9 April 2020
by David Prichard
- Related topics
- Corporate Tax & Regulatory
The legislation giving effect to the JobKeeper package was passed by both houses late yesterday evening enabling the Federal Government to implement its widely announced plans designed to keep employers and employees connected. Contrary to almost every other legislation that is passed by Parliament, the legislation did not include any clear guidance on eligibility rules which is exactly what every business wanted to know.
Importantly, the legislation contained a mechanism for the Treasurer to make “rules” by way of legislative instrument to give effect to the JobKeeper stimulus package. This mechanism is designed to provide the Federal Government with a large amount of flexibility when delivering the package. It is anticipated that this mechanism will be used to provide detailed guidance on the eligibility of employers and employees or any other aspect of the package. As at the time of writing, no additional details have been released.
The information in respect of the JobKeeper package has continually evolved. Below is a summary of the position as currently announced.
Eligibility for the employer level
- Must elect to participate in the scheme (it’s not automatic) and you can do so by applying online with the ATO.
- Employers with annual turnover (see below) of less than $1 billion are eligible where they have had a reduction in revenue of 30 per cent or more since 1 March 2020 over a minimum one-month period.
- Employers with an annual turnover of $1 billion or more, you are required to demonstrate a reduction in revenue of 50 per cent or more to be eligible.
- All employer types are eligible, except where the employer is the Australian Government and its agencies, State and Territory governments and their agencies, foreign governments and their agencies, local governments and wholly owned corporations of these bodies are not eligible for the JobKeeper payment.
- Non-government schools and private vocational education providers are eligible.
- Eligible employers will receive the $1,500 per fortnight payment for each eligible employee that was on their books on 1 March 2020 and continues to be engaged by that employer — including full-time, part-time, long-term casuals and stood down employees.
The payment in practice
- From a practical perspective, employers may wish to engage with their legal advisers to understand the implications of reducing staff salaries and standing down employees (and what this exactly means) amongst other permutations.
- Payments will be administered by the ATO and will start to be issued in the first week of May, backdated to 30 March 2020. The payments will be monthly in arrears.
Eligibility for the Employee level
Eligible employees must receive:
- at least $1,500 per fortnight if they receive less than this normally. It is up to the employer whether they want to pay superannuation on any additional wage paid to employees;
- $1,500 per fortnight before tax if they have been stood down;
- their regular income according to their prevailing workplace arrangements where the employee receives $1,500 or more in income per fortnight before tax.
Further details are:
- Casual employees eligible for the JobKeeper Payment are those employees who have been with their employer on a regular and systematic basis for at least the previous 12 months.
- An employee must be an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder as at 1 March 2020. The employee must also be a resident for Australian tax purposes on 1 March 2020.
- Employees receiving Parental Leave Pay from Services Australia are not eligible, however, employees on parental leave from their employer will be eligible.
- Employees receiving workers compensation will be eligible for the JobKeeper Payment if they are working, for example on reduced hours, but will generally not be eligible if they are not working.
- Eligible employers who have stood down their employees before the commencement of this scheme will be able to participate. Employees that are re-engaged by a business that was their employer on 1 March 2020 will be eligible.
Eligibility for the Sole Traders and other entity structures
- For charities registered with the Australian Charities and Not-For-Profit Commission (“ACNC”), they will be eligible for the subsidy if they estimate their turnover has or will likely fall by 15 per cent or more relative to a comparable period.
- Self-employed individuals will be able to receive the payment where they have suffered or expect to suffer a 30% decline in turnover relative to a comparable period.
- Partnerships or beneficiaries of trusts appear to have restricted eligibility to a single nominated partner or beneficiary.
- Turnover is calculated as it is for GST purposes and is reported on Business Activity Statements (“BAS”). It includes all taxable supplies and all GST free supplies but not input taxed supplies.
- To establish that a business has faced or is likely to face the relevant fall in turnover, businesses would be expected to establish that their turnover has or will likely fall in the relevant month or quarter (depending on their BAS reporting period) relative to their turnover in a corresponding period a year earlier.
- The Tax Commissioner will have discretion to set out alternative tests to establish eligibility in specific circumstances. There will be some tolerance where employers, in good faith, estimate a 30 per cent or more or 50 per cent or more fall in turnover but actually experience a slightly smaller fall.
- If a business is part of a consolidated group for income tax purposes, the turnover test is applied to each business in that consolidated group. As such, different businesses within a consolidated group may be eligible while other businesses may not be eligible.
As soon as further detail are released by the Treasurer / ATO we will provide a further update with clarity around eligibility rules and the finer details. As always, please contact your ESV Engagement Partner if you have any questions regarding the JobKeeper initiative or any of the Federal and State stimulus packages – we are here to help our clients through this challenging Covid-19 era.