Introduction

The Coronavirus Economic Response Package (Payments and Benefits) Rules (Rules) were released over the last weekend. These Rules set out the things that the Treasurer is permitted to do under the framework of the Coronavirus Economic Response Package legislation.

Employer’s entitlement

The Rules determine which employees (defined as eligible employees in the Rules) of a qualifying employer are entitled to the jobkeeper payment. The payment is then made to the employer if the employer has already paid those employees the minimum amount.

The Rules hinge around the employer being an “entity” as defined for tax purposes and provide that an entity/employer is entitled to a jobkeeper payment for an individual for a fortnight if:

  • the fortnight is a jobkeeper fortnight;
  • the employer qualifies for the jobkeeper scheme at or before the end of the fortnight;
  • the individual is an eligible employee of the employer for the fortnight;
  • the employer has satisfied the wage condition in respect of the individual for the fortnight;
  • the employer has notified the Commissioner in the approved form at or before the required time that the employer elects to participate in the jobkeeper scheme;
  • the employer has given information about the entitlement for the fortnight, including details of the individual, to the Commissioner in the approved form; and
  • the employer has not notified the Commissioner in the approved form that the employer no longer wishes to participate in the jobkeeper scheme.

Apart from notification requirements, there are 3 primary conditions to consider; namely:

  • Does the entity/employer qualify for the scheme in that fortnight?
  • Is an employee an eligible employee in that fortnight?
  • Has the qualifying employer satisfied the wage condition for an eligible employee in that fortnight?

What is a jobkeeper fortnight?

A fortnight is defined as a 14 day period beginning on a Monday.

A jobkeeper fortnight is defined as the fortnight beginning on Monday 30 March 2020 and ending Sunday 12 April and each subsequent fortnight thereafter ending on Sunday 27 September 2020.

Does the entity/employer qualify?

The employer qualifies for the jobkeeper scheme at a time (in a relevant fortnight) if:

  • on 1 March 2020, the relevant entity carried on a business in Australia (“business” has its usual tax meaning);
  • the entity/employer has satisfied the decline in turnover test at or before the time; and
  • if the entity is a company, it has not had a liquidator or provisional liquidator appointed.

An entity satisfies the decline in turnover test at a time (the test time) if:

  • the entity’s projected GST turnover for a turnover test period in which the test time falls, is short of the entity’s current GST turnover for a relevant comparison period; and
  • the shortfall percentage is more than 15% (in the case of registered charities) or 30% for small businesses (turnover less than $1 billion).

The turnover test period must be:

  • a calendar month that ends after 30 March 2020 (March itself counts) and before 1 October 2020; or
  • a quarter that starts on 1 April 2020 or 1 July 2020.

The relevant comparison period must be the period in 2019 that corresponds to the turnover test period.

Projected GST turnover means:

  • the sum of the values of all supplies (whether taxable supplies or not) that have been made or are likely to be made during that period other than input taxed supplies;
  • for registered charities, a drop-off in donations will also be taken into account in the turnover test.

Relevant test period

The comparable turnover test period can be periods of 1 month or 3 months regardless of the current GST reporting period.

So, if an entity were to choose a 1 month turnover test period, it must be one of the months from March 2020 to September 2020 inclusive. On the other hand, if a 3 month period is being used, it must be one of the quarters beginning on 1 April or the quarter beginning 1 July.

However, to register for a fortnight (i.e. the fortnight that you want to start to be eligible), the test period you choose must contain one or more of the days in the fortnight for which you will first register/qualify.

So, for example, if an entity wanted to qualify for the fortnight ended 12 April 2020, you can use the projected GST turnover in:

  • the month of March (obviously historical figures would apply here); or
  • the month of April; or
  • the June 2020 quarter;

(on the basis that each of these periods includes days in the fortnight 30 March to 12 April 2020).

If an entity did not qualify for this period it could start at a later period. So, for example, if in March and April the entity does not qualify and does not think that it will qualify for the quarter ended 30 June but does qualify in May itself, the entity can choose to start receiving jobkeeper payments for the first fortnight in May.

Once you qualify and are registered, further turnover is irrelevant. There is no requirement to re-test.

Decline in turnover

Projected turnover is based on information which you know at the end of the fortnight for which you first wish to register. The exception to this is for the first 2 fortnights where it is possible to base information on what you know by 26 April.  “Projected turnover” is the likelihood of a supply being made, based on a reasonable expectation, considered in the context of the facts of the business at the time.

There is no penalty or claw-back if you get the projection wrong provided that the projection was calculated on a reasonable basis on what was known at the time the assessment was made.  For this purpose it is necessary to keep records and evidence of the assessment that shows the information used to make the projection.  The spreadsheet budget and likely fall-off in turnover as a consequence of the virus downturn is the sort of evidence that is relevant and which needs to be kept for audit purposes.

Who is an eligible employee?

An individual is an eligible employee for a fortnight if the individual is employed by the entity at any time in the fortnight and, on 1 March 2020, the individual was aged 16 years or over, was an Australian resident and on that date the individual was:

  • an employee (other than a casual employee) of the entity; or
  • a long term casual employee of the entity.

A long term casual employee is defined in the Rules as being a casual employee who had been employed by the entity on a regular and systemic basis during the prior 12 months. Regular or systemic basis of work exists where there was a recurring work schedule or a reasonable expectation of ongoing work.

Under the Rules there are notification requirements for an individual to be an eligible employee. As well, there are some exclusions to be an eligible employee e.g. an individual to whom parental leave pay is payable.

The wage condition

The entity/employer satisfies the wage condition in respect of an individual for the fortnight if the sum of the following equals or exceeds $1,500:

  • amounts paid by the employer in the fortnight by way of salary, wages, commission, bonuses or allowances;
  • amounts withheld as PAYG withholding payments made to the individual in the fortnight;
  • employer superannuation contributions in the fortnight on account of superannuation; and
  • other amounts that, in the fortnight, are applied or dealt with in any way with the agreement of the individual e.g. salary sacrifice.

Importantly though an employer only qualifies if at least $1,500 is paid in the fortnight to an eligible employee; although there are some  discretions around this requirement.

The big issue is the situation where an employer has people employed on their books but they have either not been paid in the 12 April fortnight (e.g. where they have been stood down) or are paid less than $1,500. In this case, technically the employer will not have satisfied the wage condition and so is not entitled to a jobkeeper payment for them.  However, the Commissioner does have a discretion and the ATO has indicated that for the first 2 fortnights (30 March – 12 April, 13 April – 26 April), the ATO will accept the minimum payment of $1,500 for each fortnight has been paid by an employer, even if it has been paid late, provided it is paid by the employer by the end of April.  So, if an employer makes a payment of $3,000 before the end of April then the employer will qualify for a jobkeeper payment of that $3,000 in May but there is of course a cashflow timing aspect to this.