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16 September 2020
On 30 March 2020, the Federal Government announced the “JobKeeper” program, which broadly comprises a wage subsidy to help businesses keep staff employed. From 30 March 2020 to 27 September 2020, the subsidy of AUD1,500 per fortnight, per eligible employee, is available to almost all affected employer types (including not-for-profits and charities) and is also available to certain other eligible business participants such as sole traders, partners in a partnership and beneficiaries of a trust.
Under the extended JobKeeper program applicable for an additional six months from 28 September 2020 through to 28 March 2021, there is a lower two-tier payment structure and a requirement for employers to retest eligibility based on actual decline in turnover to continue to access the payment.
The incentive is designed such that an eligible employer who has suffered the requisite decline in turnover will receive the JobKeeper payments to the extent that it retains its eligible employees. Specifically, participating and eligible employers are required to ensure eligible employees will receive, at a minimum, an amount equal to the appropriate rate of the JobKeeper payment (before tax) to be eligible to receive the payment.
For more information on the latest JobKeeper payment updates, view our one-page summary.
The JobKeeper program is available to employers who, on 1 March 2020, carried on a business in Australia, was a not-for-profit organisation that pursued its objectives principally in Australia or was an international affairs deductible gift recipient, and meets the decline in turnover test.
Decline in turnover - basic test
To be eligible for the payment during the initial phase of the program (from 30 March 2020 to 27 September 2020), an employer must also experience a significant decline in turnover, based on the following thresholds:
Most charities registered with the Australian Charities and Not-for-profits Commission (ACNC) will be eligible for the subsidy if they estimate their turnover has fallen or will likely fall by 15 per cent or more relative to a comparable period. This lower threshold does not apply to universities and non-government schools that are registered charities - these entities will have to apply the 30 per cent or 50 per cent threshold in the same way as other businesses.
There are broadly two steps to determining if an employer is eligible for the payment:
Step 1: Determine which percentage threshold applies. An entity's “aggregated turnover” will be relevant for determining which percentage threshold applies, using the existing concept in the Income Tax Assessment Act 1997. This concept means that it is necessary to include the annual turnover of all entities that are connected or affiliated with the employer, whether they are Australian or foreign.
Step 2: Determine if the business has suffered, or is expected to suffer, the requisite fall in turnover for a chosen relevant turnover test period (generally a period of either a month or a quarter). This second step is based on the calculation of the projected turnover for GST purposes as compared to the turnover in the relevant comparison period. It is important to note that GST turnover is a specific term which may include different revenue items to what is usually included in Business Activity Statements (BAS). For example, GST turnover for the purposes of the JobKeeper provisions includes all taxable supplies, most GST free supplies, but not input taxed supplies. It also includes certain tax deductible gift receipts for registered charities and transactions between entities within a GST group. The ATO has provided detailed guidance on calculating GST turnover on its website and in Law Companion Ruling LCR 2020/1.
Decline in turnover - alternative and modified tests
The Commissioner also has the ability to determine, by way of legislative instrument, that an alternative decline in turnover test can apply but only where an appropriate comparison period for 2019 is not available, for example, where a business was not operating a year earlier or where the prior period business is not representative of usual circumstances. The following classes of entities are eligible to apply an alternative test:
an entity that commenced business after the relevant comparison period in 2019
an entity that acquired or disposed of part of their business after the relevant comparison period in 2019
an entity that has restructured part or all of their business after the relevant comparison period in 2019, including more than one restructure, and that restructure(s) has changed the entity’s turnover
an entity that has had an increase in turnover by 50 per cent or more in the 12 months immediately before the applicable turnover test period, or 25 per cent or more in the six months immediately before the applicable turnover test period, or 12.5 per cent or more in the three months immediately before the applicable turnover test period.
an entity that has been affected by a drought or other natural disaster in the relevant comparison period in 2019
an entity that has an irregular turnover that is not cyclical, and
It is worth noting that applying the alternative decline in turnover test cannot make an entity ineligible if the employer otherwise satisfied the basic test by reference to the comparative period in 2019, i.e. the alternative test (if applicable) does not also need to be satisfied.
A modified decline in turnover test was introduced for use by groups where the operating business which has suffered a decline in turnover is conducted in a different legal entity to the employer entity, which cannot otherwise show the requisite fall in turnover. This modified test is only available where the employer entity is a member of a tax consolidated group, a consolidatable group (that is, a group that could choose to consolidate for tax purposes but has not), or a GST group, and the employer entity’s principal activity is supplying employee labour services to other members of the group (the operating entities). Broadly, under the modified test, the employer entity uses the combined GST turnovers of operating entities to determine if the decline in turnover test is satisfied, rather than its own. The Commissioner has the ability to make a determination that the modified test cannot be used if he considers that the test is unsuitable and presents a risk to the integrity of his administration of the JobKeeper program.
From 28 September 2020 - Requirement to retest decline in turnover
The JobKeeper program was initially designed such that a business did not have to retest the decline in turnover throughout the initial six-month period of the program. With the extension of the program through to March 2021, businesses are required to retest the decline in turnover to continue to access the JobKeeper payments for an additional two quarters (the “actual decline in turnover” test). Specifically, there will be two additional test times as follows:
The thresholds for the decline in turnover (50%, 30% and 15%) remain unchanged, and the testing methodology mirrors that for the original decline in turnover test with some minor modifications (see below). Both the alternative and modified tests (as mentioned above) are available to use when calculating the actual decline in turnover.
The Commissioner of Taxation has the power to determine that certain supplies or classes of supplies are to be treated as being wholly or partly made at a particular time for the purposes of the actual decline in turnover test. The Commissioner has made a legislative instrument that aligns the time of supply under the current GST turnover for the actual decline in turnover test with how entities would attribute GST payable on the supplies to a tax period according to the GST law. This effectively requires businesses to follow the same timing basis for recognising supplies as used when completing their BAS. However, businesses will still need to assess whether any items reported in their BAS should be excluded (for example, input taxed supplies and certain GST adjustments) or additional items should be included (for example, intra-GST group supplies) for the purposes of their actual decline in turnover test.
The following entities (excluded entities) are not eligible for the payment:
An entity that is subject to the Major Bank Levy, or that is a member of a consolidated group where another member of the group is subject to the Major Bank Levy,
Australian Government and its agencies and wholly owned entities,
State and Territory governments and their agencies and wholly owned entities,
Local council governments and their wholly owned entities,
Additionally, a company that is in liquidation, or a partnership, trust or sole trader in bankruptcy, will not be eligible. Some sectors may not be eligible if they are separately provided with support from the Government that explicitly requires them to forgo access to the JobKeeper Payment.
The program covers eligible employees who were, as at 1 March 2020 or 1 July 2020 (in order to access JobKeeper program from 3 August 2020):
An eligible employee must also not be in receipt of a JobKeeper Payment from another employer or as an eligible business participant.
With effect from 3 August 2020, the test date was changed from 1 March 2020 to 1 July 2020 to allow additional employees to be brought into the program. Notwithstanding this change, employees who are eligible under the original 1 March 2020 test date are not required to retest their eligibility. This means that employees who were eligible for the JobKeeper program before 3 August 2020, continue to be eligible for JobKeeper fortnights beginning on or after 3 August 2020.
Employees receiving Parental Leave Pay from Services Australia will not be eligible for the JobKeeper Payment, however those on parental leave from their employer will be eligible. Similarly, employees receiving workers compensation will be eligible for the payment if they are working (for example, reduced hours), but will not be eligible if they are not working.
The JobKeeper program was extended to ensure that it covered paid religious practitioners who would not otherwise be eligible as they are not employees of registered religious institutions. The eligibility requirements for religious practitioners are similar to those for employees.
Before an eligible employer applies for the JobKeeper Payment, it must notify its eligible employees of the intention to participate in the program. An employer that elects to participate is required to include all eligible employees in the program. The eligible employees must agree to be nominated by their employer and receive payments under the program. The ATO has released an employee nomination notice that can be used for such purposes (although it is possible for an employer to choose to create and use their own employee nomination notice). The eligible employer must retain this notice in its records (it does not have to be lodged with the ATO). For any business that has already enrolled to participate in JobKeeper and that has additional employees that become eligible using the 1 July test time (including casuals who may now meet the definition of a long-term casual), an employee nomination notice must be provided to all of those newly eligible employees.
As part of the nomination process, employees are required to confirm that they have not agreed to be nominated by any other employer/entity and have not given another entity a nomination form for the purpose of the program. With the introduction of the 1 July 2020 employment test date, employees who have previously nominated as an eligible employee with one entity are now able to re-nominate as an eligible employee of another entity in limited circumstances. To re-nominate, the individual must have ceased their employment or business participation with the first entity before 1 July 2020, and commenced their employment with the new entity by 1 July 2020.
For any eligible employer who is entitled to JobKeeper payments at any time on or after 28 September 2020, it is also a requirement that the employer notify all eligible employees in writing whether the higher or lower rate of JobKeeper payment was notified to the Commissioner in respect of the particular individual (see Amount of JobKeeper Payment below).
Certain business owners operating as a sole trader, in partnership or through a trust or company access also the JobKeeper program if they qualify as an eligible business participant who is actively engaged in the business carried on by an entity. An eligible business participant is, broadly, an individual who:
is a sole trader, a partner in a partnership entity, an adult beneficiary of a trust, a shareholder or a director in the company;
is actively engaged in the business carried on by the entity which is not a non-profit body, and the entity had an ABN on or before 12 March 2020;
is not employed by the entity;
at least 18 years of age; or
aged 16 or 17 years and independent or not undertaking full time study (both of these terms taking their meaning from the Social Security Act 1991) (note that this latter additional independence or study requirement for 16 and 17 year olds to qualify for the program only applies from 11 May 2020);
an Australia resident within the meaning of the Social Security Act 1991 (which includes an Australian citizen, the holder of a permanent visa, and a special category visa holder who is a protected SCV holder) or a Special Category (Subclass 444) Visa Holder who was also a resident of Australia for tax purposes on 1 March 2020; and
not in receipt of another JobKeeper Payment (either as a nominated business participant of another business or as an eligible employee of an employer).
The eligible business entity must also qualify in the same way as an eligible employer, i.e. it must meet the relevant decline in turnover test(s) and not be an excluded entity. The eligible business participant (other than a sole trader) must agree to be nominated, and can do so using the ATO’s nomination notice for eligible business participants. The business entity is only entitled to receive the JobKeeper payment in relation to one eligible business participant and it is up to the business to determine which individual is nominated as the eligible business participant.
Note that the entity, not the eligible business participant, receives the JobKeeper payment (other than in the case of a sole trader who is both the business entity and an eligible business participant and who accordingly will receive the JobKeeper payment themselves).
For the period from 30 March 2020 to 27 September 2020, the JobKeeper payment available to eligible businesses is AUD1,500 per fortnight, per eligible employee or eligible business participant.
From 28 September 2020, the JobKeeper payment will change to a two-tiered structure as follows:
Eligible employee who had total hours of work and paid leave or public holidays (or an eligible business participant was actively engaged in the business) of 80 hours or more in the “reference period” - “higher rate”
Al other eligible employee and business participants - “lower rate”
JobKeeper fortnights from 28 September 2020 to 3 January 2021
AUD1,200 per employee
AUD750 per employee
JobKeeper fortnights from 4 January 2021 to 28 March 2021
AUD1,000 per employee
AUD650 per employee
In testing whether or not the requisite minimum 80 hours for eligible employees is met, the eligible business will ordinarily determine this by reference to the 28‑day period ending at the end of the most recent pay cycle for the employee that ended before 1 March 2020 or 1 July 2020. For an eligible business participant, the hours of active engagement are based on those for the month of February 2020. The Commissioner of Taxation has provided alternative tests where an employee’s or business participant’s hours were not usual during the applicable reference period (for example, where the employee was on unpaid leave, volunteering during the bushfires, or not employed for all or part of February 2020 or June 2020) or where the individual is paid salary, wages, commission, bonus or allowances that are not tied to an hourly rate or contracted rate or where there are no (or incomplete) records of the relevant hours.
There is an immediate need for eligible businesses to assess the entitlement to the higher or lower rate for each eligible employee as soon as possible in order to be ready for the extended JobKeeper program from 28 September 2020.
Eligible businesses are required to notify the Commissioner of Taxation whether the higher or lower JobKeeper amount applies to an eligible employee or eligible business participant.
The payments are made to the employer, and administered through the tax system. Businesses can enrol to participate in the program via the Business Portal or ATO online services, or a registered tax agent can apply on their behalf. Employers are required to confirm their eligibility, and provide the expected number of eligible employees and their contact and bank details.
Following enrolment in the program, employers (or their registered tax agent) must identify eligible employees and report these to the ATO. This must be done throughout the program (see further below regarding monthly reporting). There are a number of different ways to do this, depending on whether the employer uses Single Touch Payroll (STP) enabled software. Refer to our JobKeeper and single touch payroll webpage for further insight into practical considerations for payroll teams to administer and manage the obligations. As noted above, those businesses who are eligible for the program after 27 September 2020 are also required to notify the Commission whether the higher or lower payment rate applies to each eligible employee or business participant.
To remain eligible for the JobKeeper payments, eligible employers must pay all of their eligible employees a minimum amount equivalent to the JobKeeper payment per fortnight, even if they normally earn less than this per fortnight. Refer to ‘Amount of the JobKeeper Payment’ above for further details. Pay As You Go Withholding must be withheld from these payments. This “wage condition” does not apply where the entity is receiving JobKeeper payments in respect of an eligible business participant. The Superannuation Guarantee (Administration) Regulations 2018 were amended so that superannuation guarantee contributions are not required to be paid on any “top up” amount paid to employees (that is, any additional amount paid to employees on top of their ordinary wage or salary to make up the minimum payment per fortnight).
Participating businesses need to provide a monthly declaration to the ATO which includes the following information:
changes to its eligible employees, for example if employees leave the employment.
The ATO has extended the time for which the monthly declaration can be provided to the ATOso it can be lodged within 14 days of the end of each calendar month, with the exception of the declaration for the month of April which was due by 31 May 2020. However, it should also be noted that the ATO will not make any JobKeeper payments to an eligible business in respect of a month until after the declaration has been lodged.
The ATO has published guidance on best practice governance for large public and multinational groups claiming JobKeeper payments. This outlines three key principles to guide businesses on what the ATO considers to be best practice in terms of substantiating claims for JobKeeper payments:
Principle 1: Leverage existing corporate governance where possible
Principle 2: Keep good records, and
Principle 3: Make a reasonable assessment of projected GST turnover.
JobKeeper payments are assessable income of the business that receives them. The normal rules for deductibility apply in respect of the amounts the business pays to its employees where those amounts are subsidised by the JobKeeper payment. The JobKeeper payment is not subject to GST.
The JobKeeper legislation contains a number of integrity measures to ensure that only those who genuinely need support can access the payment including both criminal and administrative penalties for fraud or false statements, measures to counteract contrived schemes, joint and several liability provisions, and repayment of “overpayments” with interest. The ATO has released Practical Compliance Guideline PCG 2020/4 setting out how it will apply its compliance resources to schemes designed to obtain access to the JobKeeper payment.
The Fair Work Act 2009 (Cth) was amended in April 2020 to effectively require an employer to ensure that wage conditions are met in respect of eligible employees where the employer otherwise qualifies for the JobKeeper program. Where this obligation is breached, a civil penalty may apply.
In addition to this fundamental obligation, the amendments created a discrete regime for a limited period to allow JobKeeper eligible employers greater flexibility to give directions (for example, in relation to partial stand down or variation to hours) in response to COVID-19 than currently provided in the Fair Work Act. These provisions are subject to reasonableness and consultation requirements.
The Coronavirus Economic Response Package (Jobkeeper Payments) Amendment Act 2020 extends most of these Fair Work Act amendments in line with the extension of the JobKeeper programme to 29 March 2021. However, Fair Work Act amendments will apply in a limited way to ‘legacy employers’ that have been eligible to participate in the initial JobKeeper scheme, but are no longer eligible following 27 September 2020.
Legacy employers will need to continue to meet a 10 per cent decline in turnover test (which for most employers must be verified by a tax of BAS agent or qualified accountant not related to the employer through the issue of a certificate) in order to rely upon Fair Work Act JobKeeper enabling direction provisions following 27 September 2020. Small businesses will be able to rely upon statutory declarations as to turnover made by authorised personnel. Further, where legacy employers remain eligible, the nature of JobKeeper enabling directions will also be reduced in some important respects. For example, an eligible legacy employer will not be able to give directions that lead to a reduction in hours below 60 per cent of an eligible employee’s pre-1 March 2020 hours.
Amendments regarding the use of annual leave made earlier this year will be repealed altogether on 28 September 2020.
What are the eligibility requirements for my business?
There are multiple eligibility criteria to access the JobKeeper payment. You must be an eligible employer with eligible employees, an eligible entity with an eligible business participant or a registered religious institution with eligible religious practitioners. Refer above for additional information regarding these concepts.
For employers, it is critical that they must have been in an employment relationship with eligible employees as at 1 March 2020 (or 1 July 2020 as relevant), and have also notified all eligible employees of the intention to claim the JobKeeper payment on their behalf. Eligible employees are also required to agree that they meet the eligibility requirements and confirm that they have not agreed to be nominated by any other employer/entity and have not given another entity a nomination form for the purpose of the program.
The eligible employer must pay those eligible employees a minimum amount equivalent to the JobKeeper payment per fortnight (before tax) in line with its existing pay cycle through existing payroll systems and continue to pay them for as long as the employer claims JobKeeper. The eligible employer is also required to confirm each month that each eligible employee is currently engaged (on the books) in order to receive JobKeeper Payments for any particular month for each eligible employee.
Will I receive the payment for all of my employees?
Where the business is eligible, the majority of your employees should be eligible to receive the JobKeeper payment, and you must include all eligible employees in the program. Refer above for further details on eligibility requirements for employees.
It is not necessary that any of your eligible employees actually have had any impact on their salary or work arrangements. The JobKeeper payment is in essence a wages subsidy meant to assist any employer who is suffering a downturn of 30 per cent (50 per cent for significantly large businesses) in continuing to pay their employees, no matter what their salary or working arrangements. It is important that the eligible employee has agreed to be nominated and receive payments under the program from the employer on their behalf.
We are a not-for-profit entity and participate in the JobKeeper Program. How should we present the amounts received as reimbursements of the salaries and wages paid to our eligible employees in our financial statements?
You should use the provisions in AASB 1058 Income for Not-for-Profit Entities. The incentive is likely to be accounted for as income under AASB 1058. It needs to be presented as gross income and the related salaries employee expense will be separate. The option that for-profit entities have of netting the two under AASB 120 is not available.
I am an employer who will have many employees subject to reduced hours, possible shut-down, or potentially need to negotiate temporary salary or work arrangements. I understand that the JobKeeper program will be able to assist my business cashflow to keep my employees on the payroll, but are there any legal issues I need to be concerned about?
There are a number of ways in which JobKeeper entitlements may impact employment rights and obligations from an Employment Law perspective. The types of impact on any individual employer will be very specific to that employer’s workforce and business, all of which are ultimately a matter for legal advice.
The initial amending legislation commencing in April 2020 introduced a number of measures to allow JobKeeper eligible employers to give directions to facilitate partial stand-down, reduced hours of work and variations to duties or, location of work. These measures will continue for employers that qualify for the extended JobKeeper arrangements from 28 September 2020, and also for legacy JobKeeper participating employers that are no longer eligible, but continue to meet a 10 per cent decline in turnover test. Temporary JobKeeper provisions in the Fair Work Act also allow JobKeeper eligible employers greater flexibility to enter into arrangements for the taking of annual leave at half pay, or changes to working days, although annual leave flexibility provisions will be repealed on 28 September 2020. These provisions will only operate in respect of employees that are JobKeeper eligible, and are subject to reasonableness and consultation requirements.
Amendments to the Fair Work Act are not intended to affect employment rights existing prior to their commencement, and do not need to be invoked in order for an eligible employer to access JobKeeper payments for employees where otherwise eligible. Employers will need to be careful in considering whether flexibility provisions are appropriate having regard to existing arrangements with their employees, and their continuing JobKeeper participation status.
We encourage businesses to seek employment law advice about the potential impacts taking account of their individual circumstances before factoring in JobKeeper payments as part of workforce planning.
We participate in the JobKeeper Program. How should we present the amounts received as reimbursements of the salaries and wages paid to our eligible employees in our financial statements?
The receipts from the JobKeeper Program are accounted for as government grants under AASB 120 Accounting for Government Grants and Disclosures of Government Assistance. These can be presented either as other income or as a reduction of the related employee costs. The presentation approach should be applied consistently to all similar grants.
If you have capitalised the employee expenses to which the JobKeeper payments relate under another accounting standard (eg. as part of property, plant and equipment under construction), then receipts under the Program are accounted for as government grants related to assets under AASB 120. You can present the payments either as (i) deferred income in the balance sheet and amortized over the useful life of the related asset or as (ii) reduction of the carrying amount of the assets resulting in a reduced depreciation expense.
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