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A special one-day sitting of Parliament has now approved the Coronavirus Economic Response Package (Payments and Benefits) Bill 2020 late Wednesday evening, giving rise to the centrepiece of the government’s $214 billion economic stimulus package.

A fundamental part of these packages is the JobKeeper program which will see 6 million employees benefiting from a $1,500 wage subsidy, paid to their employers on a fortnightly basis.

It is hoped that by giving businesses the ability to maintain an employment connection with employees, business should be able to reactivate their operations quickly, without having to rehire staff, when the crisis is over.

The legislation provides the Treasurer with the power to make rules to provide for payments administered by the Commissioner of Taxation. These rules include setting out the eligibility criteria and ongoing reporting obligations.

One particular area of discretion for the Commissioner will be the application of an alternative turnover test for businesses that demonstrate there is no appropriate comparison period for the decline in turnover test.

It is our hope that the commissioner will provide clear guidance on these rules soon, particularly around the eligibility criteria when employers do not meet the decline in turnover test e.g. newly established businesses.

Contrived schemes and consequences

The legislation also makes clear that anyone who enters into or carries out a scheme for the sole or dominant purpose of obtaining a coronavirus economic response payment will face a wide range of administrative and criminal sanctions, including up to 10 years’ imprisonment.

The legislation empowers the commissioner to call out ‘any change in the financial position of any entity’ as part of a scheme designed to improperly pocket JobKeeper cash, and the ATO has extensive payback powers. It is why we may need to say ‘No’ to clients who may want to overstep what they are entitled – we outline what this means here.

We have outlined below the key aspects of the JobKeeper package, including specific points that have only recently been made public and which may be of particular interest to certain clients e.g. trusts and beneficiaries.

The JobKeeper payment is intended to assist businesses affected by the coronavirus to cover the costs of wages of their employees.

The JobKeeper scheme starts on 30 March 2020 and ends on 27 September 2020.

A business that has suffered a substantial decline in turnover (>30%) can be entitled to a JobKeeper payment of $1,500 per fortnight for each eligible employee. It is a condition of entitlement that the business has paid salary and wages of at least that amount to the employee in the fortnight.

A business can also be entitled to a JobKeeper payment of $1,500 per fortnight for one business participant who is actively engaged in operating the business.

The commissioner pays the JobKeeper payment to entities shortly after the end of each calendar month, for fortnights ending in that month. The first payments by the ATO will be received by employers in the first week of May.

You will only be able to claim the JobKeeper payment for eligible employees that were in your employment on 1 March 2020 and continue to be employed while you are claiming the JobKeeper payment.

You can only claim JobKeeper payment for eligible employees if you pay the $1,500 per fortnight (before tax) to each eligible employee.

Payments to employees should be made using your payroll system and reported to the ATO via Single Touch Payroll. This will support the online claim process when it is available. (If you do not report through Single Touch Payroll, you can still claim the JobKeeper payment; however there will be a manual claim process.)

The payment will generally be paid directly to the employer and not used to offset tax liabilities, as the intent is that it is a payment that facilitates employers to pay their employees.

The JobKeeper Payment will also be available to the self-employed.

Only one partner, in a Partnership, can be nominated to receive a JobKeeper Payment along with any eligible employees, noting a partner cannot be an employee.

Trusts can receive JobKeeper payments for any eligible employees. Where beneficiaries of a trust only receive distributions, rather than being paid salary and wages for work done, one individual beneficiary (that is, not a corporate beneficiary) can be nominated to receive the JobKeeper Payment.

An eligible business can nominate only one director to receive the payment, as well as any eligible employees. Only one person in a director capacity may receive the payment and that individual may not receive the payment as an employee.

An eligible business that pays shareholders that provide labour in the form of dividends will only be able to nominate one shareholder to receive the JobKeeper Payment.

A company that is in liquidation, or a partnership, trust or sole trader in bankruptcy, will not be eligible.

If you haven’t already done so, you can register your interest for the JobKeeper payment with the ATO here. Alternatively get in touch with your Mukiwa consultant and we can manage this on your behalf.

Additional information, including various examples can be found on the various Treasury Department Factsheets, available here.