JobKeeper payment – How to prepare, plan, enrol and report
- Published: April 17, 2020
- Author: Igor Mateski
The ATO has released a good amount of detail around the JobKeeper payment process.
Please find some helpful flow charts below to help prepare:
Preparing and planning for JobKeeper enrolment and reporting
- Work out if your eligible for the JobKeeper payment and meet the required reduction in turnover. There is some information at the end of this article on how to calculate the turnover reduction.Tip: If you don’t meet the reduction in turnover criteria to receive the JobKeeper payment starting in April or choose not to enrol from April, you can still enrol later but you will only receive reimbursements from the time you enrol rather than back to 30 March.
- Work out which of your employees are eligible and how many there are for each of the first two fortnights of April.
- Estimate the full cost of paying the eligible employees.
- Assess the potential risks and pitfalls
Risk consideration: If any of your employees are currently earning less than $1,500 before tax a fortnight, or are stood down without pay, they will get a top up to that amount under JobKeeper. This in turn means your payroll under JobKeeper may be much higher than normal. Consider if you have or can find/borrow the cash to make the payments until you get reimbursed by the ATO. (Point 3 above helps with this.)There is an example at the end to illustrate the potential cash flow impact on a business.Some of the banks have said that they will consider the JobKeeper reimbursement to be received when assessing to lend to a business.
Risk consideration: If you are not certain whether you’re eligible, but you make JobKeeper payments before your eligibility is confirmed by the ATO you risk not being reimbursed by the ATO if they later determine you were not eligible. This could particularly be significant on your cash flow if you had many employees stood down without pay or who were topped up to $1,500 per fortnight. If you’re uncertain, consider if you should register for the JobKeeper payment starting from the month of April or later.
- Get each of your eligible employees to complete an “Employee nomination form” and have them return it to you before the end of April. You need this form as proof that the employee has agreed to by nominated by your business. You will need to keep the forms as a tax record for 5 years.You can download a copy of the form here
- Once the above is done, make sure that eligible employees are paid a minimum $1,500 before tax for a fortnight. The ATO have said that if your employees on a different pay cycle (e.g. weekly or monthly) you can pay them in their normal pay cycle an amount that would equate to a minimum of $1,500 per fortnight before tax (e.g. weekly would be $750 and monthly would be $3,000). The payments will be made through your normal payroll software and subject to PAYG withholding.Tip: You must make the payments for the first two fortnights in April before the end of April. If you pay them later than that you will become ineligible for a reimbursement from the ATO for those two fortnights.
Tip: Employees receiving a JobKeeper payment will continue to accrue annual leave. Even those that are stood down.Refer to our flow chart on the JobKeeper payment amount for a guide on how much to pay an employee.If you’re a sole trader or self employed and don’t have employees, you only need to consider point 1 above.
Enrolling for the JobKeeper Payment
Starting from 20 April, you can go to the ATO Business Portal and enrol for the JobKeeper payment. However, you must enrol by the end of April to be eligible to receive your entitlements for the month of April!
As part of the enrolment you will need provide an estimate of the number of employees that are eligible for the first JobKeeper fortnight (30 March – 12 April) and the second fortnight (12 April – 26 April)
The enrolment, as well as the reporting below, can also be done by your tax agent or accountant on your behalf, though that may mean an additional cost for you. Speak to them if the cost is likely to be an issue, but you need the assistance.
If you’re a sole trader or self-employed you will need to also nominate a bank account, and if you’re trading through an entity like a trust, company or partnership you will need to nominate yourself as the person to receive the JobKeeper payment for that entity. If you have a spouse or family member working in your entity but they don’t normally get a wage but get a distribution or dividend instead, then you can still only nominate one person for the JobKeeper payment.
Reporting to the ATO to claim the JobKeeper payment
Starting from 4 May, you can go to the ATO Business Portal and apply to claim the JobKeeper payment. The application should be pre-filled with some information from your STP pay reports, so you will be able to select the eligible employees rather than re-entering all their details.
Once you’ve completed the above claim form, notify your eligible employees that you have nominated them.
Each month after that, through the Business Portal you will need to re-confirm your eligible employees and advise of your actual turnover for the month just passed and projected turnover for the month ahead.
The ATO have said:
“You do not need to retest your reported fall in turnover, but you will need to provide some information as to your current and projected turnover. This will be done in your monthly JobKeeper Declaration report.”
This implies that if your turnover increases later you’ll still be eligible for the JobKeeper payment, but if that’s the case why do they want you to keep reporting your turnover? It has been suggested that it is purely for information gathering to monitor the state of the economy.
Example of extra cashflow required for payroll
A café has 10 part time employees who have been stood down without pay due to the Coronavirus crisis. Each would normally get $750 per fortnight before tax, or $742 after tax (based on fortnightly withholding tax tables and claiming tax free threshold from the employer). Therefore, the café’s regular fortnightly payment is 10 x $742 or $7,420.
The café is eligible and applies for the JobKeeper payment. Each employee that is stood down is eligible for the JobKeeper payment, and so is now entitled to $1,500 before tax, or $1,308 after tax (based on fortnightly withholding tax tables and claiming tax free threshold from the employer). Therefore, the café’s regular fortnightly payment would now be 10 x $1,308, or $13,080.
The café will need to find $26,160 (two fortnights worth) before the end of April to pay its eligible employees in order to get reimbursed by the ATO in May. Can it do that? Is it possible that the business owner might find it easier in this case to not to worry with enrolling for the JobKeeper payment?
The reimbursement from the ATO will be $15,000 per fortnight or $30,000 for the month.
The difference between the $26,160 paid and the $30,000 received is PAYG withholding tax. If the café is eligible to receive a PAYG withholding refund for April under the Boosting Cash Flow scheme, then would have received a net benefit of $3,840. It is not clear if this was intended or not, but I suppose one could see it as “interest” for having to fund the Government’s payment a month in advance.
Calculating the reduction in turnover for the first fortnight starting 30 March 2020
The ATO have said you can use one of the following methods to work out the reduction in turnover:
- GST turnover for March 2020 compared with GST turnover for March 2019, or
- projected GST turnover for April 2020 compared with GST turnover for April 2019, or
- projected GST turnover for the quarter starting April 2020 compared with GST turnover for the quarter starting April 2019.
The ATO has the discretion to use alternative tests to establish your eligibility when prior year periods are not comparable (for example, if your business has been in operation less than a year, or your business income is “lumpy”/not consistent). The ATO has promised to soon provide further information on the alternative tests.
Though the ATO refers to “GST” turnover above, it doesn’t mean you have to be registered for GST to apply for the JobKeeper. It is simply a term used in the GST act to work out if your income is above the GST threshold for registration purposes.
GST turnover is your total business income (not your profit), minus any:
- GST included in sales to your customers (if you’re not registered for GST this would be nil)
- sales that aren’t for payment and aren’t taxable or are for no consideration
- sales not connected with an enterprise you run (e.g. private sales)
- input-taxed sales you make (e.g. residential rent, dividends, interest income)
- sales not connected with Australia
- payments of money made in settlement of a claim under an insurance policy
Exports of goods & services from Australia are generally GST-free, but the sale is considered as connected with Australia for the above purpose.
The ATO has not yet clearly stated whether you have to calculate the turnover using the cash or accrual method of accounting, but as a guide you should use the same method that you do for your BAS.
If you’re grouped for GST purposes, each entity needs to work out its own GST turnover.
For more details on the JobKeeper payment you can visit the ATO website.
For employers: https://www.ato.gov.au/General/JobKeeper-Payment/Employers/
For sole traders/self-employed: https://www.ato.gov.au/General/JobKeeper-Payment/Sole-traders-and-other-entities/
Disclaimer: The information contained herein is of a general nature only and is not intended to be relied upon nor is it a substitute for appropriate professional advice. Whilst all care has been taken in the preparation of the material, it is not guaranteed to be accurate. Individual circumstances are different and as such, require specific examination. Asparq cannot accept liability for any loss or damage of any kind arising out of the use of or reliance upon all or any part of this material. Additional information may be made available upon request.