Home / Covid-19 / Businesses

Businesses

Latest Updates:

6 April 2020 - Clarification that a self-employed person will receive the Job Keeper payment regardless of what business structure they use.

1 April 2020 - Further explanation provided regarding the requirements to meet 30% and 50% reduction in business turnover in order to receive the JobKeeper payment

Page Contents:
JobKeeper Payment
Cash Flow Boost to $100,000
Support for Cash Flow Needs for SMEs
Business Investment
Victorian Government Grants via the Business Support Fund

JobKeeper Payment Subsidy

15 April - To read our most recent article on the JobKeeper Payment, click here.

17 April - To read our overview of the reporting of JobKeeper Payments via Single Touch Payroll, click here

On 30 March 2020 the Government announced a $130 billion wage subsidy package, called the JobKeeper Payment.  This is the biggest Federal Government response to the COVID-19 outbreak to date, which is expected to affect six million Australians.

The general intent of the package is to keep people in their jobs during this time of disruption. The JobKeeper Payment will also support employers to maintain their connection to their employees. The scheme can be summarised as follows:

Where an eligible employer suffers a substantial decrease in revenue, they will receive a subsidy for their eligible employees of $1,500 per fortnight. They will continue to pay the employee at least $1,500 per fortnight, even if they have been stood down.

How the system will work

The JobKeeper payment will provide eligible employers with a flat payment of $1,500 per fortnight per employee over the next six months regardless of the employee’s salary.

The first payment will be received by employers from the Australian Taxation Office (ATO) in the first week of May, backdated from 30 March 2020.

Eligible employers (including self-employed) will need to identify and notify eligible employees for the JobKeeper payment and must provide monthly updates to the ATO confirming that the employer continues to be eligible.

Participating employers will be required to ensure eligible employees will receive, at a minimum, $1,500 per fortnight, before tax. Employees that are already receiving this amount per fortnight will not see their salary change. It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper payment.

The payment will be paid for employees engaged as at 1 March 2020.  For most employers the ATO will use the Single Touch Payroll data to pre-populate employer and employee data.

6 April 2020 update: The intent of the JobKeeper Payment is to enable any eligible self-employed person to get a wage subsidy regardless of what business strucure they use. Entities that conduct a business but the ‘owners’ do not take a salary will need to nominate a partner, director or beneficiary to receive the benefit.

Registration by employers

At this stage employers must register for the JobKeeper payment at the following website: www.ato.gov.au/general/gen/JobKeeper-payment

Following registration employers will be provided updates of the package’s arrangements over the coming month.

Eligible employers

Employers will be eligible for the JobKeeper payment if:

  • Their organisation has a turnover of less than $1 billion and their turnover has been reduced by more than 30% relative to a comparable period a year ago (of at least a month); or

  • Their organisation has a turnover of $1 billion or more and their turnover has been reduced by more than 50% to a comparable period a year ago (of at least a month); and

  • The business is not subject to the Major Bank Levy.

 In determining if a business has faced a 30% (or 50%) reduction in their turnover, the business is expected to show that their current turnover has fallen compared to a relevant month, or three-month period a year earlier. The relevant period will be dependent on the nature of the business activity.

1 April Update: Where the business has recently commenced, or the turnover a year ago is not a representative period of normal business activity, the Taxation Office will have the discretion to consider additional factors to determine if the business has been adversely affected by COVID-19. The Taxation Office will have the power to consider alternative tests and there will be some tolerance where employers have not had a reduction in turnover that does not quite meet the thresholds.

Self-employed (sole trader) individuals are eligible to receive the JobKeeper Payment where:

  • Their turnover has experienced a reduction, as outlined above,
  • They have an ABN on or before 12 March 2020,
  • They included sole trader income in their 2018/2019 income tax return, and
  • They are activity engaged in the business.

Please note the JobKeeper payment is treated as income and may affect the eligibility to the JobSeeker payment.

Where a business operates through a partnership and the business meets the turnover reduction requirement, one partner can receive the JobKeeper payment.

Where a business operates through a company and the business meets the turnover reduction requirement, one director can receive the JobKeeper payment.

        Where a business operates through a trust and the business meets the turnover reduction requirement, one individual beneficiary can receive the JobKeeper payment.

Non-government schools and private vocational education providers are eligible to claim the JobKeeper Payment.

Businesses as part of consolidated group will need to consider the group’s turnover to determine whether the 30% or 50% reduction test applies. Then each business within the group will need consider if they meet the relevant test to determine if they are eligible to the JobKeeper payment. Some businesses in a consolidated group may receive the payment, whereas some may not, depending on their reduction in turnover.

Employees on parental leave from their employer will be eligible to the payment.

Employers will be required to provide information to the ATO upon registration and then provide monthly updates to the ATO.

There must be an employment relationship with eligible employees as at 1 March 2020, and the employer must confirm that each eligible employee is currently employed in order to receive the JobKeeper payment, even those that have been stood down. If the employee has been retrenched, they will have to be reinstated in order to be eligible for the JobKeeper payment.

Employers that re-engage employees will be eligible if the employee was employed on 1 March 2020.

Employee eligibility

The payment applies to full-time, part-time and casual employees who were employed by the employer on 1 March 2020.  Casuals must have been employed on a regular basis for more than 12 months as at 1 March 2020.

All eligible employees must be:

  • At least 16 years of age;
  • An Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder; and
  • Not in receipt of a JobKeeper payment from another employer.

    Only the employee’s main employer will receive the JobKeeper payment.

Practical Considerations

Although the details are being worked out, the ATO will administer the scheme and attend to payment of the subsidy. The Single Touch Payroll System will be an integral part of the process.

Employers are required to make the minimum $1,500 per fortnight payment to employees and will be reimbursed monthly. The first reimbursement will be in the first week of May and will be backdated to 30 March. This will create some cash flow issues for affected organisations.

We will not see the full details of the subsidy for a week or so and in the meantime we are left with press releases and ATO fact sheets. We understand the two-fold intents of the subsidy are to keep people on the payroll to the greatest extent possible (which will keep people off Centrelink benefits) and to subsidise employers to encourage them to keep their staff. It does not prevent employers from making the right commercial decision about reducing hours or if there is no work, standing people down. However, when making these decisions employers should take into account the subsidy they will receive.

To the extent that the $1,500 payment is not wages but is passing on the government subsidy, SGC is not required to be paid. This can occur when an employee is normally paid less than $1,500 per fortnight or where they have been stood down.

There will undoubtedly be anomalies with the scheme but this is a bold initiative to keep employees on the books and to ensure that a work force is ready and available to bounce back.

Here are links to the Government fact sheets for employers and employees:

Fact sheet for employers:

https://treasury.gov.au/sites/default/files/2020-04/Fact_sheet_supporting_businesses_4.pdf 

Fact sheet for employees:

https://treasury.gov.au/sites/default/files/2020-04/Fact_sheet_Info_for_Employees_3.pdf

 

Cash Flow Boost to $100,000

The following businesses will be eligible for the Cash Flow Boost:

  • Aggregate annual turnover < $50m

  • Made payments to employees
  • Held an active ABN on 12 March 2020. However, ACNC registered charities are eligible regardless of when they are registered

  • Activity Statements lodged within 2 years of due date

The Boost will be provided as credits in the activity statement system by the Australian Taxation Office (ATO).  Where these credits result in a refund, the ATO will deliver this within 14 days

The credits will be delivered in two tranches.

  1. The first tranche of credits Cash Flow Boost 1 in the diagram below will be based on the PAYG withholding amount on the March, April, May and June 2020 Activity Statements.  Cash Flow Boost 1 will be a maximum of $50,000.

    • It will be paid from late April to July.

    • Organisations that pay salary and wages but do not have to withhold tax will receive the minimum credit of $10,000.

  1. The second credit tranche (Cash Flow Boost 2) will, in total, be the same amount as Cash Flow Boost 1, but will be delivered in equal instalments in the June – September activity statements.  To be eligible for Cash Flow Boost 2 the entity needs to remain active.

 The scheme has a minimum credits of $20,000 and maximum credits of $100,000.

The below diagram illustrates how the credits will be applied over the coming months. The top section applies to large and medium withholders that report monthly and the bottom section applies to those that pay withholding payments quarterly:

We have developed a Cash Flow Boost Calculator for you to use to determine the Cash Flow Boost credit you will receive. It can be downloaded from our website here

 

Example 1:

An employer withholds $5,000 per month from employees. The payments (as a credit against the IAS or BAS) are as follows:

  • If the employer remits PAYG quarterly


    • March: 3 x $5,000 = $15,000

    • June: $15,000

    • Total for 1st tranche - $30,000

    • The 2nd tranche payments will also total $30,000 and $15,000 will be applied against the June and September BASs

  • If the employer remits PAYG monthly


    • March: 3 x $5,000 = $15,000

    • April: $5,000

    • May: $5,000

    • June: $5,000

    • Total for 1st tranche - $30,000

    • The 2nd tranche payments will also total $30,000 and $7,500 will be applied to the June BAS, July and August IAS and September BAS

Example 2:

An employer with less than $10,000 PAYG to be reported in the March to June period, will be entitled to the minimum payments which will be paid as follows:

  • March activity statement credit $10,000

  • June and September activity statement credits of $5,000 each

Example 3:

An employer does not need to withhold any tax from wages paid to any employees will still be entitled to the minimum payments.  These will be paid as follows:

  • March activity statement credit $10,000

  • June and September activity statement credits of $5,000 each

Apprentice and Trainee Support

Businesses employing fewer than 20 full-time employees who have engaged an apprentice or trainee prior to 1 March 2020 will be eligible for a wage subsidy of 50% of the apprentice’s or trainee’s wage over the 9 month period between 1 January 2020 – 30 September 2020. This will be capped at a maximum amount of $21,000 per apprentice ($7,000 a quarter). Registrations will open in early April 2020 and final claims must be lodged by 31 December 2020.

Support for Cash Flow Needs for SMEs

SME Loan Guarantee Scheme

Starting in early April, the Government will provide a guarantee of 50% to SME lenders for new unsecured loans to be used for working capital. This will apply to businesses with a turnover of less than $50 million.

The maximum loan size will be $250,000 per borrower and the loans will be for up to 3 years with a six month repayment holiday. No assets will have to be provided as security for the loan.

Lenders are encouraged to provide facilities to SMEs that only have to be drawn if needed by the SME.

The scheme is worth up to $20 billion to guarantee support for up to $40 billion of loans.

Exemption from the responsible lending obligations

Lenders providing credit to existing small business customers will be relieved of the responsible lending obligations. The aim is to increase the speed at which businesses can access credit.

Business Investment

This remains the same as what was announced in the first round of measures. We have repeated them here for clarity:

Instant Asset Write Off

Previously, businesses with a turnover of up to $50 million can claim tax deductions in full for assets costing less than $30,000 (GST exclusive) instead of having to claim the cost over a number of years.
The asset threshold has increased to include assets costing up to $150,000 for businesses with a turnover of up to $500 million, if they are first used or installed ready for use between the date of the announcement and 30 June 2020.
The instant asset write off threshold is due to revert to $1,000 for businesses with a turnover of less than $10 million from 1 July 2020.

Investment Incentive

This is a time limited 15 month investment incentive for the purchase of new assets that are not eligible for the instant asset write off. This will apply to assets greater than $150,000 until 30 June 2020 and to assets greater than $1,000 from 1 July 2020. It will run until 30 June 2021 and businesses with a turnover of under $500 million will be eligible.

The incentive is a deduction of 50% of the cost with existing depreciation rules applying to the balance. There is no cost threshold for the assets in this incentive.

Temporary Relief for Financially Distressed Businesses

These are new measures that have been introduced in this package for the next 6 months:

  • Temporary increase in thresholds – these measures will increase the thresholds from $2,000 to $20,000 at which creditors can initiate insolvency or bankruptcy and increase the time to respond from 21 days to 6 months.

  • Director liability – this measure will provide temporary relief for directors for any personal liability for trading while insolvent – this is only in respect to debts incurred in the ordinary course of the company’s business

  • There will also be some additional flexibility introduced in relation to provisions of the Corporations Act 2001 to assist in dealing with unforeseen events arising from the current crisis.

Victorian Government Grants via the Business Support Fund

The State Government has released details of grants for business via the Business Support Fund. Grants are available to businesses significantly affected by Covid-19 shutdown restrictions.  The grants are targeted to business but could apply to Non Profit Organisations as well.

Businesses are eligible to apply for a grant through the Fund if they meet the following criteria:

  • Have been subject to closure or highly impacted by shutdown restrictions announced by the Victorian Government to-date; and
  • Employ people; and

  • Have a turnover of more than $75,000; and

  • Have payroll of less than $650,000; and

  • Hold an Australian Business Number (ABN) and held that ABN at 16 March 2020; and

  • Have been engaged in carrying out the operation of the business in the Australian State of Victoria on 16 March 2020.

Here is a link to the relevant webpage and on that page you will find a link to the application form. If you are eligible we suggest that lodge your application as soon as possible. https://www.business.vic.gov.au/support-for-your-business/grants-and-assistance/business-support-fund#

 

 

Subscribe to e-bulletins

Subscribe Now

Stay Connected