The initial phase of JobKeeper has come to an end on the 27th of September. What steps do you need to take now and are you eligible for an extension?
Step 1 - Stop paying Jobkeeper top ups to employees
Once you have paid your employees at least $1,500 for the pay period ending in the fortnight ended the 27th of September you need to stop paying Jobkeeper top up payments until you know if you are eligible for the Jobkeeper extension. You should have paid a minimum of $1,500 for 13 fortnights, or in the case of monthly payers a minimum of $3,125 for six months. Once you have determined if you are eligible for the extension, you will have until the 31st of October to make any required top up payments for the fortnights ended the 11th of October and the 25th of October. The minimum amount will be reduced to either $1,200 or $750 depending on hours worked during a specified reference period.
Step 2 - Communicate with your employees
Make sure you inform your employees that the minimum $1,500 payments per fortnight have ceased as the first phase of JobKeeper has ended. You need to tell them that you need to re-test your eligibility to determine if you are eligible for the extension of JobKeeper. If you are eligible then top up payments will be made before 31/10 but at lower rates than before. Communication will be essential to avoid having disgruntled employees.
Step 3 - Lodge your September monthly Declaration
Lodge your final monthly declaration for September as normal by the 14th of October to claim for the remaining two fortnights of the first phase of JobKeeper.
Step 4 - Complete your September 2020 BAS
The test of eligibility for the first JobKeeper extension will be based on the data you lodge in your September 2020 BAS. Therefore you need to get your transactions up to date as soon as possible so the BAS can be lodged. Also you'll need to ensure your previous BAS lodgements are up to date.
Step 5 - Compare turnover in your September 2020 BAS with your September 2019 BAS
The basic test of eligibility for JobKeeper for the period 28th September to the 3rd of January is a comparison of your turnover for the September quarter of 2020 against your September 2019 turnover as reported in your BAS. Previously you could elect whether you chose cash or accrual methods to determine eligibility or you could even test a particular month, but those options are unavailable for the JobKeeper extensions. For most businesses if your September 2020 quarter was down 30% or more from your September 2019 quarter turnover, you will be eligible for the first JobKeeper extension. Charities need to show a 15% drop while larger businesses need a 50% drop in turnover. You don't need to have been previously enrolled in JobKeeper to be eligible for the extension periods.
Step 6 - If the basic test fails, consider alternative tests
As with the first phase of JobKeeper, there are alternative tests that a business can use if the basic test fails because the comparison period is not representative. These tests are largely in line with the alternative tests available for the first phase of JobKeeper except that you can only use a quarter as a test period rather than a month and for many tests if you meet the required conditions you may have a choice of comparing turnover for the months of December, January and February with the September 2020 quarter. Alternative tests include tests for businesses that commenced after 1 July 2019, growing businesses and businesses with irregular turnover. We can assist you in determining whether an alternative test is available. If you are eligible under an alternative test, the ATO will need to be notified of what test you have used for the extension.
Step 7 - Notify the ATO through STP before the 31st of October
If you are not eligible, you'll need to notify the ATO through Single Touch Payroll that your employees have ceased JobKeeper from Fortnight 14 onwards. Note that once lodged, this is irreversible so please dont notify the ATO until you are certain that you are not eligible. It appears that some software providers are not allowing STP lodgements for periods after the 27th of September unless you either notify them of which payment tier your employees are on, or you notify that you have stopped JobKeeper. Please do not select to stop JobKeeper unless all options have been considered.
If you are eligible for the extension you'll need to determine what payment tiers your employees are on and report this through Single Touch Payroll. To be eligible for tier 1 payments, your employee needs to have worked for 80 hours or more in a reference period. Working hours include periods of paid leave and paid public holidays. The basic reference period for a fortnightly payer is the two pay periods ended prior to the 1st of March or the 1st of July. For weekly payers it is the four pay periods ended before the 1st of March or the 1st of July and for monthly payers it is the pay period ended prior to those dates. Your employee only needs to have worked for 80 hours or more in one of the two reference periods to be eligible for tier 1 payments ($1,200 per fortnight). For employees paid monthly, if the reference period has 29 days, the employee needs to have worked at least 82.86 hours for the month to receive a tier 1 payment. If the period has 30 days the number of hours is 85.72, while for a 31 day month the number of hours is 88.58.
If your employee did not work the required hours in either of those two periods, there may be an alternative test available if this was unrepresentative. Examples include where an employee was on unpaid leave or where an employee was not employed for the whole of the reference period. In these cases you may be able to test the period prior to when the unpaid leave commenced or for new employees, the first consecutive 28 days contained in consecutive pay cycles in which they were employed, which could include days after the 1st of March or 1st of July.
If you have insufficient records to show that your employee worked the required amount because, for example, they are paid on a commission basis, the employee may still be eligible for the tier 1 rate if they were paid more than $1,500 in the reference period (excluding JobKeeper top up payments) or it could be reasonably assumed that they worked more 80 hours or more in that period.
Step 8 - Notify your employees
If you are eligible for the JobKeeper extension it is a requirement that you notify your employees of their payment tier in writing within 7 days of lodging the information through STP. Please ensure you do this as you could lose your JobKeeper entitlement if you dont.
If you are not eligible you should advise your employees that they will not receive any further JobKeeper top up payments. Note that you may become eligible again for the second extension in January to March. You'll be able to retest this in January.
Step 9 - Catch up on top up payments by the 31st of October
If you are eligible you need to catch up on any top up payments by the 31st of October. You'll need to ensure that tier 1 employees were paid at least $1,200 each fortnight and tier 2 employees were paid at least $750 per fortnight.
Step 10 - Declaration for Eligible Business Participants
If you are claiming for an eligible business participant, that participant will need to provide a written declaration that they were actively engaged in the business for 80 hours or more during the month of February if you wish to claim the tier 1 payment of $1,200 per fortnight. If you were engaged for less than 80 hours in February you may be eligible to use an alternative reference period if February was not representative of their normal hours for reasons such as sickness or bushfires. The alternative reference period would be the 29 days immediately before that condition impacted on their number of hours. If they do not meet the 80 hour test then you will receive the lower tier 2 rate of $750 per fortnight. There is no option available to change your eligible business participant. You will be expected to be able to prove the number of hours you were actively engaged if questioned by the ATO.
Step 11 - Continue to pay any required top ups and lodge your Monthly Declaration
To continue to claim JobKeeper, if you are eligible you'll need to pay the minimum required amount to your employees each fortnight and lodge monthly declarations. The first declaration due for the extension will be the October Declaration which needs to be lodged between the 1st of November and the 14th of November. You do not need to re-register for Jobkeeper to claim the extension if you are already claiming JobKeeper. If you are new to JobKeeper, you'll need to register for October and make any necessary top up payments prior to the 31st of October to be eligible.
Step 12 - Do it all again
The first extension ends on the 3rd of January. At that time you'll need to do most of the above steps again except you'll be comparing the December 2020 quarter with the December 2019 quarter and the payment amounts will be further lowered to $1,000 per fortnight for tier 1 and $650 for tier 2. If you are not eligible for the first extension you may still be eligible for the second extension.