How the JobKeeper initiative will affect clients
The Australian government is providing a wage subsidy – the JobKeeper Payment – for entities whose revenue has been significantly affected by the economic impacts of COVID-19. Here’s a look at the who, what, when and how of the JobKeeper rules.
Elinor Kasapidis | April 2020
At an estimated cost to taxpayers of A$130 billion, over the next six months, eligible businesses and not-for-profits (NFPs) will receive A$1500 per fortnight for all eligible employees and business participants.
The Department of the Treasury expects around six million Australian workers will be supported through the measure, which provides an alternative to the JobSeeker Payment scheme.
By temporarily offsetting wage costs, JobKeeper is intended to support businesses to retain and continue paying staff during the current economic downturn. It also enables businesses to recommence operations or rapidly scale up without rehiring when the downturn ends.
Alexis Kokkinos, executive director at Pitcher Partners, a national association of independent firms and chair of CPA Australia’s Taxation Centre of Excellence, says “the JobKeeper package provides welcome relief for many businesses, although further [Australian Taxation Office] ATO guidance is required to achieve certainty for taxpayers and their advisers”.
The Coronavirus Economic Response Package (Payments and Benefits) Act 2020 received assent and the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 came into force on 9 April 2020.
JobKeeper payments will cover the period 30 March 2020 to 27 September 2020 (13 fortnights) and be paid by the ATO monthly in arrears. The JobKeeper scheme operates on a prospective basis; the only exception being April 2020. Payments will commence at the start of May 2020.
A business or NFP needs to satisfy a range of eligibility requirements to receive JobKeeper payments. These include similar parameters to the cash flow boost, but also that:
- entities with more than A$1 billion in aggregated turnover have experienced a 50 per cent decline in modified goods and services tax (GST) turnover
- entities with under A$1 billion in aggregated turnover have experienced a 30 per cent decline in modified GST turnover
- charities registered with the Australian Charities and Not-for-profits Commission have experienced a 15 per cent decline in modified GST turnover.
For the decline in the turnover test, GST is to be compared against the same period in the preceding year (the comparison period). The Commissioner of Taxation, Chris Jordan AO, has also been granted discretion to set out alternative tests for classes of entities that would establish eligibility in specific circumstances.
“The commissioner’s discretionary power will ensure a pragmatic and fairer approach to accessing JobKeeper and we look forward to further details from the ATO,” Kokkinos says.
There are specific employee eligibility requirements, including the need to be employed as of 1 March 2020. There are also special rules for casuals.
Wage payments must be made to nominated eligible employees or business participants and pay as you go (PAYG) withholding and superannuation obligations continue to apply.
Business operators who do not receive wages can also nominate a single individual to receive JobKeeper payments as a sole trader, someone in a partnership, a beneficiary of a trust or a shareholder or director of a company.
Entities will first need to estimate whether they have or are likely to experience a decline in turnover for the JobKeeper claim period that meets – or is very close to – the required threshold. This may involve applying the commissioner’s discretion when the relevant legislative instruments are made. Once the decline in turnover test is satisfied, it is taken to be satisfied for all future periods.
Eligible employees or business participants will then need to be identified and notified. These employees will need to complete and return the employee nomination notice by the end of April 2020 for the business or NFP to claim JobKeeper payments for April.
Businesses, NFPs and tax agents can enrol from Monday 20 April using the business portal or ATO online services for agents. Applications for JobKeeper payments can be made from Monday 4 May, with eligible employees identified through Single Touch Payroll (STP) pre-fill reports, or manually where there is no STP-enabled solution.
The rules also require that entities report monthly turnover information to the commissioner, but details are not yet available from the ATO.
Regardless, the ATO is administering the JobKeeper program and regularly updating information.
There remain aspects of the JobKeeper program that require further clarification; for example, the notification process for both employers and employees, the treatment of backpay, as well as issues around employee service entities.
Understandably, there is significant interest in how the commissioner will define alternative tests for classes of taxpayers via a legislative instrument.
The integrity measures and introduction of joint and several liability in the case of overpayments engender further questions about the commissioner’s approach to compliance and the recovery of associated debts.
The magnitude of the Australian government’s COVID-19 stimulus packages is unprecedented and provides many businesses and employees with support through a very difficult period.
In delivering billions of dollars in transfer payments, the ATO faces the critical but unenviable task of providing much-needed funds to struggling operations while maintaining the program’s integrity.
CPA Australia and fellow professional organisations are working together to engage with the government, Treasury, the ATO, and to represent the views and experiences of members.
As Kokkinos summarises: “The profession stands ready to support the ATO and to guide taxpayers through the detail of the packages being made available”.
JobKeeper: 8 steps to take right now
- Ascertain clients’ eligibility for JobKeeper as an employer and/or as a sole trader or other entity (the business participation entitlement).
- Identify all eligible employees, starting with those on payroll as at 1 March 2020.
- Check if the eligible business can afford to pay all eligible employees at least $1500 each per fortnight plus associated costs.
- If the decision to participate in JobKeeper is made, then advise the employer to notify each eligible employee that it is intending to nominate them as eligible employees under the JobKeeper scheme.
- Employees must complete the JobKeeper employee nomination notice and return it to the employer by the end of April to claim JobKeeper payments for April. Eligible employees must agree to being nominated.
- Ensure eligible employees are paid at least $1500 a fortnight in line with existing pay cycles through existing payroll solutions.
- From Monday 20 April, enrol for JobKeeper payments. Enrolment must be completed by the end of April to receive JobKeeper payments for April.
- From Monday 4 May, apply to claim JobKeeper and confirm the eligible employees using employee data prefilled from STP reports or otherwise entered manually.
Elinor Kasapidis is CPA Australia's Tax Policy Adviser.