The legislation for the JobKeeper Payment Scheme has now been passed into law. The proposed subsidy was announced in the Government’s third stimulus package (outlined in our most recent newsletter), and the finer details of eligibility for this subsidy and obligations for those receiving it are now available. It is the single largest piece of government spending in Australian history. More than 730,000 businesses have already registered with the Australian Taxation Office (ATO) for access to the scheme, and up to 6 million Australians are expected to benefit.
Please note that although the legislation has been passed into law, the details on the eligibility requirements for the JobKeeper Payment are contained in a legislative instrument called Coronavirus Economic Response Package (Payments and Benefits) Rules 2020. Our review below is based on the draft rules that were published yesterday. We understand that these have not yet been signed. We do not expect that they will change, however if they do we will let you know.
The National Cabinet has released a mandatory code of conduct, setting out commercial leasing principles to be applied by landlords and tenants, for a temporary period while impacted by COVID-19. The objective of the Code is to share, in a proportionate, measured manner, the financial risk and cashflow impact during the COVID-19 period, whilst seeking to appropriately balance the interests of tenants and landlords.
WA State Government announced a further $1bn package on 31 March to support Western Australian businesses, households and community groups.
We have summarised the main points on these three areas below.
JobKeeper Payment– Subsidising businesses to continue paying employees and participants
Key Points to Note
The business must notify the ATO by 26 April, in the approved form, that it elects to participate in the JobKeeker Scheme for the first 2 fortnights of the scheme (30 March to 24 April), and by the end of each subsequent fortnight. On the ATO website there is a section where you can “register your interest”. It is likely that this is not the “approved form” and businesses will need to complete another form in the future.
When initially announced, it appeared that the scheme would only apply to employees of businesses and sole traders. The rules now clearly also cover ‘eligible business participants’, i.e. one partner of an eligible partnership, one adult beneficiary of an eligible trust and one director or shareholder of an eligible company. The entity must be carrying on a business to qualify.
The obligations on businesses to provide information to the ATO, throughout the 6 months of the scheme, are extensive.
Provision of this information within the timeframes required may be difficult for businesses who do not have the appropriate in-house bookkeeping or accounting capabilities. We will offer a low-cost package, through our bookkeeping department, to assist businesses with these requirements, ensuring that they can maximise their entitlements under the JobKeeper scheme. Please contact us to discuss how we can assist you.
It is clear that this is a reimbursement scheme. Payments of $1,500 per fortnight per individual must be made in the relevant period. You cannot delay payment until a later date. Each business will have to fund this initially, to be reimbursed by the ATO within 14 days after the end of each month. The Australian Banking Association has advised that businesses may be able to use the upcoming JobKeeper payment as a basis to seek credit from their bank, to pay their employees until the scheme is making its first payments. In practical terms, for some businesses, this credit arrangement would need to remain in place until the scheme is finished.
Applicable period – From 30 March to 27 September (the 6 month period starts on 30 March, with reimbursement payments from the ATO commencing from the first week of May, relating to prior month fortnights).
Eligibility -Business Entities
Australian Businesses and Not for Profit Entities on 1 March 2020 (entities not subject to the Major Bank Levy, or under liquidation or bankruptcy proceedings) with: –
- Turnover < $1 billion and projected turnover will be reduced by more than 30% relative to a comparable period; or
- Turnover > $1 billion and projected turnover will be reduced by more than 50% relative to a comparable period; or
- Registered Charity and projected turnover will be reduced by more than 15% relative to a comparable period.
The comparable period is usually the same month or same quarter in the prior year. This is the Decline in Turnover Test. The ATO has been granted the power to apply an alternative decline in turnover test if they are satisfied that there is not an appropriate relevant comparison period to enable an entity to satisfy this test.
Eligibility – Employees
- Currently employed by the eligible employer (including those stood down or re-hired);
- Was employed by the employer at 1 March 2020;
- Full-time, part-time, or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020. There are special provisions to cover the 12-month employment requirement for casual employees where they have moved between entities within the same group and for businesses which have been restructured or sold);
- At least 16 years of age;
- Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder; and
- Not in receipt of a JobKeeper Payment from another employer (employees will need to notify their primary employer).
- Employees that are currently in receipt of an income support payment, or have registered an intent to claim, must notify Services Australia of their new income. They may no longer be eligible for income support from Services Australia as a result of receiving the JobKeeper Payment.
- The individual is not employed by the entity or by any other entity;
- The individual has not given the ATO notice to apply as a sole trader;
- The individual is actively engaged in the business carried on by the entity;
- The individual is one of the following:-
- partner of an eligible partnership,
- adult beneficiary of an eligible trust,
- director of an eligible company; or
- shareholder of an eligible company.
- An entity cannot be entitled to a JobKeeper payment for more than one individual (whether for the same fortnight or a different fortnight).
- An entity cannot be entitled to a JobKeeper payment for an individual if another entity is entitled for the individual (as an employee or as a business participant); and
- Unless the entity is a sole trader, the entity must notify an individual if the entity notifies the ATO of the details of the individual.
There are integrity rules, which require the business to have an ABN on 12 March and the ATO to have been notified of business sales, which occurred in the period 1 July 2018 to 12 March, by 12 March 2020 (or a later time allowed by the Commissioner).
Business Entity Obligations
- Notifies the ATO, in the approved form, by the end of each relevant fortnight (or by the end the second fortnight, i.e. Sunday 26 April for the first 2 fortnights) that the entity elects to participate in the JobKeeper scheme; and
- Provides information about the entitlement for each fortnight, including details of the individual(s), to the ATO in the approved form. For most businesses, Single Touch Payroll data will be used for most of this information.
- Initially, entities can register their interest in applying for the JobKeeper Payment. The ATO will then contact the business representative to advise on the next steps.
- Ensure that each nominated employee has been paid at least $1,500 in that fortnight (before tax or other deductions).
- For employees that have been receiving less than this amount, the employer will need to top up the payment to the employee up to $1,500, before tax.
- For those employees usually earning more than $1,500, the employer will pay them their normal amount.
- Obtain written agreement from each employee / business participant nominated under the scheme, in the approved form, that the individual satisfies the eligibility requirements and agrees to be nominated (sole traders must provide this notice to the ATO).
- The business must notify any individual for whom it is receiving the JobKeeper Payment, in writing, within 7 days of notifying the ATO, i.e. each fortnight that it is claiming an entitlement.
- Continue to provide information to the ATO of actual and projected turnover, on a monthly basis.
Employers will need to continue paying superannuation on salary and wages, even if these payments are funded by the JobKeeper subsidy. If the subsidy is merely being passed on and the employee is not actually working, the payment of super is not required, but may be voluntarily paid by the employer. If an employee’s wage or salary is topped up by the JobKeeper payment to $1,500 per fortnight, the employer may choose to pay super on the top up. It appears that this treatment would also apply to payroll tax and worker’s compensation insurance.
Temporary Changes to the Fair Work Act
The Fair Work Act has been amended to facilitate, on a temporary basis, more flexibility for employers who are entitled to JobKeeper Payment.
Employers will now be able to give directions to employees for whom they are receiving JobKeeper Payment (without requiring agreement of the employee, where reasonable) for a temporary period, notwithstanding the position under any pre-existing award or agreement. ‘Jobkeeper Enabling Directions’ may be given, subject to conditions,
- to vary employees’ hours, duties, timing and location of work, (including to stand down entirely); and
- to require employees to take annual leave (subject to leaving the employees with a balance of 2 weeks’ leave), if it is reasonable to do so. The JobKeeper Payment can be used to subsidise paid leave.
- due to ‘changes of business attributable to the COVID-19 pandemic or government initiatives to slow the transmission’; and
- the affected employee cannot usefully be employed for their normal hours.
The employee’s rate of pay cannot be reduced, for the hours they actually work. There must be consultation (with written record) and the direction must be in writing and give effect to the changes with at least 3 days’ notice.
Any standing directions will lapse on 28 September 2020.
Employees will continue to accrue leave entitlements as if the direction had not been given. The same applies to accruing leave whilst on annual leave. This will be difficult to manage within existing payroll software capabilities. Manual checking and updates of leave entitlements may be required. The bookkeeping expertise we have within NKH could be of assistance to you in managing these complexities. Please contact us to discuss.
Advice in relation to employment law is outside our scope of services. We recommend that you consult with a specialist lawyer to review your position before taking any steps to change terms of employment. We can recommend specialists in this area, please contact us for details.
The National Code of Conduct for Commercial Tenancies will be legislated by each State and Territory. Legislation from WA State Government is expected next week. The principles agreed to be legislated are as follows: –
- The Code applies to SME tenants (annual turnover of up to $50 million), suffering financial stress or hardship as a result of the COVID-19 pandemic, as defined by their eligibility for the JobKeeper programme. The Parties will assist each other in their respective dealings with other stakeholders including governments, utility companies, and banks/other financial institutions in order to achieve outcomes consistent with the objectives of this Code.
- Landlords must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals of up to 100% of the amount ordinarily payable, on a case-by-case basis, based on the reduction in the tenant’s trade during the COVID-19 pandemic period and a subsequent reasonable recovery period.
- At least 50% of the reduction must be offered as a waiver of rent, with the balance being a deferral, to be recouped by the landlord over the remaining term of the lease, but over a period no shorter than 24 months (unless otherwise agreed).
- Additional waivers, over the obligatory 50% of the reduction could be negotiated, based on the tenant’s capacity to fulfil their ongoing obligations under the lease agreement, and the Landlord’s financial ability to provide such additional waivers.
- Any reduction in statutory charges (e.g. land tax, council rates) or insurance must be passed on to the tenant.
- Landlords, where appropriate, should seek to waive recovery of any other expense (or outgoing payable) by a tenant, under lease terms, during the period the tenant is not able to trade. Landlords reserve the right to reduce services as required in such circumstances. Landlords should seek to share any benefit they receive due to deferral of loan payments from their bank, in a proportionate manner.
- No fees, interest or other charges should be applied with respect to rent waived and no fees, charges or punitive interest may be charged on deferrals. No security can be drawn on (e.g. bond, bank / personal guarantee) and no rent increases applied during the period of the COVID-19 pandemic and/or a reasonable subsequent recovery period.
- If agreement cannot be reached mutually the matter should be referred by either party for binding mediation.
- Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period). This appears to extend the previously announced moratorium on evictions to include a reasonable period, following the end of the pandemic period for the business to recover.
Any such arrangements reached must be in writing to ensure that parties have clarity on the changes in terms. If you need assistance in this regard you should refer to your lawyer or to us for referral to a lawyer.State Government – General Small Business Relief and Specific Relief for On-Demand Transport
The following reliefs have been announced by the WA State Government, in addition to previously announced reliefs, such as the $17,500 once off grant for businesses:-
- Power and water disconnections will not occur, and interest will not be charged on deferred payments until 30 September for small businesses facing financial difficulty due to COVID-19. This applies to Synergy and Horizon Power customers.
- Payroll tax will be waived for four months for businesses with annual wages under $7.5 million (NB: this replaces the previous payroll deferral measure which was announced).
- Affected businesses can apply for interest free payment arrangements and for late payment penalties to be waved for a range of taxes and duties, including payroll tax, transfer duty, landholder duty, vehicle licence duty or land tax.
- A range of business licence fees have been waived, including liquor licence renewal fees for 2020, which will be waived, and refunds given to businesses that have already paid.
- $4.7 million regional taxi industry assistance package, with payments expected to be made in July
- $2,500 cash payments to on-demand booking services
- Waiving booking services and passenger transport vehicle authorisation fees for one year
- Postponing the deadline for taxis to install camera surveillance units by one year
Home Office Expenses – Choice of Temporary Increased Hourly Rate
Individuals have a choice to apply the normal fixed rate of $0.52 cents per hour or the increased rate of $0.80. The new rate is introduced initially for the period from 1 March to 30 June 2020, after which the ATO will review the arrangement for the next financial year as the COVID-19 situation progresses.
The new fixed hourly rate is used to calculate normal home office expenses (utilities, use of office furniture and equipment) and the work-related portion of specific items such as phone and internet expenses.
You may have a higher claim by using the old lower rate and the actual work-related costs of phone, internet etc.
Under the new temporary rate method there is no requirement to work out the apportionment of time between work and personal use, or the dedicated area within your home for home office use, just a record to prove your working from home hours, such as a timesheet. Record keeping requirements are also less onerous. You can review further details from the ATO website here.