Online applications for the Governments $130 billion Jobkeeper Payment scheme opened as of yesterday! However with a final date for submission, to be able to claim for April payments reimbursement, of the 30th of April there are still many businesses with questions about out of the ordinary scenarios left holding their breath wondering how the ATO will apply their discretionary powers and will they qualify?
Taking into account that there is such a large amount of incorrect information floating around at the moment from every avenue, now more than ever is the time to have a trusted finance professional in your corner, to help you wade through the rubbish and get to the truth of the matter as it relates to your situation. Especially with the ATO threatening penalties such as having to pay back wrongly gained money at exceptionally inflated interest rates and, in extreme cases jail time. That’s right – this is serious, and we need to get this right.
Here is what we know so far;
Employers, as well as Sole traders, Partnerships, Trusts, and Companies with eligible Directors or Shareholders, are all able to apply for the Jobkeeper Payment Scheme if their business meets the eligibility criteria. The main requirements to qualify being that;
- the business was operating as a business on March 1st 2020,
- employed at least one eligible employee as of March 1st 2020 and
- has continued to do so for the fortnights being claimed for (including staff who were stood down/made redundant and have been re-hired).
- The business must have a;
- 30% fall in turnover for businesses with an aggregated turnover less than $1 billion,
- 50% for businesses with aggregated turnover over $1 Billion and
- 15% ACNC-registered charities other than universities and schools.
The decline in turnover is based on GST turnover (even if the entity is not registered for GST), for more information on calculating decline in turnover please see here to read about the Basic test and what has been released so far on the Alternative test (not much yet). Once the relevant decline in turnover has been established to qualify a business for the first fortnight it remains eligible and does not have to keep testing in the following months. However ongoing monthly reporting requirements include reporting ongoing turnover figures.
Employers must pay all eligible employees (no you may not pick and choose, must be all who meet the eligible employee criteria or none) the minimum of the $1500 before tax upfront every fortnight and then will be reimbursed by the ATO on a monthly basis for the prior month.
Now let’s break this down; if an employer has 10 eligible employees to pay this means that;
- They need to come up with a minimum of $1500 x 10 staff x 2 fortnights in April = $30,000 upfront to pay their staff ($45,000 in August when there are 3 fortnights falling in the month).
- At the start of each month, they then have to submit a report for the prior month to the ATO. The lodgement will include information on the business turnover and the wages paid, to substantiate the payments you may be reimbursed for
- Then after this lodgement has been processed the ATO will pay the reimbursement to the employer
Now, this is a lot of money, time and energy to come up with when your business is struggling to stay alive, especially with the only alternative to self-funding the upfront payments, on offer so far, is to go and get a loan from your bank.
While the scheme may be a great opportunity to keep staff engaged and ready to get straight back to normal when the restrictions are lifted there are more costs involved than just the $1500 per fortnight that really needs to be taken into consideration before deciding to participate.
- Leave entitlements; are still to be accrued the same as the employee’s usual pay from before the restrictions,
- If the employees are still working in the business to earn their wages, there is still Superannuation payable on that Ordinary Time Earnings. Only on Jobkeeper top-up payments or if the employee is not working at all do you have the choice of paying superannuation or not.
- Jobkeeper payments are still rateable remuneration for Work cover
- The loan costs if you need to borrow money to make it through, and
- All the costs to administer the scheme – the application process, setting up new payroll items, running the payrolls, and the monthly reporting required.
Finally, something to really consider and plan for; even when we do get ‘back to the new normal’ will your business just go back exactly to what it was before this pandemic? That is unlikely to happen immediately – for many small businesses they will be pretty much starting again from scratch, needing to rebuild. So, while we all want to do our part to help the economy and our employees right now, we also need to plan for the survival of our business into the future. Please, go and speak to your BAS Agent, Accountant or financial advisor or get in touch with us, before you do anything. It’s vital you get this correct to ensure the future of your business.
Want more information? Need some help?
Contact us directly to see how this may affect you, and what you can do to best manage your business.