The difficulty with this Covid-19 crisis is that rules are being released rapidly. Clients are incredibly unsure of their eligibility for the Job Keeper concession given the novel approach to implementation of the laws. This piece will outline both the eligibility criteria and some potential legislative issues that may have been overlooked on enactment.
Firstly, this humble practitioner is proud that his constitutional law analysis and concerns contained in a previous article on the cash flow boost appear to have been considered in the drafting of these new measures. This is evident from the manner in which the object of the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (Cth) (“the Act”) is drafted. The object makes it clear the Act is made under the quarantine head of power of the Australian constitution (“constitution”).
From the Frying Pan into the Fire
Subsection 20(4) of the Act purports to give the Commissioner of Taxation the power to make instruments both of an administrative and legislative character. The Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) (“the rules”) are purported to be delegated legislation put forward by the Treasurer Josh Frydenberg a member of the executive government.
Ironically, the constitution states under section 52 that it gives exclusive power to Parliament for the making of laws in matters relating to departments of the public service, the control of which the constitution transferred to the Executive Government. Section 69 of the constitution then goes on to transfer the department of quarantine to the Executive Government.
Despite the very real danger that the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) are ultra vires because they have not been enacted by Parliament but by the executive government this practitioner will humbly accept on face value the relevant rules in order to provide eligibility criteria to desperate small and medium sized business.
Having said this, the importance of reviewing new laws from first principles and with an understanding of the legislative and constitutional context is imperative.
Employer and Business Participation Eligibility
An employer or business participant needs to pass a number of requirements in order to access the relevant Job Keeper concession. These two types of entities have differing eligibility requirements. Both are gone through in this article.
Job Keeper - Employer Eligibility
The Job Keeper eligibility for employers is difficult to outline, but an understanding is required to claim the concession.
The first requirement for a Job Keeper payment is that it occurs in a relevant fortnight that is one in between the following dates:
- the one beginning 30 March 2020, and
- the one ending on 27 September 2020.
This requirement as are all the following ones are largely contained in the Rules rather than the Act.
This requirement is fairly straight forward, on 1 March 2020 either:
- the employer carried on a business in Australia, or
- the employer was a non-profit body that pursued its objectives principally in Australia.
An employer satisfies the decline in turnover test at a time (the test time) if:
- the employer’s turnover for a “Turnover Test Period” in which the test time occurs falls short of the entity’s turnover for a “Relevant Comparison Period” (the comparison turnover); and
- the shortfall, expressed as a percentage of the comparison turnover, equals or exceeds the “Specified Percentage” for the employer.
The relevant definitions are:
Turnover Test Period
The Turnover Test Period must be:
- a calendar month that ends after 30 March 2020 and before 1 October 2020, or
- a quarter that starts on 1 April 2020 or 1 July 2020.
Relevant Comparison Period
The relevant comparison period must be the period in 2019 that corresponds to the turnover test period.
The Specified Percentage for an employer is:
- if the “Lower Threshold” applies to the employer who are ACNC-registered charities (apart from schools or other bodies excluded from this threshold) —15%; or
- if the “Higher Threshold” applies to the employer who’s previous year and current year turnover is more than $1 billion —50%; or
- otherwise—30% (this is the majority of employers).
The employee is an eligible employee of the employer where they satisfy the following requirements:
- Employee employed at any time during the relevant fortnight under Requirement 1,
- On 1 March 2020:
- The Employee is over 16,
- The employee was either:
- An employee, or
- A long-term casual employee.
- The employee was an Australian resident (under social security or income tax law) or holder of a Subclass 444 VISA.
- The employee has given to the employer a valid nomination that states:
- the employee satisfies items 2 in requirement 4, and
- the employee agrees to be nominated by the employer as an eligible employee of the entity for the purposes of the jobkeeper scheme (and satisfied that requirement);
- At the time the employee gives the employer the nomination notice:
- The employee is not an “Excluded Employee” of the employer for the fortnight in which the time occurs; and
- If the employee is a “Long Term Casual Employee” of the employer—the employee is not also an employee (other than a casual employee) of another employer; and
- the employee has not given any other employer, or the Commissioner, a nomination notice.
Long Term Casual Employee
An employee is a long term casual employee of an entity at a time if:
- at that time, the employee was a casual employee of the employer; and
- the employee had been employed by the employer on a regular and systematic basis during the period of 12 months that ended at that time.
An employee is excluded from being an eligible employee of an employer for a fortnight if:
- Parental leave pay is payable to the employee and the employee’s PPL period overlaps with, or includes, the fortnight; or
- At any time during the fortnight, the employee is paid dad and partner pay; or
- All of the following apply:
- the employee is totally incapacitated for work throughout the fortnight;
- an amount is payable to the employee under, or in accordance with, an Australian workers’ compensation law in respect of the employee’s total incapacity for work;
- the amount is payable in respect of a period that overlaps with, or includes, the fortnight.
An employer satisfies the Wage Condition in respect of an employee for a fortnight if the sum of the “Wage Amounts” covered below equals or exceeds $1,500. Where the employer pays employees on a monthly or other basis, the Wage Amounts should be allocated on a reasonable basis.
For the purposes of this requirement, the Commissioner may treat a particular event that happened in a fortnight as having happened in a different fortnight or fortnights, if, or to the extent that, it is reasonable to do so in the Commissioner’s opinion.
The following are Wage Amounts:
- amounts paid by the employer to the employee in the fortnight by way of salary, wages, commission, bonus or allowances; and
- amounts withheld by the employer from payments made to the employee in the fortnight under section 12-35 in Schedule 1 to the Taxation Administration Act 1953 (i.e. PAYG withholding); and
- Contributions made by the employer in the fortnight to a superannuation fund or an RSA for the benefit of the employee, if the contributions are made under a salary sacrifice arrangement (within the meaning of the Superannuation Guarantee (Administration) Act 1992); and
- other amounts that, in the fortnight, are applied or dealt with in any way if the individual agreed:
- for the amount to be so applied or dealt with; and
- in return, for amounts covered by paragraph (1) for the individual for the fortnight to be reduced (including to nil).
The employer has notified the Commissioner in the approved form at or before the following time that the employer elects to participate in the jobkeeper scheme:
- For an entitlement arising in the first or second jobkeeper fortnight—the end of the second jobkeeper fortnight; or
- For an entitlement arising in any other fortnight—the end of the fortnight.
The employer has given information about the entitlement for that fortnight, including details of the employee, to the Commissioner in the approved form.
the employer has not notified the Commissioner in the approved form that the employer no longer wishes to participate in the jobkeeper scheme.
However, an entity does not qualify for the jobkeeper scheme at a time if an amount of levy under the Major Bank Levy Act 2017 was imposed for any quarter ending before 1 March 2020 on:
- the employer; or
- if the entity is a member of a consolidated group—another member of the group; or
- the employer is an Australian government agency; or
- The employer is a local governing body; or
- the entity is wholly owned by an employer covered by paragraphs above; or
- the entity is a sovereign entity; or
- if the employer is a company—a liquidator or provisional liquidator has been appointed in relation to the company; or
- if the employer is an individual—a trustee in bankruptcy has been appointed to the individual’s property.
For the purposes of Jobkeeper eligibility, treat a “Purchasing Employer” (the later entity) that employs an employee at a time (the later time) as having also employed the employee at an earlier time if the employee was employed at the earlier time by another employer in the same wholly-owned group as the later entity; or
Both of the following apply:
- At the later time, the employer is employed in a business carried on by the later entity or in a non-profit body the purposes of which are carried on by the later entity;
- At the earlier time, the employee was employed in the same business or non-profit body, but that business was, or the purposes of that non-profit body were, carried on by a different entity.
Job Keeper – Business Participation Eligibility
This is the second stream of eligibility.
A Business Participant is entitled to a jobkeeper payment for an individual for a fortnight if:
- the fortnight is a jobkeeper fortnight as follows:
- the fortnight beginning on 30 March 2020;
- each subsequent fortnight, ending with the fortnight ending on 27 September 2020.
- the Business Participant is not a non-profit body; and
- the Business Participant qualifies for the jobkeeper scheme at or before the end of the fortnight by passing the same requirements as employers as follows:
- Requirement 2; and
- Requirement 3.
the Business Participant is the “Eligible Business Participant” for the entity for the fortnight:
- the Business Participant is not employed by the entity at any time in the fortnight; and
- The Business Participant satisfies this item at a time if, at that time:
- They are actively engaged in the business carried on by the entity; and
- the Business Participant is covered by column 2 of the following table:
|Type of Entity||Eligible Business Participant|
|Sole trader||The entity|
|Partnership||A partner in the partnership|
|Trust||An adult beneficiary of the trust|
|Company||A shareholder in or a director of the company|
On 1 March 2020:
- The Business Participant is over 16,
- The Business Participant was an Australian resident (under social security or income tax law) or holder of a Subclass 444 VISA.
The notification requirements are that:
- the individual has given a notice (the nomination notice) in the manner set out stating that:
- the individual satisfies the requirements in number 5 above and in paragraph (b) of this subsection in relation to the entity; and
- the individual agrees to be nominated by the entity as the eligible business participant for the entity for the purposes of the jobkeeper scheme; and
At the time the individual gives the entity the nomination notice:
- the individual satisfies the requirements in forth requirement in relation to the entity; and
- the individual is not an employee (other than a casual employee) of another entity; and
- the individual has not given any other entity, or the Commissioner, a nomination notice; and
- no other individual has already satisfied the requirements in relation to the entity.
- the entity has not notified the Commissioner in the approved form that the entity no longer wishes to participate in the jobkeeper scheme.
An individual is excluded from being the eligible business participant for an entity for a fortnight if:
- parental leave pay is payable to the individual and the individual’s PPL period overlaps with, or includes, the fortnight; or
- at any time during the fortnight, the individual is paid dad and partner pay; or
- all of the following apply:
- the individual is totally incapacitated for work throughout the fortnight;
- an amount is payable to the individual under, or in accordance with, an Australian workers’ compensation law in respect of the individual’s total incapacity for work;
- the amount is payable in respect of a period that overlaps with, or includes, the fortnight.
There are important record keeping and fair work requirements that also apply to these measures. These are coupled with overpayment and interest imposition measures.
It is critical that both the quarterly and monthly turnover of the relevant entity is recorded and analysed against the specified drop in turnover. This and the notifications both to employees and the Commissioner are critical.