The Government’s $130 billion six-month wage subsidy scheme, aimed at limiting the economic devastation caused by COVID19 by helping businesses retain their employees – has passed parliament.
The $1,500 per fortnight per employee JobKeeper payment will act as a wage subsidy for eligible businesses to retain or rehire their workers.
Many businesses are breathing a sigh of relief, as it is the lifeline they need to keep hold of their valued workers. But other employers are scratching their heads, wondering what it means for them, if they’re eligible – and how to access it.
At DFK Everalls, we want to provide you with peace of mind during this difficult time. So we have broken down the information in an easy to digest format, to help you navigate through what’s relevant to your business.
JobKeeper Subsidy – Eligibility
Eligible employers are those with:
- Turnover below $1bn that have experienced a reduction in turnover of more than 30% relative to a comparable period 12 months ago (of at least a month); or
- Turnover of $1bn or more that have experienced a reduction in turnover of more than 50% relative to a comparable period 12 months ago (of at least a month); and
- Are not subject to the Major Bank Levy.
Eligible employees are those who:
- Were employed by the relevant employer at 1 March 2020; and
- Are currently employed by the employer (including those who have been stood down or re-hired); and
- Are full time or part-time.; or are casuals that have been employed on a regular basis for 12 months as at 1 March; and
- Are at least 16 years of age; and
- Are an Australian citizen, hold a permanent visa, are a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder; and
- Are not in receipt of a JobKeeper Payment from another employer.
Self employed (non-employees) are also eligible in certain circumstances.
Sole traders and self employed people could be eligible if:
- Turnover has fallen by 30% or more; and
- They had an ABN on or before 12 March 2020; and
- Had either lodged their 2019 tax return or a 2020 BAS on or before 12 March 2020;
- Were not eligible for the JobKeeper Payment from any other employer;
- Were actively engaged in the business; and
- They haven’t been paid wages or directors fees from their business.
For self-employed people, actively engaged in a business operating under different structures that don’t pay them wages there are special conditions. For example:
- One partner (only) in a partnership can be nominated to receive a JobKeeper Payment (along with any eligible employees);
- Only one trust beneficiary receiving distributions rather than wages can be nominated to receive a JobKeeper payment;
- Only one (non-employee) director or shareholder of a company (eg receiving directors fees and/or dividends instead of wages) will be eligible for the JobKeeper payment as long as they were “actively engaged in the business”.
How to apply for JobKeeper Subsidy payments
To access the JobKeeper subsidy, you should talk to your accountant or adviser to assist you with the registration process and calculations. If you want to manage the process yourself, you must:
You can register your intent to apply for the JobKeeper subsidy with the ATO. The ATO will provide you with regular updates and advise you when you can lodge your application.
- Ensure you have an accurate record of your revenue for the 2018-19 income year and for the 2019-20 year to date
- Ensure you keep an accurate record of revenue from March 2020 onwards
- Compare your revenue for the whole of March 2019 with the whole of March 2020
- Measure the % decline in your revenue and ensure it has declined by more than 30%
- If you are not eligible regarding the month of March, you may be eligible by looking at another time period eg March Quarter 2020 versus March Quarter 2019; or even YTD to 31 March 2020 vs 2019.
Identify eligible employees
- Nominate the employees eligible for the JobKeeper payments – you will need to provide this information to the ATO and keep that information up to date each month. The ATO will use Single Touch Payroll to prepopulate the information in most cases.
- Notify all eligible employees that they are receiving a JobKeeper payment. Employees can only be registered with one employer.
- Pay eligible employees at least $1,500 per fortnight (before tax). If an employee normally receives $1,500 or more per fortnight before tax the employee should continue to receive their regular income. Note: It is unclear at this stage if the employer must continue to pay their employee the same salary if it was more than the subsidy amount.
- Pay superannuation guarantee on normal salary and wages amounts paid to employees. If the employee normally receives less than $1,500 per fortnight before tax, the employer can decide whether to pay superannuation on the additional amount that is paid as a result of the JobKeeper program.
Report Monthly – each month you will need to report your turnover.
Sole traders and the self-employed can also register their interest in applying for the JobKeeper payment with the ATO.
These businesses will need to provide an ABN for the business, nominate an individual to receive the payment, provide the individual’s TFN and declare their continued eligibility for the payments. Payments will be monthly to the individual’s bank account.
When do I get the JobKeeper Subsidy payments
The ATO will administer this program and will make the $1,500 payments based on payroll information lodged each month eg via STP. The ATO payments will be made monthly in arrears, so it is essential that you ensure your business and your employees continually meet the eligibility criteria.
The first payments will be made in the first week of May 2020 in respect of the wages paid from 30 March 2020.
The business will continue to receive the payments for eligible employees while they are eligible for the payments. While the program is expected to run for 6 months, payments will stop if the employee is no longer employed by the relevant employer.
JobKeeper Subsidy – Example
Adam owns a real estate business with two employees. The business is still operating at this stage but Adam expects that turnover will decline by more than 30% in the coming months. The employees are:
|Employee||Employment type||Salary per fortnight (before tax)|
Both Anne and Nick are still working in the business.
Adam registers his interest in the JobKeeper scheme (from 30 March 2020). He then applies to the ATO providing details of his eligible employees. He also advises Anne and Nick 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.
Adam’s business is eligible to receive the JobKeeper Payment for each employee.
For Anne, the business will:
- Continue to pay Anne her full-time salary of $3,000 per fortnight before tax,
- Receive $1,500 per fortnight from the JobKeeper Payment
- Pay superannuation guarantee on Anne’s salary
For Nick, the business will:
- Continue to pay Nick $1,000 per fortnight before tax salary
- Pay Nick an additional $500 per fortnight before tax (totalling $1,500)
- Receive $1,500 per fortnight from the JobKeeper Payment
- Pay superannuation guarantee on Nick’s wage of $1,000 per fortnight (but can choose to pay SG on the full $1,500)
Adapted from Treasury fact sheet: JobKeeper payment — information for employers
Cash flow issues
To be eligible for the JobKeeper payment, employers must have already paid their employees – then they get reimbursed. This means employers need to ensure that they have the cash flow to pay their employees the minimum $1,500/fn during the month even though
- They won’t be reimbursed for the wages until after the end of the month;
- Eligibility, and therefore reimbursement for the month may not be clear until after the end of the month when turnover has been calculated and compared to the previous year; and
- In some cases, employers will need to pay their employees more than “normal” to top them up to the $1,500/fn payment. This creates an additional drain on cash flow in challenging times.
Get some advice
The team at DFK Everalls are still open for business. We are ready to be by your side through this difficult period and walk you through the fine print.
So, if you still have questions and are wondering how to ensure your business is eligible for this subsidy, give us a call. Can you afford not to?!