The Federal Treasurer has released the rules on how the JobKeeper Scheme (Scheme) will operate. In this insight, we provide an overview of the rules and highlight key issues for employers who intend participating in the Scheme.
Key concepts at a glance
- The Federal Government will provide a wage subsidy of $1500 before tax per fortnight to employers. The wage subsidy amounts (known as JobKeeper payments) will be paid by the Federal Government in arrears to reimburse income already paid to eligible employees.
- The Scheme operates from 30 March until 27 September 2020 (Term) and is divided into fortnightly periods. The first fortnight concluded on 12 April 2020 (First Fortnight). We are currently in the second fortnight which concludes on 26 April 2020 (Second Fortnight).
- It is not compulsory for employers to participate in the Scheme. So far, employers have been able to register their interest in the Scheme through the website of the Australian Taxation Office (ATO). From 20 April 2020, employers may enrol in the Scheme using the Business Portal in the ATO’s website.
- Employers who wish to participate in the Scheme must satisfy a decline in turnover test. An employer who meets this test qualifies for the JobKeeper payment. The decline in turnover test does not need to be met during each fortnight during the Term – this means an employer needs to meet the test only once to qualify for the Scheme.
- The rules set conditions which must be met in respect of each fortnight for an employer to be entitled to the JobKeeper payment which we discuss below.
- JobKeeper payments subsidise the wages of eligible employees of the employer. The ATO has developed a nomination form to be completed by each employee to establish their eligibility for the Scheme and indicate their agreement to participate. It is not compulsory for an employee to participate in the Scheme.
1. Decline in turnover test (which only needs to be met once for the employer to qualify for the Scheme)
Businesses whose turnover is affected by the COVID-19 pandemic will qualify to receive the wage subsidy for their eligible employees provided that as at 1 March 2020 they either carried on business in Australia or were a non-profit body that principally carried on business in Australia.
Eligible businesses will be businesses with a turnover of:
- less than $1 billion (which includes combined turnover for income tax consolidated groups) and estimate their turnover has fallen or will likely fall by 30% or more relative to a comparable period; or
- $1 billion or more (which includes combined turnover for income tax consolidated groups) and estimate their turnover has fallen or will likely fall by 50% or more relative to a comparable period.
Note the use of combined turnover for income tax consolidated groups is only relevant for the purpose of determining which of the 30% or 50% reduction applies, not for the purpose of testing whether the requisite reduction has actually occurred.
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% or more relative to a comparable period.
GST turnover is used for the purposes of determining the decline of a businesses’ turnover, with the exception of a few modifications discussed below. The basic decline in turnover test compares the projected GST turnover of the business for a period against its current GST turnover as calculated for a relevant comparison period. Alternatively, if the Commissioner is satisfied that there is no such period in 2019 (for instance, if it is a new business) or it is not an appropriate relevant comparison period (for instance, due to the effects of the drought on a farming business in the relevant comparison period) the Commissioner may determine an alternative decline in turnover test.
In determining the decline of a businesses’ turnover, only Australian based sales turnover will be considered (this differs from GST turnover as it also includes sales connected with the ‘external Territories’ of Australia). Further, businesses are to determine their GST turnover on a stand-alone basis regardless of whether they are part of a consolidated group or a GST group. As noted above, the combined turnover for income tax consolidated groups is only relevant for the purpose of determining which of the 30% or 50% reduction applies, not for the purpose of testing the actual reduction.
Businesses and charities need to establish that their turnover has fallen in the relevant month or quarter (depending on the GST reporting frequency of that business or charity) relative to their turnover in that corresponding period a year earlier.
If a business did not meet the turnover test at the start of the JobKeeper Scheme on the fortnight beginning on 30 March 2020, the business can start receiving the JobKeeper payment at a later time once the turnover test has been met. The business may satisfy the turnover test at any fortnight, up until the fortnight ending on 27 September 2020. In that instance, the JobKeeper payment is not backdated to the commencement of the Scheme.
2. Other tests (which must be met at the times specified below)
An eligible employee of the employer must meet all of the following conditions.
Firstly, conditions which must be met by an employee as at 1 March 2020 are:
- aged at least 16 years;
- employed as a permanent employee or a long term casual employee (see our discussion below); and
- Australian resident for the purposes of social security legislation or a resident of Australia under taxation legislation who held a Subclass 444 (Special Category) visa.
There is no retesting of these conditions at any other time during the Term.
Secondly, the employee must be employed by the employer at any time during a fortnight. This condition must be met in respect of each fortnight. For example, a permanent employee will be eligible whether they are actively working, stood-down without pay or on paid or unpaid leave.
In relation to long term casual employees, at common law casuals do not have ongoing employment unless agreed otherwise. They are employed by the day or by the shift when they are actually working. For this reason, a casual employee must actually work at some time during a fortnight to satisfy the condition of being employed at any time during a fortnight.
Thirdly, an eligible employee must provide a completed nomination notice to their employer. In completing the nomination notice the employee:
- verifies that they meet the eligibility criteria;
- agrees to their nomination by their employer under the Scheme; and
- undertakes that they have not agreed to be nominated by any other employer.
Only one employer (Primary Employer) may claim the JobKeeper payment in respect of the same individual. This means that an employee may not receive the benefit for the payment from more than one employer. The fact that an employee has more than one employer does not affect the entitlement of the Primary Employer to receive the payment for that employee.
The employee is ineligible for a fortnight if any the following conditions apply at any time during a fortnight:
- paid parental leave under the Government’s Paid Parental Leave (PPL) Scheme is payable to the employee;
- dad and partner pay under the PPL Scheme is paid; or
- the employee is totally incapacitated and workers compensation is payable to the employee.
If an employee is no longer excluded because of any of these three conditions, they will become eligible in respect of a fortnight/s and their employer will be entitled to the JobKeeper payment for them on completion of a nomination notice.
Long term casual employees
The rules define a long term casual employee as a casual employee who has been employed by the employer on a “regular and systematic basis” during the period of 12 months that ended on 1 March 2020. Any other casual employee is not considered eligible under the Scheme.
The Government has explained that the “regular and systematic basis” requirement is based on the same phrase in the Fair Work Act 2009 and that a recurring work schedule or a reasonable expectation of ongoing work is likely to mean the requirement is met.
Case law provides some guidance on what is employment on a “regular and systematic” basis:
- casual employment may be regular and systematic even if the hours and days of work are not;
- seasonal employment and even employment where the times and dates of work are irregular and not rostered may still qualify as regular and systematic;
- frequency of engagement may not be enough by itself to establish a regular and systematic engagement. There needs to be a system which is the basis of the engagement, such as an established process which applies to the employee related to their rostering for work.
The JobKeeper payment is a reimbursement of amounts already paid by the employer to an employee during a fortnight in the Term. The wages condition requires that these amounts have been made in (or in some cases, in respect of) a fortnight to an employee.
The condition will be met where the employer pays at least $1500 per fortnight including:
- salary, wages, commission, bonus or allowances;
- PAYG withholding; and
- superannuation contributions made by way of a salary sacrifice.
There is flexibility for employers whose pay periods are longer than a fortnight. The rules allow payments to be allocated to a particular fortnight so that the wages condition may be satisfied provided that this is done in a reasonable manner.
The ATO has announced that it is not insisting on strict compliance with the wages condition for the First and Second Fortnights. This means that employers who have not paid at least $1500 in respect of an eligible employee in each of these fortnights will meet the wages condition provided that at least $3,000 is paid to each eligible employee by the end of April 2020.
Employer notifies the ATO
The employer must notify the ATO that it intends to participate in the Scheme in respect of each fortnight – this is a reoccurring condition which requires the notice to be given in respect of each fortnight.
The rules provide that the notice in respect of the First and Second Fortnights must be given by the end of the second fortnight i.e. 26 April 2020.
For each subsequent fortnight, the employer must notify the ATO by the end of the fortnight.
The ATO advises that a form will be available on its website from 20 April 2020. The employer may use the form to enrol for the Scheme.
Employer provides other information to the ATO
The Government has announced that the ATO may require information such as:
- the name of the employee;
- the type of the employee’s employment; and
- the employee’s citizenship or residency status.
The specific information which must be provided is yet to be clarified by the ATO.
The ATO’s website suggests that an employer may provide this information about its employees online from 4 May 2020.
The employer must, within 7 days, notify each employee that their details have been provided to the ATO.
Employer has not withdrawn from the Scheme
An employer will be entitled to the JobKeeper payment provided that the employer has not notified the ATO that it no longer wishes to participate in the Scheme.
3. When will the ATO make JobKeeper payments?
JobKeeper payments will be made by the ATO on a monthly basis.
The ATO must pay employers their JobKeeper payments within 14 days of the end of the calendar month in which a fortnight ends provided that the ATO is satisfied that the employer is entitled. The Government has announced that JobKeeper payments in respect of the First and Second Fortnights will be paid in the first week of May 2020.
Otherwise, the ATO must pay an employer within 14 days of the ATO being satisfied that the employer is entitled to the JobKeeper payment. The ATO has some flexibility under the rules in paying employers even if it is not satisfied in respect of the First and Second Fortnights.
4. Record keeping and reporting obligations
An employer must keep records that enable it to substantiate any information that it has provided to the ATO in relation to a JobKeeper payment before it was paid. Further, records must also be kept of any information the employer provides to the ATO after the JobKeeper payment is made.
The ATO is yet to specify records which must be kept in relation to these obligations.
Employers who fail to comply with the record keeping obligations are not entitled and are deemed never to have been entitled to receive a JobKeeper payment.
If an employer is entitled to a JobKeeper payment for a fortnight during a month, the employer must notify the ATO of the employer’s:
- current GST turnover for that month; and
- projected GST turnover for the following month.
The report must be provided within 7 days of the end of that month.
The Government’s intention is that this information does not affect the employer’s eligibility for JobKeeper payments but rather is to provide the ATO with information on the impact of COVID-19 on the economy.
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