The constant and changing flow of information regarding government stimulus resulting from the COVID-19/Coronavirus health and financial crisis seems never ending. There are however some fantastic support packages available so we encourage you to take advantage of them where you can.
This update contains information on:
The South Australian State Government $10,000 Emergency Cash Grant
An update on the Federal Government JobKeeper scheme
Although there is some tedious reading here, we encourage business owners and managers to read this update thoroughly to the end as it contains some important and valuable information.
SA State Government - $10,000 Emergency Cash Grants for small businesses impacted by COVID-19
Small businesses and not-for-profits who have had their earnings significantly impacted by the coronavirus or been forced to close as a result of the necessary trade, travel and social gathering restrictions, can access a one-off $10,000 emergency cash grant from the Marshall SA State Liberal Government. The cash grants will be available to help cover a business’ ongoing or outstanding operating costs, such as rent, power bills, supplier and raw materials costs and other fees.
Modelled on similar schemes in New South Wales and Victoria, the SA grants apply to those businesses with a payroll of less than $1.5 million, and who are not entitled to a payroll tax waiver under COVID-19 support measures already introduced by the State Government (for businesses with payrolls of up to $4m).
It will also work in addition to the Federal Government’s stimulus measures and be made available to local small businesses that employ people in SA and have a turnover of more than $75,000.
For more information and to register your interest, businesses are urged to visit:
Applications for the grant will open shortly and be available until June 1, 2020.
To be eligible for the one-off $10,000 emergency cash grant, a business must:
Employ people in South Australia
Have turnover of more than $75,000
Have payroll of less than $1.5 million, and not entitled to a payroll tax waiver under COVID19 support measures introduced by the State Government
Have an ABN and were carrying on the operation of a business in SA on March 1, 2020
Have been subject to closure or highly impacted by COVID-19 related restrictions^
Use the funds to support activities related to the operation of the business
Apply by June 1, 2020
^Businesses eligible for the Commonwealth JobKeeper payment will be deemed to be highly impacted by COVID-19 restrictions.
NB: If a business has received any SA Government grants provided to address COVID-19 related business impacts, these payments will be deducted from the $10,000 grant.
Australian Federal Government - JobKeeper Payment legislation receives Royal Assent
The JobKeeper Payment is a $130 billion temporary subsidy scheme to support businesses (including not-for-profits) that have been impacted by Coronavirus (COVID-19) and have seen a reduction of 30%* in turnover (when compared to a comparative period). For the purposes of this section:
(a) the turnover test period must be:
(i) a single calendar month from March 2020 to September 2020; or
(ii) the quarter ended 30 June 2020 or the quarter ended 30 September 2020; and
(b) the relevant comparison period must be the period in 2019 that corresponds to the turnover test period.
The scheme will provide $1,500 per fortnight per eligible employee from 30 March to 27 September 2020 (6 months / 13 fortnights) and is also available to the self-employed (see later).
Note* - The 30% reduction in turnover is for businesses with a turnover of less than $1 Billion. For business with turnover of more than $1 Billion, the required reduction in turnover is 50%. The reduction in turnover for charities is 15%.
Other eligibility tests will also apply. These are discussed later in this update.
The legislation implementing the JobKeeper scheme passed Parliament on 8 April 2020 and received Royal Assent on 9 April 2020.
Interestingly, the legislation did not contain the details on the eligibility for the JobKeeper Payment. Instead these details are contained in a separate legislative instrument (a set of “Rules”) which are also now available and are called Coronavirus Economic Response Package (Payments and Benefits) Rules 2020.
Now that the actual legislation has been made available, some of the information provided in previous updates (from us and from the government itself) has become obsolete. You should use this guide as a starting point to determine your business’ and employees’ eligibility for the JobKeeper scheme.
So, here’s what you need to know and do now
You have until 26 April 2020 (this month) to provide the ATO with the information they need to be able to reimburse your business for the first two “JobKeeper Fortnights”. A JobKeeper Fortnight is a two-week period, with the first of these beginning on 30 March 2010 and the last ending on 27 September 2020 (i.e. there is a total of 13 JobKeeper Fortnights over 6 months). The first JobKeeper Fortnight ends on Sunday 12 April 2020 (i.e. it is finished already) and the second JobKeeper Fortnight ends on Sunday 26 April 2020.
You can start registering for the JobKeeper scheme from 20 April 2020 - Next Monday (See later in this update). If you have registered your intention to partake in the JobKeeper Scheme, we expect the ATO will advise you by email or SMS/Text message when the registration process is available. Some have been notified already. If you have not yet registered your business and intend to, you can do so on this link
Even more important than registering, right now you need to:
Determine whether you will satisfy the decline in turnover test (see below); AND
Ensure you pay your eligible employees the minimum $1,500 (pre-tax) per fortnight (note you can backdate wages to top up to the $1,500 for the already completed first JobKeeper fortnight).
Another key element of the scheme, is that qualifying employers that decide to participate in the JobKeeper scheme must, as a condition of entitlement, notify the employees in writing that they have elected to participate in the scheme, and that the employer’s eligible employees will all be covered by the scheme. The form that this notice is to take can be found in the JobKeeper registration link given later in this update. Please note that if you have terminated employees and do not intend to re-employ them after this crisis is over, you do need to include them in your JobKeeper scheme.
Who is an eligible employee?
An eligible employee, for a fortnight, is a person:
• who is currently employed by the employer
• who gives the employer a nomination notice that they satisfy the requirements for an eligible employee and agree to be nominated by the employer as an eligible employee for the purposes of the JobKeeper scheme
and at 1 March 2020:
• was employed by the employer (full-time or part-time including those stood down or re-hired)
• was a long-term casual (employed on a regular and systemic basis for 12 months or longer as at 1 March 2020) AND was NOT a permanent employee of any other employer
• was at least 16 years of age
• was an Australian resident for social security purposes or a tax resident subclass 444 visa holder
However, the following employees are excluded:
• an employee receiving parental leave pay from Services Australia under the Paid Parental Leave Act 2010 and the PPL period overlaps the fortnight (note: employees receiving paid parental leave from their employer are still potentially eligible)
• an employee receiving paid dad and partner pay under the Paid Parental Leave Act 2010 during the fortnight
• an employee who is receiving Australian workers' compensation and the employee is totally incapacitated for work through the fortnight
• an employee in receipt of a JobKeeper Payment from another employer.
You must keep paying your eligible employees
As mentioned above, there are 13 fortnights in the JobKeeper scheme. You must qualify for JobKeeper payments on a fortnight-by-fortnight basis. To qualify for JobKeeper payments for a particular eligible employee, for a particular fortnight, you have to pay the employee the minimum $1,500 (gross, or pre-tax) in that fortnight. If you fail to pay your employees the minimum amount of $1,500 (including for ‘stood-down’ employees) during any JobKeeper fortnight, with the intent of catching up when JobKeeper money starts arriving in May, you won’t qualify for the JobKeeper payment for those fortnights in the first place. Note that as mentioned above, you can backpay employees to get them up to the $1,500 minimum for the first two JobKeeper fortnights as long as you do so by the end of the second JobKeeper Fortnight (ending 26 April 2020). For fortnights whose dates end within a particular month, JobKeeper payments will be reimbursed to the employer within 14 days after the end of that month. This means the employer may have to fund two or three fortnights worth of wages (depending on the reimbursement date in May) from 30 March before receiving any JobKeeper reimbursements.
Scarily, it also means taking a risk because, if it turns out you don’t qualify for the JobKeeper Scheme, you can’t claw back those wages paid! At first glance, it seems you could decide to pay particular employees less than $1,500 per fortnight from 30 March (or nothing for stood-down employees), and start paying them the $1,500 minimum only upon receiving confirmation that you qualify (and thus receive JobKeeper payments only from that time). However, this diminishes your chances of retaining those employees, as they may choose to seek employment elsewhere.
Decline in turnover
Please note that the rules operate differently to how they have been set out in previously released fact sheets. The rules operate as follows:
There are two parts to the decline in turnover requirement:
Determining the ‘turnover decline threshold’ (percentage) that applies to you; and
Determining if you will suffer that ‘percentage decline in turnover’.
For businesses with group-wide turnover under $1 billion, the turnover decline threshold is 30% (15% for most ACNC-registered charities). For businesses with group-wide turnover over $1 billion, the turnover decline threshold is 50%.
Measuring your business’ percentage decline in turnover
The GST rules are used to determine what constitutes ‘turnover’ for turnover decline threshold purposes – it’s basically your business entity’s GST exclusive revenue on which you were liable for GST, plus your GST-free income. Ignore other forms of income that are essentially kept outside the GST system, like interest income, dividends and residential rental income.
You need to make a turnover comparison between an individual month (March to September 2020) or quarter (June 2020 Quarter or September 2020 Quarter) and the same month/quarter in the previous 2019 financial year*. If your business turnover this year is down on last year’s turnover by your turnover decline threshold percentage (i.e. 30% for most. 15% for charities), you will qualify for the JobKeeper scheme.
Note:* The decision to compare a month or quarter is not tied to whether you are registered for GST as monthly or quarterly - you choose the time-frame comparison.
You may need to get out your crystal ball…
If, by now, you haven’t already got an ACTUAL month in which your turnover is less than last year’s comparative month by the turnover decline threshold percentage (30% for most), you need to make a prediction! However, you need to show that you will satisfy the decline in turnover test only once and you will then continue to be eligible for the scheme.
For example, let’s assume your business requires a 30% turnover decline to qualify for the JobKeeper scheme. What do you predict your turnover will be for, say, the month of April 2020? When you compare to April last year (2019), has there been a decline of 30% or more this year? If yes, you’re IN! You’ve met the turnover decline requirement for the two fortnight periods ending in April (ie, ending 12 April and 26 April). You then automatically qualify for the remainder of the program. You will need to provide this information in the application to the ATO (not yet available…).
It is possible that you might not yet have felt the full effects of the economic fallout from COVID-19 and comparing predicted April 2020 to actual April 2019 won’t show a 30%+ decline in turnover. If the full effect will come through only in May and June, you can enter the JobKeeper scheme later.
The ATO has the power to determine alternative ways of measuring turnover decline (eg, for recently started or purchased businesses), but they haven’t stated yet how that discretion is to be sought. It could be part of the application process once that has been released.
What if your turnover decline ends up being less than the threshold percentage?
It doesn’t automatically mean retrospectively losing your entitlement to JobKeeper payments. Your prediction at the time might have been entirely reasonable, and you had unforeseeable good fortune leading to a lesser turnover decline. But the onus is on you to show your prediction was reasonable. If you can’t, you’ll have to repay the JobKeeper amounts received, with interest.
Self-employed persons now qualify
The JobKeeper scheme now recognises that certain participants in a business, such as sole-traders, partners in a partnership, beneficiaries of a trust or directors/shareholders of a company may also be affected by the economic downturn caused by the Coronavirus. Accordingly, in order to provide a benefit to such business participants, the Rules extend the availability of the JobKeeper payment to certain participants in a qualifying business. The entitlement to the JobKeeper payment applies to businesses only and is not available to non-profit entities.
An entity can nominate only one person for JobKeeper payments, who is active in the business, but not on the books as an employee. Instead, the person nominated may be taking drawings, dividends, or a trust distribution instead of a wage. Only one person can be nominated even if there are two or more unrelated individuals owning and/or operating the business. A person cannot be a business participant if they are a permanent employee of another employer.
A word of warning…
Businesses, individuals and entities that deliberately enter into contrived arrangements with the sole or dominant purpose of reducing their turnover in order to gain access to JobKeeper payments or increase the amount of JobKeeper payments they receive will not be entitled to the payment at all and the general interest charge will apply on the overpayment. In addition, significant administrative as well as criminal penalties are also likely to apply to the parties involved in such schemes.
According to the Rules, the Commissioner must be satisfied that a business is entitled to the JobKeeper payments before making the payment for the fortnight. However, there is a transitional rule for the first two JobKeeper fortnights (i.e. fortnights ending 12 April and 26 April) that gives the Commissioner some leeway to make the payments if he is satisfied on the basis of the information provided that it is reasonable to make the payment.
Timing of payments
As mentioned above, the subsidy will start on 30 March 2020, with first payments to be received in the first week of May. This means a business with employees still on the books will have to initially fund the fortnightly payment of $1,500 or more to eligible employees and eligible business participants before it receives the JobKeeper payments of $1,500 for each fortnight from the ATO.
Payments will be made to the employer's nominated account no later than 14 days after the end of the calendar month.
JobKeeper Registration and Checklist
You will be able to register for JobKeeper from 20 April 2020. This is a different and more complex process than simply registering your interest as outlined early in this update. A detailed checklist of the process can be found on the ATO’s website via this link: JobKeeper Registration Link .
If you are still not sure if you qualify, or need help with the registration process, please get in contact with us here at interAcct Business Consulting.