JobKeeper Payment Rules Outlined
Rules governing the $130B JobKeeper payment have been published, explaining in detail the eligibility criteria for both employers and their employees.
From next week, accountants will be able to enrol clients for the Government’s new wage subsidy payments, the first step towards ensuring that Covid-19-affected businesses can continue to pay their employees.
The Australian Government this month passed the legislation for JobKeeper, a program to provide a $1,500 per fortnight wage subsidy for eligible employers to help keep Australians in work.
Employers must choose to participate in the program and nominate eligible employees they are claiming the JobKeeper payment for. It is not compulsory.
In order to receive a payment, both the employer and employee must meet eligibility criteria.
Eligible employers are most businesses (including companies, partnerships, trusts and sole traders), not-for-profits and charities:
- With a turnover of less than $1B that have lost or are predicted to lose 30% or more of their revenue compared to a similar period a year ago.
- With a turnover of $1B or more and with at least a 50% reduction or predicted reduction in revenue compared to a similar period a year ago.
- For registered charities the threshold is a decline in turnover of 15% or more, under changes announced on 6 April.
- Were employed by an eligible employer at 1 March 2020
- Can be sole traders, full-time, part-time, or long-term casuals employed on a regular basis for longer than 12 months as at 1 March 2020.
- Are at least 16 years of age.
- Are an Australian citizen, the holder of a permanent visa, a protected special category visa, a non-protected special category visa who has been residing continually in Australia for 10 years or more, or a New Zealander on a special category (subclass 444) visa.
Eligible Business Participant ensures those individuals who are not an employee of their business are still able to receive the JobKeeper payment. This includes:
- An individual who is actively engaged in the business carried on by the entity,
- Either a sole trader, individual of a partnership, director or individual shareholder of a company or an adult beneficiary of a trust.
- The business had an ABN on or before 12 March 2020.
- The business had income from the business in the 2019 income year or income from July 2019 to March 2020.
- Is limited to one business participant per entity.
How will it be paid?
- Eligible employers will be paid $1,500 per fortnight per eligible employee from 30 March 2020 to 27 September 2020.
- Eligible employees will receive from their employers a minimum of $1,500 per fortnight, before tax. Employers are able to top up the payment.
- Employers will pay employees as usual and payments will be made to the employer monthly in arrears by the Australian Tax Office (please be mindful of the cash flow impact on businesses here as the business will initially need to fund the required payments with the ATO reimbursing the minimum amount monthly in arrears).
Other key points
- Once a business satisfies the decline in turnover test for a period, they will continue to be eligible for the JobKeeper payment until the end date being 27 September. They will not be required to retest each month or quarter (this includes any business which may experience an increase in turnover in a later period).
- Eligible employers must elect to participate in the JobKeeper program via an application to the ATO. The following information must be provided:
- Information on all eligible employees
- Continue to provide information to the ATO on a monthly basis around number of employees and turnover details.
- Employers must notify each eligible employee that they intend to participate in the JobKeeper scheme, and employees must agree to be nominated. Employees must also agree for the employer to receive payments on their behalf. The ATO has an approval form to assist with this.
- Employers cannot pay their employees less than $1,500 before tax per fortnight and keep the difference.
- PAYG is to be withheld by the employer from the $1,500 per fortnightly payment.
- Is Superannuation payable on the JobKeeper Payment?
- Yes on the full payment for those earning above $1,500 per fortnight.
- Yes on the employees normal earning if below the $1,500 per fortnight.
- No on the top-up payment to bring an employee up to $1,500 per fortnight.
- All JobKeeper payments are assessable income of the business that is eligible to receive the payments. The normal rules for deductibility apply in respect of the amounts a business pays to its employees where those amounts are subsidised by the JobKeeper payment.
What if I/ an employee has been stood down or sacked?
If an employer has registered for the JobKeeper payments, nominated you as an eligible employee and you are an employee who has been stood down, your employer must pay you at a minimum, $1,500 per fortnight, before tax.
This means that employees of businesses that shut down due to restrictions – such as cafes, restaurants, theatres, casino workers and the like – will continue to be paid even if they are not working.
If an employee were employed on 1 March 2020, subsequently ceased employment with their employer, and then has been re-engaged by the same eligible employer, the employee will also receive, at a minimum, $1,500 per fortnight, before tax.
When will payments commence?
The subsidy will start on 30 March, with the first payments to be received by employers in the first week of May. In the meantime, employers must continue paying their employees and then claim the money from the first week of May.
Businesses may register their interest on the ATO website to participate in the JobKeeper program and receive information updates.
Here’s how it could work
Let’s consider a small business run by Mary, and in which she’s a Director and employs four staff, which has experienced reduced turnover of more than 30% as a result of Covid-19 restrictions. The business has:
- Two employees each paid $2,000 a fortnight;
- 1 part-time employee (Carol) paid $1,100 a fortnight; and
- 1 stood down employee (Ned) who was paid $1,500 a fortnight.
The business continues to pay its two full-time employees their salaries and receives $1,500 per person per fortnight from the JobKeeper payment to subsidise these salaries. The business must continue paying the superannuation guarantee on their actual income.
The business will continue to pay part-timer Carol her salary of $1,100 plus an additional $400 per fortnight as a top-up to ensure she receives the minimum $1,500 per fortnight required under the JobKeeper program. The business must continue to pay the superannuation guarantee on the $1,100 salary but has the option of choosing to pay superannuation on the additional $400.
The business will receive the $1,500 JobKeeper payment for Ned who has been stood down. But because Ned is stood down, the business is not required to pay superannuation on the JobKeeper payment for him; it is optional.
Mary, who is not an employee of the business, can access the JobKeeper payment as an Eligible Business Participant. Mary will need to be added to the payroll system and paid $1,500 fortnightly. Paying Superannuation is not required; it is optional.
PAYG withholding is to be withheld from the payments made to employees and to Mary.
Assuming the above payments occur in April 2020 over two fortnights, total payroll for April would be $17,000, plus $484.50 in superannuation. The JobKeeper payments to be received would be $15,000, which would be received in arrears in early May 2020.
Enrol for JobKeeper
Accountants may enrol for JobKeeper payments on a client’s behalf from 20 April 2020 via the ATO Online services for agents, and authenticate with myGovID.
Matthew Bartemucci+ Associate at Hood Sweeney says it is important to ensure that the JobKeeper payments received by a business are paid to the right employees, and recorded appropriately in the payroll system to ensure that PAYG withholding and super guarantee payments are correct.
Having to make additional payments for PAYG Withholding, superannuation or trying to reclaim funds from employees who have already been let go, could cause additional stress and hardship on already struggling businesses, he said.
To be enrolled in the JobKeeper program via your accountant, and to find out what information you require to assess eligibility, please ring Hood Sweeney on 1300 764 200 or send an email and we will get back to you.
+Representative of Hood Sweeney Accounting & Business Advisory
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