Author: Tony Rule, Partner, TAG Financial Services
Calling all business owners – 30 April is looming as a key date in ensuring that you have everything in place to access your entitlement to JobKeeper payments for you and your employees. Which leaves seven working days to get things done…
Step 1 – Can you meet the 30% decline in revenue test?
To qualify for the JobKeeper payment you will need to show that your business has or will suffer a 30% decline in GST revenue. To be eligible for reimbursement of wages for the two fortnights ending in April (i.e. 12 April and 26 April), you will need to show that a 30% decline in revenue:
– Has occurred in March 2020 compared to March 2019,
– Is expected to occur in April 2020 compared to April 2019, or
– Is expected to occur in the June 2020 quarter compared to the same quarter in 2019.
If you do not meet any of these tests, you will not be reimbursed for wages paid in the month of April 2020. If you expect that your income will decline by 30% in May 2020 (when compared to May 2019), you will be able to access reimbursement for the fortnights ending in May 2020 and so on for each month.
Once you have met the decline in GST revenue test once, you will be eligible for the JobKeeper reimbursement from that period through to 30 September 2020. You will not have to test your eligibility again.
We note that the government is introducing “alternative tests” that are being developed this week. If you believe that you have suffered a decline in revenue, but you are not meeting the specified tests due to abnormal circumstances last year (e.g. drought, business acquisition, etc), please contact us to determine your next steps.
Step 2 – Prepare a Cash Flow Budget
Prepare a cash flow to ensure that you can fund wage payments for 6 weeks or more on top of any loss of revenue and delay in receipts that your business is (or will be) suffering. The JobKeeper payments for the month of April (i.e. the fortnights ending 12 April and 26 April) are being promised to be paid by 14 May 2020.
We are concerned that there may be delays and complications which may extend reimbursement beyond the promised date. We have seen a number of situations in the past where the ATO have withheld income tax and activity statement refunds for more than three months while they “work through their process”.
Step 3 – Employee Acceptance
If you decide to participate in the JobKeeper scheme, you will need to advise each eligible employee (employed at 1 March 2020 and was not a casual employee for less than 12 months) that you are intending to nominate them as an eligible employee under the JobKeeper scheme. You will then need to get each employee to complete the JobKeeper Employee Nomination notice and return it before 30 April 2020 to be eligible for reimbursement for the month of April. The form is located here.
But beware, whilst each eligible employee must agree to be nominated, we note that employers are responsible for payments to employees who are double dipping (i.e. receipt of JobKeeper from two different employers or receipt of JobKeeper and not cancelling JobSeeker) – any overpayments to an employee will need to be paid back by the employer. Accordingly, clear communication regarding this risk with some of your employees may be necessary and may become a reason not to register an employee for JobKeeper (if that risk cannot be properly controlled).
Step 4 – Register for JobKeeper
From Monday 20 April, business owners can register for JobKeeper payments. Enrolment must be completed by 30 April (i.e. within 10 days from becoming available) to receive JobKeeper payments for the month of April (in mid-May). Click here for information on enrolling for JobKeeper Payment.
If you miss doing this by 30 April 2020, you will miss out of the reimbursement of wages for the two fortnights ending in April.
Step 5 – Pay $1,500 per fortnight
You then need to ensure that each eligible employee receives at least $1,500 per fortnight in line with the pay cycle commencing 30 March 2020. Where eligible employees have been short paid in either or both of the fortnights in the month of April, an employer is able to make a top up payment to bring each eligible employee up to $3,000 to cover the two fortnights in April 2020 – if that top up payment is made by 30 April 2020. The option to make up a top up payment only applies for the two fortnights ending in April, if that payment has been made by 30 April. Thereafter, each payment will need to be correctly made in the relevant fortnight.
Where an employee receives a lessor amount (e.g. $1,400 in a fortnight), no re-imbursement will be received for that employee for that fortnight. It is therefore important to ensure that the full $1,500 is paid to each employee to ensure you receive the $1,500 reimbursement. Where an employee was receiving a lesser amount prior to the JobKeeper scheme, it makes economic sense to increase that employee’s pay to the full amount. For instance, an employee on $1,000 per fortnight prior to JobKeeper would benefit by a further $500 per fortnight, and the employer benefits by $1,000 per fortnight (being the reimbursement for the employees wage that otherwise would have been paid).
Step 6 – Lodge Employee Details with ATO
From 4 May 2020, employers are then able to lodge payment details with the ATO via data provided from STP reports or the payment details can be entered manually using the ATO Business portal. Any delays in this step will almost certainly result in delays to receiving your JobKeeper reimbursement promised in mid-May.
Step 7 – Get on with your other Negotiations
Do not wait for your landlord to contact you with a generous offer to reduce your rental payments. You will need to approach your landlord to discuss the contents of the “National Cabinet Mandatory Code of Conduct for SME Commercial Leasing Principles during Covid-19”. In essence, where a tenant suffers a 30% decline in turnover, as would be necessary to be eligible for the JobKeeper payment, a tenant and landlord should agree to relief equating to 30% of rental with at least half of that relief (ie. 15% in this example) being a rent reduction or rent waiver and the other half (ie. 15%) representing a rent deferral to be recouped over at least 24 months. This should represent the minimum deal for the tenant, but both parties can make an alternate arrangement if they both agree.
Think about which other suppliers you should be communicating with in terms of either a reduction in pricing or a deferral of payment while you get your business through this difficult time. The key in all of this will be communication. No supplier wants to lose a client and so they will often entertain an alternate arrangement in desperate times, as long as communication is open and timely.
Get on with it!
We concluded in a recent blog that JobKeeper will indeed be your friend, but there is much to be done over the next 7 days. Already we are seeing issues and errors while the ATO brings together a very complex scheme over a short period of time – make time your friend by getting started now in case one of these issues has your name on it!
Don’t waste any time – I know that we are all juggling a number of priorities at the moment (a special mention to all the mums and dads that are home schooling at the moment), but there is a lot to be done by the end of April.
If you have any questions, please contact us on 03 9886 0800 or via email.
Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2020. Please do not reproduce without the expressed written consent of the author.