COVID19: JopKeeper clarification and small business help on its way

Economic Package

Description

Federal Measures

JobKeeper Payment

What is it?

$1,500 payment to an employer for each employee, per fortnight (for six months). 

Who is eligible?

• Employers:
  • who are not for profit organisations who estimate their turnover has or will fall by 15% or more (for at least a month); or
  • with a turnover of:
    • less than $1 billion who estimate their turnover has or will fall by 30% or more (for at least a month);
    • $1 billion or more whose turnover has or will fall by more than 50% (for at least a month); and
  • that are not subject to the Major Bank Levy, a company in liquidation or a bankrupt sole trader.
• A decline in turnover will be worked out by (at your discretion) comparing the relevant month or quarter to the turnover in the corresponding month or quarter in the 2019 calendar year. Eg. comparing the June 2020 quarter to the June 2019 quarter. Once the test is satisfied, you do not need to re-test for a later month or quarter so a decline in turnover in an earlier month may put you in a better position.
• Payment must be made to employees who:
  • are currently employed (including those stood down or re-hired); and
  • were employed at 1 March 2020; and
  • are at least 16 years of age; and
  • are Australian Citizens, holders of permanent visas, holders protected special category visa holder (for 10 years) or holder of Special Category Subclass 444 Visa; and
  • are not receiving the JobSeeker payment (previously called Newstart); and
  • are not receiving paid parental leave, paid dad and partner pay, or any amount pursuant to Australian workers’ compensation law in respect of total incapacity for work.
• Business operators who operate as sole traders, trusts, companies and partnerships are also eligible for this measure (see below).
• Employers or business participants have until the 26^th April 2020 to apply for this measure.

Example please?

Rebecca runs a small transport business whose turnover is reduced by more than 30% and employs 5 people:

• 3 employees are each paid $3,000 a fortnight;
• 1 part-time employee (James) is paid $1,200 a fortnight; and
• 1 employee (Stacey) who was stood down was paid $1,500 a fortnight.

Rebecca will continue to pay each of her three full time employees their salaries and receive $1,500 per fortnight from the JobKeeper Payment to subsidise the cost of each of those salaries. Rebecca must continue paying the superannuation guarantee on the income.

Rebecca will continue to pay James’ salary and an additional $300 per fortnight as a top up and she will receive the $1,500 per fortnight for the JobKeeper Payment. Rebecca must continue to pay superannuation guarantee on the $1,200 salary but has the option of choosing to pay superannuation on the additional $300.

Rebecca will receive the $1,500 for Stacey and must pass that payment on to her. Rebecca must maintain a connection with Stacey and be in a position to quickly resume her operations. It is up to Rebecca whether she wants to pay superannuation on the income paid to Stacey. 

What if I run a small business but don’t pay myself a salary?

Sole Trader

• You are still eligible if you’re self-employed provided that you:
•  estimate your turnover has or will fall by 30% or more;
• had an ABN and carried on a business on or before 1 March 2020;
• are actively engaged in the business;
• are not entitled to another JobKeeper Payment (either a nominated business participant of another business or as an eligible employee);
• were aged at least 16 years of age as at 1 March 2020; and
• were an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder at 1 March 2020; and
• are not receiving paid parental leave, paid dad and partner pay, or any amount pursuant to Australian workers’ compensation law in respect of your total incapacity for work during the relevant fortnight.

Partnerships

• only one partner can be nominated to receive a JobKeeper Payment (along with any eligible employees). The partnership and partner must satisfy the requirements of sole trader above.

Trusts

• Where beneficiaries of a trust only receive distributions (rather than receiving a salary) for work undertaken, only one adult individual beneficiary can be nominated to receive a JobKeeper Payment. The trust and the beneficiary must satisfy the requirements of sole trader above.

Companies

• An eligible company can only nominate one director to receive a JobKeeper Payment. A company that distributes dividends in return for labour can only nominate one shareholder to receive the JobKeeper Payment. An eligible company can only nominate one director OR one shareholder, not both.

Each individual person can only receive the JobKeeper payment from one source so if you fit into multiple categories, you can only get it once!

Cash Flow Boost

What is it?

• Initial payment to employers equal to the amount of PAYG withholding in the March and June quarters with a minimum of $10,000 and maximum of $50,000 to be received over that 6 month period.
• Second payment for the September quarter which is equal to the initial payment.

Who is eligible?

• Businesses that:
  • have an aggregated turnover of less than $50 million; and
  • held an ABN on 12 March 2020 and continue to be active; and
  • made eligible payments that the business is required to withhold from (even if the amount required to be withheld is zero); and
  • either derived business income in the 2019 financial year or made a GST supply (including GST free supply) in a previous tax period (since 1 July 2018) and lodged the relevant activity statement on or before 12 March 2020 (or later date allowed by the ATO).
• Not for profit organisations and charities that:
  • held an active ABN on 12 March 2020; and
  • have aggregated annual turnover of less than $50 million; and
  • made payments to employees.

Example please?

Dave runs a marketing business and withholds $8,500 in PAYG withholding for his staff’s wages and salaries each month. He reports his PAYG amounts on a quarterly basis.

The initial payment will be:

Dave will receive an initial payment of $50,000. This means that Dave will also receive a second payment of $50,000.

The amounts received as a ‘cash flow boost’ will be first applied to any debt that you owe to the ATO so this measure will ease the tax burden on businesses but may not necessarily result in the full amount being paid back to the business as cash.

What if my PAYG obligation is zero?

Jenny runs an arts and craft business and hires one part time employee, Andrew, to help with the odd jobs. She pays Andrew $8,000 a year. Jenny reports $0 PAYG for Andrew as he is below the tax-free threshold.

Jenny is eligible for the initial payment as she made eligible payments that the business is required to withhold from (even if the amount required to be withheld is zero) and will receive the minimum $10,000 payment for the March quarter. She will then receive a further $10,000 for the September quarter.

Instant Asset Write Off

What is it?

• This measure allows small businesses to claim a tax deduction for the full amount of an asset (as opposed to the amount of depreciation) up to $150,000.

Who is eligible?

• Businesses with a turnover of less than $50 million
• The measure cannot be used for assets worth more than $150,000
• The assets must have been first used between 12 March and 30 June 2020

Example please?

Farming Co Pty Ltd runs a farming business (with an aggregated turnover of $10 million) and purchases a tractor on 20 May 2020 for $130,000. The company can claim the full $130,000 deduction in its 2020 tax return rather than depreciating the tractor over its effective life.

We note that the instant asset write-off is supposed to revert back to $1,000 for small business with a turnover of less than $10 million from 1 July 2020. If this measure is advantageous for your business you need to act relatively quickly.

Apprentice and Trainee Support

What is it?

• Eligible employers will receive a 50% wage subsidy for apprentices and trainees for 9 months from 1 January to 30 September 2020, up to a maximum of $21,000 per eligible apprentice

Who is eligible?

• The employer must employ fewer than 20 employees (including the apprentices or trainees)
• The apprentice or trainee must have been in training as at 1 March 2020

Example please?

• Electric Co Pty Ltd is an electrical business than employs 15 people including three apprentice electricians:
  • Sarah started as an apprentice on 19 February 2020 and gets paid $500 per week
  • Peter started as an apprentice on 15 July 2018 and gets paid $700 per week
  • Jason started as an apprentice on 23 March 2020 and gets paid $500 per week.
• Electric Co cannot claim the wage subsidy for Jason as he was not an apprentice as at 1 March 2020.
• Electric Co Pty Ltd will receive:
  • $8,000 subsidy for Sarah for 19 February 2020 to 30 September 2020 (being $500 x 32 weeks divided by 2); and
  • $13,650 subsidy for Peter for 1 January 2020 to 30 September 2020 (being $700 x 39 weeks divided by

We note that employers are eligible to apply from early April but there is no guidance as to when the payment will be received.

Other measures

There are a few other measures worth mentioning:

• The minimum pension draw down rate has been decreased by 50%
•  Early release of super up to $20,000 over the 2020 and 2021 financial year.
•  ATO payment deferrals available up to 6 months, on a case by case basis.
• Super Amnesty – this is not related to the COVID-19 measures but allows employers to disclose and pay previously unpaid super that they owe their employees without incurring the administration component or penalty.

South Australian Measures

Emergency Cash Grants

What is it?

• One-off $10,000 cash grant.

What do we know so far?

• To be eligible, a business must:
  • employ people;
  • have a turnover of more than $75,000 per year;
  • have payroll less than $1.5 million and is not entitled to a payroll waiver under other measures (see below);
  • have an ABN and was carrying on business i South Australia on 1 March 2020;
  • have been highly impacted or subject to closure as a result of COVID-19; and
  • use the funds to support activities related to the operation of the business.
• Initial guidance suggests that if a business is eligible for the JobKeeper Payment (see above) then they will be deemed to be highly impacted by COVID-19. If the business receives any other SA Government grants related COVID-19, this amount will be deducted from the $10,000.
• Each business will need to apply by 1 June 2020 by visiting https://www.treasury.sa.gov.au/Growing-South-Australia/COVID-19
• We are yet to understand how the government intends to monitor the use of the funds and manage any overpayments if a business does not subsequently meet the ‘highly impacted’ condition. We will keep you updated as more information comes in.

Payroll Tax

• Waiver: The State government is waiving payroll tax for businesses with annual Australian grouped wages of up to $4 million over the next 6 months (for the April to September 2020). If your business is eligible for the payroll waiver, there is no application form – you will receive correspondence from RevenueSA Online.
• Deferral: Business with annual Australian grouped wages above $4 million that have been significantly impacted by COVID-19 will be able to defer payroll tax for 6 months. If your business is eligible for this deferral, you will need to apply through RevenueSA.

Land Tax

Business and individuals paying land tax quarterly can defer payment of their third and fourth quarter instalments up to 6 months. Land tax notices of assessment will be sent as usual with information on how to seek a deferral.