Update JobKeeper Payment and WA Payroll Tax Concessions

TREASURY UPDATED JOBKEEPER GUIDELINES

As we wait for the JobKeeper Payment legislation to be released tomorrow 8 April 2020, we wanted to make you aware of significant new information on eligibility and compliance of this wage subsidy as released today by Treasury.

The main features of the JobKeeper Payment measures are as follows:

  • Eligible employers will receive $1,500 per fortnight per eligible employee for six months. This is to be offset against the employee wages, or to be passed on in full, if the payment is in excess of the wages.
  • In order to be eligible, the employer has to estimate that their business turnover declined by 30% or more, if the annual turnover of the business is less than $1b. If the annual turnover of the business is more than $1b, the threshold for the reduction in business turnover rises to 50% or more. 
  • Eligible employees have to be full-time, part-time, long-term casuals or recently stood down employees on the business payroll as of 1 March 2020. Long-term casuals have to be employed regularly for at least 12 months as of 1 March 2020. The employee must be aged 16 years or older, an Australian citizen, holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder, and a resident of Australia for tax purposes as of 1 March 2020. 

We outline the key points and developments regarding eligibility for the JobKeeper Payment.

KEY POINTS

Employees must continue to be employed

Employers can only claim the JobKeeper Payment for eligible employees that were in their employment on 1 March 2020 and continue to be employed while the employer is claiming the JobKeeper Payment. Employees who ‘continue to be employed’ include employees who have been stood down or rehired but does not include those who have been made redundant or terminated.

The first cash subsidy to be received in May 2020

The JobKeeper Payment will be available from 30 March 2020 for a six-month period until 27 September 2020, with the first payments by the ATO being received by employers in the first week of May.

This creates a cash flow issue for those employers who do not have the funds to pay employees prior to May. The Government suggests that those businesses may want to speak to their bank to discuss their options. Interestingly, the banks have said businesses may be able to use the upcoming JobKeeper payment as a basis to seek credit in order to pay their employees until the scheme is making its first payments, although it is too early to tell whether this is in fact occurring.

Employers must pay their eligible employee

Importantly, employers will need to pay their eligible employees a minimum of $1,500 per fortnight in the scheme payment periods, commencing on 30 March 2020.

Initially it was considered that payment of wages were not required until May 2020. Now this has been clarified, payment periods are to be 14 day periods commencing on 30 March 2020.  If the employer has stood down eligible employees without pay after 1 March 2020, the employer can ‘back pay’ the employees to 30 March 2020 and will be eligible to claim the JobKeeper Payment for these employees for each 14 day period.

Enforcement of compliance

Employers must pass the full $1,500/fortnight subsidy on to each eligible employee, even if the employee did not previously earn that amount.  Enforcement and compliance to ensure the JobKeeper Payment is passed on to employees will be done by the ATO.

KEY DEVELOPMENTS

Eligible employers 

Employers (including not-for-profits) will be eligible for the subsidy if, at the time of applying they have reduced comparable turnover:

  • Where annual turnover is less than $1b – estimated turnover must have fallen or will likely fall by at least 30% relative to the reporting period for the previous year.
  • Where annual turnover is greater than $1b – estimated turnover must have fallen or will likely fall at least 50% relative to the previous year.
  • For charities registered with the Australian Charities and Not-For-Profit Commission (ACNC) where estimated turnover has or will likely fall by at least 15% relative to a comparable period.
Turnover defined

Turnover will be defined according to the employer’s current calculation for GST purposes as reported on Business Activity Statements. Therefore, only Australian based turnover is relevant.

As the definition refers to turnover as defined under GST, all taxable supplies and GST-free supplies such as exports will be included. But input-taxed supplies like interest income will not be included.

Self-Assessment if turnover falls

The ATO will issue guidance about the self-assessment process of determining actual and anticipated falls in turnover.  Further, it has been clarified that an employer who may not initially be eligible to apply at the commencement of the scheme on 30 March 2020, may apply to receive JobKeeper payments at a later time, if their turnover subsequently falls. However, the payments will not be backdated to 30 March 2020, but will commence from when they became eligible.

Application for Commissioner’s discretion

Where it would appear not evident using the comparable period approach to substantiate a fall in turnover or where the Commissioner does not in the first place grant the subsidy, an employer has an ability to apply for the Commissioner’s discretion.

Where a business was not in operation a year earlier, or where their turnover a year earlier was not representative of their usual or average turnover for reasons such as:

  • a large acquisition
  • newly established
  • scaling up, or
  • turnover is highly variable

the Commissioner will have discretion to consider additional information that the business can provide as to the adversely effect of the Coronavirus.

Although the Tax Commissioner will be given discretion to set out alternative tests in specific circumstances, it is still not clear whether businesses such as exploration and start-up companies who have minimal or no income will be eligible. We would like to see other measures for determining eligibility introduced to address these differing circumstances or at least other sorts of measures to assist these different profiles of employers.

Employers must elect to participate

An application to the ATO will be needed when further details are announced and provide supporting information demonstrating a downturn in their business.

Employers can apply here to register interest.

Unpaid owner managed and family employees

It is common for owners and their family members of closely held businesses to not pay salary and wages to themselves, but instead take their return in other forms like dividends and trust distributions depending on their business structures.

It is pleasing that partnerships, trusts and companies that operate a business are now eligible subject to the following approach:

  • Partnerships can only nominate one partner to receive the payment and a partner cannot be an employee.
  • In relation to trusts where beneficiaries of a trust only receive trust distributions, rather than being paid salary and wages for work done, one individual beneficiary can be nominated to receive the payment.
  • Companies with an eligible business can nominate only one director to receive the payment if they are not paid as an employee.
  • An eligible business that pays shareholders by way of dividends rather than paid as an employee can nominate one shareholder.
Sole traders

People who are self-employed (as sole traders) will be eligible for the payment where at the time of applying;

  • they were actively engaged in the business,
  • estimate their turnover has or will fall by 30 per cent or more,
  • had an ABN on or before 12 March 2020, and
  • meet conditions relating to assessable income or supplies for GST purposes during the period to 12 March 2020.

All these additional guidelines are welcomed and it is very pleasing to see expanded justified groups likely to now fall within eligibility.

WA PAYROLL TAX RELIEF – NOT SO AUTOMATIC !

The WA payroll tax measures to support businesses impacted by COVID-19 are summarised in our previous newsletter.

We recap these measures:

  • The payroll tax threshold will be increased to $1 million on 1 July 2020.
  • A one-off grant of $17,500 will be given to employers, or groups of employers, whose annual Australian taxable wages are more than $1 million and less than $4 million.
  • A full waiver of payroll tax for the months March to June 2020 for employers that have Australian taxable wages less than $7.5 million at 30 June 2020. This waiver will be reflected when undertaking the annual reconciliation. This waiver replaces the previously announced option to defer payment of payroll tax until July 2020.

ACTION REQUIRED

For employers, or groups of employers, with Australian taxable wages less than $5 million at 29 February 2020, they can claim the waiver by:

  • declaring WA taxable wages as normal in Revenue Online; and
  • recording the value of WA taxable wages as exempt wages using the ‘Other Exempt Wages’ field.

If you have overlooked in doing this for your March 2020 return you will need to amend your return to obtain this exemption. Otherwise the waiver won’t be applied automatically. For employers, or groups of employers, with Australian taxable wages of $5 million or more at 29 February, or new employers registered for payroll tax from 1 March 2020, they can apply to defer lodgement and payment of returns.

OUR OFFER TO YOU

  • We have designated 4.00pm to 5.00pm each day to make ourselves available to answer your general queries free of charge.
  • We will be holding a free interactive webinar to discuss the detail contained in the newly released JobKeeper Payment legislation on Tuesday 14 April 2020 at 12.15 pm to 1.15pm WST where you are welcome to join and ask questions regarding this measure.
  • We can assist with assessing eligibility for the JobKeeper Payment, including cashflow forecasting and preparation of the program application.
  • We can prepare submissions to the Tax Commissioner to apply discretion regarding eligibility.

We can assist you in calculating any required top up payments and considering your payroll and superannuation obligations.

RESOURCES

The Government’s Treasury Guide for Employers can be accessed here.

The WA State Government’s measures regarding payroll tax relief can be accessed here.

This newsletter is current as of 07 April 2020, however, please note that announcements and changes are being made by the Government and the ATO regularly, and we expect that the tax and business-related responses will continue to evolve.  Please contact us to discuss.