate a 30 per cent or more or 50 per cent or more fall in turnover but actually experience a slightly smaller fall.
The employer must have been in an employment relationship with eligible employees as at 1 March 2020, and confirm that each eligible employee is currently engaged in order to receive the JobKeeper Payments.
Who is an eligible employee?
Eligible employees are employees who:
- are currently employed by the eligible employer (including those stood down or re-hired);
- were employed by the employer at 1 March 2020;
- are full-time, part-time, or long-term casuals (a casual employed on a regular and systemic basis for longer than 12 months as at 1 March 2020);
- are at least 16 years of age at 1 March 2020;
- are an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder at 1 March 2020;
- were a resident for Australian tax purposes on 1 March 2020; and
- are not in receipt of a JobKeeper Payment from another employer.
Warning for employee:Employees receiving Parental Leave Pay from Services Australia are not eligible for the JobKeeper Payment. However, employees on parental leave from their employer will be eligible. Employees receiving workers compensation will be eligible for the JobKeeper Payment if they are working, for example on reduced hours, but will generally not be eligible if they are not working.
If your employees receive the JobKeeper Payment, this may affect their eligibility for income support payments and they must report their change in circumstances to Services Australia online at my.gov.au or by telephone.
What is the application process for business with employees?
Initially, employers can register their interest in applying for the JobKeeper Payment via ato.gov.au from 30 March 2020.
Subsequently, eligible employers will be able to apply for the scheme by means of an online application. The first payment will be received by employers from the ATO in the first week of May.
Eligible employers will need to identify eligible employees for JobKeeper Payments and must provide monthly updates to the ATO. An employer that elects to participate is required to include all eligible employees in the scheme. Participating employers will be required to ensure eligible employees receive, at a minimum, $1,500 per fortnight before tax.
It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment.
What about business without employees?
The intent of the JobKeeper Payment is to enable any eligible self-employed person get a wage subsidy regardless of what business structure they use, where:
- the partners in a partnership only receive a share of profits – one partner can be nominated to receive it
- directors of a company only receive dividends – one direct can be nominated to receive it
- beneficiaries of a trust only receive distributions – one individual beneficiary (i.e. not a corporate beneficiary) can be nominated to receive it
Businesses without employees, such as the self-employed, can register their interest in applying for JobKeeper Payment at ato.gov.au from 30 March 2020.
Businesses without employees will need to provide an ABN for their business, nominate an employee to receive the payment and provide that employee’s Tax File Number and provide a declaration as to recent business activity.
Employer with employees on different wages
Adam owns a real estate business with two employees. The business is still operating but Adam expects that turnover will decline by more than 30 per cent in coming months.
The employees are:
- Anne, who is a permanent full-time employee on a salary of $3,000 per fortnight before tax and who continues working for the business; and
- Nick, who is a permanent part-time employee on a salary of $1,000 per fortnight before tax and who continues working for the business.
Adam is eligible to receive the JobKeeper Payment for each employee, which would have the following benefits for the business and its employees:
- The business continues to pay Anne her full-time salary of $3,000 per fortnight before tax, and the business will receive $1,500 per fortnight from the JobKeeper Payment to subsidise the cost of Anne’s salary and will continue paying the superannuation guarantee on Anne’s income;
- The business continues to pay Nick his part-time salary of $1,000 per fortnight before tax and an additional $500 per fortnight before tax, totalling $1,500 per fortnight before tax. The business receives $1,500 per fortnight from the JobKeeper Payment which will subsidise the full cost of Nick’s salary. The business must continue to pay the superannuation guarantee on the $1,000 per fortnight that Nick is earning. The business has the option of choosing to pay the superannuation guarantee on the additional $500 (before tax) paid to Nick under the JobKeeper Payment.
Adam can register his initial interest in the scheme from 30 March 2020, followed subsequently by an application to ATO with details about his eligible employees.
In addition, Adam is required to advise his employees that he has nominated them as eligible employees to receive the payment. Adam will provide information to the ATO on a monthly basis and receive the payment monthly in arrears.
Employer with employees who have been stood down without pay
Zahrah runs a beauty salon in Melbourne. Ordinarily, she employs three permanent part-time employees, but due to the Coronavirus she has temporarily closed her doors as a business and has stood down her three employees without pay.
Zahrah’s turnover will decline by more than 30 per cent, so she is eligible to apply for the JobKeeper Payment for each employee. She will receive $1,500 per fortnight for each of her three employees for up to six months and she is required to have passed on those payments to her employees.
Zahrah will maintain the connection to her employees, and be in a position to quickly resume her operations.
Zahrah is required to advise her employees that she has nominated them as eligible employees to receive the payment. It is up to Zahrah whether she wants to pay superannuation on the additional income paid because of the JobKeeper Payment.
If Zahrah’s employees have already started receiving income support payments like the JobSeeker Payment, when they receive the JobKeeper Payment they must advise Services Australia of their change in circumstances online at my.gov.au or by telephone.