Advice Budgeting Business

The Morrison government’s $130 billion JobKeeper wage subsidy package passed through parliament on Wednesday, giving effect to the largest single piece of fiscal policy in Australian history.

But the question on the mind of more than 730,000 businesses heading into the Easter long weekend remains whether or not they’ll be accepted into the scheme, which will provide $1,500 fortnightly payments for each eligible employee on their books.

About six million workers are expected to be covered by the program, but many businesses remain nervous about their prospects heading into April, as the Australian Taxation Office (ATO) prepares to begin accepting formal applications.

Despite reassurances that officials will look to be inclusive rather than excluding well-meaning firms, there are still more questions than answers about the types of business activities the ATO will be taking into account when considering eligibility.

Legislation passed through parliament yesterday outlines how the JobKeeper scheme will work for those accepted into the program, but includes far fewer details about eligibility requirements and the application process.

Under the laws, which amend the Fair Work Act temporarily, Treasurer Josh Frydenberg has been granted broad powers to pen additional rules about eligibility under the program, including the manner in which payments are made, the process for reviewing decisions and record-keeping requirements.

Treasurer and tax commissioner have broad powers

The making of these rules can be delegated to tax commissioner Chris Jordan by the Treasurer, enabling officials from the ATO and Treasury to maintain a large degree of flexibility about which businesses and workers will and won’t be eligible for JobKeeper payments throughout the life of the scheme.

It’s been designed that way to enable officials to modify and update the JobKeeper framework as the program progresses, preventing a situation where the ATO is forced to rule out businesses based on regulations already enshrined in the Fair Work Act.

These rules may cover:

  • Eligibility criteria for JobKeeper payments;
  • How JobKeeper applications must be made;
  • Whether a payment will be made in instalments or a lump sum;
  • Entitlement to payments or instalments;
  • The amount of JobKeeper payments;
  • When a JobKeeper payment should be made;
  • Conditions for applying to the JobKeeper scheme;
  • Providing information or notices; and
  • The rights, obligations and liabilities of JobKeeper recipients and other entities that benefit from those payments.

At the time of writing on Thursday morning, the JobKeeper legislation has not received Royal Assent yet. While this part is largely a formality, it limits what the ATO is able to say publicly about the scheme.

SmartCompany is expecting responses to a list of questions about the administration of the program next week; we’ll update this article when that information becomes available.

What we know so far

We already know a fair bit about the approach the ATO will be taking though. The headline eligibility requirement for employers and sole traders, updated by Treasury last Sunday, involves:

  • Businesses estimating their turnover has, or will likely, fall by 30% or more (where turnover is under $1 billion);
  • Businesses estimating their turnover has, or will likely, fall by 50% or more (where turnover is over $1 billion).

Businesses are expected to provide evidence, such as with business activity statements (BAS), of these revenue declines.

Most businesses will be required to prove their turnover has fallen over the course of a month or quarter (depending on their BAS reporting period), relative to their turnover in a corresponding period a year earlier.

Turnover will be calculated in the same way it is for General Sales Tax (GST), which is reported on BAS statements.

The headline criteria published Sunday is slightly more flexible than previous guidance initially outlined by Treasury, which required firms to show a 30% decline on a comparable period a year ago, of at least a month.

Firms which don’t meet the criteria will be relying on “tax commissioner discretion” to have their applications approved.

Treasury says firms which have not been in operation for 12 months, or which can show their turnover a year ago was “not representative” of their usual average turnover, will fall under this discretion category.

Firms which have undertaken acquisitions or have typically highly variable turnover have been singled out by Treasury as candidates for eligibility discretion.

“The Tax Commissioner will have the discretion to consider additional information that the business or not-for-profit can provide to establish that they have been significantly affected by the impacts of the Coronavirus,” Treasury said on Sunday.

The ATO will also have the discretion to set out alternative tests for firms, with Treasury saying there will be “some tolerance” for businesses which, in good faith, estimate a 30% fall but experience a slightly smaller decline.

What employees are eligible?

This part has not changed too much since the JobKeeper scheme was first announced on March 30. Although under the laws passed Wednesday, the Treasurer and tax commissioner have broad powers to change eligibility rules for workers.

As it stands, the following workers are eligible for JobKeeper payments:

  • Full-time and part-time staff; and
  • Casuals employed on a regular and systemic basis for longer than 12 months as of March 1, 2020.

There are additional requirements staff need to meet as well:

  • Staff must be currently employed by an eligible employer (including those stood down or re-hired);
  • Eligible staff must have been employed on March 1, 2020;
  • Staff must be at least 16 years of age as on March 1, 2020;
  • Staff must be Australian citizens, the holder of a permanent visa or a 444 visa holder as of March 1, 2020;
  • Staff must be residents for Australian tax purposes as on March 1, 2020;
  • Staff must not already be receiving JobKeeper payments from another employer;
  • Employees cannot be receiving parental leave pay from Services Australia; and
  • Employees on workers compensation will only be eligible if they’re working (even on reduced hours).

I’m a sole trader, what about me?

Sole traders are eligible to apply for JobKeeper payments and can register alongside all other businesses.

Firms without employees are required to provide their ABN and then nominate an ’employee’ (that’s the sole trader in most instances) to receive the payment alongside that person’s Tax File Number (TFN).

Sole traders must also have included assessable income from their business in their 2018-19 tax return and lodged taxable supplies between July 1, 2018, and March 12, 2020. This is basically a test to ensure an applicant has been operating their business.

Sole traders must have had an ABN on or before March 12, 2020, and have been “actively engaged” in their business.

Eligible sole traders must also meet the same age, citizenship and visa status requirements as employees (explained above).

Sole trader payments will be made monthly to a nominated bank account.

Other than this, the same eligibility criteria apply to sole traders as other businesses regarding turnover decline and ATO discretion.

Businesses operating through partnership structures can only nominate one partner to receive the JobKeeper payment, but where shareholders provide labour to the company but receive dividends in lieu of wages Treasury says one shareholder can be nominated for JobKeeper.

Sole trader structured firms with employees will be eligible to receive one JobKeeper payment for the director and other payments for eligible employees.

Source: SmartCompany