We wrote about the announcement of, and fact sheets concerning, the JobKeeper scheme here and here. On 9 April 2020, the JobKeeper legislation received Royal Assent and the Treasurer issued the Rules that govern eligibility for JobKeeper until the schemes planned end on 27 September 2020. This article sets out the operation of the JobKeeper scheme.
A ‘package’ of four Acts encompass the JobKeeper legislation (Legislation):
Coronavirus Economic Response Package Omnibus (Measures No. 2) Act 2020 (Omnibus Act);
Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (Payments and Benefits Act);
The Legislation does not include the rules governing the eligibility for the JobKeeper Payment. Instead, the Treasurer by legislative instrument makes rules prescribing matters to give effect to the Legislation. This means the Rules include the bulk of the detail on the eligibility for JobKeeper.
The Rules and Explanatory Statement to the Rules were released before the Easter break on Thursday 9 April 2020 and are available here and here.
In places the Rules appear different to the discussion in the Explanatory Statement. However, as set out below, the Australian Taxation Office (ATO) is coming up with administrative solutions to most of these differences.
Our summary of the JobKeeper related changes to the Fair Work Act 2009 is here.
The Omnibus Act includes various amendments to legislation to deal with the impact of the COVID-19 including:
changes to the Fair Work Act 2009 to support the practical operation of the JobKeeper scheme including the flexibility to change worker’s roles and hours during the payment period; and
expands the tax secrecy rules to allow the ATO to disclose de-identified protected information to Treasury for the purposes of policy development, or analysis, in relation to COVID-19 (including the JobKeeper scheme).
The Payments and Benefits Act sets up the framework to administer the JobKeeper payments. This includes:
the method of payment (nominated bank account);
the ability for the ATO to claw back a JobKeeper overpayment plus the general interest charge (entities can be jointly and severally liable); and
requiring keeping records for 5 years; and
integrity rules to deal with contrived schemes.
We now look at the Rules and the operation of the JobKeeper scheme.
Employer eligibility
An employer is entitled to a fortnightly JobKeeper payment of $1,500 per employee where:
on 1 March 2020, the employer carried on business in Australia or was a non-profit entity carrying on its objectives principally in Australia;
the employer satisfies the ‘decline in turnover test’ (see below)
the employee is an eligible employee (see below) of the employer for that fortnight;
the employer satisfies the ‘wage condition’ (see below) by making payments to the employee (or on their behalf) of at least $1,500 for the fortnight;
the employer has:
chosen to take part by the end of the fortnight (employers have until 24 April 2020 with respect to the fortnight that ended on 10 April 2020); and
has given information in the approved form to the ATO on eligibility and the employee (the form is not yet available).
Entities are ineligible if subject to the major bank levy, are a Government organisation, or are in liquidation or bankrupt.
The Explanatory Statement says, and the ATO has confirmed, that JobKeeper operates in a manner where an employer:
that does not meet the decline in turnover test in (say) April may meet the test later and then become eligible for JobKeeper payments; and
once the employer meets the decline in turnover test, the employer is eligible for the entire period of the JobKeeper scheme even if turnover increases later.
Decline in turnover test
An entity must satisfy either the ‘basic’ or ‘alternative’ decline in turnover test. An entity satisfies the ‘basic test’ where:
if the entity’s aggregated turnover is less than $1 billion, the entity’s projected GST turnover is at least 30% less than current (actual) GST turnover for the relevant comparison period;
if the entity’s aggregated turnover is more than $1 billion, the entity’s projected GST turnover is at least 50% less than current (actual) GST turnover for the relevant comparison period; or
if the entity is a charity registered with the ACNC (excluding certain education providers), the entity’s projected GST turnover is at least 15% less than current (actual) GST turnover for the relevant comparison period.
Education providers excluded from the 15% threshold are public or private universities or schools within the meaning of the GST Act (that is pre-schools, primary schools, secondary schools, and education for children with disabilities). These entities must satisfy the 30% or 50% decline test depending on the entity’s turnover.
The test period for calculation of GST turnover is either:
any month between March 2020 and September 2020 (compared with the corresponding month in 2019); or
the June 2020 or September 2020 quarter (compared with the corresponding quarter in 2019).
The entity can choose either monthly or quarterly irrespective of whether the entity accounts for GST on that basis (or if GST registered at all).
GST turnover is based on the GST Act definition with modifications under the Rules to:
allow for monthly or quarterly calculation under JobKeeper rather than annual under the GST Act;
disregard GST groups; and
for registered charities (including deductible gift recipients), to include the value of certain gifts.
GST turnover includes the GST-exclusive value of all supplies (including taxable supplies and GST-free supplies) but excludes input taxed supplies.
The Rules give the ATO (Commissioner) discretion to determine an alternative turnover test for a class of entities. On 23 April 2020, the Commissioner made a determination containing alternative tests for purposes of meeting the decline in turnover test that includes circumstances such as:
Businesses started, or where a major acquisition or disposal occurred, in the last 12 months;
A business affected by drought or natural disaster;
A business with a substantial increase in, or irregular, turnover; and
A sole trader, or small partnership, with sickness, injury, or leave.
Our detailed summary of the alternative tests is here.
Eligible employees
An employee is only eligible if the employee satisfies the wage condition. An employee will be an eligible employee where the employee:
was at least 16 years of age on 1 March 2020;
was employed on a full-time, part-time, or long-term (> 12-month) casual basis by the employer on 1 March 2020 and are currently employed (including stood down employees and re-hired employees) by the employer;
was an Australian citizen, permanent resident, or holder of a Special Category (Subclass 444) Visa (New Zealanders that are not Australian citizens or permanent residents) on that date; and
is not in receipt of a JobKeeper payment from another employer.
Employees will be ineligible where:
the employee is receiving Government funded paid parental leave or dad and partner pay; or
the employee is totally incapacitated for work and receiving workers compensation payments.
An employee that meets the eligibility requirements, and is not ineligible, must notify the employer in the approved form that s/he meets the eligibility requirements, agree to be nominated by the employer, and has not given another employer a nomination form.
Wage condition
The employer must satisfy the wage condition with respect to the employee. The employer satisfies the wage condition for an employee for a fortnight if the sum of the following exceeds $1,500:
amounts paid as salary, wages, commission, bonus, or allowance;
PAYG and superannuation guarantee withholding;
other amounts applied, dealt with, or agreed by the individual (for example, salary sacrifice arrangements or fringe benefits).
For employees not paid on a fortnightly basis, for example monthly, the employer must allocate the above amounts to fortnights on a reasonable basis.
If an employee (including stood down and re-hired) earns less than $1,500, the employer will need to pay the employee at least $1,500 to be eligible. Changes to superannuation law will mean that the employer does not need to pay superannuation on the ‘top-up’ (to $1,500) including for stood down (or rehired) employees.
For stood-down employees, employees that are re-hired, or employees earning less than $1,500 per fortnight, based on the Rules, for the fortnight ended on 10 April 2020, the employer needed to have paid the employee $1,500 by that date for the employer to be eligible for a JobKeeper payment for that fortnight (irrespective of the employer’s decline in turnover). The ATO on its website has said as an administrative concession, it will accept payment of the two first payments by the end of April either as two $1,500 payments or one $3,000 payment. However, employers will only receive a JobKeeper payment for re-hired employees from the fortnight those employees were re-engaged. That is, the employer cannot cannot claim retrospectively for re-engaged employees.
The ATO has confirmed that an employer cannot choose not to include stood down employees, or employees paid less than $1,500 per fortnight, in JobKeeper if the employee is otherwise eligible and notifies the employer. However, an employee can opt out of the scheme by indicating so on the employee notification form.
Business owners and the self-employed
Unlike, the cash flow boost, JobKeeper payments can be received by business owners and the self-employed who do not have employees. An entity is entitled to a $1,500 fortnightly JobKeeper payment where:
the entity is not a non-profit body and meets the relevant turnover decline test (see above);
the entity must have had an Australian Business Number (ABN) on 12 March 2020;
the entity lodged its 2019 income tax return by 12 March 2020, or the entity made a taxable supply between 1 July 2018 and 12 March 2020 and has lodged its activity statement relating to that supply;
the entity nominates the ATO of an individual, not being an employee, who is actively engaged in the business and who;
was at least 16 years of age on 1 March 2020; and
was an Australian citizen, permanent resident, or holder of a Special Category (Subclass 444) Visa (New Zealanders that are not Australian citizens or permanent residents) on that date.
However, the individual is not eligible where:
the individual is receiving Government funded paid parental leave or dad and partner pay; or
the individual is totally incapacitated for work and receiving workers compensation payments.
For entities that satisfy the eligibility requirements, eligible individuals (see above) for JobKeeper will be:
partnerships: one partner;
trusts: one adult individual beneficiary;
companies: one director or shareholder; and
self-employed: the individual.
While JobKeeper extends to eligible individuals operating businesses as sole-traders, or through a partnership, company, or trust, JobKeeper may not apply to all ‘multiple layer’ structures. For example, an operating unit trust owned by a discretionary trust will not qualify (the unitholders are not adult individuals) but a company owned by a discretionary trust may qualify where the ‘individual’ ‘actively engaged’ in the business is a director of the company.
Administration and accessibility
Notification to the ATO for the first two JobKeeper fortnights must be on or before 24 April 2020. If the ATO is satisfied that the employer is eligible, the ATO must make the payment for a fortnight by the later of:
14 days after the end of the calendar month in which the fortnight ends; or
14 days after the employer or business satisfies the ATO of eligibility to the payment.
For the first two JobKeeper fortnights ending on 24 April 2020, with payment expected in early May 2020, it will be sufficient for the employer or business to satisfy the ATO that it is reasonable to make the payments. If the ATO later determines that an employer or business was ineligible, the employer or business will need to repay the payment plus the general interest charge.
The ATO continues to update its website with further details on, and administration of, the JobKeeper scheme.
The Payments and Benefits Act includes a section that allows for the Rules to treat JobKeeper payments as non-assessable non-exempt (NANE) income. At the date of writing, the Rules do not include this, however the ATO has confirmed:
for individuals and entities receiving JobKeeper payments, those payments will be assessable income; and
employers will receive a deduction for wages and salaries paid (including ‘top up’ wages or salary to employees earning less than $1,500 per fortnight).
Integrity measures and compliance activity
The Payments and Benefits Act includes an anti-avoidance rule that can apply to a scheme entered for the sole or dominant purpose of obtaining a JobKeeper payment (or an increased payment). Like the anti-avoidance rules in the GST Act (Division 165) and the income tax legislation (Part IVA), sole or dominant purpose is by reference to ‘eight factors’.
The ATO (Commissioner) can make a determination that the JobKeeper anti-avoidance rule applies and that the entity is not entitled to a JobKeeper payment (or is entitled to a lesser amount). The Explanatory Statement also says that:
the ATO will undertake compliance activity relating to JobKeeper; and
additional administrative and criminal penalties can apply to parties involved in schemes to gain access to JobKeeper.
For more information please contact:
Neil Brydges
Principal Lawyer | Accredited Specialist in Tax Law
M +61 407 821 157 | T +61 3 9611 0176
E nbrydges@sladen.com.au
Daniel Smedley
Principal | Accredited Specialist in Tax Law
M +61 411 319 327| T +61 3 9611 0105
E dsmedley@sladen.com.au
Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au
