The JobKeeper Payment - Your questions answered

It has been a little over a week since the Commonwealth government released the JobKeeper legislation, rules and explanatory statements.  Since then, we have all been inundated with fact sheets, FAQ and guides that help explain the basics of this historic stimulus package.

There are still a number of key features that remain misunderstood, as well as a number of key questions.  This is not intended to be a detailed review of the scheme (you can find that here) but instead a short summary of a few of these key features and questions:

• JobKeeper is not paid to employees.  JobKeeper is a $1,500 per fortnight subsidy which the Commonwealth government pays eligible employers for each eligible employee.  The eligible employee must be paid at least $1500.  This means:

• If an employee is already earning $1500 per fortnight (or more) the employer is not required to pay them anything in addition to this amount.
   
• If an employee is earning less than $1500 per fortnight, the employer must increase their fortnightly pay to this amount.

• There is no requirement for an employer to account for what it does with the JobKeeper subsidy – but the employer is required to maintain records to establish that the employer correctly paid each eligible employee, and must report monthly to the ATO.
   
• The ATO has stated that the JobKeeper payment is assessable income of the recipient employer, but it is not subject to GST.
   
• The decline in turnover test has created a lot of confusion, and is possibly the most critical issue for most employers.  Here’s what we know:
  • The basic test requires a comparison of the projected GST turnover for a month or quarter this year with the current GST turnover for the same month or quarter last year.  These are terms lifted directly from the GST Act, but essentially it means the employer must compare this year’s budgeted turnover for the period, against last year’s actual turnover for the same period.
  • An employer can select either the current month or the current quarter for eligibility.
  • Once an employer is eligible, they do not need to re-test.
  • If an employer does not apply and later finds out that it would have been eligible, the employer cannot apply for past periods and receive the back payments for past periods.

• If the employer’s actual GST turnover for a period ends up being more than the projected GST turnover (and as a result, the required decline is not met) , there is no specific mechanism for the ATO to clawback a JobKeeper payment.  That said, there are new anti-avoidance measures introduced into the legislation that closely resemble the familiar tests in Part IVA of the Income Tax Assessment Act 1936 and division 165 of the GST Act.  Accordingly, it is more critical than ever to carefully manage the process of calculating projected turnover and, ideally, test these projections independently.

• Many should be aware of the different timing rule and requirement to elect to participate before 26 April where an employer who wishes to participate in the scheme and receive the first or second payment under the JobKeeper scheme (noting that the scheme will thereafter apply prospectively).

While this package was designed by Treasury, it is administered by the ATO.  Anecdotally, we have heard that the ATO has diverted a significant number of front line audit and compliance officers to the JobKeeper scheme.  It is highly likely that the ATO will administer the scheme with its usual vigour and scepticism and indeed it has already flagged compliance activity.

For this reason, primary producers who are considering their eligibility based on turnover should be clear on the basis of their downturn in business being linked to COVID-19 reasons, and not merely drought (or the flow-on effect of years of drought).

Separately, there are traditional entities utilised more by primary producers (such as companies, trusts and partnership) which also require careful consideration for determining whether employment arrangements under those operating entities will satisfy the required conditions.

If employers are in any doubt about whether they qualify (including based on the projected GST turnover test), they should strongly consider obtaining a position paper on the effect of the rules and the anti-avoidance measures in the legislation.  This will help in the event of a future ATO audit.

Throughout the last two weeks, our Tax and Employment Relations Teams have worked closely with employers, accounting bodies, and consultative groups to help raise awareness of the details of this package, which is clearly one of the largest and boldest stimulus packages Australia has ever seen.  We are happy to share our intel and work with all affected employers and their advisers to maximise the benefit of this scheme and help them achieve the intended goal of keeping as many employees in their roles as possible.

For further information on any of the issues raised in this alert please contact Frances Becker on (07) 3233 8902 or at fbecker@mccullough.com.au and Liam Fraser on (07) 3233 8618 or at lfraser@mccullough.com.au.

This article covers legal and technical issues in a general way.  It is not designed to express opinions on specific cases.  It is intended for information purposes only and should not be regarded as legal advice.  Further advice should be obtained before taking action on any issue dealt with in this publication.