Which government agency will administer the JobKeeper Payment program?
The Commissioner of Taxation will have the administration of the program, using the administration mechanics that already exist in the Commonwealth tax legislation.
When will an employer be eligible for the JobKeeper Payment subsidy?
The Coronavirus Economic Benefits Response Package (Payments and Benefits) Rules 2020, dated 9 April 2020, set out the eligibility criteria for the JobKeeper payment.
An employer will be entitled to receive a JobKeeper payment for a fortnight if:
- the fortnight is the fortnight beginning on 30 March 2020 and each subsequent fortnight ending 27 September 2020;
- the employer qualifies for the scheme on or before the end of the fortnight;
- the payment is for an eligible employee;
- the employer has satisfied the wage condition;
- the employer has notified the Commissioner of its election to participate; and
- the employer satisfies the record-keeping obligations and provides the required information to the Commissioner.
Which employers qualify for the JobKeeper scheme?
An employer will qualify for the JobKeeper scheme for a fortnight if it meets the following requirements:
- on 1 March 2020, the employer carried on a business in Australia, or was a non-profit body pursuing its objectives principally in Australia; and
- before the end of the fortnight, it met the decline in turnover test.
The following classes of employers are not eligible for the JobKeeper scheme:
- on 1 March 2020, it (or any member of its consolidated group) had been subject to the Major Bank Levy for any prior quarter;
- most government bodies; and
- any entities in liquidation or in bankruptcy.
Employers need to meet the eligibility requirements for each fortnight and need to be registered with the Commissioner before the end of the fortnight in order to qualify for the JobKeeper payment for that fortnight. There is an exception for April 2020, so that employers register by the end of April, they can receive the JobKeeper payment commencing 30 March 2020 if they meet the other criteria for each relevant fortnight.
Employers must notify their employees that they have elected to participate in the JobKeeper payment scheme and that all eligible employees will be covered by the scheme.
Self-employed individuals (businesses without employees) will be eligible for the subsidy where they meet the relevant turnover test outlined above, subject to some additional criteria.
Foreign resident business entities carrying on business in Australia may also be eligible employers.
What is the decline in turnover test?
Employers must satisfy the decline in turnover test to be eligible for the JobKeeper payment scheme. Once an entity has satisfied the decline in turnover test, it does not need to re-satisfy the decline in turnover test in future months. Entities who satisfy the decline in turnover test part way through the six-month period of the JobKeeper scheme can notify and participate in the scheme from that point onwards.
The Rules set out two ways to satisfy the decline in turnover test:
- the basic decline in turnover test; and
- the alternative decline in turnover test.
An entity satisfies the basic decline in turnover test as follows:
- if the entity’s projected GST turnover for the turnover test period falls short of the entity’s current GST turnover for a relevant comparison period; and
- the amount by which the projected GST turnover falls short equals or exceeds the specified percentage for the entity.
The turnover test period must be:
- a calendar month that ends after 30 March 2020 and before 1 October 2020; or
- a quarter that starts on 1 April 2020 or 1 July 2020.
The relevant comparison period is the period in 2019 that corresponds to the turnover test period.
The specified percentages are as follows:
- 15%: ACNC registered charities (except schools and universities);
- 30%: entities who do not meet the $1 billion aggregated turnover test;
- 50%: entities whose aggregated turnover for the income year in which the test time occurs is likely to exceed $1 billion or the aggregated turnover for the previous income year exceeds $1 billion.
What is aggregated turnover?
Aggregated turnover has the meaning given in section 328-115 of the Income Tax Assessment Act 1997.
This will include the annual turnover of the entity, but also the annual turnover of all entities that are connected entities or affiliated entities. Caution is required because the definitions are quite broad. In particular, the definition of affiliates is quite broad and will capture entities who would not formally be viewed as part of a corporate group. Importantly, entities who act, or could reasonably be expected to act, in accordance with your directions or wishes, or in concert with you, in relation to the affairs of the business will be affiliates and their turnover will need to be counted.
Aggregated turnover captures the total ordinary income that the entity derives in the income year in the ordinary course of carrying on a business. Ordinary income is to be distinguished from statutory income and the meaning also seeks to distinguish income which is not derived in the ordinary course of carrying on a business, so that extraordinary items of income or receipts may or may not be excluded. Further, caution must be exercised to ensure that legal and not accounting characterisations of income and other receipts is applied for the purposes of calculating aggregated turnover. These are highly technical questions and specialist legal advice should be sought on the characterisation of income and other amounts received for purpose of including or excluding those amounts in the aggregated turnover calculation.
Charities registered with the Australian Charities and Not-for-profits Commission (ACNC) will be eligible for the subsidy if they estimate their turnover has or will likely fall by 15% or more.
How will turnover be calculated?
GST turnover calculations will be used as reported on Business Activity Statements. It includes all taxable supplies and all GST free supplies but not input taxed supplies.
- for each entity within a group to be eligible, it will need to meet the decline in turnover test; and
- the applicable percentage (30% or 50%) will be determined by the meaning of aggregated turnover.
A small entity will have to meet the 50% decline in turnover test if the aggregated turnover of that entity and its connected and affiliate entities is or is likely to exceed $1 billion in the income year in which the test time occurs, or was or exceeded $1 billion in the previous income year. Within a group, only those entities that meet the applicable decline in turnover will be eligible for the JobKeeper payment.
Registered charities, both those who are deductible gift recipients and those who are not, must also include in their turnover calculations, most types of gifts, including gifts received and those likely to be received.
The Rules provide that the Commissioner may, by legislative instrument, determine that an alternative decline in turnover test applies to a particular class of entities. Businesses or sectors who consider they are or are likely to be effected by COVID-19, but do not meet the decline in turnover test, should seek specialist legal advice about how to approach the Commissioner to seek a discussion about the appropriateness of a legislative instrument.
What is the process to apply?
To apply for the JobKeeper Payment, employers must:
- Assess whether they have or will likely experience the required turnover decline
- Register an interest to apply on the ATO website which is currently open;
- Provide information to the ATO on all eligible employees engaged as at 1 March 2020 and those currently employed by the business or not-for-profit (including those stood down or re-hired).
- Ensure each eligible employee receives at least $1,500 per fortnight (before tax). This means that for employees who were receiving less than $1,500 per fortnight before tax, the employer will need to pay them this amount at a minimum.
- Notify all eligible employees that they are receiving the JobKeeper Payment.
- Continue to update the ATO (on a monthly basis) on the eligible employees engaged by the business.
An employer is not eligible for the JobKeeper Payment in respect of an employee if another employer is claiming it.
When does the JobKeeper Payment scheme start and end?
The JobKeeper Payment scheme will be available from 30 March 2020 and will be available for the period until 27 September 2020. It is payable to eligible employers for a maximum of 13 fortnights in respect of each eligible employee on their books on 1 March 2020 who is retained by the employer.
Is this a reimbursement plan where employers first pay employees, and then get the subsidy at the end of the month?
Yes, employers will need to satisfy the payment requirements for their eligible employees in respect of each 14 day period covered by the scheme, with the first period starting on Monday 30 March 2020 and ending on Sunday 12 April 2020 and the first payments by the ATO to be received by employers in the first week of May 2020.
The payments will be made by the ATO monthly in arrears.
How will the payment be made?
The ATO will generally make the payment directly to the business' bank account.
However, the Commissioner can instead credit an amount to the business’ tax running balance account, to allow the ATO to have more time to make inquiries as to the eligibility of the business. While the default position is that the payment will not be withheld to offset against existing tax liabilities of the business, the Commissioner is to be given the power to offset against existing tax liabilities, rather than pay the business. This is more likely to happen where a business has unmanaged tax debts and has not engaged with the ATO to put a plan in place.
If your business has an unmanaged tax debt with the ATO, you should be talking to the ATO immediately.
What if my business has a tax debt?
You should seek legal assistance to engage with the ATO about your tax debt. The ATO is more likely to release the payment where the business has tried to engage with the ATO to put a debt management plan in place.
Is the JobKeeper subsidy subject to superannuation guarantee obligations?
The legislation and Rules do not yet provide for the superannuation guarantee obligations in relation to the JobKeeper subsidy. However, the Government has said that it will seek to pass legislation to put the following policy into effect.
In relation to superannuation obligations, where an eligible employee already receives more than $1,500 per fortnight (before tax) and the eligible employer receives $1,500 per fortnight from the JobKeeper Payment to subsidise the cost of the eligible employee's salary, the eligible employer will continue to pay superannuation guarantee on the eligible employee's income.
Where an eligible employee's wage is below $1,500 per fortnight and later topped up to $1,500 per fortnight by the JobKeeper Payment, the eligible employer can choose whether to pay superannuation on the additional top up amount, but it will not be mandatory. For example, where an eligible employee is receiving $1,000 per fortnight (before tax) and later receives a further $500 per fortnight (before tax) under the JobKeeper Payment scheme (totalling $1,500 per fortnight before tax), the eligible employer must pay superannuation guarantee on $1,000 but can choose whether to pay the superannuation guarantee on the additional $500.
Consequently, in relation to eligible employees that have been stood down, eligible employers will have no obligation to pay superannuation on the JobKeeper Payment passed on to them.
Do employers have withholding obligations from JobKeeper payments?
The eligible employer must provide the eligible employee at least $1,500 per fortnight (before tax) to apply for the JobKeeper Payment. The eligible employee will be taxed (withheld by the eligible employer) on this payment.
Eligible employers will have PAYG withholding obligations on this payment, regardless of whether the eligible employee has been stood-down or not.
Is the JobKeeper payment subject to payroll tax?
All States and Territories have now introduced payroll tax exemptions in respect of wages subsidised by JobKeeper payments. The application of such payroll tax exemptions will vary depending on the jurisdiction and particular circumstances of the employer and employee.
What are the record-keeping obligations of employers?
Entities must create and retain records substantiating information provided to the ATO in relation to eligibility and payments unless the Commissioner provides otherwise. There are record-keeping requirements both prior to payment (referred to as "pre-payment record-keeping requirements") and post-payment (referred to as "post-payment record-keeping obligation").
Compliance with these record-keeping obligation is an eligibility criteria and failure to satisfy them will disentitle the entity from receiving payments, and the ATO will be able to claw back payments already made as the entity will be taken to have never been entitled to the payment. The ATO will have the power to issue guidance about the form and contents of records that must be kept.
What if an employer enters into a scheme to obtain the JobKeeper Payment?
The legislation contains specific integrity provisions and the existing administrative penalties and tax and criminal offence provisions will also apply.
If anyone enters into a scheme for the sole or dominant purpose of obtaining a JobKeeper payment, the Commissioner will have the power to determine that the entity was never entitled to a payment, or to reduce the amount of the entitlement, and to do so retrospectively. The Commissioner will also be able to recover any overpayments and will likely have the power to impose significant penalties and interest. This specific integrity provision is aimed as contrived and artificial arrangements that technically satisfy the eligibility requirements, but have been implemented for the sole or dominant purpose of accessing a JobKeeper payment.
The Commissioner may make the determination having regard to:
- the manner in which the scheme was entered into or carried out;
- the form and substance of the scheme;
- the time at which the scheme was entered into and the length of the period during which the scheme was carried out;
- the result in relation to the operation of the coronavirus payment framework that, but for this provision, would be achieved by the scheme;
- any change in the financial position of the recipient that has resulted, will result, or may reasonably be expected to result, from the scheme;
- any change in the financial position of any entity that has, or has had, any connection (whether of a business, family or other nature) with the recipient, being a change that has resulted, will result or may reasonably be expected to result, from the scheme;
- any other consequence for the recipient, or for any connected person, of the scheme having been entered into or carried out; and
- the nature of any connection (whether of a business, family or other nature) between the recipient and any connected person.
The ATO will be supported by near real-time data through STP reporting to help identify wrongdoing.
Examples of conduct that may attract the operation of the integrity provisions include the following steps undertaken for the sole or dominant purpose of accessing a JobKeeper payment:
- reducing prices;
- postponing invoices;
- invoicing out of a different entity; and
- receiving “payment” for goods or services in kind and not reporting the value of the in kind payment.
Some of these steps may also rise above the integrity provisions and constitute criminal behaviour.
Can the employer be liable for other penalties?
There are a number of tax offences and criminal offences that will apply to conduct in relation to the JobKeeper Payment, including penalties for false and misleading statements under the Taxation Administration Act 1953 and Criminal Code 1995 and other criminal fraud offences.
Can an employer seek review a decision by the Commissioner?
Decisions by the Commissioner in relation to JobKeeper Payment is subject to review under the tax framework in Part IVC of the Taxation Administration Act 1953, involving a form of statutory internal review by the Commissioner, and then review by the AAT or Federal Court.