Please find below important information on the JobKeeper subsidy, including how the 30% turnover reduction test works.
The JobKeeper subsidy is paid to you monthly in arrears but is calculated on fortnights ending in that particularly month. The scheme started on 30 March 2020.
April 2020 is the first month to claim (including from 30 March) and you can enrol in the scheme from 20 April 2020.
For the month of April, there is a special allowance where the $1,500 per fortnight payments must be made to employees by the 30 April 2020. All payments in future months must be made at least fortnightly beginning with the fortnight ended 10 May 2020.
From the 4 May 2020, you will be able to make your JobKeeper claim for the month of April which will cover the two fortnights ending 26 April 2020.
The JobKeeper subsidy received by the employer is taxable and is not subject to GST. Payments made to eligible employees are tax deductible.
The PAYG withholding applicable to JobKeeper payments made to employees may give rise to a Cash Flow Boost.
To be eligible, there are five main requirements that must be met, four of which are the responsibility of the employer:
- The employer carried on a business in Australia on 1 March 2020.
- The employer must have paid each eligible employee at least $1,500 per fortnight before tax (special allowance for month of April 20 only).
- The employer must meet the 30% turnover reduction test (see below for further details).
- The employer must enrol and report monthly to claim.
As far as the employee is concerned, he or she must give notice in the approved form stating that he or she is an eligible employee.
To be eligible an employee all the below conditions must have been met:
- Must have been employed by the employer as at 1 March 2020.
- Be aged 16 years or older at 1 March 2020.
- Be full-time, permanent part-time or casual on a regular basis for at least 12 months before 1 March 20 (provided not a permanent employee of another employer).
- Cannot have nominated for JobKeeper with another employer.
- Must be currently employed (including those stood down or re-hired).
- An Australian resident within the meaning of the Social Security Act 1991, or an Australian resident for the purpose of the Income Tax Assessment Act 1936 and the holder of a Subclass 444 (Special Category) visa as at 1 March 2020.
- Not be in receipt of workers compensation (while not working), paid Government parental or dad and partner leave.
How do I work out if I have met the 30% turnover reduction test?
The rules include two alternative tests to calculate the turnover reduction:
- Basic test: This is the default test for businesses to use, or
- Alternative test: The ATO will set specific circumstances when they accept an alternative basic for the calculation.
Basic Turnover Test
- The basic test is undertaken on an entity by entity basis. You only look at the income of the entity which is looking to make the claim for its employees (or eligible non-employee).
- What is turnover? It is GST turnover as defined in the GST Act. It does not include for example interest income, residential rent, dividends or distributions, or the JobKeeper payment itself.
- If you are on accruals for GST purposes, you measure your turnover ONLY on an accruals basis.
- If you are on cash for GST purposes, you can either use accruals OR cash for these purposes, provided the basis used is the same for calculating projected 2020 turnover vs actual 2019 turnover.
- If you believe you have met the basic turnover test, please provide a copy of your calculations to us. This is very important in case the ATO make any enquiries.
- The turnover test period can be any month March 2020 to Sept 2020 or quarter ended June 2020 or quarter ended September 2020.
- The test period does not have to align with your BAS reporting period. Once you meet the turnover test for the first time, you do not have to reassess eligibility in subsequent months.
- You can become eligible in later months/quarters.
- You compare your current/projected turnover to the corresponding period in 2019.
- It is important to realise you only need to meet the 30% turnover reduction test once. You do not need to reassess turnover again in future periods. You can remain eligible from the month you first meet the turnover reduction until the JobKeeper scheme end in September 2020.
- It is also important to realise the month which you first become eligible to receive the JobKeeper is not necessarily the same period as the turnover test period. It is critical to understand this.
The eligibility months and turnover test periods are shown below:
Month you first become eligible
30% Turnover Reduction test period
Actual March 20 vs actual March 19, or
Projected April 20 vs actual April 19, or
Projected April to June 20 qtr vs actual April to June 19 qtr
Projected May 20 vs actual May 19
Projected June 20 vs actual June 19
Projected July 20 vs actual July 19, or
Projected July 20 to Sept 20 qtr vs July 19 to Sept 19 qtr
Projected Aug 20 vs actual Aug 19
Projected Sept 20 vs actual Sept 19
You will note there are three possible turnover test periods for April 2020. If you do not meet the test for April, you may be eligible in later months if you meet the turnover reduction test for the relevant period.
You will also note that apart from March the turnover for the test is based on projected turnover. You are able to self-assess this. If you are wrong, you may be required to pay the subsidy back to the ATO but the details of how this will work is not available yet.
You may for example meet the turnover reduction test for a particular quarter rather than a particular month if your income is not regular.
The ATO will set out various different tests where it is not possible or practical to meet the basic test or the basic test is not reflective of the effects of Covid-19. Circumstances where an alternate test may apply include:
- Where income is lumpy.
- Where a business has not been operating for 12 months. In this case, you use the average of the months leading up to the test month.
- Where the 12 month ago period was not representative. For example, a farm may have experienced drought conditions 12 months ago.
- Where the business has not yet earned/received income.
- Where the business is a pre-income start up or R & D entity and relies heavily on seed capital to fund their activities rather than turnover.
Business entities that do not have employees
The following business entities who do not have employees may also be eligible for JobKeeper:
Your entity may be eligible for the JobKeeper scheme if you have a non-employee individual who is actively engaged in the operation of the business. This individual is known as the eligible business participant.
Your entity is eligible if:
- On the 1 March it carried on a business in Australia.
- It satisfies the turnover reduction test.
- It had an ABN on 12 March 2020.
- It has either lodged its 2018-19 tax return or an activity statement that started after 1 July 2018.
Changes to Fair Work Act
Please note there have been temporary changes to the Fair Work Act, which applies to employers and employees who are eligible JobKeeper payments.
It is really important to be aware of how these changes in conjunction with the JobKeeper may affect your business. Follow the below link for further information:-
Fair Work Act Changes